Two days after going down in defeat, overwhelmed by the physician lobby and AARP, health plans received another shot into the bow.
Rep Henry Waxman announced his intention to schedule Congressional hearings on insurance companies practices in the individual insurance market. What may have gotten Waxman’s attention was the ongoing fiasco in California, where two major health plans joined three others settling claims that they illegally canceled members’ policies.
The Congressional inquiry comes on the heels of multiple lawsuits filed in California against multiple health plans claiming various damages due to policy cancellation. Insurers have described some as ‘political grandstanding’ and ‘totally without merit’. Nonetheless, they’ve also paid fines and agreed to corrective action.
Suits have also been filed and settlements awarded in Arizona,
Is John McCain paying attention? Remember McCain’s reform ‘plan’ relies on the individual insurance market, a ‘market’ that has once again proven it is incapable of acting within the law. McCain seeks to end employer based insurance, replacing it with individual coverage purchased on the open market. The companies who would sell that insurance are the same ones now paying fines for illegally cancelling policies and denying claims.
Let us not forget that McCain’s ‘free market’ is built on insurance companies seeking to make money – and the way they do that is by selling insurance to folks who don’t need it. Those individuals who really need coverage for their current health conditions cannot get that coverage in the vast majority of states, as the insurance company is allowed to specifically exclude certain conditions and/or to charge significantly higher premiums. In fact, there are only five states that specifically require insurance companies to sell policies to everyone regardless of medical condition. (Maine, Massachusetts, New Jersey, New York and Vermont) If you don’t live in the northeast, and if you have any pre-existing condition (and who doesn’t?), you’re out of luck.
Of course, health plans have a solution to this – they will cover a few more folks with pre-ex conditions, as long as the states agree to cover anyone with more serious problems. Now that’s free market business at its best – guaranteeing private companies will take the good risks, and dumping the rest on the taxpayer. The plan, put together after “tireless efforts of the senior leadership of our industry” and seven months of hard work by AHIP’s board would require state high-risk pools to take on anyone who may incur medical costs more than twice the state average, while requiring insurers to cover the rest.
If there’s a clearer statement of the industry’s lack of confidence in its ability to manage health care, I haven’t seen it.
AHIP’s plan crystalizes the problem – (most) health plans long ago gave up any pretense that they would or could actually manage care.
AHIP should change its name from America’s Health Insurance Plans to the ARSC – America’s Risk Selection Companies.
If McCain has a solution to this, he hasn’t published it yet.
thanks to California HealthLine for the inspiration; for an excellent review of the individual market see Julie Appleby’s piece in USAToday.

It’s over, done, finished. For a few months, anyway. With the overwhelming Congressional vote to override Pres Bush’s veto of the Medicare bill (keeping physician reimbursement levels and cutting subsidies for health plans’ Medicare Advantage and Private Fee For Service), the pols can now move on to other issues.
But while they’re working on oil drilling and war funding and education and trade, the ‘solution’ will merely serve to kick the problem further down the road. And when next we round the corner, we’ll find that the ball has gotten much heavier (docs are scheduled for a 20%+ cut. We’ll also find a rejuvenated physician lobby, one with a renewed strength and sophistication, marked by the ‘partnership’ with AARP.
The Senate vote was an even louder repudiation of Bush’s position than the original vote, with four more GOP Senators joining all their Democratic colleagues and seventeen other Republicans.
Twenty-one Republicans voted to cut health plan subsidies and restore physician reimbursement. Twenty-one.
In the House, 153 Republicans (24 more than voted ‘aye’ originally’) joined the 230 Democrats to overturn the veto.
Some (including Shadowfax) have said physicians don’t have pull in Washington. If you don’t believe in the power of the AMA now, I respectfully suggest you go back, do the math, and ask the GOP members of the House and Senate what made them change their votes.
The next time Congress tackles Medicare, you can be sure health plans’ influence on Capitol Hill will have waned; no, diminished; no, disappeared; no, that’s not quite right either. Suffice it to say that health plans lost this round, and lost it badly. And they have no one to blame but themselves. Appalled by stories of health plans canceling policies, wildly overpaying executives, and cutting back on coverage and physician compensation, Congresspeople found it pretty easy to take a few billion out of health plans and give it to docs.
As Bob Laszewski said when asked about health plans, “Now they have zero political capital, and they’re just going to have it done to them next year.”
When it will hurt a lot more. By digging in their heels, health plans likely lost their last best chance to play a dominant role in future health care reform negotiations. Instead, they will likely find themselves with a seat or two at the table, but those seats will be at the far end, away from the powerful and influential.

Several sources indicate Pres Bush is going to veto the Medicare bill (that rescinded physician reimbursement cuts and phased out Medicare Advantage subsidies). The veto may happen today.
Oops, he just did.
The Senate and House are likely to vote to override the veto pretty quickly – perhaps within a day or so. If the veto is overridden, it will be the first time a Bush veto went down to defeat.
A post on the Wall Street Journal’s blog is notable not for the content (which appears accurate and timely nonethless) but rather for the tone and anger of the commenters. Remember folks, this is the WSJ, perhaps one of the most conservative publications in the country – yet the WSJ’s readers are beyond angry with Bush and his pending veto. Think livid, furious, outraged, hyperventilating mad. This isn’t exactly good news for McCain, who now will have yet another opportunity to either avoid voting on this (as he has to date) or will have to actually take a position.
If the veto is not overridden, it is going to be a holy mess out there in IT/reimbursement/physician contracting/patient access/state regulatory land.
Here are a few potential problems.
1. States that base their WC fee schedules on Medicaid will have to decide whether they are going to follow suit; and for those that are directly tied to Medicare, expect big noise from the occ med, ortho, and neuro physician communities.
2. CMS is going to start processing bills today with the 10.6% cut – and docs are going to start dropping out of Medicare at a rather rapid rate.
3. Republican legislators are going to be mincemeat during the August recess, which will be even uglier than their ‘holiday’ on July 4.

