Wendell Potter from The Center for Public Integrity

OPINION: ObamaCare myths and realities

2013-05-13T14:06:40-04:00

The House of Representatives is expected to vote for the 40^th time this week to repeal ObamaCare, not because anyone believes the 40^th time will be the charm, but because the exercise will enable Republican freshmen to vote for repeal and brag about it during their campaigns next year.

Those lawmakers probably won’t tell their constituents that two of the most important provisions of the law they profess to hate were actually Republican ideas the Democrats embraced in hopes of getting bipartisan support for reform. The first such provision is the requirement that all Americans not covered by a public plan like Medicare or Medicaid must buy coverage from a private insurance company. The second provision: establishment of state health insurance marketplaces (called exchanges in the law) where private insurers compete online for customers.

One of the first states to set up such a marketplace was Utah, among the reddest of states, which had its exchange up and running months before ObamaCare was enacted. Starting this fall, Americans everywhere will be able to shop in Utah-like marketplaces for coverage effective January 1, the date the GOP-inspired requirement to have health insurance kicks in.

The reason Republicans once liked health insurance exchanges is that in theory they will facilitate choice and competition, which should bring down the cost of coverage. If the exchanges work as planned — and as ObamaCare stipulates — consumers will be able to make apples to apples comparisons among health plans and pick the one that seems to offer the best value.

Based on news out of Oregon last week, there is reason to believe that the theory is holding up and that consumers will indeed benefit from price transparency that until now had never been available to the layman.

Health insurers in Oregon were required to tell the state last week how much they planned to charge for the policies they would sell this coming fall on “Cover Oregon,” the name of the state’s exchange.

As reported in the Oregonian, when the state insurance department published the insurers’ proposed rates in a chart, some of companies that had planned to charge the highest rates wasted no time in saying said they had made a serious mistake and would quickly revise their offerings with lower rates.

The charts were made available online Thursday. Within 24 hours at least two insurers asked for a do-over, according to the newspaper. One of the companies promising to resubmit new rates was Family Care Health Plans, which had said it would charge $422 a month to cover a 40-year-old non-smoker in Portland, two and a half times as much as another insurer said it would charge for the exact same policy.

Another insurance company, Providence Health Plan, said that, oops, it had made a mistake in its cost projections and would reduce its planned rates by 15 percent. A spokesman for Family Care blamed its sky-high rates on overly pessimistic underwriters and said that, upon reflection (and after seeing what competitors planned to charge) it would cut its rates even more than 15 percent.

For years, insurance companies have been able to charge essentially whatever they wanted because there has been no organized marketplace for individuals and small business and no requirement that insurers provide information in a way that would enable us to make truly informed decisions. One of the most popular provisions of ObamaCare changes that by requiring insurance carriers to provide plan descriptions in a standardized format and in language we can understand. They also have to tell us how much our monthly premiums will be and provide examples of how much we’ll have to pay out of our own pockets if we get sick — or pregnant.

ObamaCare critics have charged that the rates insurers will be charging on the exchanges will be much higher than what insurers charge today because of other consumer protections in the law, such as the one that makes it unlawful for insurance companies to refuse to sell someone a policy because of a pre-existing condition.

While it’s possible that some people will have to pay more — especially those with low-benefit, high-deductible plans that are soon to be abolished — most folks who have to buy coverage without an employer’s help will likely pay less, thanks to income-based tax credits that will be available for the first time. As the Oregonian noted, at least half the people who buy coverage on the state’s exchange will qualify for a tax credit. And they’ll be able to determine quickly how much the tax credit will reduce their premiums simply by providing income information on the exchange website.

Americans in every state can look forward to these GOP-inspired consumer benefits and protections and the very real possibility of lower premiums, assuming ObamaCare goes forward. Which, of course, it won’t if House Republicans’ 40^th attempt to repeal ObamaCare does indeed prove to be the charm.

OPINION: health reform to be political fodder in 2014

2013-05-06T00:09:01-04:00

Will the implementation of some of the most important provisions of ObamaCare this fall and next year result in the “train wreck” Senate Finance Chairman Max Baucus (D-Mont.) predicted a few days ago?

No. But you can be certain that there will be no shortage of political candidates and high-powered political spin doctors who will be working relentlessly between now and the 2014 midterms to convince us that it will be.

ObamaCare — even though it already has reduced the number of uninsured Americans by several million and has limited price gouging by insurance companies — represents the best hope that many Republicans will have of maintaining or boosting their majority in the House and possibly retaking the Senate.

Think about it. The economy seems to be on the right track. Just last week the stock market reached record highs and the jobless rate fell to its lowest point in four years. The war in Iraq is over and most American troops are scheduled to be out of Afghanistan by the end of next year. The GOP appears to have lost the advantage to Democrats on gun control and immigration, and abortion and gay rights are no longer the reliable campaign wedge issues they once were.

That leaves ObamaCare and “big government spending” as just about the only issues that remain for right-leaning candidates, barring any unforeseen domestic or global calamity. But if their campaigns against ObamaCare next year are as successful as their campaigns against it were in the 2010 midterms — and the White House and supporters of the law are once again asleep at the switch — GOP candidates might not need anything else to talk about to take both houses of Congress.

