News Flash! AARP Supports Health Care Reform

Now isn’t that curious? Their 40 million person membership is made up of folks over age 50 - a large percentage of whom are eligible for Medicare. I understand the need for Medicare reform, but AARP’s support for health care reform goes beyond supporting Medicare. I suspect they are supporting health care reform that will result in a cost shift away from their members and to the younger and healthier population.

Let’s focus on one aspect of their support of the Legislation which passed in the House last week – community rating. The Bill would not permit rating based upon medical history by health insurance companies. Older people have more medical history (generally speaking). Medical history chronicles usage and helps insurance companies evaluate risk. A good health risk should cost less because there is less history. A high risk should cost more for the same reason.

Age rating provides an adjustment for pooling, but medical rating adds a metric to encourage good behavior by us as individuals. Studies suggest that as much as 70% of health costs are lifestyle related. Shouldn’t we retain features that encourage good behavior? Needing less medical service is good because less usage (out of need) means less cost.

If concern is over the unhealthy paying too much, most states already have reformed pricing practices that prohibit insurance companies from charging too much. In this way and other ways, health insurance companies already do pool risk. This means they don’t charge as much as they might need to any given risk. To offset losses from the high risk group, they charge more than required on a low risk individual or group. This is pooling or spreading of risk.

Is AARP’s goal to have its members pay less? Probably so. But should the outcome result in those under age 50 paying more? Why not support legislation that reforms and improves Medicare?

Mark Alder, President, Herbruck Alder - malder@herbruckalder.com - www.herbruckalder.com

Pending Healthcare Reform Legislation

The pending healthcare reform legislation suggests that penalties will be levied to those not purchasing coverage. The proposed penalties are phased in and appear smaller than the premiums.

Follow this logic:

If:
Health reform brings penalties for those that don’t buy coverage,

And:
Some employers don’t offer, and some individuals don’t buy, coverage today because coverage is too expensive,

Then:
Won’t companies and individuals just pay the penalties?

We can only hope for income tax reform. I might choose to stop paying taxes.

- Mark Alder, President, Herbruck Alder - malder@herbruckalder.com - www.herbruckalder.com

My Quick Response to this Morning’s News

My quick response to this morning’s news. I intend to write our House and Senate leaders again.

The House went first and it passed. Now it’s the Senate’s turn. We may have health reform legislation yet this year. Based upon my understanding, this new Federal Legislation would trump State Legislation and bring new “reform” to prior health “reform” initiated at the State level. As such, higher costs are on the way.


Currently in Ohio, groups with 2 to 50 employees already cannot be denied coverage. Pre-existing conditions are covered immediately if individuals can show proof of prior coverage. Groups are rated based upon medical history and rated up with a guaranteed maximum cost. Many groups are not rated up because they are blessed with healthy employees or they have worked to improve the risk of their employees via wellness programs and incentives.

Groups over 100 are rated based upon their claims experience. Is this medical history? In the words of Sarah Palin – “You bet’cha!”

Without medical underwriting to give credit for small groups’ “good health,” pricing will rise dramatically for companies in states that have health reform already. If insurance companies can only use age demographics to renew large groups, costs will rise for companies that have been active with wellness and other risk management programs.

What rewards will accrue to owners and individuals for their personal contribution for keeping costs low? Few rewards for risk management; fewer still for personal responsibility. Will companies see a need to offer wellness programs in the future? Will employees be encouraged to eat right, eat less, and exercise more?

I am fearful that government, rather than market forces, will bring costs up for all; and medical rationing will be the only tool left to reduce costs. Less for more -- was this the goal?


- Mark Alder, President, Herbruck Alder - malder@herbruckalder.com - http://www.herbruckalder.com/

Public Option

The “left” favors it, and the “right” opposes it. The “it” is a Public Option for health insurance. I have written that I am not in favor of a Public Option. To be more specific, I am not in favor of a Public Option that does not fairly compete.

Competition is good. A Public Option is good if the rules apply to all who are competing for the health insurance business. This includes the government. If the government-run Public Option guarantees a “level playing field” then I will change my mind and be supportive of a government-run Public Option.

As of right now, here are a few of my concerns – in the form of questions:

1. Does the Federal Government have to comply with State law and coverage mandates --as the insurance industry does for its insured plans?
2. Does the Federal Government need individual State approval to write a national or regional plan -- as the insurance industry does for its insured plans?
3. Does the Federal Government need to have Statutory Reserve Requirements -- as the insurance industry does for its insured plans?
4. Will the Federal Government need to stop dictating pricing to providers (hospitals and physicians) and begin negotiating with providers -- as the insurance industry does presently?
5. Do the health insurance rates charged by the Federal Government need to be sufficient to cover their cost of doing business -- as most private businesses must do to stay in business?

