Employer group insurance premiums for family coverage grew 9% this year (triple the rate from 2010) and 8% for single coverage, according the 13th annual Employer Health Benefits survey conducted by Kaiser Family Foundation. Despite the increases, employers held the percentages workers paid toward premiums to about the same as they paid in 2010 (18% for single coverage and 28% for family coverage).

So what caused the sharp increases in the cost of health premiums this year? Since many have voiced concerns about the impact health care reform would have on costs, fingers will naturally point there first, but the study points out that it was not the main contributor. The research shows that provisions of the new health care law that were in effect only had about a 1.5 to 2 percent impact on the 9% increase. According KHN, “Many factors drive premium growth, the main one being actual spending on medical care, including jumps in prices charged by hospitals and doctors and growing use of expensive new drugs and technologies.”

Learn more about the results of this study in this article on Kaiser Health News. Download a summary or the full report.

Visit Extend Health — the nation’s largest private Medicare exchange.

The Washington Extension

September 23, 2011

Medicare News

The Obama Administration has recommended $320 billion in cuts to health care programs (pdf, p.35). The Medicare program is implicated by the following major policy proposals, almost all of which have been previously proposed and are roundly criticized by industry and consumer groups:

  • Impose a Part B premium surcharge equal to about 15% of Medigap premiums for new beneficiaries who purchase Medigap policies with “particularly low cost-sharing requirements”, starting in 2017
  • Impose $100 copayments for home health services (currently there is $0 copayment)
  • Increase the Part B deductible faster than currently projected
  • Increase the premiums that high-income Medicare beneficiaries pay
  • Drug companies pay rebates for drugs sold through Medicare Part D to low-income patients, similar to the current Medicaid rebate program
  • Cut funding from the public health fund created by the Affordable Care Act

As Extend Health has noted elsewhere, the Healthcare Leadership Council—comprised of health care industry leaders such as Pfizer, Aetna and the Mayo Clinic—proposed $410 billion in deficit reductions that they claim would also increase Medicare’s long-term solvency. The Medicare proposals include creating a “Medicare Exchange” where seniors can choose among private plans, increase the Medicare eligibility age to 67 from 65, cap annual out-of-pocket costs, and dramatically increase Medicare premiums for higher-income beneficiaries.

ACA Updates

The Federal government is increasingly looking to offer states options to share the responsibility of creating and running health insurance exchanges. The Center for Consumer Information and Insurance Oversight at Health and Human Services is proposing three options, including: 1) states managing health plan participation, 2) helping consumers navigate the system, or 3) both. Any of these options would leave the eligibility and enrollment processes to the Federal government.

New York State’s Republican-led Senate is blocking efforts by the state to pass a bill establishing a health insurance exchange. New York already received $39 million to begin establishing an exchange, but the Republicans’ refusal to take up the bill negotiated by lawmakers and Governor Cuomo is obstructing the state’s ability to seek additional Federal financing.

Michigan’s Republican governor, Rick Snyder, has recommended that the legislature pass a bill creating a non-profit health insurance exchange called MIHealth Marketplace. The exchange would be governed by a Board appointed by the governor, with an advisory panel comprised of representatives from small business, consumers, insurance plans, providers, agents and others.

The Blue Cross Blue Shield Association (BCBSA) is criticizing the Obama Administration for releasing regulations too slowly, and being too vague in those that are released. In particular, BCBSA alleges that the health insurance exchange regulations don’t have enough information about how the marketplaces will function, what will be the minimum requirements for plans in the exchanges, and the lack of information about selling insurance outside of exchanges.

Reports/Other News

A Mercer study finds that premiums for employer-based insurance coverage will rise 5.4% in 2012, the lowest growth in fifteen years. Survey respondents attribute this low growth to less utilization, due to a slow economy and cost-cutting benefit changes such as higher deductibles or cost sharing.

