2012- A Momentous Year in Health Care

2012 is a momentous year in health care and Health Care Reform for several reasons:

1. The Supreme Court of the United States is scheduled to hear six hours of oral argument starting on March 26th, with an expected verdict some time in June of this year.
2. The 2012 election is scheduled on November 6th. One of the key issues of this year’s presidential election is Health Care Reform.
3. A number of challenges facing the economy and Health Care Reform are effective on January 1, 2013.

Let’s look at these areas one at a time.

Supreme Court Case

Subsequent to the passage of Health Care Reform, twenty-six states sued the Federal Government over the constitutionality of this law. Specifically, the following key areas will be addressed at the Supreme Court starting on Monday, March 26th. Both the left and the right are planning to state their views ( pro and con) in front of the Supreme Court while the trial is taking place. The trial will focus on some key areas as noted below:
• Is the individual mandate constitutional?
• Is Health Care Reform severable? In other words, if one component of Health Care Reform is ruled unconstitutional, does that mean the rest of the law can be implemented?
• Does the Medicare provision ( relaxing Medicaid eligibility to 133% of the Federal Poverty Level for all states) constitute coercion?
Regarding the mandate, many commentators are predicting a very close vote in the Supreme Court. If the mandate is overturned, the Republicans will claim a victory from the overreach of Obamacare. President Obama and the Obama Administration will, no doubt, paint the Supreme Court as leaning far to the right, and thus try to marginalize its decision with the electorate prior to the presidential election.
Conversely, if the mandate is upheld, President Obama and the Democrats will claim victory regarding the mandate, as well as the validity of the law itself. This will give the Obama Administration a boost going into the presidential election.
Regardless of the decision, Obamacare is likely to be here to stay. The odds of a total repeal appear to be extremely remote. The following would have to happen in November for Obamacare to be repealed in toto: 1) The Republicans retain control of the House; 2) The Republican nominee wins the presidency and 3) Republicans win a filibuster-proof majority ( 60+) in the Senate.

The 2012 Presidential Election

Health Care Reform is one of the key issues in this year’s election. Some other key issues are 1) jobs and the economy; 2) the rising price of oil and 3) foreign policy. President Obama’s recent decision that certain religious organizations would not not be exempt from Obamacare and must comply with offering contraceptives ( including abortifacients ), while forcing the insurance industry to pay for these procedures, was quite controversial. The Catholic church has vowed to challenge this ruling. Thus, this dispute will likely play out in the months to come before the general election. To counter this argument, Democrats are portraying this argument as a women’s health issue ( rather than a freedom of religion issue).

What to Expect in 2013

This year will be marked by a lot of activity regarding Health Care Reform as noted above. However, the next President will have many challenges facing him when he is sworn in early next year. Here are a few issues that will be facing him:
• The continued implementation of Obamacare- Not only will the regulations continue to be written ( expect more surprises), but some key taxes of Obamacare will be implemented. A Medicare tax ( .9% above certain income thresholds), a tax on income ( 3.8% above these same income thresholds) and a 2.3% tax on medical device manufacturers will start next year to help pay for Obamacare.
• The anticipated $5 Trillion in fiscal decisions that will be left to a lame duck Congress between November 6, 2012 and New Year’s Eve. Perhaps the most important provision-whether to let the Bush tax cuts expire.

Summary

Whatever happens, 2012 promises to be highly charged politically. The decisions that are made this year will have profound implications for the economy and Obamacare. And, please note that the most far-reaching provisions of Obamacare will be one year later ( 2014). That’s when provisions such as the penalties for non-compliance ( and the individual mandate, if it’s ruled constitutional) take effect.

