CBO: Because of Our Massive Uncertainty on the ACA's Myriad of Impacts, We Have No Clue What a Repeal Would to do the Deficit

Yet Most Media Reports Lead Readers to Believe Impacts Would be Catastrophic

[I was on the Armstrong & Getty Radio Program this morning 

discussing this and other stories.  That audio can be heard here.]

Earlier this month, in anticipation of the Supreme Court's decision in the King case, the Congressional Budget Office (CBO) released its latest report on the impacts the health reform law.  In this 24-page release the question addressed was, what a repeal of Obamacare do to the federal deficit.  The CBO concluded, in part that, "the uncertainty is sufficiently great that repealing the ACA could in fact reduce deficits over that period—or could increase deficits by a substantially larger margin than the agencies have estimated."

Ultimately, the CBO estimated that the net increase in the federal deficit would be $137 billion when evaluating all of 2016 to 2025.  However, the CBO also expects deficits to total $7.2 trillion over those same years.  That is, the government's report concludes that it cannot accurately project whether a repeal of PPACA would increase, reduce or have no impact on federal deficits.  But, when compelled to give one answer, their best guess is that it would increase the deficit by 1.9%. Stated alternatively it would increase our national debt by 0.75% - well within their margin of error.

Here are the top six headlines generated by a Google news search at 7:30 AM PST on June 29, 2015 for the words: "ACA repeal deficit CBO"

A reading of these headlines leads one to believe that a repeal would clearly and decisively be a horror. Two of the stories even seize upon the incorrect $353 billion number.  When in reality the actual impact is not something the CBO was nearly so certain of and, in any case, would be $137 billion - not $353 billion.

Here is how Investor's Business Daily more accurately summarized the story:

ObamaCare advocates tout a new Congressional Budget Office report saying that ObamaCare's repeal would boost the deficit. But read the actual report. It tells a far different, more disturbing tale about this law. ...  

Actually, given that the CBO expects deficits to total $7.2 trillion over those same years, the increase is more like a rounding error than a blowout.
But what the CBO's latest analysis does is provide three more reasons ObamaCare is a bad deal for the American public. 

• It's bad for the economy. President Obama sold ObamaCare as a major boost to the economy. But the CBO says ObamaCare is hurting the economy and that its repeal would boost the nation's GDP by 0.7% from 2021 to 2025. Based on the CBO's own GDP forecasts, that translates into $886 billion. When you account for these economic effects, ObamaCare's impact on the deficit shrinks to just $137 billion.  

• It relies on phony accounting. The only way the CBO can claim that ObamaCare would reduce the deficit by any amount is by assuming — as it must — that the roughly $800 billion in Medicare provider cuts all take effect. But that's a fantasy. The Medicare Board of Trustees says these payment cuts aren't realistic over the long term. And Obama just signed a law repealing Congress' last attempt to impose deep cuts to doctors. 

• Past forecasts have been wildly wrong. Back in 2011, the CBO said ObamaCare would cut the 2016-21 deficit a total of $109 billion. Now it says it will boost deficits by $109 billion over those same years, once you factor in the harm ObamaCare will do to the economy. 

To its credit, the CBO admits its latest forecast should be taken with heaping grains of salt. "All of the resulting estimates," it notes right upfront, "are subject to substantial uncertainty." ...

How King v. Burwell Can be Read to Restrict Administrative and Executive Powers, While Increasing the Role of the Courts

Below is a portion of a longer Client Advisory from Alston & Bird.  It makes a couple of fascinating points about the Supreme Court's decision in King.  Namely:

1. The way it was decided precludes a future administration from undoing it in the regulatory process with a new interpretation of whether "State" means "State" or if it means "State or federal."  And, 
2. In the long run, it can lead to a decrease in the power of federal bureaucracies as the Court refused to grant significant deference to a bureaucracy on a matter that was as pivotal and weighty as the subsidy question.  

From Alston & Bird:

For administrative law, there are notable implications of the decision because the majority opinion does not follow the ordinary Chevron rules for interpreting ambiguous provisions in a statute. Ordinarily, when a court construes an ambiguous statutory provision under Chevron, the court would defer to the interpretation adopted by the federal agency that administers the statute (here the IRS) as long as that interpretation is reasonable—even if the court does not believe the agency’s interpretation to be the best interpretation of the statute. As noted in the Court’s opinion, the basis for deference is the theory that by enacting an ambiguous provision, Congress delegated responsibility to the pertinent agency to fill in the gaps in the statute. A corollary to that delegation (and deference) is that the agency could change its regulatory interpretation of the statute as long as the agency’s new interpretation is a reasonable or plausible interpretation of the statute. 

Here, the Supreme Court construes ambiguous statutory language directly, in lieu of deferring to the IRS’s interpretation. The Court acknowledges that this is a departure from the ordinary rules of interpretation but is necessary, given that King is an “extraordinary case.” The Court reasons that the availability of tax credit subsidies (to make health insurance affordable) is so central to the statutory scheme that Congress would not have intended to delegate responsibility to the IRS to decide the question. Although the Court’s approach is unusual, it ends up with the same result as if the Court had applied Chevron deference: upholding the IRS Rule implementing the tax credit subsidies. While the Court’s interpretive approach does not lead to a different outcome than would likely have obtained under a Chevron step 2 analysis of the IRS Rule, both its approach and its conclusion that Congress would not have delegated authority to the IRS to fill the gaps in the statutory provision by rulemaking could have implications on a future administration’s ability to change the IRS Rule: If the Congress did not delegate authority to the IRS to interpret IRC § 36B, a future administration cannot amend the IRS Rule to limit premium subsidies to insurance policies purchased through state-established Exchanges. 