When Barack Obama was inaugurated in January 2009, there was wide support for health care reform, and Republican strategists knew it. They realized they might be able to turn reform into a winning issue for their candidates by mounting a campaign to make people afraid of what the Democrats might try to do. So just as Congress was beginning preliminary work on what eventually became the Affordable Care Act, GOP message guru Frank Luntz persuaded his clients to condemn whatever the Democrats proposed as a “government takeover of health care.”

Even though the bill that ultimately became law was anything but a government takeover, GOP lawmakers and candidates never missed an opportunity to insist that it was. Luntz’ sound bite was repeated hundreds of times in floor speeches by Republican members of Congress in the hours before the House voted on its version of the bill on November 7, 2009.

Their fear-based campaign worked so well to influence public opinion that GOP candidates have never stopped using the “government takeover” meme, which is why the perception of ObamaCare as being exactly that has become a reality for millions of Americans.

When you consider the inadequate job that the White House and the President’s supporters have done in explaining how the law benefits just about every one of us — and never letting us forget why reform was necessary in the first place — it’s little wonder Republicans see opportunity once again.

There no doubt will be glitches when the online health insurance exchanges go live on October 1 for the relatively small percentage of Americans who will use them to shop for coverage because their employers don’t offer health insurance as an employee benefit. The exchanges will work just fine for the vast majority of people, but there will be some who will have complaints. You can expect the law’s critics to give every one of them a voice in their effort to create the impression that the exchanges are a disaster and that the government can’t do anything right.

Similarly, some people who have been paying relatively low premiums for what they don’t realize is junk insurance will be upset when junk insurance is outlawed next year. Because real insurance costs more than junk, some invariably will complain about having to pay higher premiums for coverage that will actually be there if and when they need it.

You can also expect that a fair number of folks will squawk when the requirement to have health insurance kicks in on January 1. And you can bet that the opponents of the law will be aided, unwittingly in most but certainly not all cases, by the media. Just as local TV reporters tell us about the drivers who crash into each other instead of the rest of us who get to our destinations unharmed, the media will focus on the glitches. And they’ll interview far more complainers than happy campers.

I’m betting that Frank Luntz and other Republican strategists have already been hired to craft the sound bites to use against Democrats next year. If the Democrats and consumer advocates who support ObamaCare are not at work developing their own strategies to counter the coming barrage of misleading spin, the GOP will have an excellent chance of controlling Capitol Hill after the next elections.

OPINION: insurers hiding political spending

Cigna Corporation — 2013-04-29T09:47:40-04:00

If you have private health insurance, it’s almost certain that a portion of the premiums you pay every month is used to support political agendas that are not in your best interests. But good luck finding out how much of that premium money your insurance company spends to influence public opinion and public policy.

While all companies are required to report their federal lobbying and Political Action Committee expenditures, that money is just a fraction of what they often spend in the political arena to protect their profits. Millions more — probably billions more — are spent secretly every year by corporations and their trade associations to shape policy discussions and actions. Corporate America is determined to preserve that secrecy.

Among my responsibilities when I worked at Cigna was the administration of the company’s PAC. The money we doled out to state and federal candidates every year was not huge, but a lot of thought went into determining who got checks. The lion’s share each year would usually go to Republican candidates, but influential Democrats also benefited. In 2012, Cigna’s PAC reported contributing a total of $213,000 to 73 Republicans and 41 Democrats.

That’s pocket change compared to the $3.09 million Cigna says it spent lobbying lawmakers last year in both Washington and state capitals. And it’s also a fraction of what CIGNA probably spent through its trade associations and other groups to influence how you think about health care policy issues and how lawmakers vote on them.

We don’t know how big the total is because there are no laws or regulations requiring corporations to report those expenditures. But there is a growing movement among shareholder groups to force companies to disclose this kind of spending because it may dwarf what they invest in lobbying and direct contributions to candidates.

That undoubtedly was the case during the health care reform debate. The trade group America’s Health Insurance Plans, for which Cigna is a leading dues-paying member, funneled more than $100 million in 2009 and 2010 to the U.S. Chamber of Commerce to finance the Chamber’s advertising and PR campaign aimed at defeating reform. This “backchannel spending,” which the National Journal uncovered by poring over IRS tax filings, enabled insurers to state publicly that they were backing reform while spending millions in policyholder premiums as part of an industry-wide stealth campaign to kill it.

Most of the $100 million came from “special assessments” contributed by Cigna and other AHIP member companies over and above their regular membership dues. We’ll never know how much of that $100 million came from Cigna, though, because corporations are not obligated to disclose such spending, and they have rebuffed calls that they do so voluntarily.

Among those pressuring companies to be more forthcoming is Rob McGarrah of the AFL-CIO’s Office of Investment. The union owns shares of stock in many companies, including Cigna, and is asking them to provide shareholders and the public with a more complete accounting of spending to influence public policy.

