Guest Blog: Stranger Danger - Health Insurance Exchange Edition

[Patrick Paule is a regular reader and commenter here at IB. Recently, he emailed us regarding an article about "insurance enrollers" in Exchanges. His extensive background in insurance and securities gives him a unique perspective on this potentially dangerous development, so we asked him to pen this Guest Post to explain the issue to our readers. HGS]

On January 1, 2014 you hear a knock at the door. Open it up and there stands a complete stranger. First thing he says is that he is an "insurance enroller" from -Insert Community Organization Here- . He asks to come in and help you understand health insurance. He will also explain the process of enrolling into an Obamacare exchange. Then he finishes his pitch by telling you that if your income level is low enough that it might be your lucky day and your insurance could be "free". What the person doesn't tell you is where the train wreck begins.

The LA Times had a nice little article on "insurance enrollers" last week. These are the people that the Federal Government believes can enroll people into Health Insurance Exchanges/Marketplaces (whatever they are calling them this week). California is one of the few states that has decided to create their own Exchange. Cover California, the state agency assigned with the task of implementing this train wreck, has taken an initial stance that these "insurance enrollers" should be screened to deter fraud and protect consumers. In fact, Obamacare backer and California Insurance Commissioner Dave Jones agrees, saying that without background checks and fingerprinting he thinks "there is a very real probability of immense consumer fraud." This seems pretty reasonable to me. After all, licensed insurance professionals must go through the process of background checks, fingerprinting, carry an E & O policy, and also have continuing education requirements every two years.

However, Cover Cal officials are preparing for a "battle" with community organizations over whether or not these “enrollers” should undergo background checks and fingerprinting (never mind the fact that they aren't even considering licensing these folks). Robert Ross, a Cover California board member and CEO of California Endowment, had the following to say about background checks:

"I have fears about adding bureaucratic mountains that slow us down." He goes further to say that "fingerprinting can come across in many of these diverse, ethnic communities as a scary, big-government thing." (Side note, isn't Obamacare a "scary, big-government thing?")

The "insurance enrollers" will play an important role in helping individuals understand complex terms like deductible and actuarial value, and to guide consumers through the “simple application process.” In order to complete the application, "insurance enrollers" will have access to information including: social security numbers, personal residence addresses, income data, tax returns, employment information, and dates of birth. 

Cover Cal is projecting that they will need 20,000 "insurance enrollers" to enroll the projected 1.4 million people this year and that outreach is extremely important. State officials will be paying these "insurance enrollers" $58 (!) per application. Depending on how you interpret this, it can obviously be a very lucrative deal or a very low income deal. But for the taxpayers of California, paying out $81,200,000 next year is not a simple drop in the bucket.

Cover California, and insurance exchanges in general, will be full of fraud and will cause more headache than good. Most people who enroll will have no idea exactly what they are purchasing. This will be the case especially if unlicensed idiots ”insurance enrollers” who don't have to undergo background checks or continuing education are allowed to perform the transactions. So, come January 1, 2014, the best thing to do when you hear that knock at the door would be to not answer it.

Thanks, Patrick!

Monday LinkFest

■ Remember that promise that The ObamaTax wouldn't add "one dime" to the deficit? Well, that may be literally true, but:

"Figures from the Government Accountability Office suggest that the Patient Protection and Affordable Care Act will in fact add 62 trillion dimes over the next 75 years."

Ooops.

Now, 75 years might seem like a long time, but don't be fooled, that's almost a $1 trillion dollars a year over and above any other spending.

■ We've written about rate increases in the Long Term Care insurance market, but what happens when a state forbids a carrier from doing so?

Well, Nutmeg State consumers (and would-be consumers) are about to find out:

"The Connecticut Insurance Department has rejected efforts by a unit of MetLife ... to increase rates on 5,800 long-term care insurance (LTCI) policies about 58 percent."

Their position is that, since Connecticut policy-holders haven't had a lot of claims, they shouldn't be subject to national rate increases.

Interesting ploy.

