Individual Insurance Cost Hikes Stemming From ACA Likely.

Accompanying the release of a study from the nonpartisan Society of Actuaries which projected increases in the medical costs of individual health policies across the country next year, HHS Secretary Kathleen Sebelius acknowledged Tuesday that the Affordable Care Act may contribute to some insurance premium hikes next year.

Reuters (3/27, Mason, Morgan) reports that on Tuesday, HHS Secretary Kathleen Sebelius admitted that premiums could rise next year for individuals buying health insurance, especially for men and young adults. Sebelius attributed the possible increases to "shifting" in the market due to the full implementation of the Affordable Care Act. She said, "Women are going to see some lower costs, some men are going to see some higher costs. It's sort of a one to one shift. ... Some of the older customers may see a slight decline, and some of the younger ones are going to see a slight increase." The article notes that Sebelius' comments come as many fear rising health costs due to the law, and on the same day as the release of a study from the Society of Actuaries which estimated individual insurance premiums will rise 32% over the next three years.

The Wall Street Journal (3/27, Radnofsky) "Washington Wire" blog reports that Sebelius also said, "These folks will be moving into a really fully insured product for the first time, and so there may be a higher cost associated with getting into that market. But we feel pretty strongly that with subsidies available to a lot of that population that they are really going to see much better benefit for the money that they're spending." 

Study Projects Medical Costs Will Rise For Individually Insured. The AP(3/27, Alonso-Zaldivar) reports that a report from the Society of Actuaries estimates that insurance companies "will have to pay out an average of 32 percent more for medical claims on individual health policies under President Barack Obama's overhaul. ... That's likely to increase premiums for at least some Americans buying individual plans." The AP adds, "While some states will see medical claims costs per person decline, the report concluded the overwhelming majority will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers." The AP adds that the report "could turn into a big headache for the Obama administration at a time when many parts of the country remain skeptical about the Affordable Care Act."

Affordable Care Act Taxes effective January 1, 2014

The Affordable Care Act (ACA) requires that taxes be collected in order to fund certain provisions of health reform. Beginning January 1, 2014, there are two new taxes that will go into effect. We are providing a summary of those taxes below, as well as a convenient fact sheet you can download for your reference and to share with your clients.

Purpose of these ACA Taxes

Health insurer tax – to help fund premium subsidies for certain individuals and families purchasing coverage through health insurance exchanges.

Transitional reinsurance tax – to help stabilize premiums and the cost of high-risk individuals entering the individual market in each state's health insurance exchange.

Blue Shield Market Impact

Employer Groups of 51 or more employees Blue Shield's fully-insured large group (51+) customers will see the health insurer tax (about 4%) AND transitional reinsurance tax included in their 2014 rates beginning with renewals released in February 2013. The amount owed for the tax as of January 2014 will be prorated over a 12-month period in their renewal rate. For example, if the group's contract renews in June, the amount owed for the tax as of January through May 2014 will be prorated by 12 months and will be reflected in the monthly rate, beginning June 2013. However, Blue Shield will reimburse these pro-rated taxes for groups that term in 2013. For self-insured customers, plan sponsors are responsible for the transitional reinsurance contributions. Employer Groups of 50 or fewer employees The ACA taxes will be included in all new and renewing small group clients' dues/premium effective January 1, 2014, regardless of the client’s renewal date as addressed in the group's contract. Individual and Family Plan (IFP) members The ACA taxes will be included in dues and premiums for all Individual and Family Plan members beginning on January 1, 2014. by Sebelius

Extra Health Costs on the Way

As Orange County companies gear up to renegotiate health insurance plans for 2014, employers face the likelihood of additional costs in the form of a new fee that will be imposed on insurers under the Affordable Care Act.

The fee, which applies nationwide, will finance a $25 billion, three-year transitional fund, most of which is intended to help insurers defray the extra medical costs they expect to encounter once they are required by law to fully cover patients with pre-existing conditions. That requirement, which takes effect next year, is one of the most prominent provisions of the health care reform act.

The fee next year will be $63 – or $5.25 per month – for every person enrolled in employer-sponsored and individual plans. It will be paid by the health plans themselves – a kind of industry self-insurance policy. But it almost certainly means bigger health costs for employers, which will in turn have to decide whether to pass on those increases to their workers in the form of higher premiums or curtailed benefits.

"I've been doing this for 30 years and I've never seen an insurance company say they are going to take the burden, so we are just planning on taking it," said Kathryn Gray, chief organizational development officer of Aspen Medical Products, a manufacturer of back and neck braces that employs about 110 people at its Irvine headquarters. "We don't think employees should pay the price, so we will be absorbing the charges," Gray added. 

She said that because of the combined impact of the new fee and a 2.3 percent excise tax on medical devices that took effect Jan. 1, the company has suspended plans to build a new distribution center.

Some employers, however, see no such negative fallout from the fee. Elizabeth Parker, co-owner of the Tulsa Rib Co. in Orange, said its impact will be largely mitigated by a sharp recent decline in premium hikes on the health plan her restaurant offers its employees. She said the premiums rose by only 6 percent this year and 4 percent in 2012, compared with 38 percent the year before.

"We'll take $60 any day compared to what we were seeing," Parker said. She said small businesses stand to benefit from the Affordable Care Act because they will be able to buy coverage more cheaply in the insurance exchanges scheduled to open next year.

The new fund is expected to collect $12 billion in 2014, with $8 billion more added the following year and another $5 billion on top of that in 2016.

