Los Angels Times by Chad Terhune –

June 12, 2013:

In California”s new state-run health insurance market, Kaiser Permanente will cost you.

The healthcare giant has the highest rates in Southern California and some other areas of the state, surpassing rivals such as Anthem Blue Cross and other smaller competitors. The relatively high premiums from such a strong supporter of the federal healthcare law surprised industry analysts, and it has sparked considerable debate about the company”s motives.

Some experts say Kaiser intentionally bid high to avoid drawing too many customers next year who are sick or who have been uninsured for years and may be costlier to treat. Others suspect Kaiser was worried that lower premiums would bring an influx of newly insured patients that could overwhelm its in-house roster of doctors and hospitals.

Making health insurance affordable is a crucial factor in the expansion of coverage to an estimated 5 million Californians — many of them lower-income and the uninsured — who will be eligible for a state-run exchange next year. Price will be paramount to many consumers, even for those who receive federal subsidies to help lower their costs.

In one key barometer of rates, Kaiser has the most expensive premiums for a 40-year-old in Los Angeles, Orange, San Bernardino and Riverside counties for a mid-level Silver plan. Statewide, the nonprofit company has the highest or second-highest premiums for a Silver plan in 12 of the 18 regions where it”s selling HMO policies in Covered California, the state market that opens for enrollment Oct. 1.

Kaiser”s Silver plan premium for a 40-year-old in southern Los Angeles County is $325 per month, 34% higher than the cheapest policy in the area, from Health Net Inc., at $242.

“Kaiser is not as low cost as many people think,” said Glenn Melnick, a USC health policy professor. “They appear to be protecting themselves because the people signing up in the first year are likely to be the sickest ones.”

For its part, Kaiser says it was as surprised as others were when the state announced the 13 winning health insurers and their proposed rates for 19 regions last month. These rates are scheduled to be finalized this month after a regulatory review. Individual premiums will vary based on people”s age, location and family size.

Despite its higher rates, Kaiser said it wants to enroll a large number of people in the state exchange. It blamed its lackluster showing, in part, on rivals offering cheaper plans that give consumers far less choice of doctors and hospitals.

Blue Shield of California, for instance, is offering 36% of its physician network in Covered California plans.

“We were surprised to see some of the rates,” said Bill Wehrle, Kaiser”s vice president of health insurance exchanges. “We were surprised at what looked like very narrow networks from our competitors. We don”t cut off any slice of our network.”

Of course, for years Kaiser has served as a model for the limited networks other insurers are now rushing to adopt. Kaiser is a unique healthcare system because it operates its own hospitals, physician offices and insurance company for its 9 million members nationwide.

“Blue Shield or Anthem could be a little more selective in putting together a network for this new market. Kaiser is one size fits all,” said Marian Mulkey, director of the health reform and public programs initiative at the California HealthCare Foundation. “The question now is will people find gramerbonus.org Kaiser attractive enough compared to their other options. This could put pressure on Kaiser to be less expensive.”

Overall, Kaiser is the state”s biggest health insurer with a 40% share of the market, according to 2011 data from Citigroup. Anthem Blue Cross, a unit of industry giant WellPoint Inc., was second with a 23% share of employer and individual customers.

More than 5 million Californians who don”t get insurance through work are expected to participate in the state”s new market. About half of those people will qualify for federal premium subsidies because they are low or moderate income.

Individuals earning up to about $46,000 a year and families making $94,000 or less will qualify for government help with their premiums. Even with that financial boost,

however, most consumers are expected to look for the cheapest plans available.

“I think the lowest and second-lowest plans will really be attractive,” said Lucien Wulsin, executive director of the Insure the Uninsured Project, a nonprofit research group in Santa Monica. “I”m sure being at the low end of the spectrum puts you more on the receiving end of everybody.”

One of the bigger unknowns in the federal healthcare expansion is how many people will sign up initially and who will they be. Patients with preexisting medical conditions or chronic illnesses who have been denied insurance for years should be eager to enroll. Younger, healthier people may not see much reason to buy, content instead to pay a modest penalty.

Starting in January, most Americans must have health insurance or pay a fine. The penalty starts at $95 per adult or 1% of income, whichever is greater. The penalties increase over time.

“Kaiser has structured this so they don”t get a

lot of the poorer and potentially sicker people,” said Steve Valentine, president of the Camden Group, an El Segundo healthcare consulting firm.

