No Slowdown in Health Insurance Premiums - Large Employers Expect 6% to 9% Increase in 2016

This is from Shelby Livingston writing at Business Insurance:

... Group health care premiums continue to outpace inflation, and while most employers are feeling the pressure of rising health care costs, benefits experts say smaller employers may face a heavier burden. 

Large employers are projecting health care costs before implementing plan design changes to increase an average of 6% in 2016, according to a National Business Group on Health survey published earlier this month. 

And according to an Arthur J. Gallagher & Co. survey of smaller employers, most of which have less than 1,000 employees, released Friday, 44% reported premium rate hikes of 6% or more in 2014. Twenty-three percent saw rates in the double digits, the survey showed. 

Dave Ratcliffe, Washington-based principal in the health and productivity practice with Buck Consultants at Xerox, said employer health care cost trends before measures are taken to control costs are actually higher than most surveys show. 

“We see trend rates closer to 9%… not at 6%-7%,” Mr. Ratcliffe said.
According to Joe Ellis, Philadelphia-based senior vice president with CBIZ Inc., employer health care cost increases are actually lower than they have been in the past, though he said they are still averaging 7%-8% before plan design changes. ...

 

SHOCK POLL: 57% of Obamacare's "Newly Covered" Individuals Are on Traditional Employer Sponsored Plans

RAND agrees with the federal government's claim that just under 17 million more Americans now have coverage, however, what the government doesn't point out is that 57% of those are folks who are on an employer plan.  That increase certainly could have something to do with PPACA's employer mandate.  But it is more likely a result of a modestly improving economy.  Perhaps even more shocking is the fact that less than 25% of that 16.9 million are getting insurance through an Obamacare Exchange.  

RAND Corporation Study: 

Insurance coverage has increased across all types of insurance since the major provisions of the federal Affordable Care Act took effect, with a net total of 16.9 million people becoming newly enrolled through February 2015, according to a new RAND Corporation study. 

Researchers estimate that from September 2013 to February 2015, 22.8 million Americans became newly insured and 5.9 million lost coverage, for a net of 16.9 million newly insured Americans. 

Among those newly gaining coverage, 9.6 million people enrolled in employer-sponsored health plans, followed by Medicaid (6.5 million), the individual marketplaces (4.1 million), nonmarketplace individual plans (1.2 million) and other insurance sources (1.5 million).

 

On Armstrong & Getty Today Regarding the Conceit of Regulation, Part Time Work Under PPACA and the U.S Regulatory Explosion

"The conceit of regulation is that bureaucrats of below average talent have the knowledge, insight and skill to oversee the talented and to catch their errors before they do, themselves.... The best medical, financial and business minds migrate toward JP Morgan, Merck & Coke a Cola... where the work is stimulating and the compensation, high. It is unlikely that the best and brightest will settle for a federal regulatory agency and its relatively low pay."  John Tamny, Popular Economics.

My time in studio takes place in the first half of the today's third hour: 

Obamacare is pushing the lower end of full-time employees to part-time work: 

• In June of this year, there were 191,000 fewer workers with usual work schedules of 31 to 34 hours in their main jobs than at the end of 2012, a drop of 8%. 
• Meanwhile, an additional 406,000 people usually worked 25 to 29 hours, up 12%. 
• The divergent shifts on either side of the 30-hour divide coincide almost perfectly with the initial measurement period for ObamaCare employer penalties that began in 2013. 

Source: Investor's Business Daily.

Government-Sponsored Programs Make Up 52% Of What We Spend On Healthcare - Government-sponsored programs provide either health care or health insurance to the elderly, poor, veterans, military families, federal employees, uninsured children, American Indians and Alaskan Natives, refugees who resettle in the U.S., individuals with substance abuse and mental health issues and inmates in federal and state prisons.
  

Today’s typical Medicare beneficiary will have paid into the system just 13% to 41% of his or her expected Medicare consumption. The rest is funded by payroll taxes paid by today’s working Americans.