The new fee will be levied across all sectors of the private health insurance market, but the proceeds are earmarked to help contain the rise of premiums exclusively in the individual segment. There is a lot of pent-up demand in the individual market, where chronically ill people have been excluded or charged sky-high premiums for years.

The new law not only makes it illegal to refuse insurance to such people, it also prohibits charging higher premiums on the basis of an individual's medical history. Doing away with those two practices is expected to generate significant additional medical spending next year.

The fund will relieve health plans of much of that extra burden by taking over the payment of claims on their most expensive patients. Once the medical bills for an individual surpass $60,000, the fund will kick in and pay 80 percent of costs above that threshold, up to a limit of $250,000, according to Larry Levitt, senior vice president of the Kaiser Family Foundation, which has closely followed the health reform act.

The U.S. Department of Health and Human Services, which will oversee the program, estimates it will reduce premiums in the individual market by 10 percent to 15 percent compared with the levels to which they would otherwise rise after the non-discrimination provision takes effect.

"We need this because all these new people are coming into the program and it's going to be hard to predict how much the claims are going to be," said Kelly Moore, spokeswoman for the Orange County Association of Health Underwriters and owner of Moore Benefits Inc., a medical insurance broker and administrator.

Gray of Aspen Medical said that while it is right to bring people without insurance into the system and discourage discrimination against the chronically ill, "it doesn't seem right that businesses are being asked to bear the burden of this ...We are the ones creating jobs."

But $63 per capita is a lot cheaper than the "hidden fee" employers end up paying to share the cost of uncompensated emergency room care for people who are locked out of the insurance market, said David Chase, California outreach director for Small Business Majority, a national advocacy group.

He noted that the health care law contains other measures that favor businesses, including a tax credit for small employers that provide insurance and a rebate from health plans that fail to spend at least 80 percent of premiums on medical care or quality improvement. "So you can't just focus on a $63 fee," he said.

Orange County Register by Bernard Wolfson

U.S. Drug Costs Dropped in 2012, but Rises Loom

The New York Times by Katie Thomas

March 18, 2013

Spending on prescription drugs nationwide has been slowing for years because of the increasingly widespread use of low-cost generics. But in 2012, something unheard-of happened: money spent on prescription drugs actually dropped.

The dip was small — 1 percent, to $325.7 billion — but it was the first time the research firm IMS Health had recorded a decrease in United States drug sales since the company began tracking such numbers in 1957. And this month, the pharmacy benefit manager Express Scripts reported that spending on commonly used pills — like those that treat high blood pressure and cholesterol — dropped by 1.5 percent, the first time that had happened since Express Scripts began following drug trends 20 years ago. 

Learn about PBMs (Pharmacy Benefit Managers) & what you can do to control your pharmacy costs at our next event, April 18th @ La Valencia Hotel

But even as the United States is in the midst of what has been called a “golden” period in spending on drugs, some are warning that the ever-expanding use of generics has masked a growing problem for the government, insurers and others who pay the bill for prescription drugs: the rising cost of complex specialty medicines that treat cancer, rheumatoid arthritis and other diseases.

“This is a charmed era that won’t last forever,” said Paul B. Ginsburg, the president of the Center for Studying Health System Change, a nonpartisan research group that studies health care trends. “When you talk to benefits managers at large employers or insurers, the trend of specialty pharma is very, very prominent. You might even say they regard it as their biggest problem.” 

The potential for higher spending on drugs comes as the nation is struggling over how to contain the cost of health care, which many experts agree is a major threat to the country’s fiscal condition.

Despite a recent slowdown in the growth of spending on overall health care, Republicans and Democrats alike have warned that rising health costs will eventually overwhelm the federal budget and make basic health care unaffordable for many Americans. Drugs, while not the major cause of rising costs, nonetheless account for about 15 percent of the nation’s health care expenditures.

Mr. Ginsburg and others said the forces that have been holding down drug costs are beginning to subside. Dozens of brand-name products, including widely used best sellers like the anticholesterol drug Lipitor, and Plavix, which prevents blood clots, have lost their patent protection in recent years, a phenomenon that has been called the “patent cliff.”

That cleared the way for cheap generic alternatives. But fewer major drugs are set to lose their patent protection over the next several years, and many of the newer drugs are so complex that it is still unclear how or when lower-cost copies will be brought to market once those patents expire.

The use of generic drugs may also be nearing its saturation point. In 2012, 84 percent of all prescriptions were dispensed as generics, according to IMS, the highest rate in history. IMS estimates that use of generics may reach 86 or 87 percent, but will probably not go higher than that. Some have also attributed the slowdown in spending to the weak economy as patients cut back on visits to the doctor and filling prescriptions.

“The majority of the patent cliff is over right now,” said Kevin Host, the head of specialty pharmacy at OptumRx, the pharmacy benefit manager for UnitedHealth Group. “That’s been muting the real effect of specialty.”

Express Scripts found that, among commercially insured patients, spending on specialty drugs, which account for about a quarter of all prescription drug costs, increased by 18.4 percent in 2012 even as the cost of traditional drugs dropped.

Specialty drugs are often injected or infused and many are so-called biologics, complex proteins that are made in living cells that treat a range of diseases, from various types of cancer to rare hereditary diseases. Increasingly, they come with jaw-dropping price tags: four drugs approved in 2012 carry a yearly cost of more than $200,000 per patient, according to Forbes.

