Paul Ryan’s Health Bill: Good, Bad and Ugly

John C. Goodman

Remember how the Democrats did it. They created Obamacare behind closed doors. There was no real pubic vetting. No real attempt to make sure the pieces fit together in a sensible way. And no possibility of a single vote from the other party.

The House Republican Leadership seems enamored of that approach. The latest GOP replacement plan was announced last Monday after weeks of secrecy. The two relevant committees began their markup two days later – with no hearings, no vetting, no CBO score and no amendments.

It does not lower costs. It insures many fewer people. It does not stop the race to the bottom in the exchanges that is so harmful to the chronically ill.

Instead, the GOP plan seems designed to make the individual market work better. That means helping Obamacare work better. For all the apparent differences, the Republicans are just as committed to the managed competition model as the Democrats were.

Source: Paul Ryan’s Health Bill: Good, Bad and Ugly

Obamacare Replacement Act – Senate Bill 222 by Senator Rand Paul – KY

Sen. Rand Paul, R-Ky., speaks during an event at the University of Chicago's Ida Noyes Hall in Chicago on Tuesday, April 22, 2014. (AP Photo/Andrew A. Nelles) ORG XMIT: ILAN114Lots to like and consider here.  We need more details about how tax equalization in the group market vs the individual market will be handled.  The expansion of uses and benefits of HSAs is robust and will go along way to establishing more ways to self-insure and less reliance on networks and government programs; both are a good thing.  The flexible, market-friendly Interstate Market for Health Insurance Cooperative Governing of Individual Health Insurance Coverage will be a welcome change.  Again, devil is always in the details.  Stay tuned for more details and insightful analysis here on the Sovereign Patient; we will post them as available. 

Some highlights:

Effective as of the date of enactment of this bill, the following provisions of Obamacare are repealed:

  • Individual and employer mandates, community rating restrictions, rate review, essential health benefits requirement, medical loss ratio, and other insurance mandates.

Protecting Individuals with Pre-Existing Conditions:

  • Provides a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage.
  • Restores HIPAA pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of preexisting conditions.

Equalize the Tax Treatment of Health Insurance:

  • Individuals who receive health insurance through an employer are able to exclude the premium amount from their taxable income. However, this subsidy is unavailable for those that do not receive their insurance through an employer but instead shop for insurance on the individual market.
  • Equalizes the tax treatment of the purchase of health insurance for individuals and employers. By providing a universal deduction on both income and payroll taxes regardless of how an individual obtains their health insurance, Americans will be empowered to purchase insurance independent of employment. Furthermore, this provision does not interfere with employer-provided coverage for Americans who prefer those plans.

Expansion of Health Savings Accounts:

  • Tax Credit for HSA Contributions
    • Provides individuals the option of a tax credit of up to $5,000 per taxpayer for contributions to an HSA. If an individual chooses not to accept the tax credit or contributes in excess of $5,000, those contributions are still tax-preferred.
  • Maximum Contribution Limit to HSA. Removes the maximum allowable annual contribution, so that individuals may make unlimited contributions to an HSA.
  • Eliminates the requirement that a participant in an HSA be enrolled in a high deductible health care plan. This section removes the HSA plan type requirement to allow individuals with all types of insurance to establish and use an HSA.
  • This would also enable individuals who are eligible for Medicare, VA benefits, TRICARE, IHS, and members of health care sharing ministries to be eligible to establish an HSA.
  • Allowance of Distributions for Prescription and OTC Drugs o Allows prescription and OTC drug costs to be treated as allowable expenses of HSAs.
  • Purchase of Health Insurance from HSA Account o Currently, HSA funds may not be used to purchase insurance or cover the cost of premiums. Allowing the use of HSA funds for insurance premiums will help make health coverage more affordable for American families.
  • Medical Expenses Incurred Prior to Account Establishment o Allows qualified expenses incurred prior to HSA establishment to be reimbursed from an HSA as long as the account is established prior to tax filing.
  • Administrative Error Correction Before Due Date of Return o Amends current law by allowing for administrative or clerical error corrections on filings.
  • Allowing HSA Rollover to Child or Parent of Account Holder o Allows an account holder’s HSA to rollover to a child, parent, or grandparent, in addition to a spouse.
  • Equivalent Bankruptcy Protections for HSAs as Retirement Funds o Most tax-exempt retirement accounts are also fully exempt from bankruptcy by federal law. While some states have passed laws that exempt HSA funds from being seized in bankruptcy, there is no federal protection for HSA funds in bankruptcy.
  • Certain Exercise Equipment and Physical Fitness Programs to be Treated as Medical Care. Expands allowable HSA expenses to include equipment for physical exercise or health coaching, including weight loss programs.
  • Nutritional and Dietary Supplements to be Treated as Medical Care o Amends the definition of “medical care” to include dietary and nutritional supplements for the purposes of HSA expenditures.
  • Certain Providers Fees to be Treated as Medical Care o Allows HSA funds to be used for periodic fees paid to medical practitioners for access to medical care.
  • Capitated Primary Care Payments o HSAs can be used for pre-paid physician fees, which includes payments associated with “concierge” or “direct practice” medicine.
  • Provisions Relating to Medicare o Allows Medicare enrollees to contribute their own money to the Medicare Medical Savings Accounts (MSAs).