McGarrah was unsuccessful in persuading Cigna to disclose “special assessments” on behalf of AHIP and other groups, so the AFL-CIO submitted a shareholder resolution that would compel the company to report indirect funding of lobbying through trade associations and tax-exempt organizations, such as the American Legislative Exchange Council, which drafts “model legislation” to protect business interests.

At Cigna’s annual meeting of shareholders last Wednesday, Cigna shareholder Tom Swann spoke on behalf of the AFL-CIO’s resolution.

“Transparency and accountability in corporate spending to influence public policy are in the best interests of Cigna shareholders,” Swann argued.

But as expected, the resolution failed; Cigna had encouraged shareholders to vote against it — as the Chamber of Commerce is urging all companies facing such resolutions to do.

In its 2012 Political Contributions and Lobbying Activity Report, Cigna stated that the total dues it paid to AHIP was $837,377, including “any special assessments” it might have paid last year. But the company has refused to say how much of that was in the form of special assessments, and it has not disclosed how much it paid AHIP during the height of the health care reform debate in 2009 and 2010 when the trade organization was sending millions to the Chamber of Commerce. Cigna CEO David Cordani acknowledged that the company contributed special assessments to AHIP to pay for the Chamber’s advertising, but he would not say how much.

Although the resolution failed this year, the AFL-CIO and other like-minded investors are not throwing in the towel, and the Chamber is well aware of that. This coming Thursday, the Chamber’s Center for Capital Markets Competitiveness and its “Workforce Freedom Initiative” is inviting corporate executives to a meeting “to discuss the economic value of union-backed shareholder activism to investors and employers.”

You can rest assured that plenty of money in special assessments will go to the Chamber in the months and years ahead not only to influence public policy but to beat back attempts to get corporations to be more transparent and accountable. That’s just the way things work.

OPINION: Vermont law illuminates claims statistics

Vermont,United States — 2013-04-22T09:52:12-04:00

When you’re shopping for health insurance, wouldn’t it be great if you could find out every insurer’s claim denial rate? And how much each one spent on lobbying and advertising — and how much they paid their CEO?

You can now find all of that information and more if you live in Vermont, thanks to a law that was enacted last year at the urging of the Vermont Public Interest Research Group.

In compliance with that law, the insurers that do business in Vermont have just disclosed data they’ve been able to keep secret for years. And that information should come in handy when Vermonters begin shopping for coverage at the state’s online health insurance exchange in October.

With just 626,000 residents, Vermont is the second smallest state in terms of population (only Wyoming has fewer people), and it has only three major health insurers — Blue Cross Blue Shield of Vermont, MVP Health Care and Cigna, the company I used to work for.

Blue Cross Blue Shield of Vermont is by far the biggest and the only one based in the Green Mountain State. MVP is headquartered in New York, and Cigna, the for-profit company among the three, is based in Connecticut.

Which of the trio do you think denied the most claims on a percentage basis in 2012?

If you guessed the for-profit company, as I did, you would be right. But even I was shocked to see how Cigna compared with its competitors, especially Blue Cross.

Of all the claims submitted to it last year by health care providers and policyholders, Blue Cross denied 7.6 percent. Cigna denied 21 percent. MVP was in the middle at 15.5 percent.

Since Vermont is a pretty small state, chances are pretty high that all three companies have the same doctors and hospitals in their provider networks. One would have to wonder why Cigna felt it necessary to deny more than one of every five claims submitted by those doctors and hospitals while Blue Cross denied only one of every 13.

Most of the claims denied by all three companies were categorized as “administrative,” meaning they were denied because a provider presumably used an incorrect procedure code or made some other clerical error when submitting their claims for payment. It defies reason to think that the doctors and hospitals in Vermont submitted inaccurate claims to Cigna at almost three times the rate they did to Blue Cross.

One of the things you need to know about the private health insurance business is that insurers make a lot of money when they delay paying a claim. I would be willing to bet that many — if not most — of the claims the Vermont insurers denied were eventually paid. When an insurance company delays paying a claim by days, weeks or months, it can take advantage of “float.”

The longer you can delay paying a claim, the more investment income you can make on the premiums you take in from your policyholders. And investment income is especially important to for-profit insurance companies because it contributes significantly to the bottom line. Shareholders and Wall Street financial analysts like that, even though much of the money on which the investment gains were made should have been paid to health care providers.

The data reported by the insurers is consistent with recent claim denial rates in California. A California Nurses Association analysis of 2010 data submitted by insurers to the California Department of Managed Care showed that Cigna’s claim denial rate was 39.6 percent. Aetna’s denial rate, by contrast, was 5.9 percent.

The Vermont disclosures showed that Blue Cross and MVP spent far more money lobbying state officials last year — $258,347 and $55,366, respectively, than Cigna, which spent only $9,141. But Cigna spent much more lobbying federal officials: $1.59 million. MVP spent $160,000 lobbying in Washington. Blue Cross of Vermont spent nothing, although the Chicago-based Blue Cross Blue Shield Association, which represents all of the country’s Blues plans, spends a lot on lobbying every year, as does America’s Health Insurance Plans, of which Cigna and MVP are members.

