Another Ethical Conundrum

Every couple of years, we're required to do a remedial "Anti-Money Laundering"  (AML) course. Basically, it's to remind us to be alert for "suspicious" activity, such as large cash deposits on life policies (among other "red flags"). It's a licensing requirement, and isn't really a big deal (given online, takes maybe a half hour, tops).

I don't think I've ever had a client come in and pay actual cash for a policy, let alone a thousand dollars (the threshold). Still, I want to keep my license, so I do the course as required.

Reason I bring this up is because of a notice I received today from my primary carrier. Towards the end, it says this:

"For your clients who cannot provide and ID, do not proceed until you call [the compliance official] ... Please do not notify your client or give any indication that he or she is being investigated for suspicious activity." [emphasis in original]

Here's the problem: as an independent agent, I represent the carrier, but I work for the client. This instruction puts me in an uncomfortable - perhaps untenable - position: is my first duty to the carrier (and/or the law) or my client? The actual "red flag" in this instance is that I'm supposed to see an official photo ID (driver's license, passport, etc) when dealing with folks whom I do not know who proffer large sums of cash. The key there is "whom I do not know;" that is, if a long-time client and current policyholder walks in with a wad of $100's, well that's different from a total stranger in that circumstance.

Even so, if they're in my office to buy a policy, then aren't they now my client? And how does that comport with my duty not to disclose?

I really don't know what I would do in that scenario, and that is indeed a major conundrum.

Why preventive care should not be covered

There was an interesting article in Friday's Plain Dealer regarding lung cancer screening. The real gem though was an indisputable example of consumerism working in healthcare and why PPACA's preventive coverage requirements are such a terrible idea.

"Last June, University Hospitals Seidman Cancer Center began offering $99 lung cancer screenings for people who have a referral from their primary physicians. On Monday the Cleveland Clinic Respiratory Institute will begin offering screenings for $125."

"UH and the Clinic offer low-dose CT at prices significantly lower than the $300 or more that a person would normally pay, since insurance does not cover the scans" [emphasis added]

If these tests were required coverage under PPACA they would instantly be three times more expensive. To dispel the myth that individuals can't shop for price, supply and demand doesn't apply to healthcare, or consumerism can't work just because University Hospitals and Cleveland Clinic obviously think there is a sufficient market to offer these services and Cleveland Clinic must think these consumers are price sensitive enough to lower their prices close to University Hospital's instead of charging their full normal price.

Why not unleash this power to cut cost 66% instantly on the 40%+ of healthcare that is not urgent or lacking competition?

Capitation, Rationing, The Rain, The Park, and Other Things

Kelley Beloff recently published an important and fact-filled post on physician reimbursement: specifically, fee-for-service vs. capitation.  I think this is an extremely important topic on its own, and it’s also important because it ties to many other key topics in medical delivery and finance – e.g., utilization management and rationing.  I expect we will be seeing much, much more on these topics.  Of course I can’t resist adding my 2 cents.  (Well, it started as 2 cents.  Sorry.)

The Irish playwright George Bernard Shaw was the author of many sharp opinions in the late-19^th and early-20^th centuries - opinions that often stung the comfortable classes of his time, and can still make us moderns uncomfortable.  I quoted Shaw when commenting on Kelly’s post about capitations:

"That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking bread for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair of political humanity."

I think this insight is noteworthy.  It comes from the 100-year-old diatribe that introduced Shaw’s play, “A Doctor’s Dilemma”.  Shaw’s point was that fee-for-service payment is incentive for a physician to do more.  But doing more can also mean marginal or even unnecessary services that, as Shaw vividly pointed out, bring unnecessary risk of injury to the patient. 

We moderns find it easy to accept fee-for-service, because it is predominant and familiar, and we perceive it as normal; thus we tend to accept the personal risks that come from medical treatment.   On the other hand, we find it much easier to object to capitation – because we worry that capitation provides incentive for our physician to skimp on treatment.  Thus we perceive personal risk from receiving too little treatment ourselves.  This worries us, even as we read research that shows too much treatment is a general problem, not only for the public health but for the public purse, too. The difference in how these reimbursement methods are perceived is important to keep in mind when thinking about their pros & cons.  

Another commenter on Kelley’s post took exception to my quoting Shaw, based on Shaw’s rather repugnant ideas about what we today call medical rationing.  For example, Shaw said this:

"If you can’t justify your existence, if you're not pulling your weight in the social boat, if you're not producing as much as you consume or perhaps a little more, then, clearly, we cannot use the organizations of our society for the purpose of keeping you alive.”

In the intro to "A Doctor's Dilemma" Shaw stated the same thing another way:   

“In legislation and social organization, proceed on the principle that invalids, meaning persons who cannot keep themselves alive by their own activities, cannot, beyond reason, expect to be kept alive by the activity of others. There is a point at which the most energetic policeman or doctor, when called upon to deal with an apparently drowned person, gives up artificial respiration, although it is never possible to declare with certainty, at any point short of decomposition, that another five minutes of the exercise would not effect resuscitation. The theory that every individual alive is of infinite value is legislatively impracticable

Note  “organizations of our society” in the first citation, and "legislatively” in the second.  Shaw was talking about what we now call government rationing of medical services. 

I think Shaw advocated his position for the same reason that the Obama administration advocates the same position.  That is, in order to have an affordable national medical insurance scheme, there must be some reasonable way to control spending.  Shaw concluded that to control spending the government must deny at least some medical care.  The Obama administration has reached the same decision. In other words, both concluded rationing is necessary. 