Interstate Market for Health Insurance Cooperative Governing of Individual Health Insurance Coverage:

  • Increases access to individual health coverage by allowing insurers licensed to sell policies in one state to offer them to residents of any other state.
  • Exempts issuers from secondary state laws that would prohibit or regulate their operation in the secondary state. However, states may impose requirements such as consumer protections and applicable taxes, among others.
  • Prohibits an issuer from offering, selling, or issuing individual health insurance coverage in a secondary state: If the state insurance commissioner does not use a risk-based capital formula for the determination of capital and surplus requirements for all issuers. Unless both the secondary and primary states have legislation or regulations in place establishing an independent review process for individuals who have individual health insurance coverage; or The issuer provides an acceptable mechanism under which the review is conducted by an independent medical reviewer or panel.
  • Gives sole jurisdiction to the primary state to enforce the primary state’s covered laws in the primary state and any secondary state.
  • Allows the secondary state to notify the primary state if the coverage offered in the secondary state fails to comply with the covered laws in the primary state.

Source: Microsoft Word – Obamacare Replacement Act SBS.docx

PPACA mandated state insurance exchanges struggling | BenefitsPro

One of the victims of these failures and potential failures in these states is the Small Business Health Options Program (SHOP), a program that was designed as part of the PPACA to help small businesses access affordable health insurance for their employees.

In late May, Hawaii’s health insurance exchange became the latest one to bite the dust, taking its SHOP with it. The federal Centers for Medicare and Medicaid Services (CMMS) began restricting grant funds to the state’s Health Connector two months ago, after telling state officials that the program was out of compliance with the Affordable Care Act due to fiscal instability and ongoing IT issues. One of these IT issues involved SHOP. According to a May 15 article published by Fox News, “The Connector’s Small Business Health Options Program, targeted at small business owners, sent garbled data to insurers, preventing them from signing up small businesses and their employees.”

In mid-May, Hawaii’s Health Connector began making contingency plans in case the system did shut down entirely (which it did a week later), to transition operations to the federal government. The plan directed that no new enrollees would be accepted by the local exchange after May 15. In addition, outreach services were set to conclude May 31, and the 73-member workforce will be laid off by February 28, 2016.

The Fox News article noted that the exchange was riddled with trouble from the start. “The web portal never worked properly, despite the state spending $74 million on a contract to build and maintain it. The exchange experienced tremendous staff turnover, with three executive directors appointed in two years.”

In addition, enrollment reached just over 8,500 in the first year, and, as a result, the Hawaii exchange ended up being ranked as the most costly in the nation, at almost $24,000 per person.

via PPACA mandated state insurance exchanges struggling | BenefitsPro.

Too Many Squirrels, Not Enough Attention to Their Food Source | Robert Nelson, MD | LinkedIn

1413711984830_wps_35_dmvidpics_2014_10_19_at_0Locating the food source for this second group of squirrels is pretty easy. All they have to do is show up and collect their sustenance, like fat squirrels would by taking the path of least resistance for nuts put out for them by a well-meaning homeowner.