Federal Gov't Pumped Out 324 Pages of New "Law" Per Work Day in 2014 Devouring 29% of an Annual Family Budget

Federal Government Runs More Than 2,300 Subsidy and Benefit Programs - Double the Number in the 1980s 

  

Employers Expect a 6% Premium Increase in Healthcare Costs in 2016

This is from the National Business Group on Health 2015 annual survey:

According to the [National Business Group on Health Survey] survey, employers project their health care benefits costs will increase 6.0% in 2016, the same increase employers would have experienced this year had they made no changes to their plan design. However, many employers expect to keep increases to 5% for the third consecutive year by making plan changes, such as increasing cost-sharing provisions, adopting consumer-directed health plans, and expanding wellness initiatives. The survey, based on responses from 140 of the nation's largest corporations, was conducted in June, 2015. ...

By 2020, almost three-quarters (72%) expect one of their plans will trigger the tax, while their plan with the greatest enrollment will only be one year behind. ... 

More than one in three employers (34%) will implement surcharges for spouses who can obtain coverage through their own employer, an increase from 29% this year. A handful of employers will exclude spouses altogether when other coverage is available through an employer. ...

Overall, 83% of employers will offer a CDHP in 2016, up from 81% this year. In addition, one in three employers (33%) will only offer CDHPs to their employees in 2016. 

 

How an Identity Theft Sticks You With Hospital Bills | Thieves use stolen personal data to get treatment, drugs, medical equipment

This is a truly chilling story of the myriad of problems that arise when a theif steals your medical records from Stephanie Amour at the Wall Street Journal:

Kathleen Meiners was puzzled when a note arrived last year thanking her son Bill for visiting Centerpoint Medical Center in Independence, Mo. Soon, bills arrived from the hospital for a leg-injury treatment. 

But her son had never been there. 

Someone had stolen Bill Meiners’s Social Security and medical-identification numbers, using them to get care in his name. If he had been injured, she would have known: Mr. Meiners, a 39-year-old convenience-store worker with Down syndrome, lives with his parents in south Kansas City. 

To clear things up, Mrs. Meiners, who turns 74 on Saturday, took him to the hospital to show he was fine. It didn’t work: She says she spent months fighting collection notices and trying to fix his medical records. 

In a twist on identity theft, crooks are using personal data stolen from millions of Americans to get health care, prescriptions and medical equipment.  

Victims sometimes only find out when they get a bill or a call from a debt collector. They can wind up with the thief’s health data folded into their own medical charts. A patient’s record may show she has diabetes when she doesn’t, say, or list a blood type that isn’t hers—errors that can lead to dangerous diagnoses or treatments. 

Adding insult to injury, a victim often can’t fully examine his own records because the thief’s health data, now folded into his, are protected by medical-privacy laws. And hospitals sometimes continue to hound victims for payments they didn’t incur. ... 

And the medical establishment often doesn't make it easy to clean up the mess, as Mrs. Meiners found out. 

She began early last year with a call to the Centerpoint medical center, which she says promised to clear the fraudulently billed January 2014 leg-injury treatment. But in November, the center’s radiologists turned her son’s case over to collections, seeking $25. This year, the emergency-room physicians sent a bill for $462. And the hospital, she says, wanted her to pay a bill of about $300. 

Another concern for Mrs. Meiners was that the thief’s medical information got into her son’s health records, including a drug allergy her son didn’t have. She contacted her son’s insurer, which told her it removed the false information. 

She says Centerpoint told her that medical-privacy laws prevent her from looking at everything in her son’s medical record because it contained the thief’s health information. Federal medical-privacy laws bar a person’s access to someone else’s data, even if the information is in their own files, medical experts say. ... 

Unlike in financial identity theft, health identity-theft victims can remain on the hook for payment because there is no health-care equivalent of the Fair Credit Reporting Act, which limits consumers’ monetary losses if someone uses their credit information. ... 

[A recent] survey found 65% of victims reported they spent an average of $13,500 to restore credit, pay health-care providers for fraudulent claims and correct inaccuracies in their health records. ... 

Thieves use many ways to acquire numbers for Social Security, private insurance, Medicare and Medicaid. Some are stolen in data breaches and sold on the black market. Such data are especially valuable, sometimes selling for about $50 compared with $6 or $7 for a credit-card number, law-enforcement officials estimate. A big reason is that medical-identification information can’t be quickly canceled like credit cards. 

