Friday, January 31, 2014

Stories Causing Atlas to Shrug, January 31st Edition

A proposed law in Pennsylvania would require some Medicaid beneficiaries to work 20 hours per week or be actively looking for work.  It would be the first such law to tie work to taxpayer funded healthcare but probably will be held to be illegal.  

Ready for open enrollment?  Watch this video as employees in a Pennsylvania company learn of increased health costs due to Obamacare.

44% of Americans are living with less than $5,887 in savings for a family of four

WellPoint (Blue Cross) expects to lose a ton of money on ObamaCare compliant plans this year. PPACA bailouts will be the only thing keeping them afloat.

Don’t Be Sidelined by Employer Mandate Delay: Act Now to Avoid ‘Play or Pay’ Flag

This is from Mary Bauman and Don Garlitz at

Create a Playbook for Tracking Employee Hours

Employers need to establish a measurement period for determining each ongoing employee’s average hours per week. The period cannot be less than three months or more than 12 months. An administrative period of no more than 90 days can follow to give the employer time to figure out who will and won’t receive coverage during an upcoming “stability” period, and to get employees enrolled or notified of upcoming disenrollment.

The stability period must be at least as long as the measurement period but no less than six months. During the stability period, the IRS assesses A and B penalties, in both cases treating workers as either full-time or part-time as had been established during the measurement period.

Employers are under a tight time frame to find technology and administrative solutions for tracking employee hours. Those planning to use a 12-month measurement period and 12-month stability period for testing employee eligibility effective January 1, 2015, needed to have begun tracking hours in the fall of 2013. To comply with the rules, employers that haven’t been tracking employee hours will have to look back at prior payroll records to populate a compliance system or tool retroactively, and those tools will need to be fully operational by the fall of 2014. That process will occur every year.

Keep Score on Paid and Unpaid Hours

Quantifying hours to distinguish employees’ full-time vs. part-time status may not be as simple as looking at the number of hours worked. The measurement must include the hours employees are paid and not working, such as during vacation or, in the case of union workers, layoff, to determine coverage eligibility.

Employers have options with respect to crediting unpaid leave hours. If the employer is subject to the Family and Medical Leave Act (FMLA), it can either credit the employee with unpaid FMLA leave hours, or shorten the measurement period so that it doesn’t include the leave period. Similar rules apply if an employee takes an unpaid leave for jury duty or military service.

Other breaks in employment are not as clear-cut. Basically, if the unpaid break is less than four weeks, then employers must treat the worker as an ongoing employee, but they do not have to count those leave hours during the measurement period.

If the employee is off work for at least 26 consecutive weeks, the employer may treat the employee as a new hire upon return. There is another optional rule, the “rule of parity,” for employees with no credited hours over a period of at least four weeks but less than 26 weeks. Under the rule of parity, if the time of absence is at least four weeks and is longer than the employee’s previous period of service, then the employer can treat the employee as a new hire upon return.

Yes An Employee with the Flu Can Require FMLA Protocol

From Tiffani McDonough writing at SHRM

With flu season at its peak and certain strains of the flu requiring longer recovery periods, workplaces are experiencing a spike in the frequency and duration of flu-related absences. The Centers for Disease Control and Prevention (CDC) report that it may take anywhere from a few days to two weeks to recover from the flu this season.

So, when an employee calls out sick with the flu, is the employee entitled to leave under the Family Medical Leave Act (FMLA)?

Yes, if the FMLA-eligible employee is incapacitated for more than three full consecutive days and either: (1) consults with a doctor two or more times within 30 days, or (2) consults with a doctor once and receives a regimen of continuing treatment (i.e., prescription medication). However, if the flu only lasts a few days and does not require medical treatment, it will not trigger protections under the FMLA.

Although the FMLA itself does not define qualifying illnesses, the FMLA regulations state:

[o]rdinarily, unless complications arise, the common cold, the flu, ear aches, upset stomach, minor ulcers, headaches other than migraine, routine dental or orthodontia problems, periodontal diseases, etc. are examples of conditions that do not meet the definition of a serious health condition and do not qualify for FMLA leave. 29 C.F.R. § 825.113(d).

That said, if the employee’s flu-related illness meets the definition of a “serious health condition,” the FMLA applies.

How does the FMLA define “serious health condition”?

An illness, injury, impairment, or physical or mental condition that involves either inpatient care (i.e., an overnight stay in a hospital, hospice, or residential care facility); or “continuing treatment” by a health care provider.

What constitutes “continuing treatment”?

A period of incapacity of more than three consecutive, full calendar days, and any subsequent treatment or period of incapacity relating to the same condition that also involves either: (a) treatment by a health care provider two or more times within 30 days of the first day of incapacity, unless extenuating circumstances exist (i.e., the health care provider does not have any available appointments during that timeframe); or (b) treatment by a health care provider on at least one occasion that results in a regimen of continuing treatment under the supervision of the healthcare provider. 29 C.F.R. § 825.115. Further, the first (or only) in-person treatment visit must take place within seven days of the first day of incapacity. Covered “treatment” includes examinations to determine if a serious health condition exists and evaluations of the condition, but does not include routine physical examinations. ... 

Thursday, January 30, 2014

On Armstrong and Getty 1/30/14: Unknown Risks in Exchange Plans, 2014's Wave of Uninsured, 89% of Exchange Enrollees Already Had Coverage

All Armstrong and Getty Podcasts can be found here.

A playlist of my 2013 and 2014 appearances on A&G.  

Notes from Today's Call:

1)  Nobody Knows How Bad (or good) the Exchange Risk is Right Now
  • Because health insurers are no longer permitted to ask any questions about an applicant’s health, they have absolutely no way of knowing who they are enrolling in terms of past or present illnesses or health conditions. 
  • Another problem is that some insurers may attract a whole lot of very sick people while others attract mostly healthy people. So Insurers are purposefully doing things to make their plans less desirable to sick people and trying to draw in the healthy by: 
    • Offering robust gym membership discounts and healthy eating classes 
    • Reducing doctor networks by as much as 75%
    • Making specialists that are available to treat very expensive conditions like hemophilia, anorexia, certain cancers, etc. rare or unavailable at all 
    • Making their “Platinum” plans so expensive that they will be the last ones chosen. 

2)  The 2014 Wave of Uninsured Folks Will Be Much More Painful 
  • The next wave of uninsured workers has never done any of their own shopping the way the last wave did. The last wave was a group of entrepreneurial, self-employed folks who had already gone through all of the necessary steps to find a broker, fill out insurance forms, submit to physicals and mail in payments. They were the Type-As. 
  • The 50 million or so upcoming group are employees at smaller employers who have never had to do any of that.  
  • I predict that two-thirds of them will not even bother to sign up.

3)  I spoke to an insurer this week who told me that only 11% of their ObamaCare enrollees were folks that were previously uninsured.
  • The Congressional Budget Office projected that the Exchanges would sign up 7 million people in the first year, roughly 2 million of them transitioning from other insurance plans and 5 million of them previously uninsured. We are nowhere near that mix. We created a massive entitlement for these “uninsured” and are now learning 90% of them don't really care.   

4)  ObamaCare’s Nudge to a 29-Hour Work Week is Horrible for the Economy and Will Likely Harm Women the Most
  • Two people who each work 29 hours a week are paid much less than half as much as one person working 58 hours a week. 
  • It’s more expensive to hire two people (vacation, 401K, non-medical insurances, desks, etc.) But that’s not the only cost. In specialized jobs, each worker has individual knowledge about the job that has to be passed off to anyone else working on that job.  
  • The first persons to move below 30 hours are those currently working between 30 and 37 hours.  According to the NY Times, that group is made up of women in a 2:1 margin.  