Obamacare- One Year Later

It’s been just over a year since the first mandates of Obamacare ( also known as Health Care Reform or HCR ) were passed on October 1, 2010. But, as the old saying goes, “You ain’t seen nothing yet.”
HCR has proven thus far to be politically unpopular. Many Democrats are distancing themselves from HCR, and many Republicans are calling for its outright repeal. However, an outright repeal of HCR is unlikely. The only way an outright repeal would be possible is if Republicans retained the House, won the Presidency, and gained thirteen Senate seats for a filibuster proof majority of sixty.
While the first few years of HCR addressed the additional benefits offered by the law, much of the more adverse parts of this legislation ( the costs) will be implemented in 2013 and 2014.
Here are the key provisions of HCR that are set to take effect in the next few years:
In 2012, The Supreme Court will hear five and a half hours of oral argument about HCR ( one of the longest in history). A decision should be rendered by June, 2012. The key rulings by the Supreme Court will be the following:
1. Is the individual mandate constitutional? Note: Even if the federal mandate is ruled unconstitutional, states will still have the right to impose a mandate (i.e. Massachusetts)
2. Does the required ( and substantial ) expansion of Medicaid as outlined by HCR exceed the authority of the Federal Government?
3. Regarding the legal concept of severability, if one component of HCR is viewed as unconstitutional, does that mean HCR must be repealed in its entirety? Or, can the other components of HCR stand on their own?
In 2013, some of the taxes of HCR go into effect. Two tax provisions that will affect employers and employees are the .9% Medicare Hospital Insurance Tax ( for individuals above $200,000 and joint filers above $250,000-not indexed ) and the 3.8% Medicare contribution on certain unearned income (for the same income levels as noted above).
On January 1, 2014, the major parts of HCR go into effect as noted below:
• The Individual mandate takes effect ( assuming the Supreme Court doesn’t overturn this provision). Annual penalties apply for those that don’t purchase health insurance coverage.
• The Employer “Pay or Play” provision kicks in. “Pay or Play” requires employers with greater than fifty employees to either offer a minimum level of health coverage and employer contribution level or pay a $2,000 per employee “shared responsibility” payment for failing to do so. The penalty increases to $3,000 per employee if the employee purchases health insurance with a premium subsidy through a state-based Heath Care Exchange.
• Fees on pharmaceutical firms ( starts in 2011 ), medical device firms ( starts in 2013) and health insurers ( starts in 2014 ) will be passed on to the consumer in the form of higher costs.
Three additional concerns about HCR are the following:
1. Adding about 20 Million new insureds to Medicaid while Congress continues to cut provider reimbursement rates ( both Medicare and Medicaid) could mean longer wait times for patients – and more “cost shifting” to private sector employers and employees.
2. Many believe health care costs due to HCR will increase more than if the law hadn’t passed. And, with 77 Million baby boomers beginning to enter their senior years, it’s almost certain that the nation’s health care costs will accelerate due to this demographic shift.
3. Certain medical providers ( i.e. neurosurgeons ) have reported that HCR removes their decision-making authority in emergencies and transfers that authority to an unelected board ( which is not comprised of doctors). If these charges prove to be true, there could be a backlash against this controversial feature of HCR.
For employers, HCR will continue to have a major impact on their strategic planning in the years to come. It looks like some form of HCR is here to stay. As a result, employers will need to be more proactive in order to control their future health care expenses.
Depending on a company’s size, there are a number of steps employers can take today to position their companies most effectively for HCR in the next several years ( alternative funding strategies, wellness programs, value-based plans and consumer driven health plans are a few examples).
Conversely, individuals and employers who simply react to this legislation may find that their health care costs increase at a faster rate than before Health Care Reform. This is because many project that some of the more innovative plans will be selected by a healthier employee population. As a result, the remaining employees in the traditional health plans ( HMO, PPO ) could make up a more adverse risk of employees, thereby driving up health care costs faster than normal.