The cost of some of these drugs can add up, even if only a handful of patients need them, said Judith P. Clark, the pharmacy director of Mississippi’s Medicaid program. “I do know if we don’t do something quickly, our budgets are going to be blown out of the water,” Ms. Clark told a gathering of generic pharmaceutical executives in February.

The high prices have also led to a wide disparity in the out-of-pocket expenses paid by patients. Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics, noted that while most drug-benefit plans ask for a small $10 co-payment for generic drugs, some patients who need specialty drugs can be required to pay more.

“For the vast majority of patients, their share of costs and their out-of-pocket for costs may go down,” he said. But “those few whose medicines are specialty and complicated — their share of costs may well go up.”

Still, some have questioned how quickly prices will rise, arguing that the pharmaceutical industry is no longer bringing as many blockbuster drugs to market. “I don’t see any return to the glory days,” said David Cutler, a health economist at Harvard.

IMS Health has predicted that drug sales will rise by more than 4 percent in 2014, because of fewer brand-name drugs losing patent protection and also an influx of newly insured patients with the putting in force of the federal health care law. Sales growth will then dip slightly to just over 2 percent in 2015, another year in which several big drugs are expected to lose their patent protection, before rising faster again in 2016 to nearly 4 percent.

29 States Get ‘F’ For Price Transparency Laws

	29 States Get ‘F’ For Price Transparency Laws

Kaiser Health News by Russ Mitchell - Marth 18, 2013: Wonder why you can’t get a straight answer on how much a health care procedure will cost you? One big reason: State laws which allow hospitals and other providers to keep costs hidden until they send you the bill. A report card on price transparency released today gives 29 states an “F” and seven states a “D” for policies that keep patients and their families in the dark on prices. The failing grade went to those with practically no transparency requirements. Only two states, Massachusetts and New Hampshire, rate an “A,” and even they could improve their laws, according to the report by the Catalyst for Payment Reform, a consortium of health care purchasers such as GE, Wal-Mart and The Boeing Company, and the Health Care Incentives Improvement Institute, a nonprofit group seeking to improve health care with evidence-based incentive programs. The high prices that American health care providers charge, often with little connection to actual costs, have been in the national spotlight since Time magazine devoted its entire March 4 issue to an investigation by Steven Brill. Most consumers are unaware of the tremendous variation in price. For instance, prices for knee replacement surgery in the same California market can range from $15,000 to more than $100,000, depending on the hospital, with no discernible difference in quality. High deductible insurance plans are becoming more common, with employers hoping consumers with “skin in the game” will shop around to help keep prices down. But, the authors note, consumers cannot make informed decisions without being able to comparison shop on the basis of either price or quality. “Consumers deserve to have as much information about the price of their health care as they do about restaurants, cars, and household appliances,” the report says. The grades reflect the quality and scope of the pricing data that states require and how well they disseminate it — public websites gain high points, for example. The grades also discriminate between ‘charges,’ the prices that hospitals say they charge for services, and what a consumer and her insurance company actually pay for them. There is often little connection between the two. States that require disclosure of actual prices earned higher grades. The groups plan to update the state report cards an annually.

Will health premiums jump or not?

One major question remains at the center of the health care overhaul’s ultimate success or failure — and Democrats and Republicans have spent the past three years each swearing they know the answer.

Will the law cause insurance premiums to skyrocket, as Republicans vow, or will it slow costs down, as Democrats predict?
And, for now, neither side has concrete evidence.

We’ll get a better idea of who’s right soon, when insurers announce 2014 premiums later this year. Insurance companies must roll out plans by early fall, in time to bid in the new insurance exchanges — which must be open for shopping Oct. 1 — and to make employer-based coverage open-enrollment periods.

The new batch of plans will be the first to overlap with the major insurance regulations going into effect in January, providing a more solid link between the price of premiums and the Affordable Care Act.

Until then, it’s still a guessing game, with advocates and opponents of the law each clinging to data they say proves their case.

A House panel gathered Friday morning to do just that. Each party confidently forecast its own version of the law’s effects.

The two witnesses invited by Republicans to appear before the Energy and Commerce Health Subcommittee on Health insisted that a rate shock is coming.

Rep. Michael Burgess (R-Texas), the panel’s vice chairman, rattled off a range of new insurance regulations — including mandatory coverage for habilitative services, oral and vision care and limitations on cost-sharing — asking Christopher Carlson, an actuary with management consulting firm Oliver Wyman, whether each one could hike the cost of premiums.

To each one, Carlson replied: “Yes, it will increase premiums.”

His firm has predicted that premiums will increase for large segments of the population in the individual market because of the health care law.

Republicans also highlighted evidence presented by Douglas Holtz-Eakin, former director of the Congressional Budget Office and president of the American Action Forum, who said his recent survey of major insurers shows that for younger Americans, premiums will increase by an average of 149 percent in the small-group market and 189 percent in the individual market.

“Certainly, these premiums increases are going to be dramatic in the individual market,” Holtz-Eakin said.

The Democrats’ sole witness — Wendell Potter, an analyst for the Center for Public Integrity — presented a different picture.

“The rate shock — which is crock, if you ask me — is nothing more than giving the impression it will affect most of the population when, in fact, it will not,” Potter said.

Democrats acknowledge that insurance costs could rise for a small segment of the population — people younger than 30 who purchase their health insurance on the individual market and who don’t qualify for subsidies. But the new markets are designed to have some younger and healthier people share the risk — and the cost — of covering older and sicker Americans.

