Insurance exchange could ease health care cost for small businesses

http://www.ajc.com/business/insurance-exchange-could-ease-1208016.html

As co-owner of a small IT solutions company in Alpharetta, Julie Haley would rather be out networking and snapping up new business instead of spending hours looking for ways to curb her firm’s escalating health insurance costs.

 

Like small businesses across Georgia and the nation, health care costs for Edge Solutions, which Haley started in 2008, have been jumping by double digits. Haley estimates in the first year alone, health care costs made up 25 percent of operating expenses – in part because without at least 10 employees insurers wouldn’t even bother talking with her. Instead, she paid pricey continuation coverage of workers’ prior plans to attract the experienced people she needed who were used to great benefits at larger companies.

“It really crippled us,” she said, adding that the exorbitant cost meant growing the business more slowly.

Some relief could be on the way, however, with the creation of a small business insurance exchange in Georgia that experts say could reduce costs for employers and increase plan options for workers.

A committee of local health care experts, lawmakers and community leaders is exploring ways to develop an exchange -- required starting in 2014 under the federal health care law -- and will deliver final legislative recommendations to the governor by Dec. 15. The group is also looking at an exchange for individuals.

While opposing the health care overhaul, Gov. Nathan Deal appointed the committee earlier this year -- saying it made sense to study Georgia-based solutions while the courts decide whether the law is unconstitutional. The federal government will step in to set up exchanges if states don't.

More options

Statewide, 96 percent of all firms have between two and 100 employees, with less than half offering employment-based insurance, according to a recent report by the committee. Some 39 percent of Georgians whose family head works at a firm with less than 10 employees have employer-based coverage. That compared with nearly 70 percent with coverage at companies with 100-plus workers, the report shows. The majority of small businesses in Georgia that do have benefits offer high-deductible plans, which means greater out-of-pocket costs for workers.

“I think people have become so frustrated with the health insurance marketplace, they are willing to try just about anything if they think it may lead to lower costs,” said Kyle Jackson, director of the local chapter of the National Federation of Independent Business.

Small employers face higher insurance premiums because they can’t spread risk over a large group and have higher per-member administrative costs.

Nationally, small businesses pay up to 18 percent more than large firms for the same health insurance policy, according to government estimates. From 2000 to 2009, the rate of firms with less than 10 people offering insurance fell from 57 percent to 46 percent. And 11 million of America’s uninsured work for businesses with less than 25 workers.

The idea behind state health insurance exchanges is to pool small businesses and their employees with millions of other Americans to increase purchasing power and competition in the market.

Open to businesses with up to 100 workers, exchanges would be designed to allow employers to choose their contribution levels to employee coverage, save money by spreading administrative costs across more companies and offer more plan choices from multiple insurers to fit people’s individual needs. All plans would meet federal and state quality standards.

“I think it can take away some of the unpredictability and help give workers and small firms more choice if they want it,” said Cindy Zeldin, director of Georgians for a Healthy Future and an exchange committee member.

Law raises worries

Some business owners, however, are skeptical of an exchange, the health care law in general and the new regulations, financial penalties and layers of bureaucracy they could be saddled with.

One big concern is a new fee assessed on insurers – a cost that will be passed on to businesses, Jackson said. The fee will increase annually based on premium growth and could cost insurers $8 billion in 2014, rising to more than $14 billion by 2018, according to America’s Health Insurance Plans, a national trade organization.

“That’s not going to do anything to bring down rates,” he said.

A small business tax credit -- for companies with fewer than 25 workers and an average wage below $50,000 – is helpful but too restrictive to benefit a large group of employers, he said.

Uncertainty surrounding the court battle over the constitutionality of the law is also a worry. Last month, the Obama administration asked the Supreme Court to hear a case regarding the health care law, which could result in a decision by next summer. The local group studying exchanges has a subcommittee looking at how to respond if the whole law or parts of it are struck down.

The uncertainty also is weighing on the job market because business owners are concerned about the impact of the health care overhaul on the cost of hiring employees, said Russ Childers, owner of a small insurance agency in Americus who also serves on the exchange committee.

Companies with at least 50 employees will also face possible penalties for not offering health coverage under the new law.

Those businesses that don’t provide benefits will be fined $2,000 a year for all employees beyond the first 30, said Tony Holmes, a partner in the Atlanta office of global consulting firm Mercer. An employer with 100 workers, for example, would pay $140,000.