Cigna, a much bigger company than the other two, reported paying its CEO $3,970,833 in total compensation last year, compared to $1,250,000 for the CEO at MVP and $587,184 at Blue Cross. And Cigna was especially generous in paying its nine board members: $3,199,855. Board members at Blue Cross earned a combined $246,632. MVP did not pay its board members anything.

The one area in which Blue Cross Blue Shield of Vermont spent much more than the others was advertising and PR. The company spent $743,968 for marketing last year in Vermont, compared to $516,358 for MVP and $66,849 for Cigna.

Cigna notified the state earlier this year that it would not seek to sell policies to individuals and small businesses on Vermont’s exchange, leaving that part of the marketplace to Blue Cross and MVP. But Cigna will still have at least one big client in Vermont — the state of Vermont. Cigna has had a contract for several years with the state to provide coverage to state employees. If I were one of them, I would ask for an explanation of those high claim denial rates.

OPINION: 'limited benefit' plans are no real bargain

2013-04-15T06:00:02-04:00

Among insurance executives, Aetna CEO Mark Bertolini has been among the most vocal in warning of “premium rate shock” when major provisions of Obamacare kick in on January 1.

"We've done all the math, we've shared it with all the regulators, we've shared it with all the people in Washington that need to see it, and I think it's a big concern," Bertolini told his company’s big shareholders and Wall Street financial analysts in New York last December.

If Aetna does, in fact, hike premiums by more than 100 percent for some of its customers, as Bertolini suggested at the meeting, no doubt part of that money will go to covering his shockingly lucrative paycheck.

While many Aetna employees were lucky to get two percent raises last year, Bertolini’s compensation nearly quadrupled. That’s right, quadrupled.

Aetna disclosed in a filings last week with the U.S. Securities and Exchange Commission that Bertolini’s total compensation in 2012 was $36.36 million, up from $9.7 million in 2011. If you include the $11.1 million in stock awards he was given that will vest later, his 2012 total jumps $47 million.

Bertolini’s “pay shock” so angered many current and former Aetna workers that several of them posted scathing comments on the Hartford Courant’s website.

“All Aetna employees should be picketing outside the office building in protest of this disgrace,” a former Aetna employee wrote. “What kind of leader gives his employees 2% while his earnings nearly quadruple???? Totally selfish.”

One of the reasons Bertolini mentioned “premium rate shock” to his company’s investors undoubtedly is that Aetna won’t be able to continue selling some of its most profitable health plans next year—the ones that have relatively low premiums but such limited benefits that they’ll actually be banned next year.

Since 2005, when it bought a firm that specializes in limited benefit plans, Aetna has been a major marketer of policies that provide such coverage — coverage so skimpy that former Connecticut Attorney General —and now U.S. Senator— Richard Blumenthal once called an Aetna limited benefit policy “virtually worthless.” Blumenthal was concerned that folks who had bought the policies “were led to believe they had significantly more coverage than they actually had."

Often called ‘junk insurance’ by consumer advocates, limited benefit plans typically have an annual cap of $1,000 to $15,000 and have significant restrictions on specific types of care, especially hospitalizations. But the marketing materials for these plans seldom draw attention to what is not covered.

As a consequence, many people have been shocked to find that they are on the hook for hundreds of thousands of dollars in hospital care they thought would be covered by their insurance policy.

One Aetna policyholder, Lawrence Yurdin of Austin, Tex. told The New York Times in 2009 that he and his wife had been forced into bankruptcy because of unpaid medical bills totaling nearly $200,000, even though he had what he thought was adequate insurance. As the Times reported, the brochure the Yurdins were provided indicated that their policy covered up to $150,000 a year in hospital care. Deep in the fine print, however, was language that excluded nearly all of the care Yurdin received for a heart condition at an Austin hospital.

It turned out that that $150,000 was for room and board. Coverage for “other hospital services”—which included just about everything else, including expenses incurred in the operating room—was capped at $10,000.

As the Times noted, “Aetna would have paid for Mr. Yurdin to stay in the hospital for more than five months — as long as he did not need an operation or any lab tests or drugs while he was there.”

Beginning January 1, Aetna and other companies that have made millions of dollars in profits from such plans, including Cigna, where I used to work, will no longer be able to sell them, thanks to the consumer protections in Affordable Care Act. Policies will have to provide decent coverage for hospitalization and other “essential benefits,” and the annual and lifetime caps will be banned. Insurers will also have to provide information in plain language about what is covered and in a format that will enable consumers to make apples-to-apples comparisons among plans.

Aetna CEO Bertolini probably was thinking of the thousands of people who are currently enrolled in limited benefit plans when he warned of premium rate shock. And he has a point. The premiums for such plans are low compared to policies that actually cover medical care doctors and nurses provide to cure you once you’ve been hospitalized. It’s not unreasonable to think that Aetna would charge its existing limited benefit customers more for real insurance—maybe even twice as much. But because insurers market limited benefit plans to low income workers, most likely will qualify for subsidies to help them pay the premiums.