The Court’s message is clear: Courts need not always defer to the pertinent agency when construing ambiguous statutes. Although this is a victory for the current Administration, the majority’s decision in King v. Burwell could be seen as reducing the power of the Executive Branch in interpreting and implementing statutory schemes—and increasing that of the Judicial Branch in the situations where a court chooses not to apply Chevron deference but to independently interpret an ambiguous statutory provision for itself.

   The added emphasis is mine.

On Armstrong & Getty This Morning with the Latest on PPACA, the Supreme Court Ruling on Subsides and Domestic Partnerships

I visited Jack and Joe in studio this morning.  We discussed the latest from the Congressional Budget Office on Obamacare, some of the woeful coverage of that report, the Supreme Court decision on exchange subsidies and how domestic partnerships are no longer necessary (and maybe even discriminatory) now that anyone can marry. 

  

Related Story - CBO: Because of Our Massive Uncertainty on the ACA's Myriad of Impacts, We Have No Clue What a Repeal Would to do the Deficit

  

Breaking, Supreme Court Upholds Subsidies in all 50 States (King v Burwell)

The Supreme Court issued its decision this morning upholding the IRS's interpretation that has allowed subsidies in all 50 states.  Hence, PPACA will continue to deliver subsidy support as it has been.  

From the AP:  

The Supreme Court on Thursday upheld the nationwide tax subsidies under President Barack Obama's health care overhaul, in a ruling that preserves health insurance for millions of Americans. 

The justices said in a 6-3 ruling that the subsidies that 8.7 million people currently receive to make insurance affordable do not depend on where they live, under the 2010 health care law. 

The outcome is the second major victory for Obama in politically charged Supreme Court tests of his most significant domestic achievement. 

Chief Justice John Roberts again voted with his liberal colleagues in support of the law. Roberts also was the key vote to uphold the law in 2012. Justice Anthony Kennedy, a dissenter in 2012, was part of the majority on Thursday. 

"Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them," Roberts wrote in the majority opinion. 

Nationally, 10.2 million people have signed up for health insurance under the Obama health overhaul. That includes the 8.7 million people who are receiving an average subsidy of $272 a month to help pay their insurance premiums. 

Of those receiving subsidies, 6.4 million people were at risk of losing that aid because they live in states that did not set up their own health insurance exchanges. ...

Here is a key portion from the Supreme Court's decision:

When analyzing an agency’s interpretation of a statute, we often apply the two-step framework announced in Chevron, 467 U. S. 837. Under that framework, we ask whether the statute is ambiguous and, if so, whether the agency’s interpretation is reasonable. Id., at 842–843. This approach “is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.” FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000). “In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.” Ibid. 

This is one of those cases. The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep“economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly. Utility Air Regulatory Group v. EPA, 573 U. S. ___, ___ (2014) (slip op., at 19) (quoting Brown & Williamson, 529 U. S., at 160). It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort. See Gonzales v. Oregon, 546 U. S. 243, 266–267 (2006). This is not a case for the IRS. 

It is instead our task to determine the correct reading of Section 36B. If the statutory language is plain, we must enforce it according to its terms. Hardt v. Reliance Standard Life Ins. Co., 560 U. S. 242, 251 (2010). But oftentimes the “meaning—or ambiguity—of certain words or phrases may only become evident when placed in context.” Brown & Williamson, 529 U. S., at 132. So when deciding whether the language is plain, we must read the words “in their context and with a view to their place in the overall statutory scheme.” Id., at 133 (internal quotation marks omitted). Our duty, after all, is “to construe statutes, not isolated provisions.” Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson, 559 U. S. 280, 290 (2010) (internal quotation marks omitted). 

We begin with the text of Section 36B. As relevant here, Section 36B allows an individual to receive tax credits only if the individual enrolls in an insurance plan through“an Exchange established by the State under [42 U. S. C. §18031].” In other words, three things must be true: First, the individual must enroll in an insurance plan through “an Exchange.” Second, that Exchange must be “established by the State.” And third, that Exchange must be established “under [42 U. S. C. §18031].” We address each requirement in turn. 

First, all parties agree that a Federal Exchange qualifies as “an Exchange” for purposes of Section 36B. See Brief for Petitioners 22; Brief for Respondents 22. Section 18031 provides that “[e]ach State shall . . . establish an American Health Benefit Exchange . . . for the State.” §18031(b)(1). Although phrased as a requirement, the Act gives the States “flexibility” by allowing them to “elect” whether they want to establish an Exchange. §18041(b). If the State chooses not to do so, Section 18041 provides that the Secretary “shall . . . establish and operate such Exchange within the State.” §18041(c)(1) (emphasis added). ...

Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt. The judgment of the United States Court of Appeals for the Fourth Circuit is affirmed.  