■ FoIB Holly R reminds us that, just because we have access to more health care information than ever before, we're not necessarily driven to access or use it:

"Consumers have access to more information than ever on the cost of their health care.Just one problem, according to a new study: They’re not interested."

Since we know for a fact that health care costs drive health insurance costs, this doesn't bode well for future health insurance premiums.

■ So the folks who are (allegedly) implementing the Exchanges think that there's no real role for agents going forward:

"The beauty of the exchange system is that if it works, you don’t have to use an agent,” said Jay Angoff, the first head of Office of Consumer Information and Insurance Oversight at the Department of Health and Human Services" [emphasis added]

"If it works."

Aye, thar's the rub!

■ And finally (Yay!), more news on the doc shortage front:

"[The ObamaTax] is gradually making the local doctor-owned medical practice a relic. In the not too distant future, most physicians will be hourly wage earners, likely employed by a hospital chain ... will almost certainly make the practice of medicine more expensive."

So, health care (and thus health insurance) becomes more expensive, efficiency and choice plummet, and we're worse off than before.

Hunh.

Ah, but it really is the ChargeMaster.....

It is great to see continued discussion of Steven Brills' tome in Time.In Sight thinks the charge master complaints are a distraction:

"However, from a system perspective, I think the chargemaster that Mr. Brill repeatedly attacks is a distraction. The chargemaster is the internal list of prices that every hospital keeps for every procedure and supply item that the hospital uses. These are the prices that Mr. Brill incredulously highlights: $1200 for one hour of a nurse’s services; $1.50 for a single Tylenol tablet that you can buy a 100 of for $1.49 on Amazon.

They are indeed ridiculous, and often created without rhyme or reason. Thing is, they’re also rarely used:

• The latest data (from 2009) shows that on average, 40.9% of hospital cases in the U.S. are paid for by Medicare. Medicare, which–as Mr. Brill describes–could give a rat’s *** (my words) about chargemaster prices and instead pays each hospital a set amount, about 90% of the actual costs of treating that patient (see graph below).
• Another 17.2% are paid for by Medicaid, which vary on a state-by-state basis but are usually some percentage off of Medicare rates.
• 30.5% are paid for by HMOs, PPOs, or other private insurance. According to Mr. Brill, these private payers negotiate rates that are 30-50% higher than Medicare rates (rather than negotiating downward from chargemaster rates)."

Where I think this argument falls apart is: why do 30.5% of claims get paid by HMOs, PPOs, and other private insurance? I think the author is of the mistaken belief that private insurance is willingly contracted at 30-50% higher then Medicare. This is actually far lower then what many private payors pay. At best they were pushed into such contracts, at worst they experienced coercion that would make the Mafia proud. This is where the charge master comes into play.

If you don't like paying the Cleveland Clinic Medicare at + 50% they will bill you Medicare + 500% and sue you if you don't pay. It is not a case that private insurance is happy with Medicare + 50%, they can't afford Medicare + 500% which is the alternative. If hospitals had reasonable charge masters that more closely reflected what they were actually willing to accept more people would go without PPOs.

In exchange to locking in excessive but not criminal profit margins PPOs afford the hospitals additional protections they desire:

1. Most PPO contracts give hospitals 12 months to submit claims, which can be disastrous for reinsurance contracts. The same contract that gives hospitals 12 months to bill requires they be paid in 30 days.

2. Limits on ability to audit or question the bills you receive are greatly curtailed, see State CA v Sutter Health & MultiPlan.

3. Pricing and discounts are protected by non disclosure agreements meaning private insurance doesn't know what they are getting into until the claim, and liability, is already incurred.

4. Can't favor one network hospital over another, i.e. if we identify a high cost PPO hospital a number of PPOs wont allow us to favor a lower cost PPO hospital.

Any analysis of all hospitals is just as worthless as any analysis that lumps all payors into one basket. Of the thousands of hospitals in the US there are maybe 250 to 500 "problem" hospitals that account for the majority of the excess cost. If we could just get routine and minor care to use alternate hospitals we could lower private spending by double digits.

More to follow....