An undocumented immigrant, Amira Avendano-Hernandez, of Clinton, Wis., was sentenced in 2013 in U.S. District Court for the Western District of Wisconsin to six months in prison and restitution of more than $200,000 after she got medical treatment, including a liver transplant, using someone else’s name. She had bought a stolen Social Security number from a third party, according to the U.S. attorney’s office for the district. ...

Read the full story here.

Almost all Preventive Healthcare Costs More Than It Saves

Here are the key points from an excellent column up over at the New York Times by Margot Sanger-Katz:

• The argument for cost savings from universal preventive health coverage makes some intuitive sense, but it’s wrong. There’s strong evidence from a variety of sources that people who have health insurance spend more on medical care than people who don’t.  Almost all preventive health care costs more than it saves.

• There are three main reasons health spending is ticking up:

1. The aging of the population; people get sicker as they age;  
2. The improving economy, which will enable more people to afford medical care — or the time off from work it might take to attend to their health needs; and a big one 
3. Obamacare’s coverage expansion.

• For the individual patient whose heart attack is prevented by a cholesterol screening, to give one example, that blood test is a cost-saver. But to prevent one heart attack, the health care system has to test hundreds of healthy people — and give about a hundred of them cholesterol-lowering drugs for at least five years. Added together, those prevention measures cost more than is saved on the one heart attack treatment. 

• There’s also the unavoidable fact that every time you prevent people from dying from one disease, they are likely to live longer and incur future medical expenses.

  

Legal Alert: You Should be Adding in Your 'Cash in Lieu' Award to the Employee Contributions in Testing PPACA Affordability

[This post has been updated by IRS Notice 2015-87 in this post: IRS Confirms That Your "Opt-Out" or "Cash-in-Lieu" Program Must be Added to Employee Contributions.]

Melissa Ostrower, writing at Jackson Lewis has made an outstanding point regarding employer affordability standards under PPACA and the once common cash in lieu or "opt out" policies employers have offered in order to reward employees who do not sign up for benefits with them.  

Chalk this up as yet another reason to eliminate cash in lieu policies in the brave new world of Reform.  Also see my post on why Providing Cash-In-Lieu of Benefits Really Should Be Phased Out Under PPACA, here.  This, from Ms. Ostrower: 

... Affordable means that an employee’s required contribution for individual coverage under his employer’s the plan may not exceed 9.5 percent (indexed) of the employee’s household income. As employers do not generally have the household income information of its employees, the regulations under Internal Revenue Code Section 4980H provide three separate safe harbors under which an employer may determine affordability based on information that is readily available to the employer – (1) the Form W-2 wages safe harbor, (2) the rate of pay safe harbor, and (3) the federal poverty line safe harbor. ... 

[I]f [an] employer ... offers employees an “opt-out” payment for those who decline [medical insurance] coverage, then this opt-out amount must be counted as part of the employee contribution, according to informal discussions with Internal Revenue Service representatives (speaking in their individual rather than official capacities). ... 

While this impact of cash opt-out payments on affordability is not clearly articulated in the Section 4980H regulations, the Internal Revenue Service’s informal position described above is consistent with the final regulations relating to the requirement to maintain minimum essential coverage and makes sense from an economic standpoint. We note that the Internal Revenue Service also stated informally that it may treat similar cash payments to Service Contract Act and Davis-Bacon Act employees differently. 

Employer takeaway: If you have analyzed affordability without taking into account any opt-out payments you offer, you should take another look at whether your plan is affordable.

Government Healthcare in the United States. We're Already There - And Here is What It Looks Like

Government-Sponsored Programs Make Up 52% Of What We Spend On Healthcare - Government-sponsored programs provide either health care or health insurance to the elderly, poor, veterans, military families, federal employees, uninsured children, American Indians and Alaskan Natives, refugees who resettle in the U.S., individuals with substance abuse and mental health issues and inmates in federal and state prisons.

Today’s typical Medicare beneficiary will have paid into the system just 13% to 41% of his or her expected Medicare consumption.  The rest is funded by payroll taxes paid by today’s working Americans.