And from the Dissenting Justices:

JUSTICE SCALIA, with whom JUSTICE THOMAS and JUSTICE ALITO join, dissenting. 

The Court holds that when the Patient Protection and Affordable Care Act says “Exchange established by the State” it means “Exchange established by the State or the Federal Government.” That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so. ... 

Words no longer have meaning if an Exchange that is not established by a State is “established by the State.” It is hard to come up with a clearer way to limit tax credits to state Exchanges than to use the words “established by the State.” And it is hard to come up with a reason to include the words “by the State” other than the purpose of limiting credits to state Exchanges. ...

The Act that Congress passed makes tax credits available only on an “Exchange established by the State.” This Court, however, concludes that this limitation would prevent the rest of the Act from working as well as hoped. So it rewrites the law to make tax credits available everywhere. We should start calling this law SCOTUScare.  

 

Study: Wellness Programs Don't Help People Lose Weight

In sum:

• Broad, one-size fits all wellness programs force us to lower standards for success
• They settle for one-time participation in an activity like a health assessment or biometric screening as the engagement baseline
• This allows us to say that 75% of employees engaged in the annual health assessment 
• But we don't meet more meaningful standards, like 50% of an at-risk population successfully reducing their risk for developing a chronic condition 

This is from Anthony Brino writing at Healthcare Payer News:

Once much-vaunted, the broad-based workplace wellness program is coming under more skepticism, as new data suggests the prevailing models may not be achieving some main goals. 

While more than 30 percent of American adults are obese, there “is little evidence to guide the design of health benefit incentive plans for weight loss,” wrote Mitesh Patel, MD, and a team of University of Pennsylvania researchers that probed one increasingly common approach in employee health plans—weight control incentive programs. 

Patel and his colleagues studied the effectiveness of health plan premium adjustment for weight loss and two alternative behavioral approaches by following 200 adult, obese employees at a large health system in Philadelphia. About 80 percent the employees were female and all had a body mass index of more than 30, the threshold for obesity, with an average BMI of 36 and average weight of 227. 

The employees were given the goal of losing 5 percent of their body weight and randomized into a control or one of three interventions. One was a standard where they received $550 off the next year’s premiums for meeting the goal, another was an “immediate gratification” intervention where they received $550 as soon as they met the goal, and another was a lottery, where each employee had an $18 percent chance of winning $10 and a $1 percent chance of winning $100 for each day that their weight was in decline to the 5 percent goal over the course of 12 months. 

Despite these incentives—including enough money for a short vacation—no real progress was made among the participants, who on average were in their mid-forties, Patel and his colleagues found. 

“Workplace wellness programs using health premium discounts were not effective for promoting weight loss,” they wrote, presenting the results at Academy Health. “A daily lottery incentive unbundled from health premiums was also not effective.” ...

After a full year, the average weight loss for the control group was less than two pounds, and there were “no significant differences compared to the standard incentive arm, the immediate gratification incentive arm, or the daily lottery incentive arm,” Patel and colleagues wrote 

Their conclusion is that wellness programs using financial incentives for weight loss “need further evaluation and may need to be launched in combination with other engagement strategies.” ...

“While working at a large benefits consulting firm, I cringed every time I heard someone quote the famous movie line ‘If you build it, they will come,’ in reference to employee wellness programs,” wrote Matt Cook, a director Omada Health, a “digital therapeutics” and wellness startup. 

“Perhaps a better line to describe the current state of wellness programs would be ‘If you build it, and spend a lot of money to incentivize people to use it, they will come—but they probably won’t stay or change their behavior long-term,” Cook wrote in a post on the Institute for HealthCare Consumerism. 

Broad, one-size fits all wellness programs “force us to lower standards for success,” Cook argued. “As a result, we settle for one-time participation in an activity like a health assessment or biometric screening as the engagement baseline. Sure, this allows us to say that ‘75 percent of employees engaged in the annual health assessment.’ But it makes it impossible to meet more meaningful standards, like ‘50 percent of my at-risk population successfully reduced their risk for developing a chronic condition.’” 

 

How Voluntary Benefits Can Make Your Offering Look 'Second' Class and Backfire with Employees

This is an excerpt from a well-written, longer piece from Marsh Consulting Group: 

Whether it’s critical injury insurance, cancer insurance, or pet insurance...the hype surrounding voluntary benefits seems to increase every fall. Led by the calls of an animated duck, many employees hear the sales pitch for these products and become convinced that the extra premiums they pay will protect them financially from the risk of catastrophic accidents and illnesses. Employers, pinched between ever-rising health care costs and employee protests against higher deductibles, open the door for a voluntary sales pitch as an escape route. But employers who offer robust benefits packages aren’t doing their employees a favor by adding these kinds of voluntary benefits. These products, which typically pay out less than 50% of the premiums toward actual claims, may in the end hurt employers’ credibility once their employees realize that voluntary benefits aren’t much of a benefit after all. 

Employees pay 100% of the premiums for voluntary benefits in return for a cash payout for an approved claim. Employers like voluntary benefits because they do not pay any of the cost, unlike with their other health and welfare benefits. Employees like voluntary benefits because they feel threatened by the high deductibles and out-of-pocket limits set by their health plan to control costs. Some voluntary benefits, such as disability or term life insurance, may make financial sense for employees if the potential loss is more than they can cover with their savings. The problem with many other voluntary products is that employees trade a reduction in their monthly take-home pay to protect against a very small risk of incurring a large claim. In many cases, employees are already protected against a large financial loss by their health plan, group disability plan, and other employer-provided benefits. ... 