The National Council on Aging and UnitedHealthcare find that fewer than half of seniors understand Medicare well, and half describe their understanding of the Affordable Care Act as “poor”. Even among widely advertised ACA reforms, there is little understanding: less than 1/3 of seniors are aware that they will pay a discounted amount in the Part D ‘donut hole’. Finally, just over half of seniors say they have excellent or good knowledge about evaluating their Medicare options.

Visit Extend Health — the nation’s largest private Medicare exchange.

New piece by Emily Chasen in the Wall Street Journal CFO journal today features Bryce Williams discussing the future of private exchanges as a mechanism for providing health care benefits to active employees. You must be a subscriber to see the whole story, but here’s a snip:

…a corporate exchange could be a middle ground between keeping a group plan and leaving employees to use the state exchanges. Regulations that would affect corporate exchanges are still being written, so most companies will probably want to wait for the new laws to take effect in 2014 before deciding whether to use them.

According to Bryce Williams, CEO of health-care exchange operator Extend Health, such corporate exchanges could offer companies an alternative to buying group plans from a health insurer.

Visit Extend Health — the nation’s largest private Medicare exchange.

The Department of Health and Human Services (HHS) recently announced that Medicare Advantage premiums will average four percent lower in 2012 than they were in 2011, and enrollment is expected to increase 10 percent. In addition, 99.7% of people with Medicare with still have access to MA plans in 2012, and benefits will remain about the same as those offered in 2011.

There has been a lot of controversy over the fate of MA plans since health care reform passed which caused many seniors to worry about reduced services, increased out-of-pocket costs, and being driven out of Medicare Advantage plans back to original Medicare. According to the new HHS data, those fears can be put to rest as the future for Medicare Advantage appears to be very promising.

Medicare Advantage plans will be eligible this year to receive financial incentives from CMS for high scores based on their Star rating. CMS deputy administrator Jonathan Blum said, “Plans that do a better job serving the needs of their Medicare members should be rewarded and all plans should be encouraged to improve their performance.”

Related Extend Health blog posts:

Insurers Target Medicare Advantage HMOs for Acquisition

MA plans get a little financial help from HHS

70% of seniors think PPACA will hurt Medicare benefits

Visit Extend Health — the nation’s largest private Medicare exchange.

Healthcare leaders asked the congressional “super committee” this week to include their new cost saving proposal in its deficit reduction plan. Based on published projections, including estimates from the Congressional Budget Office, the proposal would save $410 billion over 10 years and improve Medicare’s sustainability over the long term. Endorsed by the Healthcare Leadership Council, the proposal contains four recommendations.

  • Develop a Medicare Exchange where private plans could compete on cost, quality and value
  • Raise the Medicare eligibility age gradually over 10 years to 67
  • Make cost-sharing uniform, with reasonable deductibles and co-pays, and cap annual out-of-pocket costs.
  • Implement medical liability reform that caps certain damages, limits litigation filing to within one year of injury, and ensures defendants pay appropriate damages

According to HLC President Mary R. Grealy these recommendations, “will contribute to deficit reduction without placing an unfair or disproportionate burden on patients, healthcare consumers or our most vulnerable citizens.”

The HLC’s 50 members comprise a who’s who of health industry participants including pharmaceutical companies, insurance carriers, health care providers and others. Among some of the best known names: Aetna, the Mayo Clinic, Eli Lilly, Walgreens, and Weight Watchers. See the full list on the HLC Member Page.

You can find more details here.

Towers Watson, a global professional services company, surveyed 368 midsize to large companies and found that “employers are planning only moderate changes in their health care plans for 2012.”
In addition, even though health costs are expected to rise 5.9% in 2012 compared to 7.6% in 2011, most employers will be working to control costs and avoid the excise tax. Almost half will change their health care strategy in 2012, and many are not sure how they will react to state-run insurance exchanges coming in 2014.

Some of the actions that employers are considering between now and 2014 include account-based health plan (ABHP) increases, value-based benefit designs, and increased usage of preferred networks. Additional changes under consideration for 2014 and 2015 include reductions to health care benefit values for active employees and employee healthcare contributions for lower-paid workers.