And just who is responsible for this obesity epidemic among squirrels? For starters, we can thank a systemically perverse tax code. Since the 1940’s, tax laws favor employer-sponsored benefits while suppressing and punishing the individual/small business market into submission; and recently straight into the waiting arms of either the ACA or MCO’s of Medicaid.

It took 50+ years of crony deals between special interests and state & federal legislators to hitch and load the cars of this health-care gravy train. It won’t uncouple easily.

Relocating the squirrels or giving them more nut-gathering rules will not fix this. This cartel of fat squirrels will only disband by removing the food source provided by this government sanctioned and partially financed oligopoly.

But back to the first group of combative squirrels, i.e. the mouth pieces of the status quo. Why do they continue to lobby for more of the same – even to their own detriment as patients and citizens?

They beat the drum for more regulations, legislative relief, price controls and mandates (that includes the ACA) in various forms, such as Value Based protocols, Single payer (i.e. streamlined,efficient rationing), higher taxes and various other re-distributive schemes.

Sure, when viewed in isolation any of the models listed above can be found to have some laudable benefits in and of themselves. But just as pushing on one end of a balloon causes it to bulge on the other, it is the unforeseen moral hazard and downstream unintended consequences that doom many of these Utopian ideas.

None of which are necessary, by the way, if we focused on the root causes of our current dilemma: Costs! Rather than how to “cover” people within the current dysfunctional system, which amounts to just applying pressure to one end of the balloon and expecting nothing to happen on the other.

There are common-sense market-based incentives that would reset the current system and solve the majority of the cost challenges we face. It will burst the balloon which will scare the squirrels, though.

Here is an abbreviated list of reasons why I believe these ineffectual models are often championed by well-intentioned individuals and groups, even when they have no direct financial stake.

Read entire article via Too Many Squirrels, Not Enough Attention to Their Food Source | Robert Nelson, MD | LinkedIn. |Examining Private Exchanges in the Employer-Sponsored Insurance Market

Prepared by:
Alex Alvarado, Matthew Rae, Gary Claxton, and Larry Levitt
Kaiser Family Foundation

Separate from the ACA, so-called “private exchanges” have also started to emerge as an option for employers
providing coverage to their workers. These private exchanges do not provide access to premium subsidies like
the public exchanges, nor do they necessarily involve standardized coverage tiers. But, they do have the
potential to reshape the employer-sponsored health insurance, which covers 149 million people, or nearly 56%
of the U.S. non-elderly population. We conducted interviews with more than fifteen private health insurance
enrollment platforms, as well as several employers and health plans moving in this direction, to create a picture
of this quickly growing landscape. We identified ten of the platforms we interviewed as full private exchanges
(based on the definition described in the next section) and have profiled those in the appendix.

Many approaches are sold as “private
exchanges” since the concept is now in
vogue. In profiling these efforts, we have
sought to define what differentiates the
new, more competitive approaches
analogous to the ACA’s public exchanges
from the traditional technology platforms
that simply provide online enrollment.
Also, what we describe here as private
exchanges are targeted at employers,
which eliminates many of the “e-brokers”
selling directly to the individual market.
Characteristics that exemplify a private
exchange include:

Obamacare’s Exchanges Fall Well Short of Enrollment Target:

Is 9% Good Enough?

Of 38 million Eligible for Coverage, only about 3.4 million who lacked prior coverage have actually activated their ObamaCare policy by paying

38 million Eligible for coverage ⇒ 

            ⇒ 8 million “signed up” ⇒

   ⇒ 6.8 million actually paid ⇒

⇒ 3.4 million did not have prior coverage

BL obamacare enrollment attkisson   Many who were considered uninsurable now have affordable policies. But the Affordable Care Act has shifted the cost burden for those who already had insurance. More policies now have bigger deductibles and cost more. “In general, healthy people are paying more and unhealthy people are paying less,” says a source who supports and helped implement Obamacare but is disappointed with the results to date, “with those above-average [income] tending to pay more and those below-average [income] tending to pay less.” “Is the new law effective in reducing the number of uninsured? Yes, but so far not very,” he says. Key questions include:

  • How many actually have enrolled?
  • How many of those were previously uninsured?
  • How has Obamacare affected the overall pool of uninsured?
  • What percentage of eligible people have signed up?
  • What’s the cost?