The Foundation For Health Coverage Education – A Health Resource For Americans

It’s fairly common for the national press to substantially overstate the number of the uninsured. And, at the same time, they fail to recognize a number of health care programs that are now available in all fifty states for many Americans to reduce the number of uninsured Americans.
A good example is The Foundation for Health Coverage Education ( FHCE). Here’s a brief history of how this valuable American resource began.
In 2002, the Blue Cross Blue Shield Association’s study of the U.S. Census Bureau data indicated that nearly one-third of the uninsured were eligible for government-sponsored health coverage programs—yet not signed up. Let me repeat that. In 2002, The Blue Cross Blue Shield Association concluded that fully one third of all uninsured Americans were eligible for a government sponsored program-but didn’t bother to sign up. And, by the way, this third is always counted in the press’s count of “uninsured Americans.”
Blue Cross Blue Shield stated in a future report that there may have been several reasons for this statistic:
1. Some may be unaware they are eligible for these programs.
2. Others may perceive a stigma being associated with government programs.
3. Some may be unable to maneuver through complicated application procedures, extensive paperwork and language barriers.
This staggering statistic motivated Phil Lebhertz of Lebhertz Insurance Services, Inc. ( LISI ) to found the Foundation for Health Coverage Education ( FHCE) in 2004. The mission of FHCE was the following:
“Our mission is to provide simplified public and private health insurance eligibility information in order to help more people access coverage. We aim to find the uninsured and centralize the distribution of information and eligibility requirements, encouraging more people to enroll, thereby lowering the ranks of the uninsured.”
In response to the above statistic regarding the uninsured, FHCE took the following steps as noted in Health Affairs on May 9, 2011:
• Develop a centralized registry of health insurance system regulations and eligibility requirements across the states.
• Launch a 24/7 U.S. Uninsured Help Line and web site ( www.coverageforall.org) to help people more easily determine their health coverage options.
• Establish FHCE’s Eligibility Quiz- This quiz simplified the enrollment process by asking the uninsured five qualifying questions to determine a list of personalized health coverage options complete with a sign-up checklist, application and contact information for each program for which they were eligible.
The above measures and the FHCE Eligibility Quiz were kept operational to gather additional data as to why many Americans were not enrolling in the health insurance coverage available to them.
The results of their survey of 249, 867 respondents from 9/1/09 to 7/31/11 revealed the following:
• 60.3% of respondents were eligible for government-sponsored health coverage. Most public health coverage programs require individuals to have an income of 200% of the Federal Poverty Level ( FPL ) or below or $44,700 for a family of four to qualify.
• 22% were eligible for private coverage. This includes individual, group, or Cobra/Mini-Cobra insurance.
• 15.9% were eligible for high risk pool coverage. This includes both state and the newly implemented Pre-Existing Condition Insurance Plan ( PCIP ) or federal high risk pools.
When FHCE performed their Point-of-Service Hospital ER Survey to gather similar information for emergency room stays, the statistics were similar to those percentages above:
• 80.7% of patients were eligible for public health coverage programs. These government sponsored programs include the joint federal/state programs, Medi-Cal and Healthy Families ( California’s Medicaid and CHIP programs, respectively) and other state programs such as Access for Infants and Mothers (AIM), Healthy Kids, California Kids, County Medical Services and Restricted Medi-Cal with income eligibility requirements of 300 FPL or below or $67,050 for a family of four to qualify.
• 16.3% were eligible for private coverage.
• 3% were eligible for high risk pool coverage.
These startling statistics resulted in FHCE asking two key questions:
1. Why are the uninsured enrolling in government health coverage programs for which they are eligible?
2. How can the government more quickly and efficiently enroll the eligible uninsured?
FHCE concluded that there was a clear issue with the distribution channels of these public health programs to those who qualify. Therefore, they believed that it would be most efficient to more effectively communicate, educate and provide access to the above existing plans rather than just create new coverage.
Their research has confirmed their belief that there are three major enrollment dilemmas with current government-sponsored health insurance programs that must be addressed to lower the number of uninsured Americans:
Dilemma # 1 – Underfunded Programs- Not only is there a shortage of funds for these programs, but there is also a substantial inequity in the federal and state funding matchup of Medicaid dollars. For example, Rhode Island and New York are budgeted to spend $8,796 and $8,450 respectively per Medicaid enrollee; Georgia and California fund their Medicaid programs at half these amounts- $3,892 and $3,618 respectively per Medicaid enrollee. Why the inequity? It’s due to the individual
Dilemma # 2- Bureaucratic Barriers- Most enrollment in these programs has been via phone, mail or in person ( rather than online). In a survey of 50 calls made to the San Diego Medi-Cal Office over a three month period, only 15 calls were answered and addressed. The remaining 35 calls were met with a recording about the inability to respond at this time due to “ an unexpected volume of callers.” For the 15 calls that were answered, the average hold time was 22 minutes and the longest hold time was 32 minutes.
Dilemma #3- Poor Provider Incentives for Enrolling Uninsured Patients- The American Hospital Association estimates that hospitals throughout the U.S. lost $36.5 Billion in uncompensated care in 2009. This is due to 1) bureaucratic delays in the application and reimbursement process, and 2) very low compensation received from government sponsored programs.
The Solution: Point of Service Enrollment via the FHCE web site. FHCE believes that their online enrollment system will allow individuals to be enrolled at point of service ( and eliminate the need for a paper enrollment).
In summary, FHCE’s national program is now making an impact on reducing the unemployment rate by making eligible individuals available to more effective and efficient ( online ) enrollment tools. Existing programs like these will only help to lower the uninsured rate in the years to come.