And because that group of young unsubsidized people is relatively small, Democrats say Republicans are making the problem seem bigger than it is.

Ranking member Frank Pallone of New Jersey pointed to research by the Urban Institute, which has downplayed the law’s overall impact on premiums for young people.

“Opponents of the Affordable Care Act are attempting to spread fear that it will increase costs for millions of Americans,” he said.

Insurers themselves have warned that their rates will go up this year because of the health care law. But their projections are still just that: projections.

“Your fellow witnesses today have produced faulty studies that ignore specific and key policies in the Affordable Care Act, which actually do help lower costs for all Americans, young and old,” Rep. Lois Capps (D-Calif.) told Potter.

by.  PAIGE WINFIELD CUNNINGHAM

Health Insurance Exchanges: Be ready to be overwhelmed.

Twenty-four states now have been approved to set up their own health insurance exchanges, just seven months before people can start to enroll. That leaves the federal government to run 26 exchanges according to its own rules. No one’s quite sure yet what they will look like, but it’s becoming increasingly clear that many of them, at least, will provide an overwhelming range of choices for millions of people who may never have had to choose health insurance before.

Here are four things people can expect from the new exchanges:

1. They will offer lots of choices. The 2010 Affordable Care Act requires insurance companies selling policies on the exchanges to offer at least four levels of coverage: bronze, silver, gold and platinum. As the names imply, they go from bare-bones coverage to the full works.

This means they’ll be complicated.

Massachusetts is the only state with a full health exchange system up and running.

“Right now we have nine insurance carriers who offer plans on our site. We have 99 different plans from which people can choose,” says Stephanie Nichols, spokeswoman for the CommonwealthHealthConnector.

A quick look shows six different plans available for a “gold” plan for a family consisting of one adult aged 27 and child, with $500 annual deductible and no co-insurance — meaning the insurer pays the whole cost of treatment, minus a small co-pay. The six plans range in price from $762 a month up to $1,476 a month.

The website is designed to allow people to compare one plan to another, both in terms of cost and in terms of what each insurer offers, Nichols says. “You can put in the hospital that you would prefer to go to,” she said. Or you can search for particular drugs you take to see which insurer will pay for them.

HHS has its own model“finder” here.

Buyers also will have to fill out forms to determine whether they are eligible for a federal subsidy — something that is likely to take more than a few clicks on the computer.

2. They may offer far more coverage than you have now. The 2010 heath reform law requires insurers to meet a minimum standard of coverage. They all have to cover a package of what are called essential health benefits, which includes free preventive screening services for certain cancers, immunizations and maternity and birth control benefits; they can’t turn you away because you have have been sick before or are a certain age; they can’t charge you more if you are a woman, or from a certain ethnic group; and they can’t stop providing coverage just because you have become expensive.

“It is going to be real insurance,” says Linda Blumberg, a senior fellow at the Urban Institute. “In the vast majority of states now, carriers can turn you down flat. That’s going to be prohibited.”

So insurance provided on the exchanges is likely to provide far more coverage than what people can buy themselves on what’s called the non-group market.

“It is important for people to understand that the non-group market today is, essentially, dysfunctional in every state,” Blumberg says. “It’s (often) not real insurance because there are so many holes in it.”

Most Americans are covered by employer-sponsored insurance, or by government-provided insurance such as Medicare, Medicaid or the Children’s Health Insurance Program. Only a small percentage buy their own individual private coverage. “This is the place where people go when they don’t have other options,” Blumberg says. The exchanges are meant to fill in the gaps to allow more people to buy insurance — the Congressional Budget Office projects that 26 million people will buy health insurance on the exchanges by 2022.

Now, says Blumberg, the private, non-group health insurance market is dominated by younger, healthy people, because the insurers are free to turn away customers they fear will cost them more. “It’s almost impossible to get maternity coverage in the non-group market today,” Blumberg said. “People end up getting policies that don’t cover chemotherapy.”

She cites the case of a man in his 20s who found out he had an embolism in his brain — a potentially deadly bubble blocking a blood vessel. He needed emergency surgery, but had a cheap, bare-bones policy. “The hospital told him not to show up unless he had a check for $75,000, because his insurance policy wouldn’t say whether it would pay for the surgery,” she said.

3. This does, however, mean that some people who now have health insurance may end up paying more. “That benefit package is broader than what most people are buying today. While most people will get more comprehensive coverage, it’ll cost more,” says Robert Zirkelbach, spokesman for America’s Health Insurance Plans. “Even some people who are eligible for subsidies may have to pay more out of pocket for their premiums.”

And new taxes on health insurance will cost each family about $350 a year starting in 2016, Zirkelbach says, citing an analysis by the nonpartisan Joint Committee on Taxation, because the insurers are certain to pass along the expense to their customers.

The health insurance industry is also unhappy about limits on what’s called age rating. Currently health insurers typically charge a 60-year-old far more than they would change a 30-year-old. The health reform law limits this — insurers may only charge older people three times as much as they charge the youngest customers. “That means young people are going to pay more, just to cover older people,” Zirkelbach says.

Blumberg agrees this may happen, at least at first. But the Affordable Care Act never promised lower premiums. It aims to reduce costs overall by keeping Americans healthier in the first place, so they don’t wait until they have a dire health condition, such as a heart attack, to seek care. “Some people are going to end up paying more at the beginning and some people are going to end up spending less. But will have a more functional market,” she said.

And higher premiums will often be offset by lower out-of-pocket costs — insurance will have to pay for coverage that people currently often pay for themselves, and the two may balance one another out.