Here are a few more highlights from the survey results:

  • 71% will definitely continue offering health care coverage through 2014
  • 29% are not sure whether they will continue sponsorship or increase salaries to make up for any loss of employer-provided health care benefits
  • 53% believe “health care reform will be implemented within the anticipated timeline”
  • 70% are doubtful state-run insurance exchanges will be a viable alternative in 2014 or 2015

One statistic in the Towers Watson study that we found particularly interesting is the high percentage of employers (54%) that plan to discontinue health care benefits for pre-65 and post-65 retirees. We believe that public and private exchanges will provide a viable alternative for early retirees and a sustainable way for employers to continue to offer benefits to these individuals. Just as our employer clients today are able to control the cost of health care benefits for post-65 retirees with a defined contribution subsidy, the same model will work for early retirees starting in 2014 when all insurance is guaranteed issue.

Much is still unknown about the impact health care reform will have in the short- and long-term, which is why, “most employers will not make wholesale changes to employer-sponsored health plans in 2012,” said Ron Fontanetta, senior health care consulting leader at Towers Watson. “However, a small group of employers is driving more fundamental change in 2012 by using account-based platform designs, aggressively positioning incentives and rethinking subsidization levels.”

For more survey details and a snapshot of health care costs in 2012 visit Towers Watson.

Visit Extend Health — the nation’s largest private Medicare exchange.

The Washington Extension

September 9, 2011

Medicare News

The NAIC subgroup tasked by the ACA with evaluating first-dollar coverage in Medigap is raising concerns that the Congressional Budget Office (CBO)—Congress’ official scorekeeper—is overestimating savings from changes to Medigap benefits. The state officials are skeptical that eliminating first-dollar Medigap coverage for all Medicare services will save the $53 billion that the CBO projects. NAIC is considering how to make its argument, considering that Medigap savings may be on the table for the “supercommittee” as it looks for $1.5 trillion in savings by mid-November.

ACA Updates

Kansas will delay implementation of its health insurance exchange until after the US Supreme Court hears the case and rules on the constitutionality of the Affordable Care Act. The state has awarded a $135 million contract to Accenture to develop its exchange. The state expects the exchange to cost $85 million to establish and $10/year to operate over the first five years.

The Center on Budget and Policy Priorities compiled data on the status of health insurance exchange planning in states, including whether each state has passed legislation and the amount and type of grant funding received (or returned). State statuses are current as of late August.

The 4th Circuit Court of Appeals denied Virginia’s lawsuit over the Affordable Care Act’s individual mandate, saying that the state does not have a legal right to sue. This vacates a lower court ruling and does not come as a surprise to observers of the court’s hearing proceedings, which found the judges skeptical of the lawsuit. The Court also asserted that the individual mandate is a form of federal tax, not law, and therefore a lawsuit cannot be initiated until taxpayers have paid the tax, which is not effective until 2014.

On the Hill

As Congress returns to Washington, DC, the debt “supercommittee” gets to work with its initial public meeting. The 12-member Congressional panel has just six weeks left to recommend $1.5 trillion in projected deficit reduction (PDF) over 10 years. If this bipartisan committee fails, $1.2 trillion in across-the-board spending cuts will automatically be triggered, equally implicating defense and non-defense spending.

Ways & Means Committee Democratic staffers prepared a laundry list of policy changes to Medicare that could help the “supercommittee” achieve its savings target. For each policy option, the memo describes the policy change and estimated savings, as well as a discussion of proponents’ and critics’ arguments. The options include longstanding recommendations from MedPAC—Congress’ Medicare advisory panel—as well as revisiting options from the House of Representatives’ 2009 health reform bill and others.

The automatic spending cuts included in the compromise on the debt limit increase in early August were designed to motivate lawmakers to create thoughtful policies to reduce the debt and deficit—therefore avoiding blunt across-the-board cuts. Now, industry analysts and other Medicare stakeholders are analyzing the cuts that would be implemented automatically if the “supercommittee” fails to meet its targets, finding that they may be more palatable than the implications of likely alternatives. One reason for this is that the trigger shields Medicaid from any spending reductions.