“Some people have been unemployed and underemployed for years, and they may have a lot of healthcare needs. There could be a lot of pent-up demand, and Kaiser may be trying to dodge that bullet,” Valentine said.

For years, some consumer advocates have faulted Kaiser for not doing more for the state”s poorest residents on Medi-Cal, the state Medicaid program, and for building many of its hospitals and medical offices in more affluent areas.

Kaiser defends its record of charity care and denies any effort to duck certain customers. Last year, the Oakland company said it provided care to more than 560,000 Californians enrolled in Medi-Cal and other safety-net programs.

“There is a lot of uncertainty about whether the healthy show up as well as the sick,” Wehrle said. “We are very competitive on rates in some regions, which is a pretty strong indication we are not trying to avoid anything. There is no question we want to grow in the exchange, and I think we will.”

Mulkey of the California HealthCare Foundation said Kaiser has regretted being the low-cost option at times in the past

and being overrun by too many members at one time. Other insurers may have more flexibility to add doctors and hospitals to their network as enrollment builds.

Kaiser, on the other hand, could face the costly decision to contract with outside hospitals to absorb some of its overflow.

“We are focused on sustainable prices for the long haul,” Wehrle said. “If you make a large mistake in this environment, it can be hard to recover.”

NaHU – National Association of Health Underwriters June 7, 2013

California Exchange Shows Lower Premiums – Or Does It?

Last week, the state of California claimed that its version of Obamacare’s health insurance exchange would actually reduce premiums. “These rates are way below the worst-case gloom-and-doom scenarios we have heard,” boasted Peter Lee, executive director of the California exchange. But the data that Lee released tells a different story: Obamacare, in fact, will increase individual-market premiums in California by as much as

146 percent.

One of the most serious flaws with Obamacare is that its blizzard of regulations and mandates drives up the cost of insurance for people who buy it on their own.
This problem will be especially acute when the law’s main provisions kick in onLee’s claims that there won’t be rate shock in California were

repeated uncritically in some quarters. “Despite the political naysayers,” writes my Forbes colleague Rick Ungar, “the healthcare exchange concept appears to be working very well indeed in states like California.” A bit more analysis would have prevented Rick from falling for California’s sleight-of-hand.

Here’s what happened. Last week, Covered California—the name for the state’s Obamacare-compatible insurance exchange—released the rates that Californians will have to pay to enroll in the exchange.

“The rates submitted to Covered California for the 2014 individual market,” the state said in a press release, “ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions.”

That’s the sentence that led to all of the triumphant commentary from the left. “This is a home run for consumers in every region of California,” exulted Peter Lee.
January 1, 2014, leading many to worry about health insurance “rate shock.”

Except that Lee was making a misleading comparison. He was comparing apples—the plans that Californians buy today for themselves in a robust individual market—and oranges—the highly regulated plans that small employers purchase for their workers as a group. The difference is critical.

Obamacare to double individual-market premiums

If you’re a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare’s exchanges is the catastrophic plan, which costs an average of $184 a month. (By “average,” I mean the median monthly premium across California’s 19 insurance rating regions.)

The next cheapest plan, the “bronze” comprehensive plan, costs $205 a month. But in 2013, on eHealthInsurance.com (NASDAQ:EHTH), the median cost of the five cheapest plans was only $92.

In other words, for the typical 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.

Under Obamacare, only people under the age of 30 can participate in the slightly cheaper catastrophic plan. So if you’re 40, your cheapest option is the bronze plan. In California, the median price of a bronze plan for a 40-year-old male non-smoker will be $261.

But on eHealthInsurance, the median cost of the five cheapest plans was $121. That is, Obamacare will increase individual-market premiums by an average of 116 percent.

For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double

Impact highest in Bay Area, Orange County, and San Diego

In the map below, I When the game ends, the amount of money left in your pot will determine your blackjack gratis Game Score. illustrate the regional variations in Obamacare’s rate hikes. For each of the state’s 19 insurance regions, I compared the median price of the bronze plans offered on the exchange to the median price of the five cheapest plans on eHealthInsurance.com for the most populous zip code in that region. (eHealth offers more than 50 plans in the typical California zip code; focusing on the five cheapest is the fairest comparator to the exchanges, which typically offered three to six plans in each insurance rating region.)