4. There’s no way to know now what a plan would cost you on an exchange. That’s because none are up and running yet. Health insurance costs vary by state, by age, by what coverage the policy offers, by whether a person smokes and by which providers and hospitals take part.

“The cheapest plan for you is not going to be the cheapest plan for me,” Nichols says. “All the carriers have different premium rates.”

Insurance companies will have to adjust their premiums based on how many people sign up. “There is broad agreement that for all these reforms to work you need broad participation,” Zirkelbach says.

“If the only people who take part are those who are older and who have high health care costs, then it is going to be unaffordable for everybody,” he added. “Young, healthy people need to join the insurance pool.”

The law is designed to encourage people to sign on, and it now allows older adults to carry their adult children until age 26 — a way to get people aged 18 to 26, who notoriously skip health insurance, into the insurance market. And there’s the controversial fine, now defined as a tax, for people who don’t get coverage. But Zirkelbach says it’s not clear whether people who consider themselves healthy and at low risk will buy insurance. “Will those people still decide to buy coverage, or pay a penalty that’s as low as $95 the first year?” he asked.

No one will know the answer to that until after open enrollment, the period when people can sign up for insurance, which starts in October.

by Maggie Fox

Another Point of View on "Myths About Healthcare"

The Promise: “If you like your plan, you can keep it” 
The Reality: According to the Administrations’ own estimates, the health spending law will force most firms – up to 80 percent of small businesses to give up their current coverage by 2013. (Federal Register, Vol. 75, No. 16, June 17, 2010).

Furthermore, according to the latest Congressional Budget Office projections, 20 million Americans could lose their employer-provided coverage.  (CBO and JCT’s Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance , March 2012)  

The Promise: “lower your premiums by $2500 per family per year” 

The Reality: According to the Kaiser Family Foundation, average family premiums for those with employer-provided coverage have increased from $13,375 in 2009 to $15,073 in 2011.The Congressional Budget Office projects an average increase of $2,100 per family in the individual market as a result of this mandate heavy health law. (CBO and JCT Letter to Senator Bayh on Impact of PPACA on health insurance premiums, November 2009). 

The Promise: “lower the cost of health care for our families, our businesses and our government” – President Obama 
  
The Reality: According to the Chief Actuary at the Centers for Medicare and Medicaid services, national health spending will increase by more than $311 billion over the next decade under the new health spending law. (CMS Office of the Actuary, Estimated Financial Impact of PPACA as amended, April 22, 2010 ). 

The Promise: “HCR  will create 4 million jobs – 400,000 jobs immediately”
                                                                                                               
The Reality: According to the Congressional Budget Office Director, the new health law will result in 800,000 fewer jobs over the next decade. (Testimony of CBO Director Doug Elmendorf before the House Budget Committee, January 10, 2011).

Furthermore a recent Gallup survey demonstrates that 48 percent of small businesses are not hiring because of the potential costs of the new health law and 46 percent of small businesses are not hiring due to concerns about government regulations. (Gallup Survey, Health Care and Government Regulations Curb Small Business Hiring, Feb 15, 2012).  

The Promise: “There will be no impact on Medicare”

The Reality:  The health spending law cut Medicare by more than $500 billion to finance new entitlement spending. Despite claims from the White House that these cuts were being put back into Medicare, the Chief Actuary at the Centers for Medicare and Medicaid Services made it clear that “the improved HI financing cannot be simultaneously used to finance other federal outlays (such as coverage expansions under PPACA) and to extend the trust fund.” The Chief Actuary further stated that these cuts in Medicare would put one in six hospitals into the red “possibly jeopardizing access to care.”  (CMS Office of the Actuary, Estimated Financial Impact of PPACA as amended, April 22, 2010).  

The Promise: “HCR will not add to the federal deficit”  .  

The Reality:  According to Douglas Holtz-Eakin, the former Director of the non-partisan Congressional Budget Office, under a realistic set of assumptions, the new health law will increase the deficit by at least $500 billion in the first 10 years and more than $1.5 trillion in its second decade.  (Health Affairs, Health Care Reform Is Likely To Widen Federal Deficits, Not Reduce Them , Vol. 29, No. 6, June 2010)

The Promise: “No family making less than $250,000 a year will see any form of tax increase” 

The Reality: According to the Joint Committee on Taxation the health spending law includes more than $500 billion in new taxes. No fewer than 11 taxes and penalties directly impact the middle class. These range from taxes on everything from life-saving medical devices and prescription drugs to new taxes on over-the-counter medications and flexible spending accounts. Furthermore, according to the CMS Chief Actuary, the new “high-income” tax included in the health law will eventually impact 80 percent of the taxpayers since it was not indexed for inflation. (2010 Annual Report of The Medicare Trustees, August 5, 2010).

The Promise: “Health care reform is entitlement reform”

The Reality:  In May 2010, CBO Director Doug Elmendorf stated: “Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation…does not substantially diminish that pressure.” (Presentation to the Institute of Medicine, Health Costs and the Federal Budget, Congressional Budget Office, May 2010)

The Promise: “Four million small businesses may be eligible for tax credits”
                                                                                                                                     
The Reality: Despite paying more than $1 million in taxpayer money to send out 4 million postcards promoting this much hyped credit only 309,000 small businesses or about 7 percent of the eligible entities have received it. According to the Treasury’s own Inspector General, the credit is overly “complex” and faced with “risks of errors and irregularities.” (Testimony of Treasury Inspector General for Tax Administration Before the Committee on Ways and Means, Nov 15, 2011).

