Benemax

Yup, it’s official. The American people have just received a collective lump of coal in their stockings. The U.S. Senate has passed the $870,000,000,000 Health Care Reform bill.

While the bill contains some positive features (e.g. insurance underwriting reform and expanded assistance for low income Americans), the legislation is loaded with provisions that will drive up the cost and drive down the quality of health care in the U.S. As much as we do need right minded reform, this bill will almost certainly do much more harm than good.

Chief among the disturbing aspects of this bill is a provision that would limit health benefit plans to 4 cookie cutter options (so called “Platinum, Gold, Silver, Bronze”). This feature would severely limit competition and undermine all the creative plan design efforts that have been the focus of employer groups and consultants over the past several years.

Also disturbing is the new tax on insurance companies, drug companies and medical device manufacturers; the cost of this provision will be directly passed through to customers in the form of higher premiums.

Finally, the bill severely cuts Medicare funding, threatens provider reimbursement levels and imposes all sorts of new bureaucratic regulations on the practice of medicine. At a time when 30 million new insureds are scheduled to be added to the insurance roles, Congress is determined to make the practice of medicine more difficult and therefore less attractive to “the best and the brightest” in our country.

You don’t need to be an expert to understand where this bill will take us. Newly insured Americans will increase the demand for services at the same time that new regulations and wage cuts will reduce the supply of those services. More demand + less supply = skyrocketting prices.

But the battle is far from over. The Senate bill needs to be reconciled with the House bill. There will be one more vote in both chambers, probably sometime in January, before this bill becomes law. A shift of just a handful of votes in either chamber would turn the tide.

Consulting firm Oliver Wyman was recently contracted by Blue Cross Blue Shield to evaluate the impact on premiums of the Patient Protection and Affordable Care Act (PPACA), the Senate’s version of Health Care Reform legislation.

According to Oliver Wyman’s study, small group premiums will increase 20% by the 5th year of Health Care Reform. This 20% is IN ADDITION to “normal” annual increases due to so-called trend (medical inflation, increased utilzation, aging population, etc…)!

To estimate the real world impact of this change, just take a look at your current premiums for single and family coverage; now add $100/month to the single premium and $250/month to the family premium. How will you (or your business) afford that increase?

So not surprisingly, Oliver Wyman also concludes that fewer small employers will offier health benefit plans if reform legistlation passes in its current form. Almost 3 million members, now insured by small employers, would lose coverage over the next 5 years. That is in spite of the tax credits and other provisions designed to encourage employers to offer health benefits to their employees.

There are many provisions in PPACA that contribute to this projected cost increase: the inclusion of sicker people in the insurance pool, the potential for “adverse selection” (as young, healthy people opt to go without insurance…until they need it), increased taxes on insurance companies, drug companies and medical devise manufacturers, and mandated minimum benefits to name a few.

Let’s look just at this last item. The Senate bill requires all health insurance plans to have an actuarial value of 0.6 or higher. Today 32% of individuals and 9% of small employers have insurance plans with an acturarial value of less that 0.6. (This does not necessarily mean that these folks have inferior benefits; in many cases their insured benefits are supplemented by various self-funded, equity account arragnements.)

In addition, PPACA exhaustively defines what it considers to be “essential benefits” and mandates that those benefits be included in all insurance plans going forward. Many employer sponsored plans lack one or more of these “essential” provisions. The cost of including ALL federally defined “essential” benefits in ALL employer sponsored plans will alone raise the cost of those plans by more than 5%!

No doubt the goals of Health Care Reform are lofty: universal coverage, richer benefits, etc. But if these reforms make even basic insurance unaffordable…or if they soak up all our discretionay income so that our quality of life deteriorates sharply…who will have gained?

Readers of this blog may have noticed that postings have been a bit thin of late. That is because (1) the House has passed its Health Care Reform bill and is on hold now for the Senate and (2) the official Senate bill changes daily, sometime hourly. Reacting to each twist or turn would be a waste of time. Now, however, the provisions of the Senate bill are beginning to take shape and it’s time to do some analysis.

Most of us hoped that the legislative process would result in an on-going improvement in the bills’ provisions. We thought that debate, ammendment and compromise would winnow out the bad ideas anad bring new good ideas to the forefront. The opposite has happened!

 The bills keep growing in length (2,000 pages at last count, up from 800 at the beginning), the provisions are becoming ever more convoluted and arcane and the worst ideas seem to be winning out over their better rivals.

Case in point: earlier we had a great debate (followed closely in this blog) over the idea of creating a “public option” (government run) health plan to compete with private insurance companies. There was something to be said for both sides. But now, a “compromise” has emerged and part of that compromise is a provision that would permit people between the ages of 55 and 64 to buy into Medicare. What’s wrong with that?

Just everything! First, Medicare does not provide the comprehensive coverage most Americans want. As a result, most seniors also purchase a “Medigap” policy to pay for all the things Medicare won’t.

Second, the Congressional Budget Office (CBO) projects that the premium for single coverage would be $600/month. How is that a good deal? It’s almost double what the average single pays for health coverage now.

Third, because this plan is part of Medicare, health care providers will be paid at Medicare rates…that’s 20% to 30% below market rates. So the physicians are being asked to subsidize this product for the benefit of the 55 to 64 year old community. That subsidy is what allows the cost to be as low as $600/month. Without the subsidy…

Fourth, this is the same Medicare program that we’ve been told may go bankrupt in 10 years. It’s a bit like evacuating the passangers from the Titanic onto a ship that is already going down.

So everyone loses! Less benefit, higher premiums, lower compensation for health care providers and more stress on an already strained Medicare program. The perfect solution…if you live inside the Beltway!