As you can see, Obamacare’s impact on 40-year-olds is steepest in the San Francisco Bay area, especially in the counties north of San Francisco, like Marin, Napa, and Sonoma. Also hard-hit are Orange and San Diego counties.

According to Covered California, 13 carriers are participating in the state’s exchange, including Anthem Blue Cross (NYSE:WLP), Health Net (NYSE:HNT), Molina (NYSE:MOH), and Kaiser Permanente. So far, UnitedHealthCare (NYSE:UNH) and Aetna (NYSE:AET) have stayed out.

Spinning a public-relations disaster

It’s great that Covered California released this early the rates that insurers plan to charge on the exchange, as it gives us an early window into how the exchanges will work in a state that has an unusually competitive and inexpensive individual market for health insurance. But that’s the irony. The full rate report is subtitled “Making the Individual Market in California Affordable.” But Obamacare has actually doubled individual-market premiums in the Golden State.

How did Lee and his colleagues explain the sleight-of-hand they used to make it seem like they were bringing prices down, instead of up? “It is difficult to make a direct comparison of these rates to existing premiums in the commercial individual market,” Covered California explained in last week’s press release, “because in 2014, there will be new standard benefit designs under the Affordable Care Act.” That’s a polite way of saying that Obamacare’s mandates and regulations will drive up the cost of premiums in the individual market for health insurance.

But rather than acknowledge that truth, the agency decided to ignore it completely, instead comparing Obamacare-based insurance to a completely different type of insurance product, that bears no relevance to the actual costs that actual Californians face when they shop for coverage today. Peter Lee calls it a “home run.” It’s more like hitting into a triple play.

Obama attacked insurers in 2010 for much smaller increases

That Obamacare more than doubles insurance premiums for many Californians is especially ironic, given the political posturing of the President and his administration in 2010. In February of that year, Anthem Blue Cross announced that some groups (but not the majority) would face premium increases of as much as 39 percent. The White House and its allies in the blogosphere, cynically, claimed that these increases were due to greedy profiteering by the insurers, instead of changes in the underlying costs of the insured population.

“These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy,” said Health and Human Services Secretary Kathleen Sebelius. “[Anthem’s] strong financial position makes these rate increases even more difficult to understand.” The then-Democratic Congress called hearings. Even California Insurance Commissioner Steve Poizner, a Republican running for governor, decided to launch an investigation

Soon after, WellPoint announced that, in fact, because of lower revenues and higher spending on patient care, the company earned 11 percent less in 2010 than it did in 2009. So much for greedy profiteering.

So, to summarize: Supporters of Obamacare justified passage of the law because one insurer in California raised rates on some people by as much as 39 percent. But Obamacare itself more than doubles the cost of insurance on the individual market. I can understand why Democrats in California would want to mislead the public on this point. But journalists have a professional responsibility to check out the facts for themselves.

Small Businesses and Health Care Reform – What Now?

May 29, 2013

The Patient Protection and Affordable Care Act (health care reform) seeks to change the way health insurance premiums are established, just as the Act Providing Access to Affordable, Quality, Accountable Health Care did in Massachusetts. As CPAs’ small business clients begin to implement the requirements of health care reform, CPAs need to understand two significant ways in which their small business clients, and their own small practices, may be affected.

The Small Group Insurance Market and Increasing Premiums

The first big change that health care reform brings is the prospect of “merging” (formally or via rating rules) the small group insurance market with the individual insurance market. The individual market typically has the highest costs of all the health insurance markets due to the actuarial risk of a single covered life and the time and expense of selling

single policies. The small group market, historically 50 employees or less, but in the case of health care reform, 100 employees or less (mandated to expand the risk pool base of small businesses who might also absorb the cost of the merged individual market), is significantly less risky and thus has lower premiums. As has been the case in Massachusetts, if the formal merger of the two markets’ risk pools takes place in your state, it may cause small business premiums to increase dramatically. If you or your client presently have more than 50 employees and are covered in your state’s existing large group market risk pool, premiums could rise once the small group level increase to 100 employees becomes effective in 2014.

