Benemax

Proponents of so-called ‘Obama Care’ (the President’s health care reform proposals) suffered a double set back yesterday.

Strike One: A new poll released by Rasumussen showed support for Health Care Reform at an all time low. 56% now oppose the bills currently being considered by Congress while only 41% favor them. Clearly, the more people learn about the proposed “reforms”, the less they like them.

Even more tellingly, those strongly opposed to the current reform proposals exceed those strongly in favor by 2 to 1. Likewise, those who believe that reform will increase the cost of health care outnumber those who believe it will reduce that cost by the same 2 -1 margin.

The President pulled out all the stops on September 9 with his speech to Congress. He did get a short term bounce in the polls but that has more than corrected itself. Supporters of Obama-style Health Care Reform need to face an incontrovertible fact: while they may eventually win the battle in Congress, they have irretrievably lost the battle for “the hearts and minds” of the American people.

Stike Two: Shortly after the release of the new Rasumussen numbers, the Senate Finance Committee delivered its own 2 -1 rebuke of the President’s proposals. By a surprisingly large 15 - 8 margin (5 Democrats jumping ship) the Committee voted NOT to add a public option to the bill it is considering.

But this is far from the end of the line. The Finance Committee’s bill will need to be reconciled with the HELP Committee’s bill and ultimately with the House bill. While battle for public opinion is essentially over, the legislative battle is just beginning.

When we blogged on the “Baucus” Health Care Reform proposal last week, we warned that the extensive powers being granted to the federal government could later be used to change the terms of the compromise and plunge us headlong into a cookie-cutter, government mandated health benefit system. We had in mind developments that might occur in a year…or two…or ten.

Well, guess what! It’s been exactly one week and it’s already happening!

The Senate Finance Committee has accepted an amendment that would require plans offered by small businesses to have member deductibles of no more than $2,000. Just last week this blog praised Senator Baucus for linking the definition of Minimum Creditable Coverage to the out-of-pocket limits currently in force for Health Savings Accounts (almost $6,000…indexed).

But lo and behold, now we have a new limitation: plans may not have deductibles in excess of $2,000…and no indexing. This is a perfect example of what we have to look forward to. There is a real danger that the reasonable standards originally proposed by “Baucus” will morph over the coming days…months…decades into a government mandated first dollar benefit plan that could bankrupt us all.

But there is a bright side! The amendment to Baucus apparently does allow employers to buy plans with deductibles greater than $2,000, provided that the employers fund the amount above $2,000 via an HRA, HSA or 105 Plan like the Benemax Wrap. That’s great news…if it sticks.

The “Gang of Six”, three Democrat and three Republican members of the Senate Finance Committee, failed to reach agreement on a compromise, bi-partisan Health Care Reform Bill. However, their work was not in vain. The Bill being marked up in Committee this week is considerably more moderate than its earlier House and Senate cousins (see prior blog for details).

Nonetheless, a new Gang of seven Senators has formed to try again to reach a bi-partisan consensus. This “Gang of Seven” includes GOP Sens. Susan Collins and Olympia Snowe of Maine, Sen. Joe Lieberman (I-Conn.) and Democratic Sens. Ben Nelson (Neb.), Claire McCaskill (Mo.), Mary Landrieu (La.) and Ron Wyden (Ore.).

Meanwhile, over on the front benches of the House, Republican leaders have signaled that they are on board with about 80% of the Democrats’ reform bill and the Democratic leadership has responsed with an invitation to the Republicans to lay out the details of their proposed “4/5ths Compromise”.

And on the back benches, Blue Dog Democrats are reaching across the aisle seeking to form a coalition with Republicans to advance an alternative bill.

Last week the Senate Finance Committee (Max Baucus, Chair) released the long awaited first draft of its proposed Health Care Reform legislation. The Baucus Plan (”Baucus”) differs from House’s Tri-Committee bill and the Senate HELP Committee’s proposal. Overall, “Baucus” is more thoughtful and more moderate. While it still raises concerns, it is a much better starting point for a rational national conversation about the future of health care in America.

One blog post cannot begin to do justice to this complex proposal. In the days and weeks ahead we will focus on specific provisions of this bill in more detail. For now, let’s just hit the highpoints:

> No public plan, period! Instead there would be state run Insurance Exchanges and Non-profit Co-ops.

> In the non-group (Individual) insurance market place, insurers would immediately be required to offer all policies on a guaranteed issue, guaranteed renewable basis. Insurers would be forbidden to limit coverage of pre-existing considtions, raise rates based on claims history or rescind coverage. On this, Baucus hits a grand slam!