Why Brokers Push Voluntary Benefits 

...Voluntary benefits often provide the broker with a first-year commission exceeding 60%, compared to a 3-7% commission for health plans.  No wonder brokers are raving about voluntary products! ... 

The Difference Between Group and Individual Voluntary Benefits Products 

Not all voluntary benefits are a bad deal. For example, life and disability benefits can be valuable because the financial consequences of a death or disability can be catastrophic. Voluntary dental and vision coverage can also make sense. 

While dental and vision claims are never catastrophic, this coverage is often a good value because insurers are able to negotiate network discounts with providers. But do critical illness, accident, and cancer voluntary benefits make sense? These voluntary benefits are intended to cover a portion of one’s deductible and coinsurance under certain circumstances. Ideally, employees are able to self-fund their out-of-pocket costs for such events through tax-advantaged HSAs or FSAs.... 

In sum, most mid-size employers offer “first class” benefits packages that already provide strong financial protection against serious illnesses and accidents. Be careful not to push “second class” voluntary benefits on your employees that may be in the best interests of your broker instead of your employees.

 

Making Sure You Earn Less Than 4X Federal Poverty Opens Up a Devious Little Obamacare Tax Loophole

Nothing spurs innovation, creativity and job growth like complex tax notches that incentivize fraud and the suppression of one's own income.  Here is an excerpt from a longer piece up at CATO demonstrating an absurd Obamacare subsidy and reporting loophole: 

... To illustrate the Obamacare reporting loophole, consider the health insurance marketplace in Hialeah, Florida with two consumers. The first, Michael, is single, age 49, a non-smoker, and makes $46,000. The second, Lisa, makes $47,000 but is otherwise similar. Both find themselves ineligible for a taxpayer subsidy on HealthCare.gov and in searching more than 80 plans decide on a Humana Bronze plan with an annual premium of $4,092.

Where’s the reporting loophole? If Michael reports that he expects to make just $12,000 during 2015, he’ll ultimately pay $1,250 for his health insurance. If Lisa does the same, she’ll be on the hook for full amount. The Obamacare reporting loophole lowers Michael’s payment by more than $2,800, even though he wasn’t eligible for a taxpayer subsidy at all.

How does Michael profit from this? Obamacare offers sizable taxpayer subsidies to those with low income. Even so, many would have difficulty paying more than $4,000 in advance for health insurance. Instead, consumers can report their anticipated income and then have the subsidy advanced directly to the insurance company. Advanced reporting of income runs into a practical issue: Michael or Lisa might make an inaccurate report. If so, the advance subsidy would be incorrect. One might expect that Michael or Lisa would have to square up during tax filing season, a process the IRS calls reconciling. For single individuals like Michael with income under $46,680 (400% of the poverty line), the way in which the advance subsidy is reconciled encourages misreporting. Michael faces a repayment limit of at most $1,250, if the taxpayer advance to the insurance company was too large. In contrast, there is no upper limit on repayment for Lisa, because her income is above 400% of the poverty line. ...

  

The Costliest Large Claims on a Health Plan

This is from Business Insurance, summarizing a study from Sun Life Financial on stop-loss claims:

The top 10 costliest conditions, which remained generally consistent with last year’s report, accounted for more than half of the total claims paid at 52.8%, Sun Life Financial said. In addition to cancer and renal disease, conditions included congenital anomalies, or conditions present at birth, premature births, congestive heart failure, cerebrovascular disease, pulmonary collapse or respiratory failure, medical and surgical complications, and septicemia. 

Sun Life Financial also said intravenous medications, which represented 13% of the total paid stop-loss claims in 2014, contributed significantly to the high cost of cancer claims, as half of the top 20 intravenous drugs are used to treat cancer. 

Transplants, which were the eleventh-costliest catastrophic claims condition during the four-year period, representing more than $41 million in stop-loss claims, have breached the top 10 list in the past two years, moving from the 10th-costliest condition in 2013 to the fifth-costliest last year, Sun Life said. ...

 

Why Hospitals in the States That Expanded Medicaid Are Suffering

The reduction in uncompensated care is not enough to overcome the increased volume of woefully low reimbursement rates. From Investor's Business Daily:

[T]urns out that hospitals in the expansion states aren't any better off than in states that didn't take the expansion bait. 

A Moody's report issued earlier this month found that hospitals in "Medicaid expansion states did not outperform hospitals in non-expansion states" when it comes to earnings. 

Yes, it found, hospitals in expansion states saw uncompensated care costs drop by 13%, but their operating revenues were no better than hospitals in non-expansion states. 

Why? Because Medicaid vastly underpays providers, and expansion states are seeing big increases in the number of Medicaid patients. 

One hospital in Illinois says it cut its unpaid bills by $9 million last year, but had $28 million in Medicaid costs, for which it got paid $14 million. So on balance, ObamaCare has left the hospital $5 million deeper in the hole. 