NHS rations more explicitly, e.g., thru "NICE".  Other countries ration less explicitly e.g., the queue.  In the U.S. we have rationed largely on price.  But you can be certain that rationing explains why the Obama administration is trying to sell Physician Advisory Panels as necessary under PPACA.   

Shaw advocated a national medical insurance scheme in the U.K. 50 years before NHS arrived.  He felt he had suggested a reasonable basis on which to deny care.  This is a very uncomfortable subject.  But I ask you:  how can a national medical insurance scheme succeed with limited resources, if there is no limit to the expenditure of resources on anyone?  In other words without rationing, how can any national medical insurance scheme be “legislatively practical” within “the organizations of our society” - - to echo Shaw’s terms?   

Yet the issue before Shaw was not simply financial.  It was - and is - a moral and ethical issue, too.  This same moral and ethical issue is present in today's debate about the future of our medical care system.  Advisers to the Obama administration such as Ezekiel Emanuel (Rahm's brother, btw) sound just as rational - and just as repugnant - as Shaw.  However, it's no use to pretend the rationing issue will not exist if we simply ignore it, or to pretend we can safely disregard influential points of view with which we disagree. 

If you are interested, I highly recommend this article: "Principles for allocation of scarce medical interventions" Govind Persad, Alan Wertheimer, Ezekiel J Emanuel; Lancet 2009; 373:423–31.   A link to this article is found within this earlierInsureblog post.  

Thanks Of A Grateful Nation

The Wall Street Journal reported today, April 27, the estimated amounts of overall 2011 premium rebates required by Health Care Reform.  Premium rebates are payable annually by the insurance companies to their policyholders, beginning this year in August.   The reported rebate estimates come from Kaiser Family Foundation. Goldman Sachs has separately estimated similar rebate amounts for 2011.

HHS Secretary The Fair Kathleen opined that the rebate estimates show the health care law “is already strengthening the health care system.”  We'll see about that, Kathleen.

Returning to reality, the estimated average rebate payable to subscribers in small-group plans is $6.30 per month, and for subscribers in large-group plans is $6.00 per month. These estimated rebates thus equal about one half of one percent of the monthly average 2011 family-coverage group insurance premium or about 1.4% of the monthly average 2011single-coverage group insurance premium. Overall, way less than 2%.  

Keep in mind group policies cover the vast majority of privately-insured people. 

For the 7% or so of Americans who are covered by individual policies, Kaiser estimates average rebates of about $10.60 per month per policy, less than 6% of the monthly average 2011 individual policy premium. 

The thanks of a grateful nation are owed to The Fair Kathleen and The Cool Barack.

Yeah, about those MLR "rebates..."

As we've previously noted, when something looks "too good to be true," it generally is. Case in point, the now-estimated $1.3 billion in "rebates" headed towards "lucky" Americans later this summer:

"The nonpartisan [sic] Kaiser Family Foundation, which calculated total rebates at $1.3 billion, says that around $426 million will go to people who bought their own health plans; $541 million will go to large employers and $377 million to small businesses ... Goldman Sachs analyst Matthew Borsch estimated the total rebates at around $1.2 billion."

Hey, what's a few million dollars between friends, really?

The rub here is several fold. First, only fully insured plans are subject to the requirement (as Nate breathes a sigh of relief); since most large employers are self-funded, their plans are exempt (well, for as long as HHS Secretary Shecantbeserious says they are).

Second, we're talking about an average payout of about $127 per policyholder; it's unclear if that's per insured, or just to the premium payer. And don't just assume the latter: with this bunch, no such assumptions are safe.

Third, there's the little issue of taxes: if you're an individual, chances are your refund's going to be non-taxable (unless you've set up a Section 105 plan). But if you're part of a group plan, and your premiums come out pre-tax (such as under a Flexible Spending or POP Account), it appears that you'll be on the hook. And at a measly $127, don't bother waiting by the mailbox for a 1099.

Continuing on for those in group plans, there's the little matter of enforcement. That is, these checks will be going to the employer, not the employees individually. It's up to that employer to distribute the cash. Which presents two more little wrinkles:

How are the employees going to know whether or not that check actually arrived, and how much it was? And how do they make the employer cough it up? Lawsuits for $127?

And from the employer's perspective: how are they supposed to find Sally Jones, who left the company in early 2011? That's over a year before the checks go into the mail, and with our transient society, who knows where she ended up?

Good times, good times.

Cavalcade of Risk #156: Call for submissions

FMF hosts next week's CavRisk. Entries are due by Monday (the 30th).

To submit your risk-related post, just click here to email it.

You'll need to provide:

■ Your post's url and title
■ Your blog's url and name
■ Your name and email
■ A (brief) summary of the post ("Remarks")

PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like).

Thanks!

ObamneyCare© and The 1rst Amendment: UHC Clarifies

In a pair of emails, United HealthCare helpfully clears up any, um, misconceptions about how HHS Secretary Shecantbeserious is moving forward with coverage for convenience items birth control:

"On March 16, 2012, [Shecantbeserious] issued an advance notice of proposed rulemaking ... to develop alternative ways organizations objecting to coverage of contraceptive services for religious reasons can fulfill [ObamneyCare©] requirements to provide these services."

Here's an easy one: How about scuttling the mandate?

Oh, sorry: too simple and rational. My bad.

More at the link.