The Promise: “No federal dollars will be used to fund abortions, and federal conscience laws will remain in place.”

The Reality:  The health law allows government subsidies to be used to buy health insurance that includes abortion coverage because it fails to codify the Hyde amendment’s prohibition on federally funded abortions. (United States Conference of Catholic Bishops Legal Analysis, March 25, 2010)

by Joe Brenckle

Why Prescription Drug Costs Keep Going Up

Background

Advances in pharmaceutical treatments have transformed health care over the last several decades. Today, many health problems are prevented, cured, or managed effectively for years through the use of prescription drugs. In some cases, the use of prescription medicines keeps people from needing other expensive health care interventions, such as hospitalization or surgery.[1] In 2010, 90% of seniors and 57% of non-elderly adults had a prescription drug expense .[2] Additionally, the number of medicines being prescribed has increased: from 1999 to 2011, the number of prescriptions rose 43% (from 2.8 billion to 4 billion), outpacing U.S. population growth of 9%.[3]Although still only a modest part of total health care spending in the U.S (10%), with so many people relying on prescriptions, the cost implications loom large for the American public, health insurers, and government payers.

Costs of Prescription Medications

Manufacturing and development of new drugs and patent protection laws are two of the major factors that influence drug spending. Drug manufacturers increase drugs costs to try to recoup the often significant outlays in research and development costs for drugs that make it to the market as well as those that do not enter the marketplace. Additionally, drug manufacturers make substantial investments in marketing practices, to influence physician prescribing habits and consumer demand for newer more expensive drugs.[4] Furthermore, patent protection laws provide manufacturers an exclusive right to sell a new drug product for up to 20 years, after which the drug may be manufactured in generic versions by other manufacturers, lowering the selling price.[5]Spending in the U.S. for prescription drugs was $259.1 billion in 2010[6], and is projected to double over the next decade. The current rate of growth has slowed from the highs of the 1990s and early 2000s to a more modest rate, but is expected to increase sharply in 2014 after the implementation of the Affordable Care Act (ACA). (Figure 1) The recent slowdown in spending growth is attributable to a number of factors including slower growth in the utilization of drugs, increased use of generic drugs which cost less, the loss of patent protection for brand-name drugs such as Lipitor and Plavix, [7] an increase in Medicaid prescription drug rebates, and a decrease in the number of new drugs introduced. [8]

National Health Expenditures,  Average Annual Growth from Prior Year Shown, 

Selected Calendar Years 2009- 2021

 

Note: 2000-2009 shows average annual growth in that period.

Source: Keehan, SP et al. 2012. National Health Expenditure Projections: Modest Annual Growth Until Coverage Expands and Economic Growth Accelerates. Health Affairs 31(7), Exhibit 2. Online.

Public and Private Spending on Drugs

Historically, private plans and public insurers have responded to rising prescription drug costs by increasing enrollee cost-sharing amounts, using formularies to exclude certain drugs from coverage, applying quantity dispensing limits, requiring prior authorization, and using step therapy (starting with the most cost-effective drug and progressing to more costly therapy only if necessary). [9] Private plans and Medicaid programs negotiate with pharmaceutical manufacturers to receive discounts and rebates that are applied based on volume, prompt payment, and market share.

Private Insurance
Nearly all private health insurance plans cover prescription medicines; however, there is considerable variation in the drugs that are covered and the share of costs that the insured individual must bear. [10] The vast majority of covered workers (87%) are in plans where policyholders pay different cost-sharing amounts for different classifications of drugs (generic, preferred, non-preferred) called “tiering.”[11] While this can encourage consumers and their providers to use less expensive drugs, it can be problematic to low-income individuals, who may not be able to afford the higher co-payments charged for preferred medications which usually include brand-name drugs without a generic substitute. More than one in ten (11.2%) of adults between 18 and 64 reported that they went without or delayed filling a prescription medication because of the costs. [12]

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Looking Ahead

Access to coverage and the resulting use of prescription drugs will be expanded by the ACA’s health insurance mandate. Prescription drug coverage is one of the “essential health benefits” that must be included in health plans in state-based health insurance exchanges and in the benchmark benefit packages for newly eligible adults under Medicaid. The law increases Medicaid drug rebate percentages for several types of outpatient drugs and requires that the resulting savings be remitted to the federal government. The ACA is expected to improve coverage and reduce cost-sharing for seniors through the closing of the “donut hole” and other regulatory changes. [18] The health reform law also makes a number of other changes that will affect drug costs, such as requirements for pharmaceutical companies to include additional information in labeling and advertising to help consumers make more informed health care choices.

In years 2015 through 2021, drug spending growth is expected to average 6.6% per year, reflecting the diminishing impact on spending from more patent expirations and the greater use of generic drugs. [19] This is only slightly higher than projected average growth rates of hospital care (6.2%) and physician and clinical services (6.2%). Spending on prescription drugs will continue to be influenced by increasing use of generic drugs and patent expiration for “blockbuster” drugs, as well as growth in drug utilization and new therapeutic biologics and molecular entities entering the market.

(Source: kaiserEDU.org)

11 Myths About Healthcare Reform

MYTH 1: The new law cuts Medicare drastically, so I won't be able to get quality health care.