Individual market premiums will go up, even if the merged small group market is absorbing a lot of the cost, because the policies historically sold in the individual market had lower benefits than those sold through employers; health care reform no longer allows the lower benefit limits. Just as having a lower deductible and higher limits on your auto insurance policy results in a higher premium, health care reform requires more expensive policies. The mandated benefits also drive the cost of small business premiums higher. It is important to note, however, that regulations issued by the Department of Health and Human Services late in 2011 granted the states considerable flexibility in designing their own mandated benefits or benchmark plans. This, in turn, will result in the mandated benefits varying from state to state, something that was not contemplated when the legislation passed. Thus, practitioners need to look closely at what their individual state is doing. The National Conference of State Legislatures maintains a website tracking the state-by-state changes.

Premium Limits for Older Individuals and Smokers

In addition to the permitted merger of the individual and small group health insurance markets, the other two most significant changes to insurance premium rate settings involve the following:
•limiting the amount insurers can charge older individuals to no more than three times what they charge younger individuals; and
•limiting to 1.5 times what insurers can charge smokers versus nonsmokers.

When I wrote my book on the reform legislation in 2011 (with Greg Anderson, CPA/ABV), I developed an example that suggested premiums for those under age 30 would go up 32.5%. As the flood of actuarial analysis on the market in 2013 now indicates, 30% to 40% is the range of likely increase for the 20 to 30 year old crowd–many of whom

are still dealing with the recession and the burden of student loan debt.

This has significant added impact on small businesses that employ a lot of young people.

June 3, 2013
Wellness Programs and Rewards Final Regulations Released

Final regulations on wellness programs and rewards for group health plans were issued on May 29, 2013 by the Departments of Treasury, Labor and Health and Human Services. These regulations apply to insured and self-insured group plans, both grandfathered and non-grandfathered, for plan years beginning on or after January 1, 2014.

The final regulations confirmed the maximum wellness reward amounts that will be allowed.
• The maximum wellness program reward is 30 percent of the total cost of medical coverage, including both employer and employee contributions.
• The maximum wellness program total reward may be increased to 50 percent for programs related to tobacco use.
• Rewards can take many forms, such as premium discounts or surcharges, reduced cost sharing, enhanced benefits, gift cards or deposits to Health Savings Accounts or Health Reimbursement Accounts.
• The reward must be available at least once per year for all similarly situated individuals.
• If family members participate in wellness programs, the reward can be based on the total cost of coverage for all covered family members. If some family members are eligible for the reward and others are not, employers have flexibility in determining the portion of the reward attributable to each family member.

There are two types of Wellness Programs: Participatory and Health-Contingent:
1. Participatory Wellness Programs – Any Participatory Wellness program reward is based only on participation, not on meeting specific health standards. Examples of these types of programs include health club discounts or rewards for completing a health assessment. There are no limits on the rewards for Participatory Wellness programs.
2. Health-Contingent Wellness Programs – Health-Contingent Wellness programs require individuals to meet a health standard or participate in a health program to receive a reward. Every individual eligible for the program must be given an opportunity to qualify for the reward once a year. The reward cannot exceed the maximum amounts noted above.
Health-Contingent programs may be Activity-Only programs or Outcome-Based programs.

Activity-Only Wellness Programs
• Individuals are rewarded for completing a program such as a walking, diet or exercise program.
• Individuals are not required to achieve a specific result such as losing weight to earn the reward.
• A physician may provide verification that a medical condition makes it unreasonably difficult or medically inadvisable for a person to perform the activity.
Outcome-Based Wellness Programs
• Individuals are required to achieve a health outcome such as a specific blood pressure or BMI level to receive the reward.
• Individuals who do not meet the required standard must take additional steps such as working with a health coach or completing a health improvement plan to receive the reward.
• Physician verification that a medical condition makes it unreasonably difficult or medically inadvisable for a person to meet the standard is not permitted for Outcome-Based programs.
Reasonable Alternative Standards
If an individual does not qualify for a Health-Contingent reward, a reasonable alternative standard or waiver must be available.
• For Activity-Only programs, a reasonable alternative for obtaining the reward must be provided if it is unreasonably difficult due to a medical condition or medically inadvisable for an individual to attempt to

complete the activity.
• For Outcome-Based programs, a reasonable alternative must be provided to all individuals who do not meet the initial standard.
As an example, a reasonable alternative for an individual who failed to meet a BMI standard might be participation

in a weight loss program or the requirement to reduce BMI by a small amount or percentage over a year’s time.

Any materials provided to employees that describe wellness programs must include information about the availability of reasonable alternatives and contact information to request an alternative. Reasonable alternatives do not need to be defined in advance and can be determined on an individual basis.

Read the final regulation