Cleveland Clinic's take on Empathy

Came across this ad on Not Running a Hospital, Empathy: The Human Connection to Patient Care:



A 4 minute video on empathy, which apparently ceases to exist once the care stops and the billing starts. Billing 1000%+ of cost? Demanding 500%+ profit margins from PPO clients, suing those that don't hire a PPO and play by their rules for the difference.
I can see why the Clinic would be spending money to proclaim their empathy: patients won't see it otherwise unless they are covered by Public insurance or top of the line private insurance where cost is not an issue.

Not to worry Non-Profit Cleveland Clinic has plenty to spend;

In his annual "State of the Clinic" address, Cleveland Clinic CEO and President Delos M. "Toby" Cosgrove, M.D., reported that the health system's total revenue in 2011 increased 5 percent over 2010, reaching $6.18 billion. Operating income rose 22 percent to $305 million, and investments were up 10 percent, reaching $4.3 billion.

"Vaping" vs Underwriting

Fellow insurance blogger Jeff Root poses an interesting question about life insurance underwriting and e-cigarettes: is "vaping" (e-cig users' preferred term) the same as "smoking?"

Leaving aside any health or social aspects, the issue becomes what rate class one may expect to receive if one uses e-cigs. Most life insurance applications ask about "tobacco use," so carriers seem as concerned about the nicotine as the smoke itself. But e-cigs don't really "combust" in the way that tobacco cigarettes (or cigars or pipes) do.

Jeff found that most carriers don't make that distinction, and consider e-cig users the same as those who light up their Marlboros. He notes that one company - Prudential - does offer a slightly better rate class for e-cig users than their conventional cigarette-smoking brethren.

I emailed my underwriter for our primary company to see what she has to say about this:

"Just saw an interesting blog post on e-cigarettes and life insurance underwriting. I hadn’t even thought about it. As far as I know, none of my clients use these, but who knows when I’ll run into someone who does?

From what I can tell, these things generally include a liquid form of nicotine, but no tar, etc from smoke. Here’s what it says at Wikipedia:

“Liquid for producing vapor in electronic cigarettes, known as e-juice or e-liquid, is a solution of propylene glycol (PG) and/or vegetable glycerin (VG) and/or polyethylene glycol 400 (PEG400) mixed with concentrated flavors, and optionally, a variable percent of a liquid nicotine concentrate … When heated, propylene glycol breaks down into H2O (water vapor) and CO2 (carbon dioxide)”

So far, doesn’t seem the same as tobacco smoke, but what I’m having difficulty finding out is where the nicotine comes from (is it extracted from tobacco leaves? If so, then technically this would be “tobacco use,” no?).

So I guess my question would be: would someone who is in generally really good health but uses e-cigs qualify for “[a better rate class than traditional cigarette smokers]?”

Be interesting to she what see has to say.

ADDENDUM: It occurs to me that the same issue arises when we look at other types of policies, as well; how do health, disability and long term care underwriters look at this? Methinks I have some more emails to fire off...

Cavalcade of Risk #179: Call for submissions

Jacob Irwin hosts next week's Cav. Entries are due by Monday (the 18th).

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

PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like). And please only submit if you are willing to link back to the carnival if your submission is accepted.

HOST BLEG: We're scheduling Spring Cavs now - please click here to claim yours.

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NARAB: A Blast from the Past

Gosh but I miss Ray. Years ago, one of our most popular CE classes was a comprehensive update of various legislative "accomplishments" in life and health insurance. Back in 1999, the Gramm-Leach Bliley Act (primarily focused on financial services) introduced the National Association of Registered Agents & Brokers (NARAB). We discussed it at length, specifically because there was already an organization which (it seemed to us) performed many of the intended functions.

Founded three years before GLB, the National Insurance Producer Registry (NIPR) was designed to function as a sort of national licensing clearinghouse for insurance agents. Interestingly, it's only been in the past few years that agents have been required to register for their National Producer Number (even now, individual states still issue licenses). It's not so much a regulatory body as a way to centralize a lot of costly administrative functions and allow folks both inside and outside the industry to track agent licensing.

It's "governed by a 13 member board of directors" including folks from the NAIC and the insurance industry.