Of the 17 Obamacare Medicaid expansion states releasing public data, every single one far surpassed projected enrollment in 2014.  In fact, that expansion surpassed projections by an average of 91% in all 17 states.  

My Wife's Losing Her Obamacare Coverage Because The Insurer Lost $400 Million. So she eventually chose a 2015 plan almost identical to the 2014 plan she had with the same insurer—except the deductible went up from $2,500 to $6,000.  Oh, and it cost 50% more for that policy. And that was her best option.

A Race to the Bottom in PPACA Exchanges. The primary way insurers attempt to keep premiums down in Obamacare is by forming networks of any doctors who will accept the lowest fees.  Some exchange plans are paying doctors less than Medicaid pays. Blue Cross in Dallas, for example, pays some doctors 10% less than Medicaid’s fee. If insurance buyers were forewarned, that would be one thing. But no exchange plan is advertising that access will be worse than it is for Medicaid patients.  The Obamacare plans aren’t grouping together doctors who know each other and practice together. They are simply throwing out a low price and taking every physician who will accept it; devastating a patient's ability to get continuity of care.  

  

Federal Gov't Pumped Out 324 Pages of New "Law" Per Work Day in 2014 Devouring 29% of an Annual Family Budget

Unelected federal bureaucrats issued 16 new regulations for every law in 2014 — that’s 3,554 new regulations compared to 224 new laws.

These regulations severely hamper businesses, individuals, hiring and economic growth. The Competitive Enterprise Institute publishes an “annual snapshot of the federal regulatory state” entitled, “Ten Thousand Commandments.” This year’s edition paints a stark picture of the hidden cost regulations impose:

• Federal regulation compliance and intervention costs $1.88 trillion/year or 11% of U.S. Gross Domestic Product. 
• Federal regulations now exceed half the amount the federal government spends annually. 
• The total cost of federal regulation on U.S. households equates to $14,976 per home per year - around 29% of an average family budget of $51,100. 
• If U.S. regulation was a stand-alone economy, it would be the world’s 10th largest, just behind Russia and ahead of India.  
• The 2014 Federal Register contains 77,687 pages. That equates to 324 new pages of federal rules, laws, cases and orders per work day. 
• Of the 77,687 pages in the 2014 Federal Register, unelelected bureaucrats issued 24,861 in the form of regulations. 

Source: Ten Thousand Commandments, An Annual Snapshot of the Federal Regulatory State, 2015 Edition by the Competitive Enterprise Institute. 

  

Chicago is Spending $24 Million on a Wellness Program and Has No Clue if It's Working

It is so easy not to care when it is not your money.  This is from Crain's Chicago Business:

... [T]he city's watchdog said there are "serious questions" about whether the much-promoted [wellness] program, which aims to get city workers to shape up or pay more, actually has accomplished much except to spend money. 

"While the city spent nearly $10.5 million in taxpayer resources from 2012 to 2014 to improve employee health and reduce health care costs through (the program), the city has not formally assessed the program's impact in either area and, at present has no plans to do so," Ferguson said. With national research mixed on the subject, the city needs to set up "specific performance measurements and analysis" to find out. 

Under policies implemented by Emanuel, workers have to participate in Chicago Lives Healthy screenings, counseling and health activities or pay an extra $50 a month for their health insurance. Not surprising, 85 percent of benefits-eligible workers and dependents have signed up. 

But no formal measure of success has been adopted, Ferguson wrote, and the city's health care tab keeps rising. 

"In fact, despite a 19 percent decrease in its workforce between 2004 and 2013 (41,550 to 33,554 full-time equivalents), the city incurred a 43 percent increase in health care costs." 

The city's current $24 million contract with American Healthways Services, a Tennessee firm that runs the program, is due to expire at the end of the year. The company had received just under $10.5 million from the city through 2014. ...

 

ObamaCare's Biggest Winners: Big Insurers, Investors, Lawyers, Consultants & Tech Gurus

This story happens to be about two years old, but it is now even more true than when it was published as employers scramble to try and comply with PPACA's upcoming reporting requirements and the expansion of "small-group" underwriting to all sub 100-employee companies.