Why is the Definition of Minimum Essential Benefits Important?

Get ready for a more frequent use of the term “ Minimum Essential Benefits” as it relates to Health Care Reform. Kathleen Sebelius, the Secretary of Health and Human Services, has been granted the authority under Obamacare to decide what set of health benefits shall be considered Minimum Essential Benefits coverage. This is the minimum plan that can be sold in state-based exchanges in 2014.
She has solicited input from the Institute of Medicine, which is an independent agency with experts in the health care field. Their task will be to provide guidance on what health coverages should be considered in this package.
There is a heightened level of anticipation and concern among employers as to what set of mandated benefits Ms. Sebelius will require in this package. And, for employers who currently offer coverage that is less generous than the forthcoming Minimum Essential Benefits, they will likely do one of the following in response to this mandate:
HR 3590 states the following:
Sec. 1302. Essential Health Benefits Requirements
b. Essential Health Benefits-
1. In General- ….The Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:
A. Ambulatory patient services.
B. Emergency services.
C. Hospitalization.
D. Maternity and newborn care.
E. Mental health and substance abuse disorder services, including behavioral health treatment.
F. Prescription drugs.
G. Rehabilitative and habilitative services and devices.
H. Laboratory services.
I. Preventive and wellness services and chronic disease management.
J. Pediatric services, including oral and vision care.
HR 3590 goes on to say … “The Secretary shall ensure that the scope of the essential health benefits under paragraph 1 is equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary.”
For those employers that offer coverage that is less than the Minimum Essential Benefits package, here are three alternatives they will likely consider:
1. Enhance coverage and pay more per employee, thereby increasing per employee expenses and reducing future profit margins.
2. Terminate some employees to offset the increased expense of complying with the new Minimum Essential Benefits mandate.
3. Raise prices to consumers.
Further, what about all the industries ( i.e. restaurant, construction, etc.) that have never offered health insurance in the past? For these industries, it’s apparent that their costs will increase substantially. As a result, they will have to reduce their staff and/or raise their prices to consumers.
In addition, the Minimum Essential Benefits mandate applies to “state based exchanges.” What about those states that are not moving forward in setting up their own exchanges ( which means the Federal Government will structure the exchanges in those states)? Does this mean that exchanges of states where the Federal Government structures the plan are exempt from the Essential Benefits Mandate?
In summary, I believe that the passage of the Minimum Essential Benefits requirement is likely to have a similar impact on our economy as when there is an increase in the minimum wage. While this provision of Health Care Reform is well intended, it will serve to reduce employment- particularly in those industries where benefits are either low or nonexistent.

Health Insurance For Those At Or Near Medicare Age May Offer Significant Savings

The Medicare Annual Election Period ( for coverage starting on January 1, 2012 ) starts on Oct. 15th and goes until December 7th. This period is for seniors who want to consider their options under Medicare Advantage ( such as Medicare HMO, PPO and Private Fee For Service) and Medicare Part D ( Drug) coverage.

I wanted to share a recent example of the type of savings that can be realized if a currently insured employee under a group plan decides to explore their Medicare options. Recently, a 67 year old employee was referred to me by the Director of Human Resources of a group client of mine. The monthly group health premium for this employee and his spouse was about $2,100 per month. The employer paid about $600/month, and the employee was responsible for the other $1,500 per month. This employee and his spouse were on an HMO plan with his employer.