Wednesday, January 29, 2014

Women Likely To Be Pushed to Below 30 Hours Twice as Often As Men in Obamacare

From economist Casey Mulligan

One of the least costly ways to move full-time workers to the 29er group would be to focus on those who already work slightly more than 29 hours. It is usually less costly for a 35-hour-per-week worker to cut hours to 29 than for a 55-hour-per-week worker to do so.

I used the Census Bureau’s data to put together a sample of people likely to be 29ers over the next couple of years, based on working 30 to 37 hours per week before this year and not having health insurance available through a spouse (if married). Women outnumber men more than 2 to 1 among likely 29ers. The 29ers are also likely to be less than 30 years old.

Heart Surgeon Declares What Really Causes Heart Illness

  • The number one cause of injury to our hearts and arteries is inflammation; not solely cholesterol. 
  • The inflammation in our blood vessels is caused by the low fat diet recommended for years by mainstream medicine. 
  • Foods loaded with sugars and simple carbohydrates, or processed with omega-6 oils have been the mainstay of the American diet for six decades. These foods are slowly poisoning everyone. 
  • When you spike your blood sugar level several times a day, every day, it is exactly like taking sandpaper to the inside of your blood vessels, causing more inflammation which further forces cholesterol to accumulate in arteries.   

The below is an excerpted version of an article written by heart surgeon, Dr. Dwight Lundell, posted at Tuned Body  The entire piece is absolutely worth reading.  

We physicians with all our experience, know how and authority often acquire a rather large selfishness that tends to make it hard to accept we are wrong. So, here it is. I openly admit to being mistaken. As a heart surgeon with 25 years experience, having done more than 5,000 open-heart surgeries, today is my day to right the wrong with medical and scientific proof.
I trained for many years with other prominent physicians labelled “opinion makers.” Bombarded with scientific literature, continually attending education seminars, we opinion makers insisted heart disease resulted from the simple fact of elevated blood cholesterol.
The only accepted therapy was prescribing medications to lower cholesterol and a diet that severely restricted fat intake. The latter of course we insisted would lower cholesterol and heart disease. Deviations from these recommendations were considered heresy and could quite possibly result in malpractice.
It Is Not Working!
These recommendations are no longer scientifically or morally defensible. The discovery a few years ago that inflammation in the artery wall is the real cause of heart disease is slowly leading to a paradigm shift in how heart disease and other chronic ailments will be treated.
The long-established dietary recommendations have created epidemics of obesity and diabetes, the consequences of which dwarf any historical plague in terms of mortality, human suffering and dire economic consequences.
Despite the fact that 25% of the population takes expensive statin medications and despite the fact we have reduced the fat content of our diets, more Americans will die this year of heart disease than ever before. ... 
Simply stated, without inflammation being present in the body, there is no way that cholesterol would accumulate in the wall of the blood vessel and cause heart disease and strokes. Without inflammation, cholesterol would move freely throughout the body as nature intended. It is inflammation that causes cholesterol to become trapped.
Inflammation is not complicated — it is ... your body’s natural defence to a foreign invader such as a bacteria, toxin or virus. The cycle of inflammation is perfect in how it protects your body from these bacterial and viral invaders. However, if we chronically expose the body to injury by toxins or foods the human body was never designed to process, a condition occurs called chronic inflammation. Chronic inflammation is just as harmful as acute inflammation is beneficial. ...
The rest of us have simply followed the recommended mainstream diet that is low in fat and high in polyunsaturated fats and carbohydrates, not knowing we were causing repeated injury to our blood vessels. This repeated injury creates chronic inflammation leading to heart disease, stroke, diabetes and obesity.
Let me repeat that: The injury and inflammation in our blood vessels is caused by the low fat diet recommended for years by mainstream medicine.
What are the biggest culprits of chronic inflammation? Quite simply, they are the overload of simple, highly processed carbohydrates (sugar, flour and all the products made from them) and the excess consumption of omega-6 vegetable oils like soybean, corn and sunflower that are found in many processed foods.
Take a moment to visualize rubbing a stiff brush repeatedly over soft skin until it becomes quite red and nearly bleeding. you kept this up several times a day, every day for five years. If you could tolerate this painful brushing, you would have a bleeding, swollen infected area that became worse with each repeated injury. This is a good way to visualize the inflammatory process that could be going on in your body right now.
Regardless of where the inflammatory process occurs, externally or internally, it is the same. I have peered inside thousands upon thousands of arteries. A diseased artery looks as if someone took a brush and scrubbed repeatedly against its wall. Several times a day, every day, the foods we eat create small injuries compounding into more injuries, causing the body to respond continuously and appropriately with inflammation.
While we savor the tantalizing taste of a sweet roll, our bodies respond alarmingly as if a foreign invader arrived declaring war. Foods loaded with sugars and simple carbohydrates, or processed with omega-6 oils for long shelf life have been the mainstay of the American diet for six decades. These foods have been slowly poisoning everyone.
How does eating a simple sweet roll create a cascade of inflammation to make you sick?
Imagine spilling syrup on your keyboard and you have a visual of what occurs inside the cell. When we consume simple carbohydrates such as sugar, blood sugar rises rapidly. In response, your pancreas secretes insulin whose primary purpose is to drive sugar into each cell where it is stored for energy. If the cell is full and does not need glucose, it is rejected to avoid extra sugar gumming up the works.
When your full cells reject the extra glucose, blood sugar rises producing more insulin and the glucose converts to stored fat.
What does all this have to do with inflammation? Blood sugar is controlled in a very narrow range. Extra sugar molecules attach to a variety of proteins that in turn injure the blood vessel wall. This repeated injury to the blood vessel wall sets off inflammation. When you spike your blood sugar level several times a day, every day, it is exactly like taking sandpaper to the inside of your delicate blood vessels.
While you may not be able to see it, rest assured it is there. I saw it in over 5,000 surgical patients spanning 25 years who all shared one common denominator — inflammation in their arteries. ...
To make matters worse, the excess weight you are carrying from eating these foods creates overloaded fat cells that pour out large quantities of pro-inflammatory chemicals that add to the injury caused by having high blood sugar. The process that began with a sweet roll turns into a vicious cycle over time that creates heart disease, high blood pressure, diabetes and finally, Alzheimer’s disease, as the inflammatory process continues unabated.
There is no escaping the fact that the more we consume prepared and processed foods, the more we trip the inflammation switch little by little each day. The human body cannot process, nor was it designed to consume, foods packed with sugars and soaked in omega-6 oils.
There is but one answer to quieting inflammation, and that is returning to foods closer to their natural state. To build muscle, eat more protein. Choose carbohydrates that are very complex such as colorful fruits and vegetables. Cut down on or eliminate inflammation- causing omega-6 fats like corn and soybean oil and the processed foods that are made from them.
One tablespoon of corn oil contains 7,280 mg of omega-6; soybean contains 6,940 mg. Instead, use olive oil or butter from grass-fed beef.
Animal fats contain less than 20% omega-6 and are much less likely to cause inflammation than the supposedly healthy oils labelled polyunsaturated. Forget the “science” that has been drummed into your head for decades. The science that saturated fat alone causes heart disease is non-existent. The science that saturated fat raises blood cholesterol is also very weak. ...
The cholesterol theory led to the no-fat, low-fat recommendations that in turn created the very foods now causing an epidemic of inflammation. Mainstream medicine made a terrible mistake when it advised people to avoid saturated fat in favor of foods high in omega-6 fats. We now have an epidemic of arterial inflammation leading to heart disease and other silent killers.
[C]hoose whole foods your grandmother served and not those your mom turned to as grocery store aisles filled with manufactured foods. By eliminating inflammatory foods and adding essential nutrients from fresh unprocessed food, you will reverse years of damage in your arteries....

