Insurance Regulation
Thursday, July 3, 2008You've Done A Great Job - Don't Bother Coming Back TomorrowThe Lights Go Dim on the Pennsylvania Health Care Cost Containment Council By John R. GrahamCategories: Insurance Regulation, PennsylvaniaOK, let me get this straight: We've been critically following the passage of the autism mandate in Pennsylvania for almost a year now. It stalled in the state Senate despite advocates' citing a study from the Pennsylvania Health Care Cost Containment Council (PHC4) that showed relatively low costs of the mandate. However, this report was kept secret! Due to pressure from the Commonwealth Foundation, PHC4 finally releases the report. Both chambers of the state's General Assembly pass the bill, which the governor supports. And on the same day, the governor shuts down PHC4 because of a fight with senate Republicans! 38 of 43 employees were locked out because PHC4 "has no statutory basis to perform work", i.e., had sunsetted. Apparently, the squabble has to do with reforming medical malpractice in the Keystone State. But PHC4's role was to study the costs and benefits of different treatments. Over the years, bodies like this were instituted by legislators to reduce the risk of "mandatitis", that is, legislatures passing runaway mandates on health insurance without taking their costs as well as their benefits into account. Well, that never really worked: states with these bodies kept on imposing more mandates than ever, despite the "reviews" (as I discussed in a recent briefing paper). Whether Pennsylvanians will have more or less luck keeping the state government out of the doctor's office, now that PHC4 is in limbo, I leave for others to decide. But, really, doesn't this childishness show that we cannot afford to have politicians own and operate our health care?
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Thursday, July 3, 2008For Autism, Try Vouchers, Not MandatesBy John LaPlanteCategories: Insurance Regulation, Oklahoma, PennsylvaniaRather than impose yet another mandate on insurance policies, lawmakers in Pennsylvania might have helped the autistic by creating a school voucher or tax credit program for autistic children. Writing for the Oklahoma Council of Public Affairs, Joshua D. Hall says that such a program would help autistic children get a good start it life. He also offers an explanation for why insurance policies don't offer autism benefits as often as they do. The reason lies with the employment-based nature of our health insurance system, the way that most of us think about what "insurance" should do, and the preferences of employers.
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Thursday, July 3, 2008New Health Care Mandates in the Keystone StatePA passes autism mandates, pushes "slacker mandate" By Nathan BenefieldCategories: Insurance Regulation, PennsylvaniaThe Pennsylvania General Assembly just passed a bill to require insurance companies to cover autism services, along with colorectal cancer screening. Despite the fact these mandate are known to drive up the cost of insurance, and the number of uninsured, the bill was passed with a nearly unanimous vote (49-1 in the Senate and 203-0 in the House). Another bill, creating a "slacker mandate", would mandate coverage of adult children up to age 30, with no dependants of their own, on their parents' plans. Read the Commonwealth Foundation's commentary on these new mandates.
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Thursday, July 3, 2008A Point and Shoot Camera for $8,000By John LaPlanteCategories: Insurance RegulationHaving bought a point and shoot digital camera for $300 a few months ago, I can relate to David Catron's article on health insurance mandates, which recently ran in the American Spectator. Here's an excerpt from the beginning of the article:
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Tuesday, July 1, 2008From Heart Transplants to Hairpieces: The Questionable Benefits of State Benefit MandatesNew Study Finds Higher Premiums, Lower Wages, Longer Hours, More Uninsured By John R. GrahamCategories: Insurance RegulationPRI released a new paper today, which examines one critical area where states interfere in residents' ability to buy health insurance of their choosing. According to From Heart Transplants to Hairpieces: The Questionable Benefits of State Benefit Mandates for Health Insurance, benefit mandates increase health insurance premiums, reduce wages, increase working hours for employees, and deprive some workers of health benefits altogether. In 2007, there were 1,594 state mandates, averaging 32 mandates per state. This marks a significant increase from 1979, when there were just 252 mandate laws in force – an average of only five per state. Among the benefit mandates introduced since 2000 are: hearing aids, hormone replacement therapy, and reimbursement for clinical trial participation.
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Monday, June 30, 2008Changing Blues to For-Profit: Little EffectBy John LaPlanteCategories: Insurance Regulation, New JerseyHorizon Blue Cross Blue Shield is the largest health insurance company in New Jersey--and the largest non-profit one. It's seeking a conversion to a for-profit status, which worries some self-styled consumer advocates. The Newark Star-Ledger, however, says that the concern may be over nothing. After asking whether such conversions have the dire results predicted by some opponents, it says " The answer from several academics who have studied a handful of the 14 states where nonprofit Blue Cross organizations have become for-profit public companies: Not really." So why the opposition to the change? A tiny segment of the American population is outright socialistic, opposing anything that has the word "profit" attached to it. A somewhat larger segment believes that the profit motive somehow makes for worse health care outcomes, in part because it results in higher prices. But of course few people actually face real prices (and the choices the present) in the strange world of health care financing. Further, just because an organization has a non-profit status doesn't mean that its employees and executives live on Mother Teresa-like salaries, passing along the savings to patients. I'm not entirely sure what to make of all this, but we would in all likelihood be better off were everything about health care, including the insurance market, incorporate more of a free and open market.