In Kentucky, which fully embraced ObamaCare and where three quarters of the newly insured are on Medicaid, the state's hospital association says the law has cost hospitals there $1 billion, resulting "in hospital staff layoffs" and threatening the "availability of hospital care, especially in rural areas." 

Meanwhile, several states that expanded Medicaid have seen enrollment rates much higher than expected. Just seven states saw 1.4 million more sign up for the government-run health program than they'd planned. 

In Kentucky, Medicaid enrollment was twice what the state had predicted, and in Illinois, more than 500,000 had signed up. The state estimated that 199,000 would. ...

 

Federal Government Can’t Verify and Doesn't Plan to Reconcile $2.8 Billion in Obamacare Subsidies

Nobody can waste your money like federal bureaucrats.  This is from Elizabeth Harrington writing at the Washington Free Beacon:

The federal government cannot verify nearly $3 billion in subsidies distributed through Obamacare, putting significant taxpayer funding “at risk,” according to a new audit report. 

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) released an audit Tuesday finding that the agency did not have an internal system to ensure that subsidies went to the right enrollees, or in the correct amounts. 

“[The Centers for Medicare and Medicaid Services] CMS’s internal controls did not effectively ensure the accuracy of nearly $2.8 billion in aggregate financial assistance payments made to insurance companies under the Affordable Care Act during the first four months that these payments were made,” the OIG said. 

“CMS’s system of internal controls could not ensure that CMS made correct financial assistance payments,” they said. 

The OIG reviewed subsidies paid to insurance companies between January and April 2014. The auditfound that CMS did not have a process to “prevent or detect any possible substantial errors” in subsidy payments. 

The OIG said the agency did not have a system to “ensure that financial assistance payments were made on behalf of confirmed enrollees and in the correct amounts.” 

In addition, CMS relied too heavily on data from health insurance companies and had no system for state-based exchanges to “submit enrollee eligibility data for financial assistance payments.” 

The government does “not plan to perform a timely reconciliation” of the $2.8 billion in subsidies. ...

 

Ten Things Every Employer Should Know About Healthcare Costs

1. Total national health expenditures, including spending by federal and local governments, private companies, and individuals, was $2.9 trillion in 2013, or about $9,255 per person. 
2. The U.S. population is about 320 million, which makes 2015 the first year healthcare spending will reach $10,000 per person.
3. Health spending is projected to grow 6 percent annually from 2015 through 2023, according to CMS.
4. According to data released by CMS in June, the prices hospitals set for a series of common procedures increased by more than 10 percent between 2011 and 2013. 
5. The average cost per inpatient day in 2013 was $2,289 at nonprofit hospitals and $1,791 at for-profit hospitals.
6. Among nonprofit hospitals, the cost per inpatient day in California was $3,500 — the highest of any state in 2013 — and lowest in South Dakota where the average cost was $1,234.
7. The cost per inpatient day at for-profit hospitals was highest in North Dakota ($3,714) in 2013 and lowest in Maine ($815).
8. In 2015, the cost of healthcare for a typical American family of four receiving health insurance from an employer-sponsored preferred provider plan will increase by 6.3 percent, or $1,456, resulting in a total cost of $24,671. 
9. Out-of-pocket healthcare costs — defined as premiums plus deductibles — accounted for 9.6 percent of median income in 2013, up from 5.3 percent 10 years prior.  
10. The average healthcare cost per employee for large companies was $10,471 in 2013, compared with $10,131 in 2012.  

Source: Becker's Hospital Review, Ayla Ellison, June 10, 2015.  

  

Healthcare Inflation Taking Off Again: Spending up 7.3%; 9.2% for Hospital Spending

This is from Drew Altman writing in the Wall Street Journal: 

... [H]ealth cost watchers like me have been waiting for health spending to begin to grow more rapidly again as the economy strengthens. It looks like that may now be beginning to occur. 

The U.S. Census Bureau has published new estimates of health spending based on their somewhat obscure but important Quarterly Services Survey. Analysis of the survey data shows that health spending was 7.3% higher in the first quarter of 2015 than in the first quarter of last year. Hospital spending increased 9.2%. Greater use of health services as well as more people covered by the ACA appear to be responsible for most of the increase. People are beginning to use more physician and outpatient services again as the economy improves. The number of days people spent in hospitals also rose. 

Overall, as the chart above shows, the increase was much larger in first quarter of 2015 than in the first quarters of 2014 or 2013. ...

[T]he fact that spending has been growing at higher rates over the last four quarters suggests that the lowest of the lows of the health cost slowdown are now in the rear view mirror. ...

  

The Average American Woman Now Weighs As Much As the Average 1960s Man

This is from Christopher Ingraham at the Washington Post:

The average American woman weighs 166.2 pounds, according to the Centers for Disease Control and Prevention. As reddit recently pointed out, that's almost exactly as much as the average American man weighed in the early 1960s. 

Men, you're not looking too hot in this scenario either. Over the same time period you gained nearly 30 pounds, from 166.3 in the 60s to 195.5 today. Doing the same comparison as above, today's American man weighs almost as much as 1.5 American women from the 1960s. At 195.5 pounds, put five American guys in a room and you've gathered roughly half a ton of manhood.