Last week the National Coalition on Benefits went public with their position on health reform – they don’t want any reduction in the role of employers. The NCB’s position was laid out in a letter to Sens. Ron Wyden (D OR) and Bob Bennett (R UT) opposing the Healthy Americans Act. The big issue for NCB appears to be the HAA’s focus on providing benefits through state organizations, thereby eliminating employers’ ability to offer consistent plans across multiple states.
I don’t get it. Or maybe I do, and it smells like good ol’ special interest self preservation.
According to their website, the NCB represents employers, health plans, and trade associations that provide benefits under ERISA (Federal law that regulates big employer benefit plans, exempting them from state control). Members like the current employer-based system; their position is that “any change must not erode those parts of the health care system that are working…”
The NCB’s letter goes on to claim “The federal ERISA framework also makes it possible for employers to drive value-based strategies that improve the entire health care system by allowing employers to apply leading edge, innovative practices on a consistent, nationwide basis.”
That’s a puzzler. If the current employer-based system is working so well, why

• have premiums gone up 87% since 2000 while the CPI is only up 17%?
• are 10 million of the uninsured working full time at large employers (>1000 workers)?
• did Safeway and Wal-Mart endorse Wyden’s Healthy Americans Act?
• have insurance costs as a percentage of payroll gone from 8.2% to 11% in six years?
• are 30 million uninsured Americans in families where the head of the household is working full time?

According to a source in Sen Wyden’s office, “what the National Coalition on Benefits is saying isn’t the attitude of all their members, even of some listed in that letter. In fact, the NCB had a conference call [last] week with some of the members listed on the letter who were unhappy because they didn’t agree with it.”
Turns out the letter from NCB only reflects the opinions of the dozen members of the steering committee which is comprised of equal numbers of trade associations and employers (e.g. ATT, GM, UPS, Verizon).
The staffer went on to note that “news reports said Boeing was severely disadvantaged in competing with Airbus because of the costs they have to bear for their employees’ health care costs that Airbus doesn’t have to pay because their employees’ health care is paid for by the government. Employers could be relieved of that competitive burden under the HAA.”
Wyden himself responded rather acerbically to the NCB (a change from his usual low-key, laid-back-Oregonian style), saying “We may be talking about the coalition of the un-willing. We have talked to several alleged coalition members — like NIKE, AHIP, Wal-Mart and Johnson and Johnson — and they all say that the letter does not represent their views on the Healthy Americans Act. As for their message, their defense of the employer-based health system sounds eerily similar to the Titanic’s deck crew hyping the merits of a sinking ship.
Whoever wrote this letter can’t guarantee a single American that their employer-provided benefits won’t be taken away. But of course, that’s not their job. Their job is to protect tax preferences for the status quo.”
The Senator has a point. The tax benefits of the employer-based system are well-documented and extensive, amounting to about $200 billion annually for employers. Health benefits save employers and employees taxes as they are paid for with ‘pre-tax’ dollars – dollars that aren’t counted as income for tax purposes. If employer sponsorship of health benefits went away, the assumption is the cash employers spend on benefits would instead be paid as wages (and therefore subject to taxation) or (under the HAA) paid into the state agencies as the employers’ contribution for their workers’ health benefits. Of note, monies paid to these agencies would still be tax-deductible.
Provisions in HAA allow for a transition from the current system over a two year period. Employers would increase their workers’ wages by the amount they had been spending on health benefits. After that two year period was up, employers wouldn’t have to pay employees the added wages, but instead contribute to the state agencies running the benefits purchasing groups. Here’s what’s puzzling about the NCB’s position; the amount employers would have to contribute is about 10% of the total cost of health benefits for their employees – a much lower percentage than they are now paying.
Seems like a pretty good deal for employers.
According to the Lewin Group’s assessment, “Private employer health spending under the HAA is reduced under the HAA by $309.8 billion, from $428.8 billion under current law to $119.0 billion under the program.”
There’s a much better reason for employers to maintain a role in the health benefits decision process than the ones claimed by the NCB – benefits directly impact worker productivity. If employers are removed from the process of vetting and selecting health insurance vendors, individuals would be responsible for choosing their carrier. Insurance companies would ‘win’ based on how cheaply they could provide insurance to individuals and families, and the less care delivered, the lower the premiums. I don’t see what would prevent those vendors from suggesting each and every injured or ill worker or dependent tried bed rest and over the counter drugs for two weeks, then an x-ray or basic lab test, and only then would they get to see a diagnostician. In fact that’s how group plans treat back pain, while under work comp care is much more aggressive as it is focused on getting that worker back on the job.
Over time, those insurers who best manage chronic conditions (which drive most health care spending) will have lower costs and therefore deliver lower premiums. But the key issue is this – health plan incentives under an individually-driven system are different from an employer-based system. Over the long term, payers would figure out how to best care for medical conditions, and over that long term, the ones who do it right will win. However, that may not be the case over the short term – wherein low price based on denial of care or very conservative care would ‘win’ in the individual market.
Of course, studies show the number of employers who actually understand the linkage between health benefits and productivity is identical to the number of Yankee fans living within two blocks of Fenway. Yes, employers are ignorant of the real reason they should be involved in health benefits. But that doesn’t mean we shouldn’t protect them from themselves.
The net is this. The Healthy Americans Act would save employers a shipload of cash. It would also allow them to focus on running their businesses and get them out of the health plan management business. Those are good things.
Yet the impact of health benefits on productivity is undeniable – and has to be part of the cost:benefit calculus.