Tuesday, January 28, 2014

Why The Stock Market Excels While Our Economy and Employment Suffer

It is important to realize that around 50 percent of the SP500′s earnings are generated overseas

This means that our stock market is to some extent decoupled from our economy. Statistics like ratios of corporate profits to GDP are not necessarily going to be indicative of movements in income shares. Imagine a foreign subsidiary getting profits without generating and GDP whatsoever. 

For full discussion click here

How the Obamacare Bailouts Work

... What are risk corridors? Are they as boring as they sound?

Risk corridors limit both the amount of money that a health insurance plan can make -- and how much it can lose -- during the first three years it sells on the health insurance exchanges. Risk corridors tend to exist in the bowels of actuarial science rather than in New York Post op-eds but, since they're having a moment in the sun, we'll stop here to explain this very technical program in two paragraphs.

Some background is helpful here: Typically, insurance companies rely on their past experience to set prices; how many people got sick in 2013 can be a good proxy for estimating how many people will get sick in 2014. But when insurance companies went onto the exchanges, none of them had ever sold in the Obamacare marketplaces. They didn't have a 2013 to rely on, which made setting premiums a vexing task.

One way insurance companies could mitigate their risk was by setting premiums pretty high -- if you charge each person $800 per month, for example, to sign-up for your plan, you will probably cover the cost of claims. But the Obama administration was worried that such high prices would scare away consumers and enter the risk corridors, a program that reimburses insurance plans for claims that cost significantly more than premiums that new subscribers paid in.

What counts as "significantly" more? 

The risk corridor program kicks in when health insurers show that the claims their subscribers submit outpace premiums they paid in by more than 3 percent. So, if we take the World's Tiniest Insurance Company and say it received $100 in premiums (it is, after all, very tiny) but paid out $110 in claims, it would get help from other insurance plans paying for that $10 above and beyond the $100 paid in premiums -- but the government will not foot the whole bill.

For claim costs that are 3 to 8 percent higher than the amount paid in premiums, the federal government will reimburse half that amount. For costs that exceed 8 percent, insurers will be reimbursed 80 percent. So, if we stick with World's Tiniest Insurance Company example, this means the government would reimburse it $4.10: $2.50 for 50 percent of the 3 to 8 percent cost above the premium, which in this case was $5, and another $1.60 for 80 percent of remaining 2 percent, $2 in this example, in additional costs.

Could you put this in a chart?

We can't--but the American Academy of Actuaries can! This chart shows how the risk corridor program kicks in at different levels of claims paid out.

Where does the money to pay insurance companies come from?

Other insurance companies. [It is far more accurate to say policy holders and tax payers since these funds ultimately come from increased premiums] All non-grandfathered plans are required to pay into a pot of money that's used to fund the risk corridor program. This means there's potential for insurers to lose money through the risk corridor program, which is what you see represented on the left side of the above chart. If an insurance company finds that their premiums way more than cover claims paid out - the technical definition of "way more" here is defined as claims cost at least 3 percent less  than premiums - then that health plan has to fork over some of that money into the risk corridor pool.

And this just goes on forever, each year?

No -- the health-care law's risk corridors are a temporary program that expires in 2016. By then, insurance plans should have enough experience with who is in their plans and the level of claims they submit in order to accurately price their insurance products. ...

You mentioned earlier there were three programs. What are the other two?

Are you ready to get wonky? Hope so! The two other programs are called risk adjustment and reinsurance.  In the risk adjustment program, Health and Human Services collects funds from plans who have healthier enrollees and redistributes them to plans that have sicker enrollees.

Unlike risk corridors, this is a permanent part of the health-care law. In the temporary reinsurance program (which, like risk corridors, runs through 2016), Health and Human Services has $10 billion in federal funding to help insurers pay the cost of especially expensive enrollees.

More specifically, the reinsurance program helps health plans pay for subscribers who run up at least $60,000 in claims. There is a cap on reinsurance payments, too: Above $250,000, the health plan would once again be responsible for covering its subscribers' costs.

More charts please!

Okay! Here's a great one from Kaiser Family Foundation that puts all three of these programs onto one page, comparing their main features.


Monday, January 27, 2014

A Credible Plan To 'Repeal And Replace' Obamacare Sits in the Senate

This is from Avik Roy at Forbes, My comments in [ ]: 

... Coburn-Burr-Hatch retains some popular Obamacare provisions

CBH would repeal Obamacare, and replace it with a set of more market-oriented reforms. One key point right at the start: the authors “believe our proposal is roughly budget neutral over a decade.” That is to say, for all the reconfiguring it does to the health-care system, it doesn’t substantially reduce the deficit. It may modestly reduce the amount of federal spending and taxation. The Senate trio aims to have their proposal fiscally scored by an outside group of economists, most likely Doug Holtz-Eakin’s Center for Health and Economy.

While the plan would repeal Obamacare, it would preserve some of the law’s most popular features, such as its ban on lifetime limits on insurer payouts, and its requirement that insurers cover adult children younger than 27. It would replace Obamacare’s premium hike on young people, known as age-based community rating, with a more traditional 5:1 rating band. [That still softens the blow on older folks a bit as most actuaries agree that the purely data-driven difference should be 6:1. But is it much better than Obamacare's 3:1 ratio].  

It wouldn’t maintain Obamacare’s individual mandate, nor its requirement that insurers offer coverage to everyone regardless of pre-existing health conditions. Instead, the plan would require insurers to make offers to everyone who has maintained “continuous coverage,” while aiding states in restoring the high-risk pools that served those who insurers won’t otherwise cover. Subsidy-eligible individuals who failed to sign up for a plan would be auto-enrolled in one priced at the same level as the subsidy for which they qualified.

... It would encourage medical malpractice reform by “adopting or incentivizing states to adopt a range of solutions to tackle the problem of junk lawsuits and defensive medicine.” It would strive to expand price transparency and the supply of physicians.

Means-tested tax credits for the uninsured, funded by the employer tax exclusion

Most importantly, the CBH plan would make substantial changes to the tax exclusion for employer-sponsored coverage, in order to fund subsidies for the uninsured. “Our proposal caps the tax exclusion for employee’s health coverage at 65 percent of an average plan’s cost” today, and then grows the cap at the rate of the Consumer Price Index—a common measure of inflation—plus one percent (CPI+1%).

The revenues gained from this change would then be used to offer tax credits for the uninsured, so long as their incomes were below 300 percent of the federal poverty level (FPL). Importantly, the subsidies are structured on a sliding scale so that those at 300% FPL get a smaller subsidy than those below 200% FPL. In addition, the subsidies increase as you get older; an individual aged 18-34 would get a subsidy of $1,560, whereas one aged 50-64 would get $3,720: 2.4 times what the young’uns get. The size of the subsidies would grow, again, at CPI+1%. (Obamacare offers subsidies to those below 400% of FPL.)

Patient CARE Act subsidies

This is a substantial improvement from previous “repeal and replace” plans, that offered a uniform tax credit to every American, regardless of their prior health or wealth. The CBH plan aims to let younger pay lower premiums, but subsidize those premiums at a lower level. Similarly, the subsidy level is means-tested. 

This structure, though described as a “repeal and replace” plan, is remarkably similar to the one that Obamacare uses. What are the key differences? The CBH plan would grow its subsidies and tax exclusion cap at a higher rate than Obamacare does—CPI+1% vs. CPI+0% for Obamacare. ...

Milder Medicaid reform using per-capita caps

Finally, the plan would reform Medicaid using an approach first proposed by Bill Clinton, and endorsed by former Democratic Senate Majority Leader Tom Daschle: per-capita caps. Under the per-capita cap approach, the federal government would give states a fixed amount of money per person enrolled in Medicaid. It would be up to the states to use that money in the most cost-efficient way possible.