These are not complicated questions. However, if the answer to these questions is “No,” then the Public Option is a Trojan Horse for a Single Payer System – and I am not in favor of a Single Payer System either.

- Mark Alder, President, Herbruck Alder - malder@herbruckalder.com - www.herbruckalder.com

Workplace Wellness Seems to Really Work

An article was recently posted on MedicineNet.com entitled "Workplace Wellness Seems to Really Work." The article confirms what we already know and promote at Herbruck Alder “Wellness Works." At Herbruck Alder we realize that one wellness solution does not fit all organizations. If you would like to learn more about a customized wellness program though Herbruck Alder Health Advocates please contact us at 216-623-2600 or www.herbruckalder.com.

Click here to view article.

Chris Herbruck, cherbruck@herbruckalder.com

National Health Reform cont.

I’ve reserved my comments of late wanting to give our elected officials the opportunity to legislate national health reform based upon our stated needs -- better access and lower cost.

Based upon what I have read in various articles and have heard from various “news” programs, the legislators seem to have lost their way. If quality is to remain, costs are best controlled with competition, not price controls. A public option is, in my opinion, more likely to discourage the marketplace and looks more like a Trojan Horse for a single payer system.
Here are a few suggestions to provide access to all and yet keep costs within reach:

1. Open markets. Repeal laws that require insured plans to be controlled by each state. Large self-funded employers have special treatment which avoids state law through a “national” exemption called ERISA. Give the same exemption to all plans.


2. Enroll all those who are presently eligible into Medicare and Medicaid, and work on reducing the fraud in these government-run programs.


3. Level the tax playing field. Just as premiums paid for Employer-Sponsored plans are tax deductible, premiums for individual plans should be tax-deductible as well.


4. Enact tort reform to lower the cost of doing business for health providers. Fewer tests will be ordered for defensive reasons.


5. Repeal laws which mandate coverage for a growing number of services. Simplify the process to enable people to purchase core services and add additional coverage as riders.


6. Make costs transparent. Help consumers understand choices and cost of services.


7. Require guarantee issue of coverage, including coverage for pre-existing conditions. Allow a rate-up based upon current health status and proof of prior coverage to provide incentives for people to keep coverage in place and encourage healthy lifestyles.

I’ve read some good articles recently which make sense. It seems that Whole Foods, a national grocery store chain, has it right. They provide full-time employees a high deductible health plan and fund a portion of the deductible through a Health Savings Account. As a result, employees have access to health insurance; the plan design covers preventive services that are not subject to the deductible; and because of the high deductible, the premiums are low and employees are encouraged to use the program wisely. The Health Savings Account encourages thrift – save money for when you become sick. Because the account is owned by the employee, the employee chooses how and when to spend the money. Unused HSA funds remain in the employees’ accounts year after year. Whole Foods reports their costs are as much as 50% lower than the national average. Thus, they are already achieving lower costs.

Health reform is a complicated issue with many facets and is laced with emotion. Surveys say that most people like their present arrangements. Can we please focus the reform on access and ideas that will reduce cost or at least slow the rate of growth?

- Mark Alder, President, Herbruck Alder - malder@herbruckalder.com - www.herbruckalder.com

A Tax on Insurance Companies is a Tax on You

Bob Laszewski addresses in his Healthcare Policy and Marketplace blog a recent idea by the Congress and the White House for paying for the proposed healthcare “reform.” They want to tax insurance companies. Let’s set aside for a moment that Ohio and most other states already have a state premium tax that insurance companies pay and instead look at what this really is. It is simply an attempt to stick somebody with the price tag for the legislation currently being discussed. And since, as Mr. Laszewski points out, everyone else has fought back against being saddled with that price tag, the Congress and the White House are picking a target that the general public would never defend: insurance companies.

Well, Mr. Laszewski is asking that you in fact defend the insurance companies against this move, and he is right. It is NOT a tax on insurance companies, it is a tax on consumers and businesses. In order to pay a new tax, which will simply be viewed as a cost of doing business, insurance companies will increase premiums by the amount of the tax. Does this action help solve the problem of rising healthcare costs?

Our leaders in Washington need to focus on addressing the waste in the current system and on the true reasons behind the rising cost of healthcare. Taxing insurance companies may be a politically convenient way to pay for universal coverage, but it hides the truth that each taxpayer will be forced to pick up the bill.

Link: http://healthpolicyandmarket.blogspot.com/2009/07/health-insurance-premium-tax-would-be.html

- Kevin Hignett, Herbruck Alder - khignett@herbruckalder.com