The second item focuses on the religious exemption part of the convenience items birth control mandate:

"Qualified religious organizations wishing to exclude contraceptive coverage from their health benefit plans must submit the appropriate [Torquemada-approved] certification with their renewal forms ... no less than 30 days before the next renewal date."

Bet nobody expected that.

More ObamneyCare© Lies

The folks behind ObamneyCare© can't make their case legitimately, so they continue to offer up frauds as exemplars.

Latest case in point:

"A Des Moines woman who publicly thanked President Barack Obama on Tuesday for helping her obtain health insurance actually is receiving her coverage through a long-standing state program."

Regular readers won't be surprised, of course, but it's a great object lesson for those on the fence about the existing safety net's availability and efficacy. In this case, a former lawyer (why am I not surprised?) allegedly lost her health insurance along with her job a couple of years ago.

The story gets fishy after that:

"She bought private coverage for her two children"

Really? From whom? We know that the child-only health insurance market started drying up in mid-2010. Was Ms Ibson one of the lucky few whose kids snuck in under the wire?

The mystery deepens:

"[She] could not find it for herself."

Again, why is that? Was COBRA continuation available from her former employer and, if so, why didn't she take it? She claims that "[n]o one would insure me because of my pre-existing conditions," but offers no explanation as to what they are (were?) or with whom she applied.

Why is that?

And then there's this whopper:

"In fact, Ibson’s current coverage is provided by HIP Iowa, a state program for people whose health problems make them ineligible for most commercial insurance."

The program's been around for some 25 years, so it's not as if it needed any boost from DC. Nor is it a net drain on the taxpayer (unlike PCIP): "Most of the program’s subsidies come from fees paid by commercial insurers."

Heh.

There are two major issues with stories like this: first, that the media laps them up uncritically and second, that they so often turn out to be based on lies (or at least obfuscation).

Health Wonk Review: Shiny Happy edition now up

Jennifer Salopek, blogging at Wing of Zock (which, BTW, would make a great name for a rock band), makes a terrific HWR hosting debut. It's obvious that she's read every post, and offers her own insights to each entry.

Kudos, Jennifer!

Speaking of Health Care and Buses...

Following on the (w)heels of Monday's post about mobile hangover care, we have this breast cancer-related item:

"An industry known for selling sex is doing its part to save women’s breasts – as well as their lives. Porn star Bree Olson ... used her assets to raise awareness for breast cancer by hosting a breast exam bus tour around New York City"

According to the American Cancer Society, almost 40,000 women are estimated to die from breast cancer this year. How many of these could be prevented with a simple screening?

And there's this: ObamneyCare© mandates that health insurance policies cover preventive screenings (mammograms) with no deductible or co-pay. So there's very little excuse for putting that off.

But a mammogram-bus?

Hey, whatever it takes to get the word out.

Economics and Consequences

As the economy continues to founder, more and more folks find themselves "underemployed." That is, able to find a job or two, but only on a part-time basis. While that may, in fact, put food on the table and keep a roof over one's head, it creates another problem:

"Fewer workers say they have access to employer-sponsored health coverage."

That's because, in order to be eligible for group cover, one must consistently work a certain number of hours "on the job." So if you're racking up 20 hours at (for example) Fred's Shoes and another 20 at Joe's Cafe, that 40 total hours doesn't get you benefits at either place.

Here's another little clue that the reporterette missed, by the way:

"[E]ven when the unemployment rate fell between 2002 and 2005, it did not appear to have an impact on employer sponsorship of health plans"

Really? And what happened in 2010 that might have changed this calculus, Allison?

Here's a hint.

And now for the big bucks

It's been a while since we reported on efforts by some of the 58 states to force life insurers to keep better track of their customers and beneficiaries. Unfortunately, this doesn't mean that said states have been idle in their efforts:

"MetLife's Landmark Unclaimed Property Settlement Could Approach $700 Million - the settlement was a “huge milestone” ... because it was really changing industry practices by making MetLife ... check monthly and as of April 2103, quarterly, against the Social Security Death Master File."

Which sounds like a great idea, except for this:

"[A]s the SSA has itself acknowledged, the DMF is itself rife with potential errors and misinformation"

Oops.

So now it's become the insurance company's responsibility to track down long-lost relatives, and hope against hope that the information in that Social Security database is accurate.

Rotsa ruck with that.

Here's a question: if insurers are now to be required to track down beneficiaries, how come banks aren't required to track down customers with whom they've lost contact? Why is it okay for the states to have the "unclaimed funds" database but not force them to actively find those owners?

Sauce for the goose, and all that.

PBM = Pharmacy Benefits Merger?

From email:

"It was announced on April 2, 2012, that the FTC commissioners, in a 3-to-1 vote, allowed the merger of Express Scripts, Inc. (ESI) and Medco Health Solutions, Inc. (Medco), pharmacy benefit management partner for [several carriers]."

Perhaps anticipating the usual glitches, the email included this helpful codicil:

"Please assure your groups and members they should experience business as usual while the two companies integrate."

"Business as usual." Why am I not comforted by that?

Breaking Prostate Cancer news

This is heartening:

"[T]he new treatment, which involves heating only the tumours with a highly focused ultrasound, will mean men can be treated without an overnight stay in hospital and avoiding the distressing side effects associated with current therapies."

Having written life insurance on several PC survivors, I'm aware of how much pain and trauma can be involved. And although it's among the most curable of cancers (if caught early on), it's still no picnic.

