“I hear screaming on the left, yelling on the right–sitting in the middle trying to live my life.”  — Kid Rock “Care”

 

These words from Kid Rock describe the climate of the healthcare “debate”

in a clearer, more accurate way than I’ve seen.

Don’t believe it?  Just venture over to twitter.com for a few minutes and

type healthcare reform. There you will find more words filled with hate,

more outright attacks, sweeping generalization heaped upon sweeping

generalization, and more twisted and distorted stories than you thought

possible.

It’s enough to make your head spin.

What’s missing here?  Kid Rock points it out…No one is really listening.

To solve a really big problem, I believe it is necessary to examine it from

all angles — to truly understand what’s broken. Then, and only then, can we

even begin to evaluate potential solutions.

While I think our system has some great things about it, there are dozens of

things wrong with it.  I believe you can fundamentally narrow the problems

down to about 4 things:

  1. 15% of the population has no insurance and therefore has more limitedaccess to health care;
  2. 85% of the population does have insurance and the costs of thatinsurance have been rising annually at an alarming rate; and
  3. As a country, we spend 2.6 trillion dollars on health care or the roughequivalent of the total GDP of the United Kingdom.
  4. As a country, the data show that we have alarming rates of inactivity,obesity, and epidemic of disease…i.e. we are not very healthy and we aregetting worse…  [INSERT obesity article]

These problems are all related, and one effects the others.  For example, we

are not very healthy as a country. Because of this, our medical expenditures

have been soaring. Insurance is a business. If the dollars going out

increase rapidly, the insurance premiums also rise, which causes more and

more people to be unable to afford insurance.

While this is a big oversimplification,  I believe it does show that our

health care system is a complex machine. When one gear starts to turn, it

has an impact on all the other gears in the system.

I have worked in the health insurance industry for 14 years, hold numerous

graduate level designations in the industry, and have attended several

national forums designed to describe what’s wrong and identify potential

solutions.

The most interesting forum I attended was the 2010 National Policy Forum,

held in Washington DC just a couple of weeks before President Obama signed

the bill into law on March 23, 2010. A few of the powerful speakers there

were Kathleen Sebilius, Secretary of HHS, Gail Wilensky, Kenneth Thorpe,

Henry J. Aaron, and Peter Lee.  These experts all spoke about our health

care system and what we can do to fix it.

As I review my notes from that event, I keep coming back to a visionary

statement made by Dr. Henry J. Aaron.  He indicated that “even when it’s

over, it’s not going to be over, and it’s not even close.”

I think part of the reason this is true is because of the way that this

version of health care reform was passed.  Straight party lines. Not a

single Republican idea. Using a budget reconciliation maneuver to avoid

having to meet normal voting requirements.  Countless backroom deals. The

calculated demonization of an entire industry.

I want healthcare reform. The problems we have are too big to ignore and I

believe we as a society and as a country have a moral obligation to address

them.

But I believe that this version is primarily health insurance reform…not

healthcare reform. As Peter Lee from the Pacific Business Group on Health

indicated in the National Policy Forum “employers, pharmaceutical companies,

medical equipment suppliers, purchasers, insurers, doctors, hospitals, and

the entire population are part of the problem.”

In my professional opinion, the new reform law does not address costs in a

meaningful way.  Until we do that, we have not “fixed” the problem. In some

ways, we may have exacerbated it.

Since there is a helluva lot of misinformation (some intentional and some

accidental) out there, I have included a summary of the key reforms, and I

have referenced the actual law where applicable by section.

Guaranteed issue/Prohibition of pre-existing conditions

Starting in 2014, the law requires guaranteed issue for all group and

individual insurance policies. (Section 1201 of the Act)  Also, all

pre-existing conditions are eliminated in the new law (2014).

Individual Mandate

Starting in 2014, all US citizens must carry insurance. If they do not, they

are subject to a penalty of $95 (which eventually increases to $695 in 2016

and thereafter) *(Section 1501 of the Act Section 1002 of the Reconciliation

Bill).

These new provisions are directly related. Think about it. If the insurance

company has to issue all policies regardless of health status, the only way

to make that work is if we are all required to carry insurance.  Otherwise,

one would only purchase insurance when sick.

OK, well, what’s the problem with this aspect of the law? Well, you need to

use your common sense.  If the average insurance premium is $300 a month or

$3600 per year…and the penalty for not having coverage starts out at only

$95 per year…what would YOU do if you were healthy???

That’s right, you would voluntarily pay the penalty and buy insurance if and

only if you got sick.

This is disastrous and it is bass-ackwards. If the system is set up so that

a healthy person would have to be out of their mind to buy an insurance

policy (and that is precisely what ObamaCare’s mandate with no teeth does),

do you think most healthy people will buy a policy or pay the penalty?

Now, conversely, will sick people buy a policy or will they pay the penalty?