The employee has decided to move to a Medicare Advantage HMO and his spouse will be doing the same. The monthly premium: $0. However, both husband and wife must enroll in Medicare Part B ( doctor ) coverage to be eligible for a Medicare Advantage Plan. The monthly cost for Medicare Part B coverage for them = $96.40 per person or $192.80.

The coverage is comparable to the HMO plan they had with their employer.

The total estimated savings:

Employer Savings: $600/month X 12 = $7,200/yr.

Employee Savings: $1500/month current cost – $192.80/month new cost = $1,307 X 12 = $15,684/yr.

Total Savings ( Employer + Employee): $22,684/ yr.

This is an example of why employers ( and employees/retirees who are approaching 65 or are already 65+) may want to explore their options in this area of Health Care Planning. There is a lot of innovation in this market and, in many cases, significant savings can be realized.

Employers Should Not Take a “Wait and See” Approach to Obamacare

As I continue to speak to organizations and communicate with my group health clients about Health Care Reform, there seems to be an attitude among some business owners that Obamacare will be repealed. As a result, they believe they don’t need to do anything different regarding their Group Health Insurance and Employee Benefits. Here are some key reasons why I don’t believe Obamacare will be repealed ( although I do believe it will be revised quite a bit over the next several years):
While I do believe that there is a greater than 50% chance that the individual mandate will be ruled unconstitutional, I don’t believe this decision will result in an outright repeal of Obamacare.
Most people would agree that the Democrats will not be willing to repeal Obamacare, which is one of the most significant pieces of legislation in our history. The Democrates used some aggressive political tactics just to pass Obamacare. Therefore, expect a major fight over its repeal.
Republican presidential candidate Mitt Romney has stated that if he was elected president, he would grant a waiver to all 50 states for Obamacare. However, granting a waiver is different from an outright repeal of Obamacare.
Even if the House and Senate were to be controlled by the GOP, President Obama                ( assuming he was reelected ) would veto the legislation.  So, the only realistic way that the GOP might have a slim chance at repeal is if they do the following:

1) Win the White House.

2) Retain control of the House of Representatives.

3) Win the U.S. Senate with a filibuster proof 60+ GOP Senators.

Because the GOP currently has 47 Senators, this is not very likely. However, it is possible, because many more Democrats vs. Republicans are up for reelection in 2012.
Assuming the above scenario happens, and the next president is a Republican, he/she will have a major challenge regardless of his/her decision to repeal Obamacare. If the new President tries to repeal Obamacare, all those individuals who were given this new entitlement will be furious that it was then taken away from them. And, if Obamacare stays intact, all the taxes and penalties are set to take effect in 2013 ( taxes ) and 2014       ( penalties).
So, I would strongly encourage employers to not take a “wait and see” approach to this legislation. Employers may want to consider the following steps in transitioning to Obamacare:
1. Develop a three to five year strategic plan for your company.
2. Compare what provisions of Obamacare will be implemented over the next three to five years.
3. Learn what proactive strategies your company can take today or in the near future to ease the transition to Obamacare. Be sure to try to capitalize on taking advantages of any incentives in the bill, while reducing or avoiding any penalties.
I believe those that take a wait and see approach to Obamacare will regret having done so   ( particularly as we move into 2013 and 2014 and beyond).

Workplace Wellness Programs- One of the Benefits of Health Care Reform

There are many provisions of Health Care Reform that are controversial and threatening. However, Workplace Wellness Programs are one of the most favorable elements of this legislation.