2016 is going to be administratively burdensome for all employers in complying with health reform.  For groups with under 100 employees, it will also be incredibly costly as we expect to see those sub one hundred employee groups have premiums escalate at two to three times the rate of larger groups.

From Lee Ross at Fox News:

While polling data suggests many Americans remain anxious and skeptical about ObamaCare, the early big winners of the president’s signature law include investors, lawyers, consultants and purveyors of new technology. 

Since March 23, 2010, when it was signed into law, the health care sector of stocks in the S&P 500 has increased in value by 50 percent. Gilead Sciences, a California-based drug maker with 5,000 workers, has seen its stock price explode by 157 percent in the last three and a half years. 

Health insurers Cigna, Aetna and United Health have each seen healthy gains since President Obama signed the reform measure. Those companies as well as hospital operators Tenet Healthcare and Health Management Associates have seen stock gains near or above the S&P's overall 41 percent jump. 

On a smaller scale, lawyers with expertise understanding ObamaCare are winners, too. 

Arthur Tacchino grew up near Philadelphia and says he always wanted to be a lawyer. He earned his law degree in 2010 and while some of his fellow graduates struggled to find work, Tacchino says he's fortunate to have stumbled into a job asking him to become an ObamaCare expert. 

Even though he didn't have an interest in health care, he's now taken his intricate knowledge of the law to the private sector, where he's part of a small team selling software programs to companies needing help managing the new law’s red tape. ...

"It's no secret to anyone that the mechanics of what has happened with ObamaCare have been driven by some very strong lobbying from the private industry," Dr. Sreedhar Potarazu, founder of VitalSpring Technologies Inc., told Fox News.

Some of the key behind-the-scenes players who helped write the law and draft regulations implementing ObamaCare are now lobbying on behalf of corporate clients.

Consulting companies, a frequent go-to resource for businesses who want outside expertise, have also beefed up their ObamaCare offerings. ...

One of ObamaCare's requirements is a mandate forcing doctors and hospitals to move towards electronic record keeping.  Shareholders in some of these firms have done quite well in recent years: Athena Health is up 180 percent and Cerner is up 110 percent since ObamaCare became law.

See full story and video.

Do 'Consumer-Directed' Health Plans Bend the Cost Curve Over Time?

In summary:

• The offer of a consumer-directed health plan is associated with an approximately 5 percent reduction in total health care spending in each of the three years after CDHPs were introduced relative to cost growth observed for non-offering employers. 
• The long term decreases in spending are focused in outpatient care and drugs and there is little impact on inpatient or emergency department spending. 
• The impact of CDHPs is greater when paired with HSAs (versus HRAs) and when employers make smaller account contributions. 

This is from the National Bureau of Economic Research's working paper entitled, "Do 'Consumer-Directed' Health Plans Bend the Cost Curve Over Time?"

“Consumer-Directed” Health Plans (CDHPs) combine high deductibles with personal medical accounts and are intended to reduce health care spending through greater patient cost sharing. Prior research shows that CDHPs reduce spending in the first year. However, there is little research on the impact of CDHPs over the longer term. We add to this literature by using data from 13 million individuals in 54 large US firms to estimate the effects of a firm offering CDHPs on health care spending up to three years post offer. We use a difference-in-differences analysis and to further strengthen identification, we balance observables within firm, over time by developing weights through a machine learning algorithm. We find that spending is reduced for those in firms offering CDHPs in all three years post.  The reductions are driven by spending decreases in outpatient care and pharmaceuticals, with no evidence of increases in emergency department or inpatient care. ...

With health care costs continuing to grow faster than GDP (CMS 2014; BEA 2014) it is critical to understand the effectiveness of cost-reduction strategies. Prior literature has established that CDHPs reduce spending in the short term. However, the longer term impacts are less clear. There has been concern that CDHP enrollees will decrease their use of necessary care and this will result in increased spending in the long term due to greater complications. 