Enrollment: Less Than Advertised

But the 8 million figure is overstated because it counted people who weren’t actually covered because they hadn’t paid their premiums, which Blue Cross, analysts and the government agree is in the 15 percent to 20 percent range. Estimates of how many marketplace enrollees were previously uninsured range from about one-third to more than half, depending on the survey and the methods used. A recent Kaiser Family Foundation survey found that 43 percent of those who purchased insurance through the marketplace already had insurance; 57 percent are newly insured. “The enrollment figures for marketplace coverage will grow over time, assuming that the exchange insurance plans don’t fail as a result of adverse selection,” said the source who supports and helped implement Obamacare. “But the impact on reducing the uninsured so far is very disappointing.”

Obamacare’s Exchanges Fall Well Short of Enrollment Target.

Individual market enrollment: Updated view | McKinsey on Healthcare

All of the findings in this Intelligence Brief represent a view of the rapidly evolving individual insurance marketplace through February 13th. As such, enrollment trends may differ materially on March 31, 2014, the end of the open enrollment period. Six key observations emerged from our February survey findings:

  • Previously uninsured respondents accounted for 27 percent of February respondents who reported having selected a new 2014 product i.e., insured who switched and previously uninsured who enrolled, up from 11 percent in earlier surveys.
  • In total, 10 percent of all previously uninsured February respondents said that they had enrolled in a product, up from 3 percent in January.
  • More than three-quarters of those who reported having obtained coverage also said they had paid their premium out of all February respondents who said they had selected a new 2014 product, i.e., insured who switched or uninsured who enrolled. The payment rate was higher among the previously insured 86 percent than among the previously uninsured 53 percent.
  • A smaller proportion of the respondents who had not yet enrolled reported that they are likely to enroll, compared to prior surveyed months. However, most 65 percent of those who said that they intend to enroll continue to be the previously uninsured.
  • The most common reason for not enrolling cited by both previously insured and previously uninsured respondents continues to be perceived affordability challenges this was cited by ~50 percent of the respondents who had not yet enrolled.
  • Over 80 percent of the respondents who cited affordability as the reason for not enrolling are eligible for subsidies; 66 percent of these consumers were not aware of their subsidy eligibility status or subsidy amount.

via Individual market enrollment: Updated view | McKinsey on Healthcare.

ObamaCare’s Mandates Are Harming Small Business | Health Policy Blog |

The Mandate on Employers. Though most of the media attention has focused on the number of individuals who have lost health coverage and the rocky start of the federal and state health exchanges, much of the burden of complying with the ACA will actually fall on employers. About six-in-ten Americans with private health coverage get it through an employer. The cost is not trivial: The Congressional Budget Office estimates that the required coverage for an individual will cost the equivalent of an additional $3 an hour “minimum health wage.” Family coverage could cost more than twice that amount.Employers are also required to limit the amount of premiums most employees pay to a percentage of their wage income. For example, health plans are considered “unaffordable” if workers earning less than 400 percent of the federal poverty level about $46,680 for an individual must pay a premium that is more than 9.5 percent of their income. Firms that fail to provide health insurance will be subject to a tax penalty of $2,000 for each uninsured employee beyond the first 30.  Firms that offer “unaffordable” coverage will pay a penalty of $3,000 for each worker who cannot afford coverage.In theory, firms could retain their current health plan by claiming “grandfathered” status. However, according to official documents, two-thirds to as many as 80 percent of employer plans will likely lose their grandfathered status — forfeiting protection from cost-increasing regulations.Effect of ObamaCare on Premiums. The consequences for employers and individual workers who must purchase coverage are already becoming apparent. A 2014 survey of 148 insurance brokers by the investment firm Morgan Stanley found that renewal rates in the small group market have risen substantially. For instance:Premiums for firms renewing in 2014 jumped 11 percent in the small group market.For firms with coverage through BlueCross, the year-over-year renewing contract premium hike is nearly 16 percent.For individuals, the increase was similar — about 12 percent.

via ObamaCare’s Mandates Are Harming Small Business | Health Policy Blog |