Wikipedia defines these programs as “a program offered by some employers as a combination of educational, organizational, and environmental activities designed to support behavior conducive to the health of employees in a business and their families.”
While the health insurance industry has talked about these programs for the last twenty years, their popularity is beginning to accelerate. Here are some reasons why:
1. The average age of the workforce today is older than it was years ago. Consequently, keeping and maintaining good health is more difficult than it was years ago.
2. Group health plans in years past offered rich coverage with low copays. If an employee wasn’t healthy, it only meant that the insured employee would pay a few extra low copays ( i.e. $10 office visit copay or the like) and the insurance company and/or the employer would pick up most of the remaining cost. Today, copays are higher for traditional plans, and many employees have high deductible health plans ( including Health Savings Accounts). As a result, the cost to the insured employee is greater if they are unhealthy and consume more health care services.
3. Online Health and Wellness and Disease Management tools are available from most of the health insurers to assist the employees in assessing and monitoring their health and health risk factors. Because up to seventy percent of health care costs are due to lifestyle, maintaining and monitoring employee health will be very important to manage health care costs and maintain employee productivity.
4. Employers today are integrating Consumer Driven Health Plans ( not available before 2004 ) with Workplace Wellness Programs. Both plans encourage consumers to manage their health care costs efficiently and effectively.
5. In 2014, The Health Care Reform law will allow an employer to provide a financial incentive to employees of up to 30% of employee only health care premiums if they agree to take certain steps to monitor and improve their health. Previously, this incentive was only 20% of employee only health care premiums. Further, this provision may increase to as much as 50% of employee only health care premiums after 2014 at the discretion of the Secretary of Health and Human Services, Kathleen Sebelius.
As an Insurance and Financial Services advisor with a number of group clients, I have noticed in the last five years that my client’s employees are exhibiting more risk factors than ever before. The natural progression as one gets older is to become less healthy, exhibit more risk factors and become less productive. In order for employers to maintain or enhance employee productivity as their employees get older, they will need to use Workplace Wellness Programs to allow employees to “turn back the clock” and maintain their health. What makes this task even more difficult is that far more employees ( due to a sedentary work environment ) are burning fewer calories on the job than ever before. This factor has helped to contribute to one third of Americans becoming obese.
While all the major health insurers offer effective Health and Wellness tools, one program offers a health monitoring system for employees that can predict with up to 83% accuracy whether the employee will be a high cost claimant up to three years into the future. Capturing this data allows the employee to see into the future how their current health and lifestyle could jeopardize their health and take corrective measures now- before their current lifestyle leads to more risk factors, higher health costs, and higher insurance premiums.
It’s estimated by Towers Watson ( Employee Benefit Consultants ) that about half of large employers are either offering Workplace Wellness or will consider doing so in the near future. This same trend is already starting to happen in the small group employer market as well. In their 2010 Health Care Cost Survey, Towers Watson believes the employer market will be divided up by “High Performing Companies” and “Low Performing Companies” depending on what steps they take to adjust to Health Care Reform. Two of the primary factors: whether a company adopts an effective Workplace Wellness Program and is able to articulate a vision to their employees that good health equals good business.
Towers Watson estimates the cost difference per year for High Performing Companies vs. Low Performing Companies will be $2,000 per employee per year. Or, stated differently, for a 100 employee firm, a High Performing Company will spend $200,000 less per year than a Low Performing Company. These are significant dollars, and employers would do well to heed the result of the Towers Watson study between High Perfoming Companies and Low Performing Companies.
High Performing Companies are already offering good incentives to their employees who take a Health Risk Assessment and take steps to monitor and make efforts to improve their health. While an employer may not be able to require employees to take these steps as a condition of employment, we are seeing employers adopt effective incentive strategies to encourage healthy behaviors.
As a fellow Employee Benefits Broker/Consultant, we are learning more and more about the health risk factors that our clients’ employees and their family members face and am encouraging them to use the tools available to them to become more healthy, productive employees for their firms.
This information is rarely provided by the employee to his/her employer for two reasons: 1) Many employees are reluctant to share any any adverse health information with their employer because perhaps they are fearful it will jeopardize their employment with the firm ( even though terminating an employee for health reasons is not allowed ); 2) Privacy laws are such that employers would prefer not to have this information because they could be accused of using it as a basis for terminating an employee.
In summary, Workplace Wellness Programs couldn’t come at a better time. With 77 Million Baby Boomers approaching retirement, their health care utilization ( and health costs) are beginning to increase. Let’s hope that company adoption of Workplace Wellness Programs translates to what it was intended to do: Offer employers and employees lower health care costs, greater employee health and wellness, and improved employee productivity ( which leads to more productive companies).