Even those who do offer coverage could be fined if it's considered unaffordable – more than 9.5 percent of a worker’s total family income, Holmes said. If it's too expensive for some employees, those who make up to 400 percent of the federal poverty level will be eligible for the individual exchange and federal tax credits.

Garry Hill, head of the group benefits practice at insurance brokerage Sterling Risk Advisors, said the small businesses he works with already pay closer to $3,000 to $4,000 in health costs per employee.

“I can in theory scrap my health plan, pay the [$2,000] penalty and give my employees a raise and still come out ahead,” Hill said.

A big reason for providing benefits is to retain and attract employees, which in this economy isn’t an issue, he added. “Most people are just thankful to have a paycheck."

Personal choice

For many small companies with slim margins, the decision of whether to offer health benefits can come down to choosing between having employees or even keeping their doors open, Holmes said. However, businesses with less than 50 workers aren't subject to the same penalties as larger firms under the law.

Trying to keep a cap on expenses as his Marietta firm slowly grows, Brian Mayfield doesn’t offer benefits to his two full-time and four part-time employees at Techquidation, which services cash registers and barcode scanning equipment. Mayfield said he may have added one or two employees this year if things weren't so uncertain.

“Everybody I know who owns a business, we’re all very cautious right now,” he said.

Mayfield said he wouldn’t consider a small business insurance exchange, but hopes to someday offer his workers a set amount of money they can apply toward individual plans that work for them – avoiding his exposure to premium hikes at the same time.

“I’m a believer in people being accountable for making their own choices,” he said

Could "Obamacare" be working?

By Jonathan Cohn 

 

http://www.cbsnews.com/stories/2011/09/15/opinion/main20106631.shtml 

.

• Del.icio.us
• Facebook
• Stumbleupon

• Newsvine
• Yahoo bookmarks
• Mixx

• Digg
• Reddit
• Google Bookmarks

• Twitter
• LinkedIn 

Need a reason to believe the Affordable Care Act is starting to work? The Census Bureau just gave you a half million of them.
That’s how many young adults had health insurance in 2010, as compared to 2009, according to the official estimates. Or, to put it another way, the proportion of 18- to 24-year olds without health insurance fell, by roughly two percentage points, last year.
It's pretty remarkable, given what was happening in the rest of the population. For every other group of non-elderly adults, from 35 through 64 years of age, the proportion without health insurance increased.
You expect that sort of data, given economic conditions: When people lose jobs, they also lose access to employer-sponsored insurance. When their incomes fall or their debts rise, they have a harder time keeping up with premiums.
But then why aren't 18- to 24-year-olds suffering the same fate? What makes them so special?
Nobody can be certain right now. Health insurance estimates are famously quirky and these data frequently mask critical information. But, as noted on Monday, the circumstantial evidence suggests, very strongly, that the Affordable Care Act is the primary factor.
Remember, one of the first provisions to take effect was a requirement that insurers allow young adults, up to age 26, to stay on their parents’ policies if employer-sponsored insurance is not available. Even though that requirement didn't kick in until the fall, several insurers began offering such coverage earlier, in anticipation of the new rule. Media reports, like this one from Kaiser Health News, have suggested large numbers of young people are signing up for the newly available coverage, even more quickly than the government had anticipated.
Brad Wright, a smart health care researcher now at Brown University, sums it all up in a post at his blog:

Historically, economic downturns coincide with increases in the number of uninsured, as people lose their jobs and, thanks to the design of our health care system, their insurance coverage. So, the unchanged number of uninsured masks what actually happened: Roughly 810,000 middle-aged adults, those ages 45 to 64, were likely let go from their jobs, didn't yet qualify for Medicare, and ended up uninsured. Meanwhile, some 494,000 young adults, those ages 18 to 25, gained coverage, which seems to point to the ACA provision allowing children to stay on their parents' plans until age 26 that went into effect in the fall of 2010. Of course, there may be other explanations, but the simplest explanation is likely the right one.