  

Healthcare Reform, Insurance Costs, Overtime Laws and the Mounting Regulatory State Driving Up Part-Time Work

This is from the Federal Reserve Bank of San Francisco, the bold emphasis is mine. Huh, I wonder what those "long term structural factors" could be?

The incidence of involuntary part-time work surged during the Great Recession and has stayed unusually high during the recovery. This may reflect more labor market slack than is captured by the unemployment rate alone. ...

[T]he ratio of the rate of involuntary part-time work [people who work part time but would prefer to work full time] to the unemployment rate has been rising over time, especially since 2010 but also during the 2002–07 recovery. The ratio rose from about 0.55–0.60 during the late 1990s to about 0.75 in early 2015. This trend increase in the prevalence of involuntary part-time work relative to the unemployment rate suggests that long-term structural factors may be boosting employers’ reliance on part-time work. ...

 Involuntary part-time work vs. unemployment

Healthcare Spending Growth Disproportionately Extracts from California's Budget. State Senate Votes to Add Illegal Immigrants to Tab

As healthcare draws more and more of California's resources, leaving less for other governmental functions, the state Senate has voted to add illegal immigrants to to the list of taxpayer-funded health coverage recipients. 

Here is a chart of California budget proportions posted by Austin Frakt at the Incidental Economist:

And a story by Tracy Seipel from last week's Contra Costa Times:

California Senate approves health care for many illegal immigrants 

SACRAMENTO -- A first-in-the-nation bill aimed at expanding health care for illegal immigrants sailed through the Senate on Tuesday even as some lawmakers acknowledged that thousands of legal residents are having to struggle to access health care through the state's Medi-Cal program. 

In a 28-11 vote, a newly pared-down version of Senate Bill 4 by Sen. Ricardo Lara, D-Bell Gardens, would let undocumented Californians buy health insurance with their own money through the state's Covered California exchange if the state is given a waiver by the federal government. It would also allow anyone age 18 and under to enroll in Medi-Cal regardless of immigration status -- and let undocumented immigrants age 19 and up enroll in Medi-Cal if there's money provided in the state budget. ... 

Last week, SB 4 was scaled down from a "health care for all" bill that would have allowed all undocumented immigrants to enroll in Medi-Cal. But that bill would have cost taxpayers from $175 million to $740 million annually -- something Gov. Jerry Brown said was just too expensive. 

The exact cost of the amended SB 4 won't be known until an upcoming fiscal analysis is released shortly....

 

PPACA Exchanges Fall 41% Short of Targeted Enrollment for Young Adults

Devastating demographic realities for the PPACA Exchanges.  This is from Jed Graham at Investor's Business Daily: 

[T]he number of people age 55 and over who have joined the exchanges is 29% above forecasts. 

There are 1.1 young adult enrollees for every member age 55+. That young-to-old ratio was supposed to be 2.4-to-1. 

ObamaCare's demographic mix is key because the law bars insurers from charging 64-year-olds more than three times the premium charged to 21-year-olds. 

Before ObamaCare, older adults in the individual insurance market were charged up to five times more because their expected costs were, on average, about five times greater than the youngest adults. 

Under ObamaCare, "older adults will be paying premiums that do not fully cover their expected medical expenses, while younger adults will be paying premiums that more than cover their expenses," Kaiser Family Foundation researchers Larry Levitt, Gary Claxton and Anthony Damico explained. 

But the math doesn't work so well if young-adult enrollment lags behind, causing health and administrative costs that exceed premium revenue. The obvious response: increase premiums. ...

 

More Worker Hours Cut, More Regulatory Costs and Burdens Added to Employers | PPACA & Now New Overtime Rules

Another outstanding post from the fine folks over at Coyote Blog detailing precisely how one business (his) managed PPACA's 30-hour full time threshold and how employers will respond to new DOL regulations set to release this week.  Here is an excerpt: 

Barack Obama Poised to Convert Millions of Junior Managers into Timeclock Punchers

The title of this post is my alternative to Politico's headline which reads, "Barack Obama poised to hike wages for millions." What is actually happening is that Obama is proposing to raise the threshold for how much money an employee can make before he or she can be considered exempt from overtime rules (and thus exempt from filling in a time sheet). [Quoting from Politico:]

As early as this week, the Labor Department could propose a rule that would raise the current overtime threshold — $23,660 – to as much as $52,000, extending time and a half overtime pay to millions of American workers. 

The Obama Administration and its supporters (and apparently Politico, by how they wrote the headline) are smoking something if they think employers are going to react by raising salaries of current exempt employees being paid 23,660 or 30,000 or 40,000 to $52,000.  Absolutely no way.  There may be a few just under the $52,000 threshold that get a bump, but that will be a minor effect. 

Everyone else is going to suddenly find themselves converted from a junior manager back to a wage earner.  Companies are not going to allow these newly minted wage earners to earn overtime, and so I suppose one good outcome is that we may see a new boost in productivity as companies find ways to automate or eliminate junior management tasks to get all these folks down to 40 hours a week. 

Five years ago, I might have really been in a panic over this in my company, but fortunately our experience with Obamacare has given me confidence we'll figure it out.  With Obamacare we were facing enormous costs which we (like many service and retail companies) managed to eliminate by converting almost all of our full-time employees to part-time.  Compared to that effort, figuring out how to get all of our managers down to 40 hours seems like child's play. 