This new technique holds great promise:

High Crimes and ObamneyCare©?

Maybe. Alert reader Paul D tips us to this little gem:

"The Missouri House thinks the dreaded federal health care reform law is a crime. Or at least a misdemeanor ... the Missouri state House has passed a bill declaring the Affordable Care Act unconstitutional and therefore "altogether void and of no force."

Book 'em, Dano, PPACA-one.

Mobile HangoveRx [UPDATED!]

From the "Finding New Health Care Markets" Department:

"Dalia ... was one of the first patients on the rollout day of a mobile treatment center for tourists who spent the night before drinking ... For a fee, they get a quick morning-after way to rehydrate, rejuvenate and resume their revelry."

Sure beats a Cuppa Joe or a 5-Hour Energy, right?

Well, it better: for almost $100 a pop, "patients" get a "basic IV of saline solution, B vitamins and vitamin C." Another $60 gets a second bag of the magic potion. Door-to-door service is also available (for a fee).

That potion, by the way, also includes a pain-killer and anti-nausea meds.

The service does have certain rules: no alcohol within two hours of treatment, and no service to folks who are still inebriated. Walk-ins and pregnant folks aren't welcome, either.

According to their website, they don't take insurance (and apparently aren't in any PPO networks). One wonders, of course, if the treatment is eligible under HSA, FSA or HRA plans [see update below].

The service is currently available only in Vegas, but who knows: next stop, Atlantic City?

UPDATE: Well, according to my gurus of all things 213d (FSA/HSA/HRA):

"A hangover isn't a medical condition.....generally speaking, FSA/HSA eligible expenses must be for the cure and/or mitigation of a disease or medical condition."

Drat!

A (Not So) Mighty Fortress

Time again for an update on the on-going battle between life insurers and would-be viatical investors. This time out, the Fortress Investment Group bought a thousand "junk" policies in the hopes that at least a few would pay out the big bucks.

What's a "junk" policy, you ask?

Well, it's a new term to me, as well; it seems to refer to policies other investors had dumped on the market as it became more and more apparent that collecting on them was getting to be problematic. There are two diametrically opposed forces at work here: the (bogus) insurable interest issue and the (very real) issue of fraud.

Part of the problem, of course, stems from the fact that some carriers - Phoenix apparently among them - fell on hard times through the last decade, victims of the economic downturn and their own financial strategies. Faced with the possibility of paying out hundreds of thousands, perhaps millions, of dollars, these carriers are fighting tooth-and-nail to hold onto their assets.

Can't say I blame them.

Auto-erotic Death Claim

Content Warning: While this is, in fact, a post about a specific type of life insurance claim, it refers to a rather unsettling (and adult-themed) "proximate cause."

Accidental Death policies are something of an enigma to me: the idea that one needs (more) life insurance only if death occurs by accident, as opposed to illness, seems absurd. You either need the coverage or you don't; the bank doesn't care if you die of cancer or gun-shot, it wants its money. Now.

We've touched on this subject before, but a recent ruling by a circuit court opens up a rather, um, unusual can of worms:

"A widow has won a bitter victory — her husband’s death by electrocution to the genitals has to be revisited by their insurance company."

Apparently, the late Mr Martin chose to engage in a "specialty" sexual practice, and was electrocuted while so engaged. The Hartford Life insurance company, after investigating the claim, determined that, even though he most likely didn't set out to kill himself, the activity was such that he should have been aware of the possibility (the fact that he was an electrical engineer by trade may have been a clue).

The court, though, made an interesting point:

"The Hartford’s stance “would exclude injuries resulting from merely negligent acts, even if the insured did not intend to injure himself."

A fair cop, really. What if he'd been bungee jumping or skydiving? The principle that these are highly dangerous activities would let the carrier off the hook, right? Heck, driving or flying can be characterized as "dangerous," as well; where does The Hartford get to draw the line?

I'm still not a fan of these kinds of policies, but I have to side with the US Second Circuit Court of Appeals here.

Now Playing...

The world's smallest violin:

"An increasing number of Democrats are taking potshots at President Obama’s healthcare law ... I think we would all have been better off — President Obama politically, Democrats in Congress politically, and the nation would have been better off — if we had dealt first with the financial system and the other related economic issues and then come back to healthcare,” said Rep. Brad Miller (D-N.C.)" [emphasis added]

Ya think?

Then what were you thinking when you decided to pass the bill to learn what was in it?

By the way: interesting prioritization there: the President first (of course!), then your political party, then last (and definitely least) your country.

[Hat Tip: FoIB Holly R]

Friday Afternoon LinkFest

■ On the tech front, Humana's developed a new app "that helps employees make sound healthcare decisions." Over the next few years, according to Humana, more than a half a billion folks will be using their smart phones to help them manage their health care.

Who knew?

■ From the "Scant Comfort" files:

"Cost increases for health care are perhaps finally slowing down, with employer health benefit expenditures not expected to increase in 2012 at the same explosive growth in recent years. Costs for all types of medical plans are expected to increase by 9.9% for 2012"

This is what drives me so crazy: it is not health care costs, it's health insurance costs, you moronic cretins. And these folks are supposed to be a premier industry resource?

Sheesh!

■ FoIB Holly R tips us to this item from the "Department of D'uh:"

"Hospitals targeting well-insured patients, report says ... Targeted expansion to “capture” well-insured patients is a hot trend across the country ... Hospitals that are dominant in their market are the most likely to be pursuing geographic expansion"

For real?