That’s right.  They need the insurance.

What does this have to do with insurance premiums? Well, again…you need to

use your common sense. If the majority of people regularly buying insurance

are less healthy than average, the rates go up.  The insurance company needs

the healthy people in the equation in order to keep rates relatively stable.

Premiums in Group and Individual coverage

Premiums in Group and individual coverage can vary only by the following

four factors:

  1. Family structure or coverage type;
  2. Rating area;
  3. Age (but not more than 3 to 1)
  4. Tobacco use (but not more than 1.5 to 1) Section 1201 of the Act

What is relevant about this?  Couple of things.  Again, use your common

sense. Does it cost more to insure a 25 year old male or a 64 year old male?

You’re right! It costs as much as 7-10 times as much to insure a male in his

60s than it does a male in his 20s. Think about it. Most 20 and 30 and even

40 something males don’t go to the doctor. Because their utilization rates

are so low, it doesn’t cost much to insure them.  In fact, these males

already subsidize insurance premiums for people in other age brackets.

To a 26 year old male, a health insurance premium of $150 per month seems

astronomical.  Now, just to comply with the law, the insurance premiums for

that “10 feet tall and bulletproof” individual will have to be at least $250

if the premium for the 64 year old male is $750.

So, this healthcare reform law requires an increase in the premiums of the

youngest and healthiest in the population of the country because of this

provision. Also, did you know that the ranks of the uninsured in this

country are dominated by people in the 20-40 range?  They believe that the

costs of insurance are ALREADY too high.

What else about this provision is relevant?  Well, notice what is not there.

Health status.  This means that 2 people of the same age–one healthy, pays

attention to what she eats, works out, etc. — the other an obese person

with multiple health issues who doesn’t seem to even want to improve her

health…will pay the exact same premium rate. HEALTH status can not be used

as a factor in setting your premium rates.

The equivalent of this in car insurance is that your driving record cannot

be a factor in setting your car insurance rates!!!

So, this helps “fix” our healthcare problems exactly how???

Preventive care

I believe this part of the new Health care law is the very best aspect of

the entire package. In Section 1001 of the Act, as amended by the Mikulsi

amendment, it requires plans to cover preventive care.  Specifically, it

requires:

  1. services that have an A or B rating in the US Preventive Services TaskForce to be covered;
  2. immunizations recommended by the Centers for Disease Control;
  3. evidence based preventive care screenings for infants, children, andadolescents; and
  4. additional preventive care screening for women as described in HealthResources and Services Administration.

Preventive care saves lives. Dr. Thomas Frieden, MD, MPH indicated in his

speech at the national Policy Forum that the epidemic of obesity in the US

has tripled since the 1980s.  Further he indicated that “Prevention is the

best buy in the health sector” and that we need to “orient everything we do

(in our health care system) towards prevention.”

Grandfathered plans

Remember when President Obama promised Americans in his health care rallies

that “if you like your insurance, you can keep it!” ?

Well, this promise is being kept (sort of) by the introduction of the

concept of “Grandfathered” health plans.

Grandfathered plans would allow you to be subject to some, but not all of

the provisions of the new health care law.

Some would argue that the promise requires an asterisk because you can not

make any material changes to your plan such as increasing your copayment,

deductibles, or out of pocket without compromising your grandfathered health

status.

Limitations on Deductibles for Employer Sponsored plans in the Small Group

market

Section 1303 limits the maximum deductibles for any insurance plan to be

$2000 for single coverage or $4000 for family coverage.

I don’t think this does anything to “fix” healthcare.  In fact, I believe

this is a provision that will force many small employers to drop coverage.

For example, I currently own an H.S.A. policy with a deductible of $2600,

and then 100% coverage thereafter. According to this provision, a small

employer would not be able to provide this affordable type of coverage for

his/her employees.

Establishment of 4 categories of coverage

The law indicates that all plans will be classified as Platinum, Gold,

Silver, or Bronze according to their actuarial values. Talks about 90% of

the actuarial value of the benefits provided under the essential benefits

package for the Platinum, 80% of the actuarial value of the benefits

provided under the essential benefits package for the gold, 70% for the

silver and 60% for the bronze.

I could go on about various aspects of the new law, but Im worried most of

my readers left me at actuarial value of the the benefits provided under the

essential benefits package…LOL so I will wrap this up.

I hope I have provided a balanced approach here. I do think there are some

wonderful things within ObamaCare.  It is a noble effort to address a very

critical issue in this country.

My personal opinion is that it does not “fix” healthcare and in some ways

can exacerbate some of the problems that exist today…but it is a start.

And to those who say that ObamaCare does not in any way represent a

government takeover of health care or fundamentally reshape our entire

healthcare system, I would say…huh?  Seriously???

Guy V. Furay, FLMI, GBA