Of course, the young adult provision is just one small part of the new health care law. The really big increases in insurance coverage won’t happen until 2014, when Medicaid expands to cover a much larger proportion of the low-income population and the federal government begins offering subsidies, plus the opportunity to buy regulated coverage through new insurance exchanges, to middle class people who can’t get employer coverage. And, I’m sure, critics would argue the gains in coverage either don’t make much difference or aren’t worth the harm the law would bring.
Still, these numbers are striking – and seem to suggest that the Affordable Care Act is already helping large numbers of people.
Bio: Jonathan Cohn is a senior editor at The New Republic. The opinions expressed in this commentary are solely those of the author.

Affordable Care Act - paying dividends or is it too early to say?

http://www.businessweek.com/news/2011-08-23/medicare-spending-slows-as-hospitals-improve-care-peter-orszag.html

Aug. 24 (Bloomberg) -- And now for some good news: Medicare spending growth has been slowing noticeably. So far this fiscal year, expenditures have actually declined slightly, according to the Congressional Budget Office.

Part of the decline this year reflects timing shifts in certain Medicare payments, which will soon be reversed. Even adjusting for these shifts, though, Medicare spending is still up less than 4 percent so far this year.

The 2011 numbers come on the heels of relatively slow growth in 2010 as well. Last year, Medicare spending rose just a little more than 4 percent.

Compare this with an almost 12 percent average annual growth rate in Medicare spending since the early 1970s. During those four decades, there were only four years in which costs rose by less than 5 percent -- and three of those four years were in the late 1990s, when payments were cut back as part of the 1997 budget deal.

We don’t yet have enough data to tell for sure what’s causing the recent deceleration in Medicare spending -- or whether it will last. But some evidence suggests it may be a shift toward value in the health-care sector. Various hospital executives have told me they have already begun to prepare for less generous reimbursement from Medicare as the new federal health-care-reform law takes effect and there is a greater focus on value. They are therefore trying to become more efficient now. That’s the discussion taking place in the strategic planning process at Mount Sinai Medical Center in New York, where I recently joined the board of directors.

Trimming Medical Expenses

To some degree, the Medicare slowdown also reflects the weak economy. Spending increases for people with private insurance have also slowed, as consumers have cut back on everything in the past couple of years, including health care. Even though copayments and deductibles in Medicare are usually small, Medicare beneficiaries, too, seem to be having fewer elective procedures and unnecessary doctor visits. This year, for example, Medicare has seen a reduction in the number of costly hip, knee and other major joint replacements, which are sometimes more a choice than a necessity.

Medicare’s growth slowdown has been much greater than that of private health insurance, however, as Maggie Mahar has noted on the Century Foundation’s Health Beat blog. In the 12-month period that ended in June 2011, Standard & Poor’s index for commercial health insurance rose 7.5 percent, while its Medicare index rose only 2.5 percent. The S&P data show that Medicare spending growth has been falling fairly steadily over the past 18 months.

So why are we seeing an especially rapid decline in Medicare growth?

The Mount Sinai experience may be instructive. From September 2010 to May 2011, the hospital’s Medicare revenue rose only 2 percent over the previous year -- in part because the number of inpatient cases fell. Why was that? One important reason was that the number of patients readmitted to the hospital within 30 days of discharge was 5 percent less than what it had been the previous year.

Reducing readmissions is one of the objectives of the federal health-care-reform law enacted last year. Historically, nearly 20 percent of Medicare patients have been readmitted to a hospital within 30 days of being discharged, in part because their doctors and other health-care providers have not managed patient handoffs very effectively. The Affordable Care Act included, among other remedies, a modest penalty for hospitals with high readmission rates.

At Mount Sinai, patients at risk of rehospitalization are now identified when they first come in and assigned to a special team of doctors and nurses that works to minimize that risk. Apparently, the effort is working. And as more hospital systems begin to use information-technology systems to measure and manage value, we could see progress in other areas of patient care as well.

It is much too soon to know whether the Medicare slowdown we’re seeing this year is a temporary blip or the beginning of a new era. But even if the slowing does represent the early stage of a shift toward value and reducing the fat in the health-care system, the improvement will not be sustainable unless certain further changes are made in the existing payment system.

Penalty for Quality

Reimbursement from Medicare is still primarily based on how many services hospitals perform rather than on how well they care for patients, so hospitals are often financially penalized for improving value and quality. The Mount Sinai program to reduce readmissions, for example, is costly for the hospital both because of the extra expense of running it and because fewer readmissions means less revenue. Ken Davis, the president and chief executive officer of Mount Sinai, says the hospital won’t be able to afford continuing the successful program if the financial incentives remain so skewed against it.