Indeed those people might be shocked when Aetna tells them how much they’ll have to pay for a plan that is not “virtually worthless.” But at least they will be saved from the kind of shock that Lawrence Yurdin experienced when he realized that the money he had been paying Aetna in premiums—some of which went to pay Mark Bertolini’s salary—was not enough to keep him out of bankruptcy court.

OPINION: Obamacare's help for small business

2013-04-08T06:00:02-04:00

With April 15 approaching, some small business owners who provide health coverage to their workers are not going to be as indebted to Uncle Sam as they have in years past, thanks to Obamacare. That’s right, thanks to Obamacare.

Mike Roach, owner of Paloma Clothing, a women’s clothing store in Portland, Oregon, is among them. He is one of several hundred thousand small employers who have taken advantage of a provision of the reform law that provides a substantial tax credit to companies that offer health insurance to their employees. And not only is Roach able to save money, now that he’s offering coverage, he’s no longer losing valued employees to large department stores that have long provided benefits as a recruitment tool.

Roach had always wanted to offer coverage to his 12 employees but had found the premiums too steep. He said the message he kept getting from insurance companies was, “We don’t really want your business, but we will do business with you as long as we can gouge you.”

Small businesses like his have always had to pay considerably more for the same coverage as large employers. At big companies with hundreds or thousands of workers, insurers’ and employers’ risk is spread across a much larger “pool” of people. A few employees getting sick or injured in a given year at a big company would have a negligible effect on the risk pool.

Not so at a shop like Roach’s with just a dozen workers. Small business owners pay more because underwriters at insurance companies know that if just one worker at a small business gets sick, the insurer could wind up losing money on the account. Small businesses also lack the bargaining power of large firms.

As a consequence, more and more small companies have dropped coverage in recent years while big employers have continued to offer it.

“Not offering health insurance puts a small business like ours us at a distinct disadvantage,” said Roach, “especially when you consider that we are competing to have the best employees we can have to provide the best customer service against crack competitors like Nordstrom’s.”

So when he heard that the Affordable Care Act makes tax credits available to small employers that offer coverage, he talked with his accountant, who told him that the tax credits would make coverage affordable—not cheap, but affordable—for the first time.

Another motivation: his store manager was considering taking a job with a competitor that offered benefits.

“We didn’t want to lose her, and she didn’t want to quit,” Roach said, but her husband had just lost his job. She needed to work for a company that offered coverage.

Roach decided to go for it. He now pays about $29,000 in premiums for his workers, but he has received tax credits that have averaged $5,000 over the past two years. And he’ll save even more next year.

Under the law, small businesses that employ fewer than 25 people whose average wages are less than $50,000 get a tax credit equivalent to 35 percent of the employers’ contribution to the workers’ premiums. It will go to 50 percent starting next year.

Also next year, companies with fewer than 100 employees will be able to buy coverage through the online health insurance marketplaces (referred to as exchanges in the ACA). This should make polices even more affordable because the exchanges will pool the purchasing power of small businesses together. And starting next year, insurers will no longer be able to dramatically increase small business health insurance premiums because an employee got sick or older or because the business hired more women, who historically have been charged more than men.

Companies with fewer than 50 employees will not have to offer coverage, but Roach says he believes many if not most will do so once the exchanges are up and running and more employers learn of the tax credits.

“I would really encourage every business to take a serious look at it because if you can do it, you’re going to have a better workforce,” Roach said. “The employees you’re going to have are going to feel better about coming to work. They are more likely to stay with you, and they’re probably going to be more productive because they’re not going to have to worry as much about access to health care.”

Most small employers that provide coverage typically offer only one type of plan because offering multiple options increases administrative costs. That, too, will change, thanks to the exchanges, meaning that employees like Mike Roach’s will eventually be able to choose among competing plans just like employees at many large firms. The effective date of that change was originally scheduled to be January 1, 2014, but the Department of Health and Human Services is considering delaying it for a year. Even if it is delayed, though, many small business employees already are getting employer-subsidized coverage for the first time. And companies like Paloma Clothing are finally on a more level playing field with their bigger competitors.

OPINION: industry pushes high-deductible insurance plans

2013-04-01T09:41:26-04:00

Those accustomed to obtaining health insurance through the workplace and choosing among different types of policies may be in for a rude surprise.

Increasingly, employers of all sizes are eliminating choice and offering only high-deductible plans — euphemistically referred to in the insurance world as consumer-directed health plans or HDHPs.

The looming shift has nothing to do with Obamacare or even the widely held belief that certain types of health plans will encourage people to give up costly bad habits like smoking. It is about profit.

The trend appears to be irreversible. Within the next few years, most Americans not only will find that the plans they’ve been enrolled in for years are no longer available, but that they will also have to pay much more out-of-pocket for medical care.

There were many reasons why I left my job in the insurance industry, but near the top of the list was the expectation that I be, for all practical purposes, a snake oil salesman. If I were still in the business, I would be part of an industry-wide campaign to persuade employers, policy makers and the general public that high-deductible plans are the new silver bullet.