In some ways, it’s a milder form of block-granting. There are a number of pitfalls in the per-capita cap approach, as I discussed in a September 2012 article for Forbes.

Per-capita caps aren’t problem-free. Without other fiscal controls, states might enroll an unexpectedly high number of people into Medicaid, further straining the budget. In addition, Medicaid patients are highly heterogeneous, with the elderly and disabled costing more money than, say, children…Urban Institute researchers noted that “a single aggregate cap would create incentives to add low-cost enrollees such as children,” and that even dividing patients into broad categories could lead to gaming.

An attractive feature of CBH is that Medicaid enrollees could take the dollars allotted to them in the per-capita cap and spend it on a regular private-sector insurance plan. [This is a great feature and really offers a happy medium between free market thinkers and single payer solutions.]. Indeed, CBH could be improved if this became universal: that is to say, instead of giving states the Medicaid money, give it directly to poor people to buy the coverage of their choice with an auto-enroll feature. [Agreed.] ... 

The bottom line is this. The Coburn-Burr-Hatch plan is a serious, constructive, and pragmatic one. Precisely for those reasons, it won’t satisfy the purest Obamacare haters for whom there is not a single provision in the law worth retaining, nor those who think the health care system was just fine as it was [or proponents of government healthcare]. And it won’t drastically shrink the scale and scope of federal spending on health care, at least in the near term. ...

Obamacare's Dart Throwing Approach to Actuarial Value Calculations

This is from Linda Gorman writing at John Goodman's Health Policy Blog

In order to standardize health insurance plans, the ObamaCare law requires insurers to offer plans that are categorized as Bronze, Silver, Gold and Platinum. These plans, in turn, must cover 60%, 70%, 80% and 90%, respectively, of the expected costs. The “actuarial value” of a claim is the average amount a plan with a given set of benefits is likely to pay given a standard population.

If the Department of Health and Human Services (HHS) overestimates actuarial value, which it appears that it has done, the bloated insurance plans required by ObamaCare can be offered with higher deductibles, copayments, and other out-of-pocket costs than would otherwise be the case. All else equal, higher deductibles and out-of-pocket costs also enable lower premiums.

Lower premiums improve the political palatability of the exchange plans. Because higher deductibles and out-of-pocket costs are relatively more attractive to the healthy than to the chronically ill, they are attractive to insurers seeking to improve the risk profile of the group of people signing up for their plans.  

There is no standard for defining a standard population or for determining its health expenditures. Insurers have historically combined experience and actuarial judgment to arrive at their spending estimates. In 2011, The Kaiser Foundation  conducted an experiment in which it asked three highly respected actuarial firms to estimate ObamaCare’s allowable Silver plan deductibles under a common set of assumptions. The standard populations differed, and the estimates of allowable deductibles ranged from $1,850 to $4,200. [This was our experience as well when we tasked actuarial experts to craft our estimates.] 

People who purchase health insurance with their own money balance the extra cost of having an insurer cover smaller costs like routine screening against the higher premiums it will charge to do so. In 2009, almost half of all individual policies purchased for a single person had deductibles that were higher than $2,500. Some of the more popular pre-ObamaCare individual policies featured deductibles of $5,000 with no additional cost sharing after the deductible. People who chose those policies knew their annual financial risk in advance.

ObamaCare makes those policies illegal. It generally limits deductibles to $2,000 per individual and $4,000 per family in the unsubsidized individual and small group markets, even though total cost sharing can be as high as $6,250.  ...

Proprietary data from Milliman suggest that the average annual per individual claims cost for a commercially insured population in 2010 was $4,000. Assuming that the deductibles were the entire amount of cost sharing, and a market average deductible of $2,500, the commercial insurance market’s HHS actuarial value would have been about 0.38. In order to qualify under ObamaCare, deductibles would have had to fall to $1,600, likely triggering an increase in premiums.

When the actuarial value calculations were carried out, the amount of cost sharing that ObamaCare allowed depended upon the government’s estimate of the overall plan costs for plans that have not yet taken effect. In a methodology report, HHS explained how it estimated plan costs for its standard population. With one exception, the choices made would likely overstate the cost of essential benefits coverage.

The HHS estimates are based on claims by 12.6 million people. They were culled from 2010 claims data for 39 million people provided by Blue Health Intelligence, a spin-off of the BlueCross and BlueShield Association. HHS discarded claims from individual policies, claims from groups that were not covered by PPO/POS plans, claims from groups without maternity claims, claims from groups of fewer than 50 people, and claims from groups that didn’t have at least one claim over $5,000. The report does not provide basic sample characterizations and is silent on a number of issues that are known to affect claims, things like age, geographic distribution, and the prevalence of union plans.

Plan design matters because

 plan design affects the claims that people make and the claims that plans pay. For example, the RAND Corporation has shown that the design of consumer directed policies tends to reduce health expenditures. If people with individual policies tend to have less expensive total claims than people with employer group policies, dropping them would inflate the estimates of actuarial value for the standard population.

Eliminating plans without claims of at least $5,000 is also likely to overstate the cost of covered benefits. In any given year, relatively few people have high health care claims costs. Willey et al. (Health Affairs, 2008) reported on average spending by people drawn from a managed care database of 26.8 million people in 2004/2005. In their sample, median spending was $989. Mean annual health spending for the plan population in normal health was $3,075 for both out-of-pocket and plan costs. People with chronic disease spent more, with mean spending of $8,225 and median spending of $3,321. For the severely ill, mean spending was $29,273 and median spending was $9,300.

After selecting its sample, the Centers for Medicare and Medicaid Services (CMS) adjusted the data in a variety of other ways that could produce inaccurate estimates of average annual health care payments. ...

The emphasis and [ ] are mine.   

One More Way ObamaCare May Increase Costs

This is from Doctor John Goodman commenting on a recent NYT article:
The health reform law encourages doctors to work for hospitals. But once they become employees, doctors are encouraged to admit more patients so the hospitals can bill Medicare for more money. This is happening everywhere, but here is an example from The New York Times:
Every day the scorecards went up, where they could be seen by all of the hospital’s emergency room doctors. Physicians hitting the target to admit at least half of the patients over 65 years old who entered the emergency department were color-coded green. The names of doctors who were close were yellow. Failing physicians were red.  

Sunday, January 26, 2014

Wellness Programs Delivered Another Blow in Jan. 23rd PPACA Regulatory Release

On January 23, 2014, the Internal Revenue Service proposed a set of regulations that further elaborate on the details of the individual mandate, affordability and wellness programs.  The regulations state that "wellness program incentives are treated as earned only if the incentives relate to tobacco use." Page 15 of the release.

This means that employers can ratchet up the smoker penalties without worrying if those penalties drive a plan up to unaffordable status (meaning more than 9.5% of an employee's household income, or W-2 wages under the safe-harbor).  However, those penalties could make an employer's plan unaffordable if used for any wellness rationale other than tobacco/smoking.  I.e., an employer's attempt to drive better health with wellness spankings or doggie treats are all fun and games but can never cause an employee to pay more than 9.5% of income without triggering a possible PPACA unaffordability penalty back to the employer.

Here is how Timothy Jost explains it at Health Affairs:
[W]here an employer-sponsored plan includes a nondiscriminatory wellness program that offers incentives that affect premiums, these premium reductions are treated as earned in determining an employee’s or a related individual’s required contribution if the incentives relate to tobacco use. Wellness program incentives that do not relate to tobacco use are treated as not earned. That is to say, if the employee’s premium would be reduced if the employee participated in a tobacco-cessation program, the affordability of the coverage is determined by assuming the employee participates. For other wellness programs, however, affordability is determined by assuming the employee does not participate and thus does not earn the incentive, so that an employee does not have to pay the tax penalty simply for not participating in a wellness program.