And this is a surprise, why?

Of course hospitals (and any other provider that wants to stay in business) needs to shore up their revenues, and it doesn't take a rocket surgeon to know that increasing services and/or locations is the way to go.

BREAKING: MLR = More Lovely Revenues [UPDATED]

"UnitedHealth Group Inc. had no complaints about the effects of the new medical loss ratio (MLR) on first-quarter earnings ... MLR-related adjustment added $130 million to its profits for the quarter."

Why does HHS Secretary Shecantbeserious love insurance carriers so much?

UPDATE (from comments): Bob notes some additional issues with this:

What is really fun is when the rebate goes back to an employer who is then supposed to divvy up the rebate among all participants if the plan was contributory. This would include participants only on the plan a few months and those who are no longer employed.

Which is one more nail in the employer-based health insurance coffin. Imagine that nightmare.

Bob also observes:

The rep told me at least one carrier ... is going to charge back any commissions paid to agents an amount equal to the rebates offered on their clients.

As we noted regarding insureds' tax liability, this also opens a major can of worms: that charge-back means that the agent (and his agency, if applicable) will have to re-file the previous year's taxes. OTOH, one supposes this will be a gold mind for the CPA's.

Old Dog, New Trick

Regarding the recent VEBA post, I did want to mention something else I learned in that class: Short Term Medical plan alternatives.

As Bob noted a while back, Short Term Medical (STM) plans are a convenient and relatively inexpensive way to bridge the gap between coverage (eg new job waiting period) but do have some definite drawbacks.

Thing is, folks are drawn to STM for (primarily) price and simplicity. Most folks can't imagine actually needing to use it (to be fair, most folks don't anticipate "using" their car or home insurance, either); it's mostly "peace of mind" coverage.

For me (and, I suspect Bob), the two major problems with STM plans are that they don't cover pre-existing conditions (especially relevant when one plan expires and a new one begins), and coverage expires when the policy does (with some very specific and rare exceptions).

Still, convenience and price are powerful motivators, and so most of us continue to offer these plans to our clients and prospects.

So what, you may be thinking, does this have to do with that CE class I keep bringing up?

Just this:

The instructor was also very concerned about the pitfalls of STM, and suggested using [her company's low-cost, no-frills] plan. The downside to this method is that underwriting can take longer for this than a STM, but using the electronic application process can significantly shorten the processing time. The pricing on this plan is (ostensibly) comparable to the STM, but this method offers two distinct advantages:

Since it's major medical, you keep the plan as long as you want to (3 months or 30). And if you end up not lasting through the new employer's waiting period, you're all set with insurance while you keep looking.

But there's another, more serious but generally less well known issue: the "active at work" clause. No, it doesn't mean that you're setting new production records. Rather, it means that group insurance plans require you to be actively at work on the first work day of eligibility. This seems innocuous, until you consider what might happen if that first day is the Monday following the weekend during which you totaled your car, and you're still in the ICU: your STM ended Sunday night, and your new group plan isn't in place (you're not "actively at work," are you?).

Creek. Paddle. Some assembly required.

Using the (inexpensive) no-frills major medical plan, however, obviates all of this. Whether or not you're at work on Monday is irrelevant, and you don't have to worry that the plan ends at midnight.

Two caveats: first, a given person might qualify for the STM but not the "regular" medical plan. And second, these "no frills" plans will cease to exist come 2014 (Thanks, ObamneyCare©!).

[Hat Tip: Beverly D]

Questions: We Got Questions About PCIP, the federally-subsidized Pre-Existing Conditions Insurance Program

More than two years after healthcare reform legislation created PCIP and its $5 billion appropriation, enrollment has been far below expectations, and HHS has not released emerging cost information. So the first Q has to be this: "Why isn't HHS telling the public anything about PCIP?”

PCIP is undoubtedly a godsend for the people who have enrolled. It’s just that very few have actually enrolled. And financial results aren’t available (at least no one can find the financial results - for example DecisionHealth can't find them)

The lack of information from HHS just raises more Q’s: Why did PCIP require a $5 billion appropriation (in addition to individuals’ own premiums)? Does the $5 billion meet a real need? Does the $5 billion create a political mirage i.e., to persuade the public that a need of this magnitude actually exists? Was there some other reason?

According to a GAO report in July 2011, “initial projections of total enrollment varied from 200,000 to 375,000.”

According to NCSL (The National Conference of State Legislatures), the PCIP enrollment was fewer than 50,000 individuals as of the end of 2011 – after almost two years, far below the projected enrollment.

What has HHS done as the result of the low early enrollment results?

(1) it reduced premiums in the 23 federally run PCIP states
(2) it increased enrollment outreach
(3) it began to require regular reporting of expense and enrollment data, and annual completion of independently audited financial reports.

The first two responses suggest HHS still thinks PCIP will help hundreds of thousands of people, even though there just don’t seem to be that many people interested.

More Qs: Are the HHS responses overreactions? Are they even necessary? (In fact as InsureBlog reported here and here, HHS has already ended one of the outreach efforts, a broker incentive arrangement).

These first two HHS responses also remind us of a previous HHS attempt to portray the Early Retirement Reimbursement Program as helping a huge number of small, private employers when, in fact, it mainly helped a small number of unions and heavily unionized major employers (recall that unions, perhaps coincidentally, are important Democrat campaign contributors):

Is the third HHS response simply an admission of poor management from the start? Or, if not, did HHS fail to include these elementary controls in the first place because PCIP funding was ONLY FIVE BILLION??? Surely HHS would not treat $5 billion of our dollars as whisky spillage . . . ?