Not only will HDHPs reduce health care costs, according to the campaign propaganda, forcing people into them will cause them to lead healthier lifestyles.

That’s the hype. And the hype is necessary to obscure the real reason insurers and employers are herding more and more of us into HDHPs: they’re perfect vehicles to shift more of the cost of care from them to us.

Even in 2008, the last year I worked for an insurance company, my colleagues in the sales division were encouraging employers to go “total replacement,” which means eliminating all choices except high-deductible plans. Insurers have long used proprietary “studies” supposedly proving that making people pay more out of pocket for medical care will “incentivize” them to lead healthier lives.

As a new survey of employers by the benefits consulting firm Towers Watson shows, my former colleagues have been very successful.

Of the large employers surveyed by Towers Watson, 15 percent already offer nothing but account-based high-deductible plans. That’s nearly double the number of employers that had gone total replacement just three years ago. Towers Watson predicts that by this time next year, one of every four big employers will have dumped everything but HDHPs.

In a report about its most recent survey, Towers Watson contends “account-based health plans can be an important strategy for… facilitating the shift toward greater accountability from employees and more consumer-like behavior in their purchase of health care.”

Translation: forcing employees to shell out more of their hard-earned pay for medical care will make them switch from cigarettes to carrot sticks.

So, is there any evidence that’s really happening at companies that have gone total replacement?

No, according to a recent peer-reviewed study funded by the U.S. Department of Veterans Affairs and the Robert Wood Johnson Foundation.

As lead researcher Jeffrey T. Kullgren of the University of Michigan told me, he and his research colleagues wondered if it might be possible that associations between HDHP enrollment and healthy behavior could be due to healthier people volunteering to enroll in HDHPs because of the lower premiums and their lower likelihood of needing health care services.

“If this were the case,” Kullgren said, “then associations between HDHP enrollment and healthier behaviors should exist only among people who could self-select into that type of plan, and not among those who were less able to choose their plan.”

Kullgren and his research colleagues used nationally representative data to explore the relationship between HDHP enrollment and smoking among U.S. adults. After controlling for other factors, they found that associations between HDHP enrollment and smoking are only found among adults who could choose an HDHP, and not among adults who could not choose their plan.

Yes, it is true, as insurance companies contend, people in HDHPs smoke less, but it is not because they were forced into more-skin-in-the-game HDHPs. It is because HDHPs attract more nonsmokers than smokers to start with.

Kullgren’s research shows that when a company goes total replacement, smokers continue to puff away. The results are also consistent with findings from the RAND Health Insurance Experiment of several years ago that showed there were no lower rates of unhealthy behaviors among individuals who had been randomly assigned to plans with high levels of cost-sharing.

“Our findings suggest that offering only an HDHP to employees with the expectation that this will reduce rates of unhealthy behaviors like smoking — as a growing number of employers are now doing — may not have its intended effects,” Kullgren and his colleagues wrote.

If, despite Kullgren’s findings, the trend toward total replacement continues unabated, as it most assuredly will, it will not be because HDHPs make us behave any differently. It will be because insurers and employers know they can use them to shift more of the cost of care to us.

OPINION: gaming Obamacare to benefit the few

2013-03-25T11:03:46-04:00

We’re just a bit more than six months away from when Americans will have to begin making decisions about purchasing health insurance, but, according to a survey released last week, more than two-thirds of people who are currently uninsured don’t have much of a clue how Obamacare will affect them, including the fact that coverage will soon be mandatory.

On October 1, as required by the law, states must have online insurance marketplaces (known as exchanges) up and running so their residents can shop for coverage. Some states will be operating the exchanges on their own, but most have decided to either partner with the federal government to operate them or have the feds do all the work.

After October 1, the next most important date Americans need to know about is January 1, 2014. That’s when the mandate to have coverage goes into effect.

Making sure Americans become aware of that mandate and sign up for coverage before the end of the year will be an enormous undertaking, which is why Obamacare also includes a provision authorizing a broad range of organizations to serve as “navigators” to educate people about the law’s requirements and help them find plans that meet their needs.

The law states that entities eligible to be navigators — and to receive government grants to do the navigating — include “ trade, industry, and professional associations, commercial fishing industry organizations, ranching and farming organizations, community and consumer-focused nonprofit groups, chambers of commerce, unions, resource partners of the Small Business Administration, other licensed insurance agents and brokers, and other entities” the Feds deem capable.

In the past, agents and brokers have largely had the marketplace all to themselves because there have been no other formally recognized “navigators” to help people decide what kind of insurance policy makes the most sense for them. The agents and brokers have made a good living as middlemen between consumers and insurance companies because the insurance companies they represent pay them a commission for every policy they sell.

As you can imagine, agents and brokers are not happy that all those other organizations will be able to help folks “navigate” the health insurance world. And so they are trying to get laws passed at the state level that for all practical purposes would make it difficult, time consuming and expensive for any of those other groups to qualify as navigators.