Are We Systematically Short Changing Ourselves by 50% for Calories Burned in Strength Training Exercises?

Study Says Anaerobic Exercises Burn Two Times More Energy Than Previously Thought

From SuppVersity:  
If we go by the data from the ... study, push-ups and pull-ups burn 50% and 62% more energy than we previously thought they would [respectively].  Against that background it's no wonder that participants ... [went] from 16% to 8% body fat. ... 
[T]he methods we use to calculate the [energy expenditure] of anaerobic activities significantly ... underestimat[e] of the energetic costs of anaerobic activity. ...

"Traditional" in this context means using calorimetry to measure oxygen uptake continuously throughout the trial. "Oxygen uptake" and "anaerobic activity" - when you come to think about it ... [don't] really go together.  The former is ... specifically high, when you perform "aerobic," not anaerobic activities. ... [The alternate alternate "improved" method used in this study measure oxygen uptake during the rest periods subsequent to exercise.]

In spite of the fact that it is questionable, whether the alternative the scientists used, i.e. measuring the oxygen uptake during recovery, instead of during activity, is actually "accurate", it goes without saying that the real world health benefits and weight loss results people achieve, when they lift heavy weights or perform high intensity interval training would support the notion that the de facto energy expenditure could have been significantly underestimated.  

Saturday, January 25, 2014

The 7 Deadly Email Sins For Your Psyche

This is from Science 2.0:
... You could be damaging your mental health and that of their colleagues too, according to Kingston University occupational psychologist Dr. Emma Russell.
Russell says she has identified 7 deadly email sins that can lead to 'negative repercussions' if not handled correctly. Some of the worst habits include 'ping pong' messages back and forth and 'read receipts', which accompany every missive sent, the study, looking into which email practices stress employees out, found. 
Russell analyzed 28 email users across different companies to see which habits had positive and negative influences on their working lives. She these 7 habits which can be positive if used in moderation but are likely to have a negative impact if not handled correctly:

1. Ping pong - constant emails back and forth creating long chains
2. Emailing out of hours
3. Emailing while in company
4. Ignoring emails completely
5. Requesting read receipts
6. Responding immediately to an email alert
7. Automated replies

Responding to out of hours emails, for instance, may make an employee look keen but it can also mean workers find it difficult to switch off, according to presentation. “This puts pressure on staff to be permanently on call and makes those they are dealing with feel the need to respond,” Russell explained. “Some workers became so obsessed by email that they even reported experiencing so-called ‘phantom alerts’ where they think their phone has vibrated or bleeped with an incoming email when in fact it has not. Others said they felt they needed to physically hold their smartphone when they were not at their desk so that they were in constant email contact.” ... 
Some [practices] create a problem for the sender rather than the receiver, she said, as they can lead to them giving out the wrong impression or not remaining in control of what they are doing.  For example having email alerts switched on and responding to email immediately can have positive benefits if one wants to show concern to the person who has emailed them.

However, it may have negative repercussions in terms of the sender feeling that responding to emails is taking them away from other tasks and impacting on their sense of well-being. ...

Friday, January 24, 2014

Q and A: Must all medical plans have pediatric dental under the new rules of Obamacare?

Each state has been given significant leeway on this particular matter.

In Utah, for example, insurers on the state’s exchange have to cover dental cleanings and sealants for children, but they don’t have to pay for any restoration, such as fillings for cavities.

California passed state legislation in 2012 requiring all non-grandfathered medical plans sold to individuals and small employers (but not large groups of 50 or more), to include coverage for all ten essential health benefits, including pediatric dental coverage.*

But, most medical plans sold and created for the Exchanges did not have dental benefits in them. So many states had to graft them in after the fact via separate dental providers. States that did this do not have to require parents to purchase them. While some states, such as Washington and Nevada, are making it a requirement, others are not. So in effect, although pediatric dental benefits are deemed essential by Obamacare, they will not be mandatory in all states.

In states that are meeting this requirement by providing stand alone dental plans (as opposed to having the benefit baked into a medical plan) federal subsidies are not available for premium assistance even though those subsidies are available when the dental is part of a medical plan.

* CA Health and Safety Code (HSC) §1367.005 and CA Insurance Code (CIC) §10112.27 (AB 1453, Chapter 854, Statutes of 2012 and SB 951, Chapter 866, Statutes of 2012 respectively.)

Additional information available here and here.  

Medicaid Asset Seizure Rules Causing People to Avoid Coverage

This is from Sandhya Somashekhar of The Washington Post:
Add this to the scary but improbable things people are hearing could happen because of the new federal health-care law: After you die, the state could come after your house. 
The concern arises from a long-standing but little-known aspect of Medicaid, the state-federal program that provides health coverage to millions of low-income Americans. In certain cases, a state can recoup its medical costs by putting a claim on a deceased person’s assets. 
This is not an issue for people buying private coverage on online marketplaces. And experts say it is unlikely that the millions of people in more than two dozen states becoming eligible for Medicaid under the program’s expansion will be affected by this rule. But the fear that the government could one day seize their homes is deterring some people from signing up. 
“I was leaning toward not getting Medicaid, because there is somewhat of a stigma,” said Steve Olin, 60, a former copy editor from Eureka, Ill. “Then, when I heard about the estate recovery, I was really sure.”... 
Asset recovery predates the health-care law, but the legislation makes it apply to a larger pool of people.... 
In 1993, concerned about rising Medicaid costs, Congress made it mandatory for states to try to recover money from the estates of people who used Medicaid for long-term care, which can cost taxpayers hundreds of thousands of dollars per person. They included exceptions in cases in which there is a surviving spouse, a minor child and other situations. 
Congress also gave states the option to go further — to target the estates of all Medicaid recipients for any benefits they received after age 55, including routine medical care. Many states took that route, including Oregon, which from July 2011 to June 2013 recovered $41 million from about 8,900 people. ... 
But after the Affordable Care Act made it mandatory for most people to carry health insurance, Oregon’s Medicaid office decided to change its approach because people scared about asset recovery were not signing up for coverage. ... 
Other states have taken a much more lax approach to asset recovery in the past, hesitant to target poor people whose only valuable asset might be the farm that has been in their family for generations. Experts say there are no good, recent national data on how asset recovery is applied, with states differing drastically and working on a case-by-case basis. ... 
Still, when it comes to something as central to middle-class identity as a home and what people can pass on to their heirs, it is perhaps not surprising that some people are not taking any chances. 
A 54-year-old former lawyer from New York City, who spoke on the condition of anonymity because she will be looking for a job soon, said that despite the prospect of free insurance, she did not enroll in Medicaid because she owns an $850,000 apartment she hopes to bequeath to a family member. 
“I don’t want my assets to be raided after my death,” she said. “The idea that someone can come after my house after I die — I just can’t do it.” 
Advocates are pressing the Obama administration to specify that new Medicaid recipients nationally should not be subject to asset recovery. 
Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, said, “We recognize [the] importance of this issue and will provide states with additional guidance in this area soon.” ... 

Government Healthcare is Already Working Incredibly Well in the U.S., Why Not Extend It?

Just ask a veteran.

This is "The Best of Care" from Charles Oliver at
An investigation by the Pittsburgh Tribune-Review found that contractors or employees at 167 Veterans Affairs facilities committed 14,215 privacy violations over a two-and-a-half year period. The violations affected more than 100,000 veterans and 551 VA employees. Some of the violations included posting photos of the “anatomy” of some of the victims on social media. In other cases, the personal information of some victims was used to obtain credit cards. The study found that privacy violations at the VA very rarely result in the offender being referred to the Office of Inspector General much less punished.  