As usual, most of the costs of this regulation will be born by workers.  As with other minimum wage-type laws, some will be better off, actually getting the "raise" promised by Politico, while some will be worse off, dropped to straight 40-hour work which does not pay as well, or out of work entirely. ...

The full post is absolutely worth your time to read.
 

70% of Companies Say PPACA Has Been a Negative Experience, 40% Have Directly Cut Employment Due to Reform

In March the International Foundation of Employee Benefit Plans deployed its sixth survey in a series on how employer plans are being affected by the Patient Protection and Affordable Care Act (PPACA).  In surveying 598 human resources and benefits professionals and industry experts, three particular findings jumped out at me.  

1. 12% of professionals said that PPACA had provided an overall positive impact on their business while 70% stated that PPACA resulted in an overall negative impact on their business.  About 18% were undecided. 
2. When asked whether they viewed PPACA more positively or negatively now, as opposed to five years ago when it passed, respondents were three and a half times more likely to have a more negative view (36% vs. 10% with the remainder having no change in opinion). 
3. Finally, respondents were asked about the actions they have taken specifically due to PPACA. The overwhelming list of actions was quite negative for employees and employment.  In sum, 40,1% of companies stated that they already have or plan to engage in at least one of the following practices in the next year: 

• Reduction in hiring to get/stay under the 50-employee PPACA threshold for small employers
• Adjusting hours so fewer employees qualify for full-time employee medical insurance requirement
• Reduction in workers due to costs directly associated with PPACA
• Froze or reduced pay raises/compensation
• Reduced non-health-care-related benefit offerings

  

Single Out of Pocket Maximum to Apply to Every Individual on a Plan in 2016, Regardless of Coverage Level

This is from Benefit First:

The Department of Health and Human Services (HHS) has set the 2016 out-of-pocket (OOP) maximum for plan years starting on or after January 1, 2016, to $6,850 for self-only coverage and $13,700 for other than self-only coverage (family coverage). 

More importantly, the HHS guidance clarifies that the self-only OOP maximum will apply to each individual covered, regardless of whether the person's enrolled in single or family coverage. 

• For Example: if the family OOP max is $13,000, and Mom incurs $10,000 in expenses, she is responsible for paying only the self-only OOP max, which is $6,850 in 2016. The plan pays the rest. 

This is a dramatic change for High Deductible Health Plans (HDHPs) eligible to be coupled with Health Savings Accounts.  Historically, virtually all HSAs apply a single family deductible and a family OOP maximum.  Hence, in the above example, Mom would be liable for the full $10,000 because $10,000 is still under the family deductible of $13,000.  

Based on this guidance, it appears that the most common historical HSA-compatible plan design will no longer be permitted.  HSA-qualified HDHPs will now need to include an embedded self-only OOP maximum to be compliant after December 31, 2015.

This new guidance will soften the blow on family deductibles at the point of service in 2016 but it will also increase premiums for HSA-eligible plans.
 

Obama Administration's Unilateral Decision to Delay PPACA Provisions and Spend Unappropriated Money Comes Under Legal Fire

The Obama administration is about to face another big legal headache in defending PPACA.

The unprecedented suit challenges the administration's decision to delay the ACA's employer mandate and to use Treasury funds that were not appropriated by Congress to pay for $175 billion in subsidies for low-income exchange plan members to help them with out-of-pocket costs. ... 

Without those subsidies, which are in addition to the law's premium subsidies, many exchange enrollees likely would not be able to afford health care because of high deductibles and coinsurance. Exchange plans still would be required by the ACA to reduce cost sharing, but doing so would not be financially viable for the insurers, potentially disrupting the exchange market. 

The new legal challenge comes as everyone tensely awaits the Supreme Court's decision in King v. Burwell, expected in late June, which could eliminate premium subsidies in up to 37 states that are using the federal insurance exchange. The new case creates the possibility that even if the high court upholds the premium subsidies, the cost-sharing subsidies for people in silver-tier plans with incomes up to 250% of the federal poverty level still could be in peril. ...

   Source: Business Insurance.
 

Cadillac Tax Set to Hit As Many As 77% of Health Plans in 2018, CFOs and Unions Fret

PPACA calls for a new excise tax on health plans, beginning in 2018.  The levy, often called the “Cadillac tax,” is 40% per year on the amount by which employer-sponsored plans exceed government-set limits. These limits start in 2018 at $10,200 for individual coverage and $27,500 for family coverage.

The limit is triggered by the total amount both the employer and employee pay in premium irrespective of cost sharing arrangements.  Federal bureaucrats also plan to include an employee's contributions to his Flexible Spending Account into those threshold tallies. Regulators also plan to include employer contributions toward HSAs or HRAs.

The Cadillac tax is applied across the nation uniformly despite significant premium differences among the states.  Furthermore, the annual thresholds will only escalate at the rate of the Consumer Price Index as opposed to healthcare inflation which has been about three times that amount in the last fifteen years.

Hence, the number of plans taxed will increase rapidly over time.  It is expected to extract $5 billion from the economy in 2018, then $34 billion by 2024 as more plans succumb to the tax's limits, according to the Congressional Budget Office.