And so we're back to the first Q – if regular reporting of expense and enrollment data from the states to HHS is now taking place – where is it?

Note however from the NCSL report: in the 23 states that ran their own high risk pool before PCIP the average cost for 2010 was just under $11,000 per covered person. It’s not clear whether a “high risk” person will have similar costs to a “pre-existing conditions” person. Maybe, maybe not. But what if PCIP will in fact cost $11,000 per year per person? That means the cost of 50,000 PCIP individuals would be $1.1 billion for 2012 and 2013, or less than 25% of the $5 billion appropriated – and that’s before counting the premiums that enrolled individuals pay.

At this time it appears that neither the PCIP enrollment nor its estimated cost come anywhere near the appropriated amount. So we must also ask: Is PCIP just another overfunded federal solution in search of a problem?

A Dickens of a Day

The Wall Street Journal today reported some optimistic health care news:

“Johnson & Johnson Tuesday . . . pointed to early signs of improvement in the health-care market.”

And in the same issue, the Journal reported some pessimistic health care news:

“Johnson & Johnson Tuesday . . . said it has seen a recent uptick in surgical procedures . . . this might be a sign that consumers are seeking more medical attention after years of sluggish health-care spending.”

In health care – as with so much else that is going on these days - perhaps 2012 will be both the best of times, and the worst of times.

". . . it is the age of wisdom, it is the age of foolishness, it is the epoch of belief, it is the epoch of incredulity, it is the season of Light, it is the season of Darkness, it is the spring of hope, it is the winter of despair, we have everything before us, we have nothing before us . . . "

Only the Healthy need Apply

“Making providers routinely pay attention to cost and quality is widely viewed as crucial if the country is going to rein in its health-care spending, which amounts to more than $2.5 trillion a year. It’s also key to keeping Medicare solvent.”

That's from a Washington Post article, “Medicare moves to tie doctors’ pay to quality and cost of care.” The mantra since the passing and signing into law of the Affordable Healthcare Act has been that doctors need to be paid on their quality of care. The prevailing theory is that better quality will result in lower healthcare costs. This theory only works, though, if you don’t get one of those expensive diseases or costly injuries. Now, however, Medicare has made the doctor responsible for the cost of care. A doctor is no more responsible for the cost of care than an oil driller is for the cost of gasoline.

A doctor provides a service. The doctor prices the value of that service on the same factors that drives all pricing in a free market society. Cost of overhead and competition. Cost of overhead is what it costs the doctor to deliver the service and competition is what the doctor down the street is charging for the same procedure. Now this is where the free market stops and reality of medicine today takes over. If a provider has a contract with a third party payer, Medicare or private, then the provider is paid based on the set fee schedule of the third party payer, meaning that the doctor can charge whatever he wants for the procedure, he will only be paid what the third party payer has deemed he will be paid. Thus, it is the third party payers, including Medicare, that are controlling the cost of healthcare, not the physician and certainly not the patients.

The article continues with this gem in response to quality care:

“…properly assessing how a doctor affects costs must include not just the specific services she directly provides, but also care other providers may give, either because the patient was referred to them or because the original doctor didn’t take the right preventive steps to avoid more expensive treatments later on. And without properly adjusting for patients’ health problems, paying bonuses to physicians who use fewer Medicare resources might encourage doctors to stint on care or shun patients with expensive-to-treat ailments.”

The writer puts it together that if a doctor will be rewarded for healthy patients and penalized for unhealthy patients, then the doctor will not see unhealthy patients. These patients will be dismissed from the practice so that the doctor’s numbers will be healthy. According to the article, this will happen sooner than people had expected, “although the program is still being devised, it will become reality for many doctors starting in January, because CMS plans to base the 2015 bonuses or penalties on what happens to a doctor’s patients during 2013."

Physicians are being squeezed financially with rising overhead and stagnant reimbursements from third party payers. Now physicians are facing the unpleasant prospect of denying care to a patient because that care will cause the physician to lose money, a prospect that no business can take on and survive. It is for this very reason that a policy has been in place for decades that a doctor cannot take into account the cost of a procedure, treatment or medication as that will unduly influence the doctor’s decision. Malpractice is based on the concept that the doctor will inform the patient of the best course of treatment, regardless of cost, because what is important is the life of the patient, not the cost. Now, that underlying concept has been deemed inappropriate and instead it is the cost of the care that will matter.

Cavalcade of Risk #155: What's Happenin' edition

Jaan Siderov presents this week's collection of risky posts, and adds his own helpful and unique spin to each one.

By the way: We're looking for summer Cav hosts. Just click here to grab yours!

Ill-timed Carrier Tricks

Given the high stakes ObamneyCare© SCOTUS case, the on-going MLR assault, and the pending PCIP implosion, what better time could there be for a major health insurance company to announce....wait for it....

A new logo.

Yes, that's right, when those who actually sell its products are about to lose their livelihood, the rocket surgeons running Aetna think now's the right time to re-brand:

Oh, you may be forgiven for thinking that the one at the top of the post was it.

Grand Rounds kaput?

No, but it is "on hiatus."