Thursday, January 23, 2014

The Changing Face of Employer Benefit Plan Compliance Under PPACA

Highlights from the survey include:
  • Despite the risks associated with noncompliance, only two-thirds of respondents have a formal compliance strategy and, while 69% have a dedicated governance and/or compliance team, 31% do not.
  • Fewer employers planned to update their SPDs this year, with just 16% planning a rewrite for readability (down 50%) and 67% planning content updates.
  • About a quarter (26%) of respondents update and distribute SPDs to their active employees every year, but by far summaries of material modification (SMMs, 67%) or notices in annual enrollment material (46%) were the preferred methods for alerting participants to new plan changes.
  • More employers (45%) are using or planning to use social media (such as Twitter or Facebook) to communicate with employees and retirees.
  • The biggest challenges facing employers when it comes to producing SPDs are having sufficient resources and managing the review process. And twice as many respondents as last year indicated “writing” was a challenge.
  • More employers are producing ACA-required materials in-house than in previous years. Forty percent of respondents generated SBCs themselves this year (up from just 18% last year) and 68% planned to produce the Notice of Coverage Options in-house.
- See full survey.  

Neuroscientist: Why Dieting Doesn't Usually Work

In the US, 80% of girls have been on a diet by the time they're 10 years old. In this honest, raw talk, neuroscientist Sandra Aamodt uses her personal story to frame an important lesson about how our brains manage our bodies, as she explores the science behind why dieting not only doesn't work, but is likely to do more harm than good. She suggests ideas for how to live a less diet-obsessed life, intuitively.

Spouses Cost More for Employers to Cover

This is from Paul Fronstin, Ph.D., EBRI, and M. Christopher Roebuck, Ph.D., RxEconomics:
  • As of 2012, 7 percent of employers did not cover spouses when other coverage was available to them and 4 percent of employers with 1,000 or more employees reported not providing such spousal coverage. As of late 2012–early 2013, another 8 percent of large employers were reporting that they planned to exclude spouses from coverage when other coverage was available. 
  • A recent decision by United Parcel Service to eliminate health benefits for spouses who were eligible for coverage through their own employer may be a tipping point in employment-based health benefits, in part due to provisions in the Patient Protection and Affordable Care Act (PPACA). 
  • This study documents that spouses, on average, cost more to cover than otherwise comparable policyholders. This, in conjunction with the latitude offered by PPACA, makes spousal coverage a target for employers seeking ways to lower their health care expenditures. However, this analysis finds that working and non-working spouses are likely quite different in their use of health services. Therefore, the strategy of not covering spouses who are employed may have unintended consequences for employers. 
... In 2011, policyholders spent an average of $5,430 on health care services [for employees], compared with $6,609 for spouses. Because spouses in an employment-based health plan are more likely to be female than male (twice as likely in this study), a key question is how much of the $1,179 difference is due to gender.  This analysis estimates that the marginal effect of being a spouse on annual total healthcare costs declines by $268, which means gender explains about 23 percent of the difference.  Next, it includes age and overall health status in the model and finds the spouse effect on total healthcare costs further declines to $392.  Finally, controlling for region and plan type only slightly increases the estimate, to $404.

Because spouses still have health care costs that are roughly 7 percent higher than policyholders for reasons other than gender, age, and general health status, the source of this variation remains a question. A key limitation of this study is that it does not have information on the employment status and other health insurance eligibility of spouses. As a result, it cannot directly determine if the remaining differences in health services spending are attributable to employment status. ...

Resolved: ObamaCare is Beyond Rescue, Here is a Timeline of Its Destruction

This is from Megan McArdle at Bloomberg
In a nutshell, Obamacare has so far fallen dramatically short of what was expected -- technically, and in almost every other way. Enrollment is below expectations: According to the data we have so far, more than half of the much-touted Medicaid expansion came from people who were already eligible before the health-care law passed, and this weekend, the Wall Street Journal reported that the overwhelming majority of people buying insurance through the exchanges seem to be folks who already had insurance.  Coverage is less generous than many people expected, with narrower provider networks and higher deductibles. The promised $2,500 that the average family was told they could save on premiums has predictably failed to materialize. And of course, we now know that if you like your doctor and plan, there is no reason to think you can keep them. Which is one reason the law has not gotten any more popular since it passed. 
The administration and its supporters have been counting on the coverage expansion to put Obamacare beyond repeal. So what if the coverage expansion is anemic, the plans bare-bones, the website sort of a disaster? It’s a foundation upon which we can build -- and now that so many people have coverage, the thinking goes, Republicans will never dare to touch it. The inevitable problems can be fixed down the road. 
But it’s far from clear that this is true. The law is unpopular, not only with voters, but also apparently with the consumers who are supposed to buy insurance. The political forces that were supposed to guarantee its survival look weaker by the day. The Barack Obama administration is in emergency mode, pasting over political problems with administrative fixes of dubious legality, just to ensure the law’s bare survival -- which is now their incredibly low bar for “success.” 
Although the fixes may solve the short-term political problems, however, they destabilize the markets, which also need to work to ensure the law’s survival. The president is destroying his own law in order to save it. ... 
[W]henever someone has voiced discontent with the way things are going, the administration has taken a hacksaw to another leg [of the law]. For example, some folks who had policies they liked before were being forced to drop them and buy new policies they didn’t like so much. That caused an outcry, followed by an emergency grandfathering rule. Other major emergency fixes include: 
  • A one-year delay of the employer mandate (which our own Ezra Klein has shown is critical to both coverage expansion and cost control). It seems unclear that this will ever go into effect, as the regulatory difficulties of tracking compliance are enormous, and enforcing it will trigger unpopular changes in working hours and other conditions for many workers. 
  • Numerous extensions of enrollment and payment deadlines, even though these have led to consumer confusion. 
  • Changes in the rules governing the “risk corridor” programs that cover excess losses at insurers, with more potentially in the works. This buys peace with the insurers, but is going to be incredibly politically difficult for the administration to defend when the costs become clear.
Why does this put the law beyond rescue? 
First, let’s define what we mean by “beyond rescue.” Is Obamacare going to be repealed in its entirety? No. Some of the provisions, such as letting parents keep their kids on their insurance until they’re 26 years old, have no chance of being repealed. Others, such as the Medicaid expansion, will almost certainly stand in some form, though I could see Medicaid being block-granted and then slowly whittled away under another administration. The fate of other pieces, such as the cost-control procedures and the exchanges, is still too cloudy to predict. 
By “beyond rescue,” I mean that the original vision of the law will not be fulfilled -- the cost-controlling, delivery-system-improving, health-enhancing, deficit-reducing, highly popular, tightly integrated (and smoothly functioning) system for ensuring that everyone who wants coverage can get it. 
The law still lacks the political legitimacy to survive in the long term. And in a bid to increase that legitimacy, the administration has set two very dangerous precedents: It has convinced voters that no unpopular provisions should ever be allowed to take effect, and it has asserted an executive right to rewrite the law, which Republicans can just as easily use to unravel this tangled web altogether. ...
[T]he worst is yet to come. Here’s what’s ahead:   
  • 2014: Small-business policy cancellations. This year, the small-business market is going to get hit with the policy cancellations that roiled the individual market last year. Some firms will get better deals, but others will find that their coverage is being canceled in favor of more expensive policies that don’t cover as many of the doctors or procedures that they want. This is going to be a rolling problem throughout the year. 
  • Summer 2014: Insurers get a sizable chunk of money from the government to cover any excess losses. When the costs are published, this is going to be wildly unpopular: The administration has spent three years saying that Obamacare was the antidote to abuses by Big, Bad Insurance Companies, and suddenly it’s a mechanism to funnel taxpayer money to them? 
  • Fall 2014: New premiums are announced. 
  • 2014 and onward: Medicare reimbursement cuts eat into hospital margins, triggering a lot of lobbying and sad ads about how Beloved Local Hospital may have to close. 
  • Spring 2015: The Internal Revenue Service starts collecting individual mandate penalties: 1 percent of income in the first year. That’s going to be a nasty shock to folks who thought the penalty was just $95. I, like many other analysts, expect the administration to announce a temporary delay sometime after April 1, 2014. 
  • Spring 2015: The IRS demands that people whose income was higher than they projected pay back their excess subsidies. This could be thousands of dollars. 
  • Spring 2015: Cuts to Medicare Advantage, which the administration punted on in 2013, are scheduled to go into effect. This will reduce benefits currently enjoyed by millions of seniors, which is why they didn’t let them go into effect this year. 
  • Fall 2015: This is when expert Bob Laszewski says insurers will begin exiting the market if the exchange policies aren’t profitable.
  • Fall 2017: Companies and unions start learning whether their plans will get hit by the “Cadillac tax,” a stiff excise tax on expensive policies that will hit plans with generous benefits or an older and sicker employee base. Expect a lot of companies and unions to radically decrease benefits and increase cost-sharing as a result. 
  • January 2018: The temporary risk-adjustment plans, which the administration is relying on to keep insurers in the marketplaces even if their customer pool is older and sicker than projected, run out. Now if insurers take losses, they just lose the money. 
  • Fall 2018: Buyers find out that subsidy growth is capped for next year’s premiums; instead of simply being pegged to the price of the second-cheapest silver plan, whatever that cost is, their growth is fixed. This will show up in higher premiums for families -- and, potentially, in an adverse-selection death spiral.
Each of these is likely to trigger either public outcry or providers leaving the market (leading to public outcry). Policy analysts can say that this is unfortunate but necessary -- that you can’t make an omelet without breaking eggs. Fair enough, but the administration has been manifestly unwilling to tell the eggs that. Instead, it’s emergency administrative fixes for everyone. And we sure can’t count on Republicans to save Obamacare by tackling the egg lobby. 
Instead, I expect that the administration is going to issue “temporary” administrative fixes for most of the law’s unpopular bits -- just as it has so far. That’s not going to get any easier as midterms and then a presidential election creep closer. And then Republicans will make the “temporary” fixes permanent. And by the time everyone’s done “fixing” the original grand vision, not much of it will be left. ...