The health-care law includes a variety of provisions meant to shift Medicare’s payment system toward a focus on quality. Yet many of these aspects of the law are under attack in Congress. It is therefore important for the new supercommittee - - created by the recent debt-limit deal to find $1.5 trillion in further savings in the federal budget -- to protect and even strengthen the effort to base the Medicare payment system on value.

Another innovation of the Affordable Care Act is the Independent Payment Advisory Board, a panel of health-care experts charged with devising proposals to reduce Medicare spending growth and boost the quality of care. Many health-care providers are vehemently opposed to this board, because they fear it will be an ax that cuts too bluntly, making their financial condition even more precarious. But blunt spending reductions wouldn’t require a new board. Congress has been adept at ratcheting down payments, but it has struggled with the challenge of shifting toward value-oriented payments. The payment advisory board is intended to take some of the politics out of the effort.

Those doctors and hospital administrators who are already shifting their efforts toward greater health-care value may therefore want to reconsider their stance toward the advisory board. With Congress in gridlock, it is one of the few mechanisms we can use to reward their efforts.

In any case, the best way for health-care providers to keep the board from making any changes to Medicare is to ensure that the growth in spending stays low.

(Peter Orszag is vice chairman of global banking at Citigroup and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)

What would happen if suppliers controlled demand?

http://lincolntribune.com/?p=21152
By Neal Inman Civitas Institute
A special committee of North Carolina lawmakers met this month to discuss a little-known program, Certificate of Need (CON), which effectively controls large sectors of the health care economy in the state. While lawmakers could simply reform the program to make it more equitable, they can and should decide to repeal this ineffective process altogether.

North Carolina is one of 36 states that retain some form of a CON law which requires healthcare providers to go through a lengthy application process before most healthcare facilities can open, expand or close. The services regulated range from the acquisition of multimillion dollar equipment to the addition of just one bed in a nursing home. State agencies issue a limited number of these CONs after a lengthy review process. Operating without one can result in enormous fines, the loss of medical licenses and a potential end to Medicaid and Medicare spending.

According to the state Department of Health Service regulation, the fundamental premise of the CON law is that increasing health care costs may be controlled by governmental restrictions on the unnecessary duplication of medical facilities. However, multiple studies have found that the program has largely failed to reduce costs or increase access and mainly exists to protect incumbent healthcare providers.

Proponents of CON claim the process forces hospitals to carefully consider new expansions, keeping healthcare costs down. Following this rationale, the federal government mandated that each state have some form of CON service in 1974. However, the federal government stopped mandating CON in 1987 due to its complete failure to contain the national growth of healthcare costs.

Congressional testimony indicated that the program was ineffective at best. However, no state has repealed CON since Indiana in 1999.

Since repeal of congressionally mandated CON, several studies have shown that the process has failed to decrease the nation’s rapid growth in healthcare spending, including multiple papers published by Duke University researchers Conover and Sloan.

“There is little evidence that CON results in a reduction in costs and some evidence to suggest the opposite,” the researchers said in an examination of Michigan’s CON program.

The program has been effectively used by hospitals and other incumbent healthcare providers to maintain a monopoly on profitable sectors of the health market. One hospital association member admitted to this rationale in a National Institute for Health Reform study.

“Member hospitals initially had mixed views about the benefits of CON but banded together to support the process after realizing it was a valuable tool to block new physician-owned facilities,” said the respondent, who remained anonymous.

Through the CON process, major players in the state’s healthcare industry such as Rex Healthcare, Duke, and Novant are able to tie their competitors up in court for years, preventing consumers from accessing quality healthcare. Navigating the CON regulatory process can take millions of dollars in application and consulting fees. Millions more may be spent as a newcomer’s entrenched competitors challenge them in court. Physician-owned facilities are kept out of the market, whether by regulators or the cost of the CON process itself.

During the recent legislative session, lawmakers from both parties introduced several bills that would help level the CON playing field. While these bills have merit, the General Assembly should repeal most aspects of the current process.

Instead of having the state protect the profit streams of enormous healthcare corporations, let healthcare providers make rational decisions for themselves based on what the market will support. Consumers will decide which services are needed far better than any bureaucracy in Raleigh.