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Wednesday, June 25, 2008Organized Medicine's Unhealthy Focus on "Medical Loss Ratio"Why Does the California Medical Association Want Accountants to Run Health Care? By John R. GrahamCategories: California, Insurance RegulationThe California Medical Association has released its annual ranking of the state's health plans. No, the ranking does not measure health plans by the degree to which their reimbursement policies hew to medically recognized standards of care, which I believe most laymen would consider a public service. Instead, they've measured health plans by the medical loss ratio (MLR): the percentage of premium dollars spent on medical care, as opposed to administrative costs. Currently, this is an accounting measure that California health plans report to the state, but which has no regulatory implications. The CMA supports a bill, SB-1440, that would mandate an MLR of at least 85 percent. While this sounds patient-friendly, it is not. I addressed the fallacy of regulating the MLR in my January paper on the California Health Care Deforminator, ABX1 1, the Schwarzenegger-Nuñez bill that also included an 85% MLR. Put simply, the MLR is an accounting measure, not a measure of quality or efficiency. For some plans, the MLR is quite impossible to interpret, especially those that serve government programs. For example, Molina Healthcare of California is a Medicaid managed-care plan that reported an MLR of 167.26 for 2006. Obviously, there is no real way for a health plan to spend two-thirds more on medical costs than it earns! According to Professor James C. Robinson of the University of California, Berkeley, “the Medical Loss Ratio is an accounting monstrosity that enthralls the unsophisticated observer and distorts the health policy discourse.” There are a number of reasons for this “monstrosity,” according to Professor Robinson. Many health insurers compete in markets across the country, allocating overheads across state lines, which makes accounting conventions even more arbitrary. Narrow networks obviously have fewer administrative costs than broader networks, but patients appear to value broader networks nevertheless. Also, integrated managed-care organizations, such as Kaiser Permanente, can have much higher MLRs because they move administrative costs to the provider side of their organizations. PPOs have higher administrative costs because they cannot do this. Regulating the MLR is also deadly for consumer-directed plans, which are becoming increasingly popular. Let’s assume a scenario where a consumer-directed health policy incurs exactly the same costs as a traditional policy. (In fact, this is unlikely, because total costs of consumer-directed plans are significantly lower than for traditional ones, as patients have better incentives to control costs. ) The traditional policy costs $4,000 and spends $3,400 on patient care, for an MLR of 85.00. With the consumer-directed policy, the patient controls $800 more of the medical spending than with the traditional policy (through a higher deductible), and his premium goes down by $800. In this case the MLR goes down to 81.25 ($2,600/$3,200). There is no real difference, but the accounting looks worse. The CMA's report also rails against the "profits" of the for-profit health plans, blaming high MLRs on capitalism. (To drive the point home, the report gratuitously announces the total remuneration of senior executives at health plans that are listed on the stock market. I wonder when the CMA will publish remunerations of the highest paid doctors in the state?) But of the three health plans with the "worst" MLRs, which the CMA chose to single out in its press release, one is a not-for-profit. Of the two plans that it singled out for the "best" MLRs, one is for-profit. There is no consistent relationship between a health plan's taxable status and its MLR. Somehow, the CMA believes that if the law compelled all health plans to magically adhere to an 85% MLR, that money would go to patient care. But it would not: capital would flee the state, fewer medical procedures would get done, and more Californians would become dependent on the state for health care. Indeed, if the CMA thinks a high MLR is so bad, you'd think it would jump at the chance to replace all health plans with one that has no profits: Medi-Cal, the state's Medicaid program. Well, they're actually not too enthusiastic about that health plan either, since Gov. Schwarzenegger proposed cutting payments to doctors by 10% to help solve the state's budget deficit. Organized medicine must focus on restoring physicans' right to practice medicine - not imposing a government accountants' right to practice it for them.
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Tuesday, June 24, 2008Has the Autism Mandate Avalanche Hit A Roadblock?Pennsylvania Senate Holds Up Ultra-Expensive Mandate By John R. GrahamCategories: Insurance Regulation, PennsylvaniaLast August, I wrote an op-ed in the Philadelphia Business Journal decrying the Commonwealth's rush to impose a mandate for autism treatment costing $36,000 per patient. (Note: this is a specific, new, treatment, not autism treatment that health plans already cover.) I figured the annual cost of the treatment would be about $3 billion, state-wide. At the time, the bill was flying through the Assembly, with the enthusiastic support of Gov. Rendell. Since then, it has stalled in the Senate health committee, opposed by Pennsylvania's health insurers. An article in the Lancaster Intelligencer-Journal explains why. As usual, the article focuses on how much campaign money the committee chairman receives from health insurers (as if the other legislators, who support the legislation, receive none). According to the article, the health insurers claim that the mandate will increase premiums by six percent. The Pennsylvania Health Care Cost Containment Council (PHC4), the government agency that reckons these things, claims it will be only one percent. Whoops. Unfortunately, although the bill has been floating through the legislature for a year now, PHC4's report is still secret. (The Lancaster I-J got a leaked copy). The Insurance Federation of Pennsylvania, which represents all insurers, not just health plans, has an ineffective website, with no public analysis of its position. So, which claim is more accurate? Pennsylvania has about 8 million privately insured residents. At $5,000 per head, that results in costs of about $40 billion. As noted above, I've estimated the state-wide cost of the new mandate at about $3 billion, which is 7.5% of current costs. So, the insurers' claim that the new mandate will add 6% to health insurance premiums is pretty conservative, I'd say. But if PHC4 ever releases its report, we can see why this government agency thinks it would be significantly less. Is there a lesson here? If you want transparency in health care costs; don't wait for government to provide it.