If, like us, you're missing your weekly 'Rounds fix, you may want to check out the bi-weekly Health Wonk Review. Like Grand Rounds, HWR is hosted on a rotating basis - a different blog each edition. Unlike 'Rounds, however, the focus isn't on the clinical so much as the philosophical. It's a different experience, to be sure, but no less satisfying.

Brad Wright hosts the most recent issue, with a fun Masters (as in golf) twist.

Life and Death and Insurance

Ran across an interesting and provocative article the other day, the premise of which is that philanthropic-minded folks may be missing a charitable opportunity sitting right under their noses.

We've discussed Stranger Owned Life Insurance many times here at InsureBlog, generally as it relates to insurable interest and, often, fraud. But as with most things, there's a good side, as well; in this case, it's turning unneeded life insurance policies over to a charity:

"Don wished he could do more to help his son realize his dream of building that [children's ER]. Don is about to let a $4 million term life policy lapse because he and his partner have sold their medical practice and they do not need it anymore. Don is unaware the policy is convertible into a permanent policy ... he is unaware that he has the option of gifting that converted policy into the hospital foundation and contributing tax deductible cash to the charity each year to pay the annual policy premiums and create a $4 million endowment"

One imagines that some home office critter or other will again raise the (bogus) "insurable interest" issue, but maybe not: donating life insurance policies to charity is a time-honored tradition.

Interesting article - Recommended.

Death, Taxes and Risk

FoIB and Tax Meisterblogger Joe Kristan reminds us to be extra careful as we speed over to the Post Office to mail in our 1040's:

VEBA: Where you want to be

Well, maybe.

I recently attended a class on health insurance alternatives for early retirees. These are folks who are too young to qualify for Medicare, but old enough that the 18 months of COBRA just isn't enough. Some employers offer their retirees health insurance, most don't, and that was the purpose of the class.

It was interesting enough (certainly better than our last outing!), and I took several pages of notes. Unfortunately, the most intriguing piece was also the one least discussed; there was a very good reason for this (the carrier doesn't offer them here), but my interest was piqued, and so I decided to do a little digging.

VEBA's the acronym for the unwieldy "Voluntary Employee Beneficiary Association." Briefly, a VEBA offers a way for employers to offload their retiree health plans while maintaining minimal control of them (aka purse strings). Employers (well, former employers, really) set up and fund a trust, the purpose of which is to pay for specific insurance products (typically retiree health insurance plans). The donations (payments) are generally tax deductible, and the requirements seem pretty tame.

The VEBA tax exemption comes via the Internal Revenue Code (501(c)(9) to be precise); once the money's deposited in the trust, though, the employer gives up control of it to the Trust's administrator.

VEBA plans can be set up as either Defined Benefit or Defined Contribution plans, and often include a Health Reimbursement Arrangement (HRA). Those that include the HRA are called "Hybrid VEBA" plans.

Now you know.

[Hat Tip: Anthem]

When is a battle not a battle

The title of the article says it all: “The Battle over Billing Codes.”

On Marketplace Tuesday (April 10, 2012), Gregory Warner did a report about one physician who has decided to use the billing codes, known as CPT’s to the maximum effect for maximum revenue. The physician states that by maximizing codes he has increased his revenue “by 70 percent -- hundreds of thousands of dollars per year” by doing the same thing he did.

The article also states that we are paying for medicine the way we have been doing it for years, by procedures. As a business professional, with over 15 years in retail and medicine, I have a question for Mr. Warner. How else are we to pay for services rendered than for the service rendered?

At the end of the segment there is a tease related to ObamaCare:

“So can we get rid of the codes? Well, some doctors and hospitals are already signing up for a new program under the health care reform law that would pay doctors by a lump sum instead of per procedure. “

The new program is the ACO initiative, which is a revised capitation HMO program. A capitation program is where the provider is paid a lump sum at the beginning of a set time frame, usually the beginning of the year, to take care of a patient. What is left at the end of the year, i.e Fee Paid less Medical Expenses = Physician Revenue, is the doc's to keep. But wait: if the care for the patient exceeds the fee paid, can the doctor go back and request more money to take care of the patient? The answer is no, because that would be fee for service. The doctor then has to take money from other patients to pay for the really sick patient or take money from his own coffers. Once the docs realized they were on the losing end in capitation, it went the way of the dinosaurs and the only docs who do capitation today are the ones straight out of med school.

Mr Warner continues:

“But other doctors don't want to give up their independence. Larry Rabon and his family have gotten used to playing the chess game. And if every doctor played as well as they do, then our deficit would really be in trouble. “

Mr. Warner refers to payment for procedure as a chess game, meaning there are winners and losers. The implication is that doctors are “winners” because they want to be paid for their services rendered, as any other service professional. Payment for services rendered is how all services are paid. We pay our hairdresser for a haircut, we pay our tarot card reader for a tarot card session, we pay for a ticket to see a movie or play, etc.

Then as a winner, he states that if all doctors understand the CPT rules and bill as Dr. Rabon does, then it will expand our deficit. I hate to tell Mr. Warner, but with people living longer, 86 is now average, and with the Baby Boomers entering Medicare in droves, that is enough to destroy the Medicare system. Dr. Rabon is not only billing Medicare, which has the strictest billing rules, but also the private insurers in order to maintain his revenue stream.

After years of berating doctors to take coding more seriously, which results in them getting paid for what they do, it is refreshing to find out that one doctor has decided his time has worth.

Drink up, Think up?