How Large Employers and Self Funded Plans Can Circumvent Most of Obamacare with Mini-Meds

This is from Adrianna McIntyre at the Incidental Economist:
The fact that some employers will continue to offer mini-med insurance plans isn’t new news. The Wall Street Journal broke this back in May—and back then, I was baffled. I followed up with a colleague, who very patiently walked me through the loophole left in the law.
Imagine insurance plans fall into one of two buckets: Bucket A holds the individual and small-group markets; Bucket B captures the large-group market and self-insured plans (usually only large employers self-insure, but small businesses are increasingly looking to self-insurance to ease regulatory pressures). 
Bucket A is subject to all of the rules you’ve come to associate with Obamacare: they have to offer preventive services without copay, must cover essential health benefits, annual and lifetime limits on coverage are forbidden, and out-of-pocket (in-network) spending can’t exceed $6,350 for individuals ($12,700 for families). At a minimum, these plans meet a 60% “actuarial value” threshold, the definition of bronze plans. Legally, insurers cannot offer a plan that fails to meet these standards on the individual and small-group markets. Every exchange plan falls into this bucket, as do a number of off-exchange plans. 
Coverage is regulated less stringently for Bucket B. Large-group** and self-insured plans still have to offer copay-free preventive care, but they aren’t legally obligated to offer additional benefits; plans can be sold even if they skimp on EHBs. And those plans don’t need to meet a 60% AV minimum. Here’s the real wrinkle: out-of-pocket spending protections only apply to benefits covered by the plan. In theory, a mini-med plan could cover the bare minimum in preventive services, and nothing else. However, offering—and carrying—subpar coverage has implications for the employer and individual penalties. 
Employers with plans that fall into Bucket B essentially have three options. 
  • Offer compliant coverage. Most employers have always offered coverage that generally complies with requirements laid out in the ACA (98% of individuals enrolled in employer sponsored insurance have plans with an actuarial value that meet or exceeds the “gold” level on exchanges). Employees offered compliant coverage from an employer are not eligible for exchange subsidies.  
  • Offer “loophole” coverage. Employers that offer large-group or self-insured plans have the freedom to purchase plans that don’t comply with all of the ACA’s intended protections. However, if the plan doesn’t offer a minimum actuarial value of 60%, employees below 400% FPL are eligible for subsidies. The employer could be slapped with the “light” version of the employer penalty, $3,000 per employee who opts into the exchange. Individuals who carry subpar coverage might also be subject to the individual mandate penalty 
  • Offer coverage that doesn’t even meet loophole standards—or no coverage at all. If a large employer’s plan fails to meet the barest preventive care requirements, or if a large employer doesn’t offer coverage at all, they’re subject to a $2,000 penalty per full-time worker***.
This week’s WSJ story introduces a new twist: employers could get around the employer penalty associated with skimpy coverage if they offer a compliant plan alongside a mini-med option. Because employees are offered minimum essential coverage through their employer, they’re ineligible for tax credits; those are the trigger mechanism for the employer penalties. 
This strategy might work for some companies; the WSJ story features a security firm, where security-guard employees essentially act as their own young, healthy, low-income risk pool—characteristics that make bare-bones plans broadly appealing (if insufficient for serious health events). However, given a more heterogeneous risk pool, this move invites adverse selection into the more generous plan. 
The loophole was probably an oversight—but one borne out of an intentional decision to leave self-insured and large-group plans largely untouched by regulatory changes, appeasing the interests of important stakeholders. In other words, it’s another symptom of our wildly counterproductive tendency to cling to the status quo in health policy. ...
**Large group plans are still subject to state-level coverage requirements that predate the ACA. (Thanks to Max Fletcher for the reminder.) 
***For the very precise, the $2,000 penalty-per-employee is actually assessed against the number of full-time employees less 30.  

Timothy Jost, who probably knows the legal quirks of the ACA better than anyone, very helpfully offered some clarifications about how the mini-med loophole works. Below is his email to me (shared with permission).
Large group and self-insured plans are also subject to the lifetime and annual dollar limit cap. They cannot, therefore, legally offer fixed dollar indemnity policies as medical coverage. The WSJ article is wrong on this. Fixed-dollar indemnity plans can be offered as excepted benefit plans as long as payments are based on time periods rather than services. Under recent guidance, fixed dollar indemnity policies can also be offered in addition to comprehensive coverage as excepted benefits. I blogged about this last week at HA. But they cannot be offered alone as minimum essential coverage (and excepted benefits are expressly not MEC). 
An employer could offer, that is, a plan that covered preventive services and 2 days of hospital coverage and 5 physician visits and meet the MEC requirement. An employer cannot, however, meet the MEC requirement with a fixed-dollar indemnity policy.
Another issue is the discrimination in favor of highly compensated employee prohibition. The agencies have yet to issue regs on this, but the requirement is in effect. An employer that had all of its executives signed up for Cadillac coverage but its minimum wage employees in mini-meds could conceivably be found to violate that prohibition. 
For more detail, you can see Jost’s posts describing guidance on fixed dollar indemnity plans over at the Health Affairs blog, here and here.

Moody’s downgrades health insurers over ObamaCare uncertainty

Moody’s announced Thursday it was downgrading its outlook for health insurers from stable to negative based on uncertainty related to ObamaCare.

The credit rating agency cited an unstable environment because of the healthcare law’s difficult rollout, and projected that insurers would earn 2 percent less than forecast in 2014.