The agents and brokers initially tried to get a committee of the National Association of Insurance Commissioners to adopt language to protect their interests. When that committee rebuffed them, they began pleading their case to another NAIC committee and also directly to state lawmakers.

As a result, bills are being introduced all over the country that might as well be described as the “Agent and Broker Income Protection and Enhancement Act.”

Take the measure introduced recently in the Missouri legislature by Rep. Christopher Molendorp — who happens to own the Christopher Molendorp Insurance Agency in Raymore, Mo. Like most of these bills around the country, Molendorp’s would establish restrictive licensure requirements that all would-be navigators would have to meet. And it would prohibit navigators who are not licensed agents or brokers from providing any advice to individuals or employers about specific plans or pointing out which ones might be better or worse than others.

This clearly is not what Congress intended, but the Affordable Care Act gives states fairly wide latitude to set up the navigator programs within their jurisdictions.

In fact, Jay Angoff, a former Missouri insurance commissioner who served as head of the Office of Consumer Information and Insurance Oversight at the Department of Health and Human Services, says bills like Molendorp’s would be a disservice to consumers.

“The beauty of the exchange system is that, if it works, you don’t have to use an agent,” Angoff said during a recent panel discussion on how states are implementing Obamacare. “You can go directly to the Internet, you don’t have to use an agent. If you want to use an agent, you can, but you don’t have to. I would hate for exchanges to build in the extra expense that requires people to use an agent that raises the price of insurance to be more than it should be based on the electronic system.”

But that is exactly what will happen if bills like Molendorp’s are enacted. Agents and brokers are hoping that the bills will even make it unlawful for people to buy coverage on the exchanges without first going through a licensed agent or broker.

Consumer groups are working at the state level to keep the bills from passing, but agents and brokers have a lot of clout in many state legislatures. If the consumer groups lose, premiums of policies purchased through the exchange will be much more expensive than necessary.

OPINION: reform will help level premium costs

2013-03-18T10:30:15-04:00

Recently I was one of three witnesses to testify before a House committee hearing on whether the cost of health insurance will be higher or lower for people who cannot obtain it through their employer when important provisions of the Affordable Care Act go into effect in a few months.

I cited studies that indicate the overall cost of coverage — premiums plus out-of-pocket obligations — will be lower. The others on the panel — Douglas Holtz-Eakin, who was director of the Congressional Budget Office during the Bush Administration, and Christopher Carlson of the actuarial firm Oliver Wyman, cited their own studies that indicate costs could be higher for some young adults who have benefited over the years from the prevalent insurance industry practice of charging older people up to 10 times as much as they charge younger folks.

Insurers will not be able to do that much longer. Beginning January 1, they’ll be prohibited from charging someone more than three times as much for insurance as anyone else for the same policy.

Congress would have been better served, in my opinion, if the witness list had included Jim Elder, a retired small business owner from Florida who I interviewed last week as I was preparing for my testimony and this column.

He would have been a better witness than all three of us combined, hands down. That’s because his story would have served as a real-world reminder of just how unaffordable — and even unavailable — health insurance has become for average middle-class Americans who have done nothing wrong other than get sick.

Jim Elder might not be a widower today had premiums for the health insurance coverage he was providing for his family and his employees not become so unaffordable after his wife was diagnosed with breast cancer that he had no option but to drop coverage for everybody.

Elder became a victim of a common but little known practice in the health insurance business called purging. That’s a term insurance executives use behind closed doors (and during conversations with shareholders and Wall Street financial analysts) to describe what they do to small businesses after an employee or dependent gets sick: jack premiums up so high that the employer either has to shift far more of the cost of coverage to workers or stop offering coverage altogether. In many cases, they are not offered a policy at any price.

Purging explains why far fewer small businesses offer health insurance to employees than a decade ago. And it’s one of the reasons I decided to leave my insurance company job. I couldn’t in good conscience continue working for an industry in which coverage for life-saving medical care was priced beyond the ability of millions of Americans to pay for no reason other than to meet profit goals.

Jim Elder’s wife, Leslie, died an untimely death at age 63 last summer, uninsured and facing foreclosure because no insurance company was willing to sell the Elders an affordable policy because of her age and, ultimately, her serious but treatable illness, Hodgkin’s lymphoma.

I learned of the Elders from a CNN report that described the nightmarish roller coaster they were on. Until Leslie got sick, they had what they thought was good medical coverage with stable premiums. Soon after her initial cancer treatments, they had no coverage at all because Elder Auto Repair was purged by Jim’s insurer. And in between: skyrocketing insurance premiums, high deductibles and stacks of unpaid medical bills. The Elders had to deplete their IRA and savings account to pay for Leslie’s care and were ultimately forced into foreclosure.

The Elders could not find affordable health insurance, and from the industry’s perspective, it’s easy to see why: insuring Leslie would not have been profitable. This is the dilemma we face as Americans, as we try to balance the demands of a health insurance industry driven by money against the needs of friends, family and loved ones who require insurance to survive and be productive citizens.