> The same rules would extend to the Small Group Market (50 or fewer eligible employees) but not until 2013 and then only on a phased-in basis.

> Baucus also offers small employers (this time up to 100 employees) “safe harbor” protection from the non-discrimination rules that apply to so-called “Cafeteria Plans” (which include most health benefit plans since most employees contribute to those plans with pre-tax dollars). Qualifying for the safe harbor will not be difficult for most employers so this is a great idea..another home run!

> As promised by President Obama, individuals and groups would be allowed to renew existing plans. However, these plans would not be eligible for any of the bill’s tax credits and they would have to conform to new “rating rules” by 2013.  Also, presumably, they could not be amended. How long can any employer go before it HAS to amend its benefits? Will insurance companies even agree to renew old policies indefinitely? This is at best a short term reprieve from the full impact of Health Care Reform

> Most importantly, all new policies issued to individuals and small groups would have to conform to fairly specific government imposed design requirements. All policies would have to include a common list of covered services and plans would have to fit into one of four cost/benefit tiers based on the actuarial value of their benefits. This provision, at least in its current form, is probably the most worrisome provision of the bill. It would severely limit the plan design creativity of insurers and employers alike. We will discuss this provision is greater detail in future blogs.

> Plans could not have out-of-pocket exposures of more than that allowed for HSA qualified health plans ($5,950 for individuals, $11,900 for families in 2010). This is a restriction that I think we can all live with. However, there is a further provision that these maximums would be reduced for low income plan members. How that would work remains to be seen.

> Baucus imposes a mandate on most Americans to have qualified health benefits in place by 2013 or pay a fairly significant income tax penalty!

> In general, Baucus does NOT impose a mandate on employers to offer health benefits to their employees. However, employers with more than 50 employees who do not offer benefits would be required to pay some or all of the cost of tax credits claimed by their employees for the purchase of individual policies. This is an interesting approach whose impact will vary widely from employer to employer.

On first read, Baucus looks like a pretty good start…BUT with two big caveats:

First, many of these provisions are just in outline form. The devil is always in the details. How these provisions take shape as the legislation moves through the Senate and then on to Conference Committee and then into the regulatory phase will make all the difference.

Second, the plan puts in place ALL the mechanisms needed for a total federal take-over of the health care system down the road. While the provisions of Baucus are generally mild, the bill establishes the precedent for the government to dictate acceptable benefit levels, order states to follow its direction, impose business practices on insurance companies and mandate both individual and employer behavior.

Our future blogs will comment further on these two key concerns.

Exit polls taken on election day 2008 turned up something surprising. While some Obama voters saw him as ultra-liberal, others classified him as a moderate and some even called him a conservative. Clearly, the President-elect’s campaign message had accomplished something magical. When voters looked at Obama they saw precisely what they wanted to see: their own political views reflected back at them by the candidate of their choice.

President Obama’s Health Care address last week gave us all an inside view of how Candidate Obama achieved this effect. No matter what your position on Health Care Reform, your views were represented in the President’s speech.

“The Plan I’m announcing…will provide more security and stability to those who have insurance…provide insurance for those who don’t (and)…slow the growth of health insurance costs…”

Well, we’ve all been working toward these goals for decades. The problem is how actually to achieve them? 

Do you support a public plan, or a network of non-profit co-operatives, or a trigger mechanism that would create a public option only if the free market failed to hit certain markers; or do you oppose a public offering entirely? Not to worry, the President agrees with you! 

Whatever your view on this topic, you could find support for it in the President’s speech.

What is your view of individual and/or employer mandates? The President supports them (”…individuals will be required to carry basic health insurance…businesses will be required to offer their workers health care or chip in…”) but only “basic” coverage would be required (whatever that is) and “there will be a hardship waiver for those individuals who still can’t afford coverage and 95% of all small businesses…would be exempt from these requirements.”  So what’s changed?

And what if you’re perfectly happy with your existing coverage? “Nothing in our plan requires you to change what you have.” Except that it does…in the very next paragraph. Example, “We will place a limit on how much you can be charged for out-of-pocket expenses.”

What else does the President suport?

“Quality, affordable choices…low-cost coverage…choice and competition…high-quality care at costs below average…common-sense best practices…reducing hospital infection rates…encouraging better coordination between teams of doctors.” Wow!

But what do YOU think is the key to improving our health care system:

Greater emphasis on preventive care? Guaranteed issue insurance? An end to pre-exisiting condition exclusions? Avoiding excessive adminstrative costs? Reducing waste and inefficiency? Reforming our medical malpractice laws?