Turns out, a drink or two really does lubricate the brain-pan:

"Scientists found that men who either drank two pints of beer or two glasses of wine before solving brain teasers not only got more questions right, they also were quicker in delivering correct answers ... alcohol may enhance creativity problem solving by reducing the mind’s working memory capacity"

It appears that Cliff was right.

Friday Exchange Update

FoIB (and Director of Health Policy for the Cato Institute) Michael Cannon has 2 words of advice for the 58 state departments of insurance: Civil. Disobedience:

"The most important front right now is to ensure that states do not create the health-insurance exchanges [ObamneyCare©] needs ... Refusing to create exchanges is the most powerful thing states can do ... Think of it as an insurance policy in case the Supreme Court whiffs."

Even I can applaud the mandate for this kind of policy.

On the other hand, Empire State Governor Mario Cuoma has not heeded Michael's sage advice:

"New York Gov. Andrew Cuomo is being heralded as brave for moving forward to set up a statewide health exchange by executive decree ... The Executive Order allows for regional advisory committees of all stakeholder representatives to make recommendations on the establishment and operation of the Exchange."

And so what, you ask?

So this:

"Sen. Greg Ball ... does not see cost savings but more spending the state can ill afford ... “any rush towards enacting [ObamneyCare©] is more political than reality. The promise of federal funding is not without strings and the program itself will ultimately ... cost New York taxpayers billions of additional dollars that we do not have."

Now that's an expensive insurance policy.

The Neasham Chronicles: A Contrarian's Take

For those just tuning in, a quick summary: (now former) California insurance agent Glenn Neasham sold an annuity to an elderly woman. Her family, claiming that she was in fact suffering from Alzheimer's at the time, took umbrage. Mr Neasham, stripped of his license, now sits in jail for felony theft.

The longer version is here and here.

From the first, I've been on the fence regarding this case. For one thing, I fail to see how the "victim" was actually harmed. For another, I fail to see how forwarding a check to an insurance company constitutes "theft." And as much as has been written about this case in the industry media, we still don't have all the facts.

This morning, I came across a terrific analysis of the case written by Sheryl Moore, herself a licensed agent and the grand-daughter of two Alzheimer's patients. She points out several details which, if not disregarded by that media, has seen precious little airtime:

"It is a known fact that the state of California is one of the worst insurance departments to deal with ... they also have a senior-protection law (SB620) that imposes severe penalties for insurance agents selling “unsuitable” annuities to seniors."

Was the indexed annuity product "unsuitable?" We don't know, but it's not a question to be taken lightly.

She notes also that "[t]he bank that held the certificate of deposit [the funding vehicle] ... had discussed with Mr. Neasham their concerns about the prospective annuitant’s decisions, independence and ability to understand the annuity purchase."

This is actually a two-edged sword: the fact that Mr Neasham agreed to accompany Ms Schuber to the bank at all would seem to be a net positive regarding his character and belief that she was, in fact, competent to make the purchase decision.

On the other hand, once he had heard these concerns, perhaps a call to the carrier's compliance department would have been prudent.

I think Ms Moore is a little premature in letting Allianz off the hook. As she (correctly) notes, Mr Neasham represented the carrier, and had a fiduciary duty to it. But it seems to me that this is not a one-way street: the carrier processed the application; as we've been noted, indexed products receive additional scrutiny compared to their fixed-design counterparts.

On the whole, though, I find Ms Moore's analysis to be a refreshing change from the hand-wringing that's characterized this case. Again, my natural sympathies lie with Mr Neasham, and I do believe - based on the facts as we know them - that jail-time was a clear abuse of prosecutorial power. But there is certainly more here than initially met the eye.

Cavalcade of Risk #155: Call for submissions

Jaan Siderov hosts next week's CavRisk. Entries are due by Monday (the 16th).

To submit your risk-related post, just click here to email it.

You'll need to provide:

■ Your post's url and title
■ Your blog's url and name
■ Your name and email
■ A (brief) summary of the post ("Remarks")

PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like).

Thanks!

Update - Mandated Contraception Coverage

On March 21, 2012, the Federal Register contained an Advance Notice of Proposed Rulemaking [ANPR] released jointly by the Departments of the Treasury, Labor, and HHS. This ANPR concerns the recent dust-up over coverage of contraceptives under the Affordable Care Act.

For anyone who is interested, the complete ANPR can be found here [.pdf file].

In the Overview of Intended Regulations (Section II, page 16503) we read:

"The starting point for this policy development includes two goals"

"First, the Departments aim to maintain the provision of contraceptive coverage without cost sharing to individuals who receive coverage through non-exempt, non-profit religious organizations with religious objections to contraceptive coverage"

"Second, the Departments aim to protect such religious organizations from having to contract, arrange, or pay for contraceptive coverage."

Later in the same section, we read:

"For such religious organizations that sponsor self-insured plans, the Departments intend to propose that a third-party administrator of the group health plan or some other independent entity assume this responsibility."

Notice that the first aim quoted above makes it crystal clear that the administrations’ consistent use of the term “accommodation” is both significant and deliberate. No compromise is intended, and accordingly this ANPR does not seek ideas for any compromise.

Second, the remark regarding self-funded plans reminds me of every manager’s last desperate hope when completely out of ideas: “ . . . and then a miracle happens.” It will be fascinating to see which, and how many, third-party administrators or other independent entities will actually agree to assume this responsibility. It will be equally fascinating to find out how it will be paid for. Who knows, maybe there will be a miracle - I'm guessing that’s what the administration hopes, anyway.