Reports/Other News

The Kaiser Family Foundation reports that 16% of employees expect their out-of-pocket health care costs to rise, as open enrollment season approaches, with a greater percentage of employees at large firms expecting changes than at small firms. Almost 70% of employees blame insurance companies raising rates for their increased out-of-pocket costs, and just over 40% blame the Affordable Care Act. While 2/3 of employees would be willing to participate in a wellness program to lower costs, only one-third would be willing to pay more for brand-name Rx drugs, pay a higher deductible, or accept a more restricted provider network. Finally, 61% of workers say health benefits are either a very, or the most, important consideration when looking for a new job.

August’s Kaiser Health tracking poll found that only about half of the uninsured know about the provisions in the Affordable Care Act, such as premium tax credits and cost sharing reductions, which are designed to help them afford insurance. A similar percentage thinks that health reform “won’t make much difference”. Among Americans as a whole, 39% have a favorable view of the ACA, 44% are unfavorable, and 17% don’t know enough to say. This division is similar to public opinion in recent months.

New studies in the journal Health Affairs find that 29 million adults with health insurance lacked adequate coverage in 2010, exposing them to high out-of-pocket costs if they fall sick. This is an increase from the 16 million adults who were underinsured in 2003. Additionally, monthly health care expenses for a family of four nearly doubled between 1999 and 2009, virtually eliminating any income gains over the past decade.

Governors are in a conundrum. How can their states toe the line on spending for vital health care services without killing the health care job creation engine?
 Read the full article >>

By Fast Company Expert Blogger, Bryce Williams

Visit Extend Health — the nation’s largest private Medicare exchange.

Will 2011 be known as the year big insurers gobbled up Medicare Advantage companies? According to a recent article in HealthLeaders Media, by Margaret Tocknell, it just might. Tacknell speculates that the MA HMO acquisitions by HealthSpring, WellPoint and Humana are just the beginning as MA growth continues to climb, driven by companies transitioning retirees from employee-sponsored plans to MA plans, and increasing numbers of baby boomers reaching retirement age. To point out just how fast Medicare Advantage is growing, the article sites data from the Kaiser Family Foundation indicating enrollment in MA plans has more than doubled in recent years, growing from 5.3 million in 2005 to 11.1 million in 2010. Trocknell writes:

. . . competition is heating up as well-financed players such as Aetna, Humana, WellPoint and UnitedHealth look to increase their share of the market. James [Sarah James, health insurance analyst with Wedbush Securities] expects to see more acquisitions of smaller Medicare Advantage companies as healthcare reform kicks in and economies of scale become even more important. “The Medicare Advantage market is very fragmented and it’s getting more difficult to be a small player.”

Read the full article: “Insurers Eye Medicare Advantage Acquistions.”

Visit Extend Health — the nation’s largest private Medicare exchange.

One of the provisions of the Affordable Care Act (ACA) requires insurance companies to publicly disclose and explain rate increases that are defined as unreasonable. The ACA also made $250 million available to help states protect consumers from unreasonable rate hikes, and over the last nine months 45 states and the District of Columbia used $44 million in grants to improve their rate review oversight capabilities.

Starting today, September 1, 2011, those states with effective rate review systems will begin reviewing rate increases that have been proposed for 2012. In the few states that do not yet have an effective system, HSS will handle the rate reviews. If the new rate is 10% or higher “for non-grandfathered plans in the individual and small group markets” the insurer will have to publicly disclose the rate and post justification for the increase on its website.

As of August 15, 2011 43 states had effective review programs in place for both the small group and individual markets. This CMS Fact Sheet has more details and a complete list of the rate review program status in each state.

Additional Resources:

Implementation Timeline

Fact sheet

HHS news release

States with effective rate review programs

Visit Extend Health — the nation’s largest private Medicare exchange.