Well, you’ll be glad to hear that your President agrees with you…all of you!

With so much free-floating goodwill, can we find anything at all in the President’s speect that gives us pause? The answer is yes: everything that is at all specific. For example:

“…by creating a new insurance exchange…customers will have greater leverage to bargain with insurance companies for better prices and quality coverage.”

This repeats the old myth that “bigger is better” and that the core problem with our health care system is insurance company waste and greed. The fact is that many insurance carriers (e.g. Blue Cross Blue Shield of Massachusetts) pay-out in claims 90 cents of every dollar they take-in in premium. How much better can consumers do by bargaining en masse with a carrier like this? And how much difference could it possibly make in the big picture? Won’t work!

“…insurance companies…argue that these private companies can’t compete fairly with the government. And they’d be right if taxpayers were subsidizing this public insurance option.”

First, taxpayers are subsidizing the public plan by capitalizing its launch. But that’s not the main point. The real reason private insurance cannot compete against a public option is that the public plan will pay doctors and hospitals 80 cents on the dollar. Could your business survive if a competitor could buy raw materials for 20% less than you? Of course not! Can America solve its health care problems simply by cutting the incomes of doctors and other health care professionals? Can’t work!

“Reducing waste and inefficiency in Medicare and Medicaid will pay for most of this plan.”

Does anyone seriously believe this? And if it is true, why aren’t we reducing that waste and inefficiency RIGHT NOW, regardless of when and in what form Health Care Reform becomes a reality. Defies logic!

“…much of the rest would be paid for with revenues from the very same drug and insurance companies…” 

Can anyone imagine that the government can impose major new taxes on insurance and drug companies and NOT drive UP the cost of health care and health insurance? Defies economics!

Amidst the soaring rhetoric of the President’s address (and make no mistake, he did a GREAT job) lie certain key facts. And these facts add up to one thing: there is zero real money is the system to pay for this $900 Billion program.

“…excessive administrative costs and executive salaries…waste and inefficiency in Medicare and Medicaid

Walking a tightrope between ultra-left-wing Pelosi Democrats and his own party’s Blue Dog Coalition, President Obama gave everyone something to cheer about last night. His speech was well crafted, persuasive, and of course, well delivered.

He renewed his support for a “Public Option” health plan…but he also gave favorable mention to non-profit cooperatives and in the end he said that any public plan was a means to an end and not an end in itself.

He continued his support for an individual and an employer mandate (all Americans must purchase health insurance and all employers must provide it) but he added that only “basic coverage” would be mandated and he went on to say that some individuals and most small businesses would be exempt from the requirement.

In short, the President offered something for everyone and left all of us more confused than ever about his real bottom line.

In two crucial respects, however, the President’s speech misrepresented fundamental realities. First, he cited the benefits of free market competition in advocating the public plan option. He failed to mention that the proposals before Congress do NOT provide for such “free market competition”. Instead, they would give the public option an insurmountable competitiive edge by setting providers’ payments at 80% of current market rates and by requiring all providers to accept payment at that level.

Second, he stated that the mandate proposals would require individuals and employers to purchase basic coverage only. In fact, however, the bills in Congress would require individuals and employers to purchase coverage that is considerably richer than the coverage most Americans enjoy today. The actual mandate proposals require old fashioned “first dollar” benefits, a model that has proven to be ultra-inflationary and that most employers and individuals have abandoned in recent years.

Apparently, the President’s strategy is to get Congress to vote for the cover without reading the book.

In a few hours, it will be September 8…and the battle over the future of health care in the United States will begin in earnest. No doubt, August was a good month for those of us who favor reforms that would reduce the number of uninsured Americans and improve access to affordable care and benefits…without destroying the existing health care and health benefit systems in the process.

August was a good month…but the “counter-attack” begins tomorrow! President Obama will kick it off with an address to the nation’s school children followed by a televised address to a Joint Session of Congress. We are told he will emphasize “common ground”.

And there is common ground! Most Americans support three things: (1) additional assistance to lower income Americans to ensure that more people can be covered by affordable health benefits; (2) underwriting reforms that would prevent insurance carriers from denying or cancelling anyone’s benefits based on health history (e.g. pre-existing conditions); (3) payment reforms that will reward health care professionals for providing high quality care and achieving favorable outcomes.

If the President proposes a plan based on these three principles, he will enjoy the support of most Americans. But if his proposals expand the role of the federal government, micro-manage everyone’s health coverage, and limit the ways individuals can provide health benefits for themselves and their families, that common ground will quickly disappear.

Stay tuned!