I know firsthand that insurers are eager to avoid the expense of providing coverage for people who, because of their age and health status, might need costly medical care. In a 2009 policy paper, America’s Health Insurance Plans, the industry’s biggest trade group, acknowledged that almost a third of people in Leslie’s age group were denied coverage every year.

One of the reasons for the congressional hearing was the industry’s massive PR and lobbying campaign to try to get Congress to change Obamacare so that states can decide how much insurers can charge people based on age. That would enable them to maintain the very profitable status quo. By restricting the amount insurers can charge older Americans, however, the Affordable Care Act will foil their attempts to deny coverage to people they want to avoid by charging exorbitant premiums. People who need medical care the most. People like Leslie Elder.

This new restriction is one of the most important consumer protections in the reform law. It would be a tragedy if Congress guts it.

OPINION: taking advantage of Medicare Advantage

2013-03-14T11:54:41-04:00

Facing government cuts to one of their cash cows—private Medicare plans—health insurance companies have launched a multi-pronged campaign, financed by the customer premiums, to persuade Congress to keep the cuts from going into effect next month.

The industry’s big PR and lobbying group, America’s Health Insurance Plans, is deploying the tactics I described in Deadly Spin to scare seniors into believing that if the federal government stops overpaying insurers that offer Medicare Advantage plans (the private alternative to the traditional government-run Medicare program) seniors will “pay more, get less and lose choices.”

“U.S. Health Insurers Launch TV War Over Medicare Advantage Cuts,” read the headline of a Reuters story last week when AHIP’s ads started running.

At issue is a 2.3 percent cut in payments to Medicare Advantage plans by the Centers for Medicare and Medicaid Services (CMS) that are scheduled to go into effect on April 1.

The industry’s campaign, of course, conveniently leaves out the fact that the government has been overpaying private insurers for years and that the cuts being proposed starting next month are part of a broader effort to put a stop to those overpayments.

Members of Congress inserted a provision in the Affordable Care Act to reduce the overpayments by $200 billion over the next several years. The 2.3 percent cut would be in addition to that.

It makes little sense for the government to overpay private insurers in the first place, but that is exactly what’s been going on for several years. During the administration of George W. Bush, which supported the privatization of the Medicare program, Congress passed legislation to provide incentives to insurers to offer private plans to compete with traditional Medicare. This enabled the plans to offer richer benefits than traditional Medicare at little or no additional cost to beneficiaries while also making a tidy profit.

It’s little wonder that the number of people enrolled in Medicare Advantage plans has increased rapidly. About one of every five Medicare beneficiaries are now enrolled in private plans. When the government enables you to offer plans with vision and dental benefits, lower copayments and discounts on gym memberships, all at no additional cost, you’re going to be able to lure a lot of seniors from traditional Medicare.

An agent for Humana Inc., one of the biggest Medicare Advantage companies, told me a few years ago that, thanks to the sweet deal insurers have been getting from the government, his job of enrolling healthy seniors in Humana plans was “like shooting fish in a barrel.”

AHIP’s campaign to kill the cuts includes intense lobbying on Capitol Hill as well as other tactics to influence public opinion, like paying for a survey to bolster its case that seniors are happy with their MA plans.

AHIP hired a polling firm to survey 800 seniors, half of whom were enrolled in MA plans and half in traditional Medicare. The result, according to AHIP: “Seniors in Medicare Advantage are as satisfied with their plans as seniors in traditional Medicare.”

AHIP clearly hopes no one pays close attention to the survey. If you do, you’ll see that people enrolled in traditional Medicare were actually more satisfied with their coverage (92 percent satisfied/very satisfied with 5 percent unsatisfied) than people in MA plans (90 percent satisfied/very satisfied with 7 percent unsatisfied).

AHIP did not disclose the full results of the survey or the methodology used by the polling firm, North Star Opinions, used. I asked for it, but no one has gotten back to me.

AHIP’s CEO, Karen Ignagni, has been quoted as saying that the MA program will go into a “tailspin” if the proposed cuts go into effect. She predicted that many people enrolled in MA plans will see their premiums go up and their benefits reduced and that many of them will actually be dropped by their MA insurers. That’s because some —if not many— of the private insurers will desert the market if the profit margins decrease on their MA business.

I can attest that that could indeed happen. Cigna, one of the companies I used to work for, used to operate private Medicare plans in several markets but left all but one several years ago, affecting more than 100,000 seniors, after the government adjusted payments to insurers. Aetna and a number of others insurers dumped thousands more. Shareholders were not happy that the business would be less profitable than before.

AHIP may have a hard time convincing the current Congress to take pity on insurers. Last week the Government Accountability Office released a report estimating that CMS overpaid private insurers between $3.2 billion and $5.1 billion from 2010-2012. Chances are, though, that far more people will see AHIP’s TV campaign than an obscure GAO report. And people won’t even know that insurers are behind the campaign. That’s because AHIP is using one of its front groups, the Coalition for Medicare Choices, as the sponsor of the campaign.

Insurers don’t want you to know they’re spending your money to mislead you in order to protect profits. Can’t blame them for that.