“While we’ve had industry risks from regulatory changes on our radar for a while, the ongoing unstable and evolving environment is a key factor for our outlook change,” Moody’s Senior Vice President Stephen Zaharuk said in a statement. “The past few months have seen new regulations and announcements that impose operational changes well after product and pricing decisions were finalized.”

The Moody’s report also cites the slow enrollment of young people into ObamaCare as a reason for the downgrade.

“Uncertainty over the demographics of those enrolling in individual products through the exchanges is a key factor in Moody’s outlook change,” the ratings agency said.

Citing statistics released by the administration, it noted that so far about 24 percent of enrollees are between the ages of 18 and 34, while a target of 40 percent may be necessary to keep premiums from rising in the future.

It said the 24 percent of young people enrolled so far is “well short” of the 40 percent target.

Moody’s also said it was worried that insurers’ premium calculations might not be enough to cover the industry assessment tax that begins in 2014. ...

Full story:

Wednesday, January 22, 2014

Wall Street adviser: Actual unemployment is 37.2%

Don't believe the happy talk coming out of the White House, Federal Reserve and Treasury Department when it comes to the real unemployment rate....  Because, according to an influential Wall Street advisor, the figures are a fraud.

In a memo to clients provided to Secrets, David John Marotta calculates the actual unemployment rate of those not working at a sky-high 37.2 percent, not the 6.7 percent advertised by the Fed.... 

Marotta, who recently advised those worried about an imploding economy to get a gun, said that the government isn't being honest in how it calculates those out of the workforce or inflation. ... 

“Unemployment in its truest definition, meaning the portion of people who do not have any job, is 37.2 percent. This number obviously includes some people who are not or never plan to seek employment. But it does describe how many people are not able to, do not want to or cannot find a way to work. Policies that remove the barriers to employment, thus decreasing this number, are obviously beneficial,” he and colleague Megan Russell in their new investors note from their offices in Charlottesville, Va.“The unemployment rate only describes people who are currently working or looking for work,” he said. That leaves out a ton more.

They added that “officially-reported unemployment numbers decrease when enough time passes to discourage the unemployed from looking for work. ...

Tuesday, January 21, 2014

Deductibles in Obamacare Exchanges Violating Obamacare, So What's New?

If You Like Your Deductible, You Can Keep Your Deductible (in Some States)
The ACA ... capped deductibles for small group health insurance plans at $2,000 for individuals and $4,000 for families. However, the Department of Health & Human Services announced in February 2013 that these deductible limits could be waived in situations where a limit prevented a health plan from meeting its ratio of insurance payments to enrollee out-of-pocket costs under the ACA.  [This was simply another example of PPACA's unworkability.  In response, federal regulators waived their magic wands and nullified, via illegal line-item vetoes, the portions they realized they could not practically enforce without massive political losses.]  
“As the implementation of the Affordable Care Act gets progressively modified, we are finding a variety of downstream consequences for consumers," said Kev Coleman, Head of Research and Data at HealthPocket, "In the case of the small group market, the conditional waiver has allowed the deductible for Bronze plans to average over twice the amount of the original deductible limit." 
... Using government data on this year's small group health plans from 32 states, HealthPocket analyzed the average out-of-pocket costs for the major health plan types and then determined what percentage of plans, if any, exceeded the original deductible limit for the small group market. For individual enrollees in small group health plans, HealthPocket found that 35 percent of the plans studied had deductibles that exceeded the ACA limits. When analyzed by plan type, HealthPocket found:
  • 96 percent of Bronze plans had deductibles over the $2,000 cap,
  • 28 percent of Silver plans had deductibles over the $2,000 cap,
  • 6 percent of Gold plans had deductibles over the $2,000 cap, and
  • 0 percent of Platinum plans had deductibles over the $2,000 cap.
When examining deductibles for families, similar results were found with respect to the percentage of plans that exceeded the $4,000 family deductible cap.

Strictly enforcing the deductible caps for small group health plans could have substantially narrowed the inventory of health plans in the SHOP Exchange, according to the study. For the Bronze tier in particular, fewer than 4 percent of 2014 plans would have satisfied the ACA’s deductible caps for individual as well as family enrollees.

NYT Comments on 105(h) Delays in Obamacare: Employers Can Still Discriminate in Favor of Highly Comp'd for Now

This is from Robert Pear at the NYT:
The Obama administration is delaying [and has been for three years] enforcement of another provision of the new health care law, one that prohibits employers from providing better health benefits to top executives than to other employees.   
Tax officials said they would not enforce the provision this year because they had yet to issue regulations for employers to follow. 
The Affordable Care Act, adopted nearly four years ago, says employer-sponsored health plans must not discriminate “in favor of highly compensated individuals” with respect to either eligibility or benefits. The government provides a substantial tax break for employer-sponsored insurance, and, as a matter of equity and fairness, lawmakers said employers should not provide more generous coverage to a select group of high-paid employees.
But translating that goal into reality has proved difficult. 
Officials at the Internal Revenue Service said they were wrestling with complicated questions like how to measure the value of employee health benefits, how to define “highly compensated” and what exactly constitutes discrimination. 
Bruce I. Friedland, a spokesman for the I.R.S., said employers would not have to comply until the agency issued regulations or other guidance. 
President Obama signed the health care law in March 2010. The ban on discriminatory health benefits was supposed to take effect six months later. Administration officials said then that they needed more time to develop rules and that the rules would be issued well before this month, when other major provisions of the law took effect. 
A similar ban on discrimination, adopted more than 30 years ago, already applies to employers that serve as their own insurers. The new law extends that policy to employers that buy insurance from commercial carriers like Aetna, Cigna, Humana and WellPoint, or from local Blue Cross and Blue Shield plans. 
This could eventually be a boon to workers, the administration says. 
“Under the Affordable Care Act, for the first time, all group health plans will be prohibited from offering coverage only to their highest-paid employees,” said Erin Donar, a Treasury spokeswoman. “The Departments of Health and Human Services, Labor and the Treasury are working on rules that will implement this requirement.” 
The enforcement delay is another in a series of deadline extensions, transition rules, policy shifts and other steps by the Obama administration to minimize disruption from the new health care law, which is sure to be invoked by both Democrats and Republicans running for office this fall. ... 
One of the questions facing the I.R.S. is whether an employer violates the law if it offers the same health insurance to all employees but large numbers of low-paid workers turn down the offer and instead obtain coverage from other sources, like a health insurance exchange. 
Some health insurance arrangements will almost surely be forbidden, officials said. For example, they said, employers will not be able to provide coverage only to management.
Likewise, the officials said, a company could not provide free coverage to “highly compensated individuals” while requiring other employees to pay, for example, 25 percent of the cost. In addition, they said, benefits available to the dependents of highly paid executives must be available on the same terms to dependents of other employees in the health plan. 
Under the 2010 law, an employer that has a fully insured health plan that discriminates in favor of high-paid executives could face a steep penalty: an excise tax of $100 a day for each individual affected negatively. 
Thus, if a company had 100 employees and its health plan were found to discriminate in favor of 15 executives, the employer could be subject to a tax penalty of $8,500 for each day of noncompliance, for the 85 employees discriminated against. If the discrimination continued for 10 days, the penalty could be as much as $85,000. 
If a company with 60 employees failed to meet the new standards with respect to half its employees for a year, it could face a penalty of $1 million. 
One reason for the delay in enforcement is that officials have decided to review the existing nondiscrimination rules for self-insured companies, even as they try to write new rules for employers that buy commercial health insurance. 
The existing restrictions on self-insured health plans are “outdated, inadequate and unworkable,” said Kathryn Wilber, a lawyer at the American Benefits Council, which represents many Fortune 500 companies. 
Under the earlier law, all health benefits provided to highly compensated individuals — with the possible exception of certain executive physicals — are supposed to be provided to rank-and-file employees. ...