The Wall Street Journal recently tackled the issue by discussing it with a few CFOs as well as reviewing transcripts of conference calls between company executives and investors. Here is an excerpt:

Waste-management company Action Environmental Group, based in Teaneck, N.J., could face a $400,000 bill from the government for triggering the tax, based on coverage it provides for 350 of its employees and their families. 

“To me it’s a penalty for giving our employees a generous benefits package,” said Chief Financial Officer Brian Giambagno. ... 

Action Environmental briefly considered doing away with employee health coverage altogether to save money. “I’d be lying if I said we haven’t had that discussion,” said Mr. Giambagno. 

So far this year, executives of 13 publicly traded companies, including CVS Health Corp., have talked about the Cadillac tax in conference calls and investor presentations, compared with eight companies during all of 2014, according to a Wall Street Journal review of FactSet transcripts. Benefits providers such as Aetna Inc., Wageworks Inc.,Towers Watson TW -0.91% and CVS Health are among the companies that have discussed how the tax would affect overall business strategy. 

“Employers will do what they need to do to stay under that threshold,” said Larry Merlo,chief executive of CVS Health, at an investor conference last week
According to a March survey of 562 human-resources and benefits officials representing U.S. companies, just 23% said they wouldn’t hit the excise threshold because their companies don’t have high-cost plans. A mere 2.5% said that they would pay the tax. 

About 34% said in March that they were taking action or had taken action to avoid the levy. That compares to 24.5% of 624 respondents surveyed in 2014. 

Businesses likely will shift to lower-cost insurance plans to avoid the levy, the CBO says. Some already are moving in that direction to stem health-care costs, which have risen by an average of 7% a year over the past 15 years, according to benefits consultant Mercer. 

To avoid the tax, or lessen its bite, many companies intend to move to high-deductible health plans that require their employees to cover significantly more expenses out of pocket before insurance coverage kicks in. ... 

The Cadillac tax could be changed, delayed or eliminated. Most congressional Republicans and many Democrats oppose it, and some presidential hopefuls have said they would do away with the whole health-care law. 

CFOs, however, say they must plan for the Cadillac tax in its current form. Cisco Systems Inc. doesn’t want to trigger the tax based on the roughly 33,000 U.S. employees it covers. The networking-gear maker, based in San Jose, Calif., offers its workers a plan with a high deductible in addition to its standard plan, said CFO Kelly Kramer. 

About 30% of workers switched to the high-deductible option, she said, and they received a stipend for their health-savings accounts to offset the larger deductibles. ...

I firmly believe this tax will be amended or repealed prior to 2018 when we will have a new President and almost entirely new congress.  The tax was tremendously unpopular with unions when it was originally proposed during passage.  Unions wanted it out of the law entirely. 

However, the Administration knew that it needed the Cadillac tax in the law in order to accomplish two goals. First, the tax helps pay for the behemoth of PPACA. Overly rosy projections of the tax helped to keep PPACA's original price tag, myopically, under a trillion dollars.  Second, it applies additional downward pressure on employers and insurers to keep premiums from skyrocketing - even if that means passing on greater co-pays, coinsurance and deductibles to plan enrollees. 

The Administration also knew that it needed unions on its side, politically, to pass PPACA. The compromise was to keep the provision in the law but to kick it out to 2018, long after the implementation of the remainder of PPACA.  This strategy means that a whole different set of politicians will have to deal with the political and economic fallout. 

Nevertheless, the Cadillac Tax is the law at this moment in time.  Hence, an employer has to start thinking about cheapening its plans and passing more cost onto employees via plan design in order to lessen the shock that could come in 2018 if this provision of the law is not significantly altered.  

Mayor Bloomberg, for example, began that process in New York City before he left office in 2013. He pointed to this provision as a legitimate rationale to reign in rich and costly union employee benefits.  Unions across the nation are now being warned that if they cannot figure out how to lessen health care costs, the effect of the tax will be steep, threatening raises and even jobs. 

  

PPACA Accelerates Employer Trend Toward Penalizing Spouses Who Join Their Health Plan, Study

The Patient Protection and Affordable Care Act (PPACA) does not require an employer to offer spousal healthcare coverage but does mandate employers cover eligible dependent children. Employers generally use two methods to control health care costs by placing restrictions on coverage for an employee’s spouse.

1. Some plans disallow spouses onto the employer's plan entirely. 
2. While others take the more common approach of passing on most, all, or even more than 100% of the cost of that additional spouse to the employee. 

Most of these approaches, however, apply such restrictions only to spouses who have coverage available from another employer and choose not to significantly penalize a nonworking spouse.

While this trend has existed for more than a handful of years, it has accelerated under PPACA as employers become desperate to trim costs however possible.  And since PPACA does not mandate the employer offer coverage to a spouse, by default, this becomes one of the available techniques.  

A new study from the actuarial firm Conrad Siegel Actuaries of 130 companies from a range of industries has illuminated this growing trend.  

• In 2012, 20% of companies either charged spouses for coverage or excluded them. 
• In this year’s survey based on 2014 data that shot up to 47%. Of that 47%, 
• 31% offer no spousal coverage at all (up from 25% in 2013) and the remaining
• 16% penalize with a surcharge. 
• The average surcharge is $1,700 a year or $142 per month.