The Affordable Care Act (ACA) in fact prohibits cuts to guaranteed Medicare benefits. There are provisions in the law to help curb the soaring costs of Medicare, but savings will come from reining in unreasonable payments to providers, taxing high-premium plans (beginning in the year 2018), cracking down on fraud and waste, and encouraging patient-centered, coordinated care, says Sara R. Collins, Ph.D., vice president of the Commonwealth Fund, a private research foundation focused on health care.

The ACA also covers preventive care designed to avert chronic conditions like heart disease and diabetes, which currently cost billions. Medicare beneficiaries get an annual wellness exam as well as numerous screenings and vaccines free of charge. The new system also improves coordination of care between doctors, nurses and other providers to prevent harmful and costly hospital readmissions.

Finally, the law closes the infamous Medicare Part D prescription drug "doughnut hole," in which Medicare beneficiaries paid full price forprescription drugs after exceeding a certain dollar limit each year. Now enrollees who reach the doughnut hole get large discounts, and by 2020, the hole will close.

MYTH 2: I've heard that Medicare Advantage plans will be cut or taken away.
The ACA does not eliminate Medicare Advantage plans, which are privately administered plans that provide benefits to about a quarter of Americans with Medicare. These plans were created to bring market efficiencies to Medicare, but they actually cost taxpayers 14 percent more per enrollee than the traditional Medicare program does. The ACA aims to bring costs back into line.

"The plans are still required to provide at least the same benefits as those available through traditional Medicare plans," says Stuart Guterman, vice president of the Commonwealth Fund. "And for the first time, the law ensures that plans that perform better will be paid better, so the care they provide should improve."

MYTH 3: I'll have to wait longer to see my doctor — or I won't be able to see my doctor at all.

"If your current plan allows you to see any physician in the plan, nothing will change," says UCLA's Lavarreda. Health plans are already building bigger networks in anticipation of new patients, so choices could be even greater.

Although the law doesn't specifically address wait times, many of its provisions are aimed at improving quality of care, including some that encourage more physicians to become primary care doctors.

MYTH 4: If I have Medicare, I will need to get more or different insurance.

Some people have confused the ACA's "individual mandate" with a requirement to obtain additional insurance on top of Medicare. "That's just not accurate," says Guterman. "Medicare beneficiaries will continue to have Medicare, and there's no requirement that they get additional coverage beyond what they already have."



MYTH 5: The new law "raids Medicare of $716 billion."

It's simply not true. The Congressional Budget Office (CBO), Congress' independent and nonpartisan budget scorekeeper, recently estimated that the changes to Medicare in the ACA will reduce spending by a total of $716 billion between 2013 and 2022.

"That's where the number comes from," says Guterman. The largest portion of these savings would come from changes to provider payments and correcting overpayments to insurance companies that offer private Medicare plans. "And that projected savings will be used to close the prescription drug 'doughnut hole'; to pay for free, preventive care for consumers; and to increase coverage for the uninsured," Lavarreda says.

All guaranteed benefits in Medicare were protected. These measures actually strengthen Medicare's fiscal viability: Before the ACA was passed, Medicare's Hospital Insurance Trust Fund, which is used to pay hospital bills for Medicare beneficiaries, was projected to run out of money by 2017; after the law was passed, that date was pushed back to 2024.

MYTH 6: The law is going to bankrupt America.

Not according to the CBO and the Joint Committee on Taxation, nonpartisan entities that estimated health reform will actually reduce the nation's deficit by $210 billion between 2012 and 2021, by reducing subsidies to private insurance companies, cracking down on waste and fraud, and reining in profits.

"If we don't get health care spending under control, that's going to bankrupt America," says Shannon Brownlee, acting policy director at the New America Foundation, a nonpartisan think tank.

MYTH 7: The new law will drive up premiums astronomically.

That's an unlikely scenario. "A significant number of the uninsured people who will be brought into the system with the ACA are the 'young invincibles,' " says Brownlee, describing the 18-to-29 age group. "Their relative good health helps to subsidize care for less healthy people."

The law also strengthens states' power to question unreasonable rate increases, whether because of age, preexisting conditions or any other reason. And the law's "medical loss ratio requirement" dictates that 80 to 85 percent of premiums be spent on medical costs. As of Aug. 1, approximately 12.8 million Americans received an estimated $1.1 billion in rebates from insurance companies in cases where overhead expenses exceeded 15 to 20 percent of premiums charged in 2011.

As for Medicare Part B premiums (which cover doctors' services and outpatient care), those are determined by a formula designed decades ago by Congress, based on the previous year's Medicare health care costs. In essence, the government pays 75 percent of Part B costs, and Medicare beneficiaries pay the remaining 25 percent. The law did not change this formula. (There is no truth to a rumor that Part B premiums will rise from $99.90 a month in 2012 to $247 a month by 2014, Lavarreda says.)

MYTH 8: If I can't afford to buy health insurance, I'll be taxed — or worse.

If you can't afford health insurance because of financial hardship (if the cheapest plan exceeds 8 percent of your income), you will be exempt from the tax penalty. Special taxes (from $95 the first year to $695 a year by 2017) will be phased in over the next seven years for those who choose to forgo coverage. Even then, the government will not criminally prosecute or place property liens on people who ignore the tax. At worst, the IRS will withhold the tax amount from individuals' tax refunds.

MYTH 9: I'm a small-business owner and I'll pay big fines if I don't provide health insurance to my employees.

Small businesses that already provide health insurance will not be affected. "Penalties for not providing health coverage apply only to companies with 50 or more workers," says the Commonwealth Fund's Collins.