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Monday, June 23, 2008California Health Plans' SuccessLike the thousands of planes that land safely every day By John R. GrahamCategories: California, Insurance RegulationLike other bloggers here, I'm no fan of employer-sponsored health care. I wish those who benefit from it would embrace real, consumer-driven reform. Nevertheless, I am always amazed at how the mainstream media covers stories of health insurers' "denial of care". It's kind of like watching Michael Moore's grotesquely misleading SiCKO on an endless loop. The California media have been on a feeding frenzy since the state regulators went after health plans for rescinding policies of people in the individual market who misrepresented their health status on their applications. That story seem to have fully played out, so now Victoria Colliver of the San Francisco Chronicle has written an article that describes California health plans' not paying for prescribed treatments. Ms. Colliver asks: "...what happens when that process breaks down and sick patients are left to fight for medical care? Each year, thousands of Californians find themselves at odds with their health insurers over whether they, as patients, should get the treatment their doctors prescribed." Well, not quite: no health plan can prevent a doctor from prescribing any treatment within his scope of practice. The health plan pays (or not) for the treatment, but it doesn't practice medicine. Ms. Colliver's article resulted in 138 comments on the newspaper's website (at my last count), pretty much all of which were along the lines of: "...profit-hungry, blah, blah, blah, ...single-payer better, blah, blah, blah...". According to Ms. Colliver (in whose figures I have full confidence), 7,000 Californians have taken advantage of the statutory Independent Medical Review (IMR) since 2001. In 2007, the state's two regulators of health plans resolved just under 2,000 cases, of which 40% went in favor of patients and 60% went in favor of health plans. That sounds pretty fair to me. If 100% went in one direction or the other, I'd conclude that the system was unbalanced. All claims processes have friction in them. Any reasonable person must accept this. Let's put the number of IMRs in perspective. There were 20 million privately insured people in California in 2006. Let's assume the same for 2007. If California holds true to the standard model of health care costs, the incidence of expensive illness was very skewed. About one million of the 20 million would have incurred half the health care costs of all privately insured Californians that year, and only 200,000 would have accounted for fully one-third of the costs. Let's figure that California's private health plans paid $80 billion in claims in 2007: $4,000 per person. That implies that the 200,000 most expensive patients would have incurred claims of about $27 billion: $135,000 per person, on average. Of those 200,000, only one percent (2,000) went to IMR, and less than half of that one percent got the coverage decision turned over. Bluntly, the naive accusation that health plans "profit" from simply denying claims is clearly not accurate.
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Wednesday, June 18, 2008From a Private Good to a Public Good to a Public BadBy Merrill Matthews, Jr.Categories: Insurance RegulationJust last week I was commenting to someone how long it had been since I had heard anything from Families USA, the pro-government run health care group that likes to call itself a "consumer" organization."Could it be," I asked, "that they had decided to find something useful to do with their lives?" Apparently not. Families USA has just released a study that can find nothing right with the individual health insurance market. It's filled with breathless concerns about evil health insurance practices. For example, according to the study, "Failing Grades: State Consumer Protections in the Individual Health Insurance Market":
With these kinds of "consumer protections," who needs enemies? The language is deceptive and insidious and never points out that these practices go on all the time -- in life insurance and other types of insurance. What Families USA really opposes is standard underwriting. The organization wants the individual market to work like the group market. And if and when it succeeds in achieving that goal -- and it is having a fair amount of success in the states, as legislators propose legislation creating "groups of one" -- it will then try to get the group market to work like Medicare. Other types of individual insurance operate the same as health insurance. Life insurance, for example, can deny people who apply with a significant, or terminal, medical condition. If life insurers accept an applicant, they can charge more for older people or those with medical conditions that might affect their life expectancy. And life insurers can revoke a policy within the two-year "contestability period" just as health insurers can. Since groups like Families USA aren't screaming about unfair life insurance practices, the organization must not be opposed to those actions in principle -- just where health insurance is concerned. The fact is they don't want a market in health care, and they don't want consumer choice. They see health care as a public good that should be provided and paid for by the government (i.e., taxpayers). All of their criticisms are simply window dressing to help them achieve their goal of universal coverage in a government-controlled system. In doing so, they will turn this "public good" into a public bad.
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