This study substantially adds to our knowledge on the long term cost impacts of CDHPs. We estimated spending trends for three years across over 13 million people across the country in an analysis estimating CDHP impacts without the threat of individual level selection bias. We find that health care cost growth among firms offering a CDHP is significantly lower in each of the first three years after offer. This result suggests that, at least at large employers, the impact of CDHPs persists and is not just a one-time reduction in spending. However, an important caveat is that the decrease in spending may be smaller in year 3 compared to year 1 post-offer. Recognizing that the differences are not statistically significant, these results are suggestive and consistent with a decreasing impact of CDHPs over time. 

The decreases in total spending growth observed are primarily due to reductions in spending on outpatient care and pharmaceuticals. In contrast, by the third year there are no differences in either emergency department or inpatient spending. There are several potential explanations for this differential impact depending on whether reductions in costs are achieved through price shopping, switching to higher-value treatment options, or blanket reductions in care. 

Pharmaceutical spending is ideally suited for learning over time as chronic medications are purchased regularly and price information is fairly accessible (Huckfeldt et al. 2015). Also, generic drugs, where available, provide a clearer signal regarding value than most treatment options. Some patients may also believe that taking their medications less regularly has little health consequence, although research has shown that cost-sharing induced reductions in pharmaceutical use can lead to increased hospitalizations (Chandra et al. 2010). In contrast, emergency department care and inpatient care may be less amenable to any of the three mechanisms for reducing costs. It is difficult to obtain price information and in many instances the care is emergent making it impossible to shop for care. In addition, the incentives to reduce spending might be limited as the cost of one inpatient episode will typically be greater than the deductible. Outpatient care is intermediate between these two extremes. Outpatient physician visits tend to be repeated more than inpatient care but less than pharmaceutical purchases, perceptions of the harms of reducing care are likely to be similarly intermediate, and price and quality information is difficult to obtain. ...

In summary, in the first large multi-employer study to investigate long term CDHP spending impacts we find reductions in health care cost growth in all three years post CDHP offer and do not detect increases in any component of health care spending. These findings do not support either the concern that decreases in spending will be a one-time occurrence or that short-term decreases in spending with a CDHP will result in increases in spending in the long term due to complications of forgone care. We cannot rule out either of these concerns developing over an even longer time frame. ...

 

Why More Companies Are Poised to Self-Fund Healthcare

Great read on some of the benefits of self-funding medical plans in the era of Reform from CFO.com: 

The percentage of U.S. workers covered by health plans that are at least partially self-funded by their employers has been rising gradually for many years, reaching 61% in 2014, compared with 44% back in 1999, according to the Kaiser Family Foundation. 

Based on anecdotal evidence and current events and trends, the pace of that growth may pick up in the near future, some corporate benefits observers say. But there’s a caveat: Because the vast majority of large companies are already self-funded, new growth has to come further down the size spectrum. 

“There are advantages for employers in self-funding, so we see the [growth] trend continuing, but largely among midsize and smaller employers, in the range of 100 to 1,000 covered lives,” says Brad Nieland, vice president of stop-loss at Sun Life Financial. 

Switching from a fully insured health plan to a self-insured one reduces an employer’s health-care costs because health-insurance pricing builds in a risk premium and the insurer’s profit margin. Benefits consultants say that the savings, absent any other changes, is typically 5% to 8% for large companies, and in many cases even more for others. In return for those savings, of course, self-funded employers assume more financial risk than fully insured ones do. ...

Full story from CFO.com. 

  

Federal Government Runs More Than 2,300 Subsidy and Benefit Programs - Double the Number in the 1980s

Of course it is all managed with ruthless efficiency.  Nobody watches your dollars like far-away bureaucrats, right?  From CATO:

[T]he federal government’s 2014 budget of $3.5 trillion was almost 100 times larger than the average state government budget of $36 billion, as shown in the figure. The largest state budget was California’s at $230 billion, but even that flood of spending was only one fifteenth the magnitude of the federal spending tsunami. Total state spending in 2014 was $1.8 trillion, which includes spending on general funds and nongeneral funds. 

The federal government is not just large in size, but also sprawling in scope. In addition to handling core functions such as national defense, the government runs more than 2,300 subsidy and benefit programs, which is double the number in the 1980s. ...