In fact, many small companies will be eligible for tax credits to offset the burden of providing insurance. From now through 2013, eligible employers will receive a business credit for up to 35 percent of their contribution toward employees' premiums. For 2014 and beyond, the tax credit rises to as much as 50 percent of the contribution. These credits apply to companies with fewer than 25 full-time employees whose average annual salaries are less than $50,000. Companies with more than 50 workers that don't provide coverage will be subject to a fine of $2,000 to $3,000 per employee per year.

MYTH 10: The ACA basically turns our health care system into universal health care. So now some government bureaucrat will decide how and when I get treated.
Health care under the ACA will not be government run. "The law builds on and strengthens the existing private insurance system," says Collins. "Fifty to 60 percent of people will continue to get insurance through an employer, and people who are buying their own insurance will still buy private health plans. The choice of plan is not dictated, and you'll be able to choose the provider you want — no government bureaucrat involved."

The health care system envisioned by the law aims to be universal in one way: by making health insurance accessible to the vast majority of Americans. "That's a good thing," says Brownlee. "We'll have more people covered."

MYTH 11: If my state doesn't set up an insurance exchange, I can't get health coverage.

The ACA calls for each state to create an exchange, a marketplace of private health insurance companies. This will give individuals and small businesses a place to shop for affordable coverage, with subsidies provided, starting in 2014. But some states have declined to set up an exchange or have moved slowly.

"If a state hasn't done it, then the Department of Health and Human Services will set up an exchange in that state," says Collins. "Each state will have an exchange operated by either the state or the federal government. And tax credits will be available in your state, regardless of who is running it."

By. Beth Howard

$100 billion in new taxes to pay for HCR

The Internal Revenue Service on Friday unveiled its proposal to raise billions of dollars through annual fees on health insurers, a “$100 billion health insurance tax rule” that the industry says will significantly drive up costs for consumers.

The rule as part of the Patient Protection and Affordable Care Act imposes annual fees on health insurers that start at $8 billion in 2014, increases to $14.3 billion in 2018, and will increase every year after that. The Joint Committee on Taxation estimates the tax will exceed $100 billion over the next ten years.

The proposed rule will be published Monday for public consideration in the Federal Register. The IRS will accept comments for 90 days, beginning Monday.

Not paying on time will result in a $10,000 penalty for insurers, plus $1,000 for every day they miss deadline.

America’s Health Insurance Plans blasted the rule as a tax that will financially drown both employers and consumers. They warn that the costs will have to be passed along to consumers in the form of higher premiums, a claim that the Congressional Budget Office has also verified in its analysis.

“Imposing a new sales tax on health insurance will add a financial burden on families and employers at a time when they can least afford it,” AHIP President and CEO Karen Ignagni said Friday. “This tax alone will mean that next year an individual purchasing coverage on his or her own will pay $110 in higher premiums, small businesses will pay an additional $360 for each family they cover, seniors enrolled in Medicare Advantage will face $220 in reduced benefits and higher out-of-pocket costs, and state Medicaid managed care plans will incur an additional $80 in costs for each person enrolled.”

There is currently legislation to repeal the fees, recently introduced by Reps. Charles Boustany, R-La., and Jim Matheson, D-Utah, which AHIP strongly supports.

A 2011 report by Oliver Wyman found that nationally the health insurance tax alone “will increase premiums in the insured market on average by 1.9 percent to 2.3 percent in 2014,” and by 2023 “will increase premiums 2.8 percent to 3.7 percent.” 

Families purchasing coverage in the individual market will be hit the hardest in New York while those getting coverage from a small employer will be most impacted in West Virginia, Oliver Wyman analysis also found. Medicare Advantage beneficiaries in New Jersey and the Medicaid managed care program in Washington, DC top their respective lists of those that will be hardest hit by the tax.

BY KATHRYN MAYER

How will HRAs and HSAs work on public exchanges?

The answer to that question is still fuzzy. That’s because while the Department of Health and Human Services has confirmed to Employee Benefit News  that health reimbursement arrangements and health savings accounts will be offered on the public exchanges, the organization still hasn’t released the details and regulations surrounding these accounts. So where do industry leaders think we’re headed with these accounts?

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“Anything out of the public exchange will be the same analysis as insurers will have to offer to groups,” says Mark Holloway, a director of compliance at Lockton Benefit Group. “HSAs and HRAs are consumer-driven plans and they’ll continue to grow in popularity, as they’re effective at holding down costs.”

Holloway adds that the feds have not yet released how they’ll evaluate expenses at 60%, the lowest tier of coverage available on the public exchanges. But he says if an HRA is on a public exchange, it will most likely be attached to a high deductible plan like the 60% coverage level.

The one thing we do know, HRAs will not be as flexible as they once were. “The regulators have been pretty clear that employers won’t be able to set up stand-alone HRAs and have them use it to buy an individual policy on an exchange,” says Amy Bergner, a director of human resources at Pricewater house coopers. She echoes Holloway in terms of how the accounts will be used. “The products on the shop exchanges are still really under development,” Bergner continues. “It’s probably too early to tell whether there will be robust account based plans.”

But robust is what will most likely interest small business employers, those with less than 50 employees, which will be allowed to purchase insurance on the shop exchange. And that interest will only continue to spread.

“Not everyone has gone down the consumer-driven route before but I think that’s where most employers will be in 2014 and the future, just because of cost,” Holloway says.

HHS did not respond to a request for timing of HRA and HSA regulations on the exchanges.

by Gillian Roberts