Very interesting, Henry (not really), but why the heck are you regurgitating this?

Well, it seems that the NARAB idea never really died, and has been reincarnated as NARAB II. As Elizabeth Festa notes at LifeHealthPro:

"Bipartisan legislation to introduce National Association of Registered Agents & Brokers Act of 2013 (NARAB II), which would streamline the insurance agent licensing process legislation has been introduced in both the House and the Senate ... The new licensing entity, if created by law, would be governed by a 13-member panel of state regulators and insurance industry representatives." [emphasis added]

Looks familiar, no?

And what are the key benefits of this new agency? Well, that would be:

"[T]o create a national agent/broker licensing entity for nonresident licensing on a multistate level."

We should just call this the "Large Insurance Company Expense Relief Act."

Currently, large carriers (with national presence) find it expensive to administer the licensing requirements for its agents. The NARAB would not only duplicate many (most?) of the functions of the existing NIPR, but it would afford these large carriers a welcome break in their cost of doing business.

How's that, you ask?

Because it's industry-funded, which means a non-trivial portion will be borne by smaller, regional carriers to subsidize their larger competitors (whereas the NIPR generates the bulk of its revenue from access and transaction fees).

No wonder "the industry" loves it.

Health Wonk Review: Chew on this edition

Fresh off hosting last week's Cavalcade of Risk, uber-wonk David Williams presents this week's Health Wonk Review. As usual, David adds his own insights and context (which I appreciate).

And a hearty Mazel Tov to David as his excellent blog turns 8!

Government Healthcare just the way Maggie likes it

Maggie Mahar has always been a huge fan of government healthcare, doesn't really matter which flavor, as long as the government is running it. For years she has touted the VA as a shining example of a great healthcare system, a model to replace inefficient private insurance.

While most people would find revolutions like this unacceptable;

"Department of Veterans Affairs officials purposely manipulate or hide data that would support the claims of veterans from Iraq and Afghanistan to prevent paying costly benefits, a former VA researcher will tell a House subcommittee Wednesday afternoon."

Maggie probably sees it as proof of efficiency and a job well done.  The same way NHS in England is still held up as a model and people still claim Medicare is a shining example of cost efficiency.

“There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs,” the administration said.

That's the last sentence of this NY Times article.

That sentence corroborates - as if further corroboration were needed - the existence of the so-called cost-shift.

The cost-shift occurs because the feds (and the states, in the case of Medicaid)  do not reimburse medical service providers “all or substantially all of their costs.”  Because the law does not require it.  The government uses its market power not to negotiate fair reimbursements, but to dictate inadequate reimbursements for Medicaid.  Same is true for Medicare.

As a result, the medical service providers naturally seek to make up what they can by increasing their charges to patients who can pay - patients who have better insurance than Medicaid or Medicare.  That would be private insurance. 

Unsurprisingly the feds' tactic to hold down federal insurance cost has the simultaneous effect of increasing private insurance cost.  Since at least 1970, a parade of actuaries has rather consistently estimated this cost-shift from federal to private insurance adds something like 15% to the cost of private insurance.

More here.

By the way, the Times article also reminds us that when the subject is insurance and medical care, one should always read to the very end of the article.  Important stuff is too often buried down there at the end.

The New Transparency

Longtime IB readers know of my interest in (bordering on obsession with) transparency in health care financing. How cool would it be if your doc not only told you the price of his services up-front, but even posted them on-line? Well, that's precisely how Dr Ryan Neuhofel rolls:

"Direct primary care," which is the industry term for Neuhofel's business model, does away with the bureaucratic hassle of insurance, which translates into much lower prices ... He consults with his patients over email and Skype in exchange for a monthly membership fee of $20-30"

Whether one calls it "direct primary" or "concierge" care, the model seems to be catching on. Last fall, we interviewed Dr Rob Lamberts about his new practice, which employs a similar model. In a sense, it's a response to the changing face of health care, especially the ObamaTax and its myriad of new directives and restrictions.

One thing no one seems to be discussing, though, is the interplay between these direct care models and the new requirement that everyone purchase insurance. What this means is that, for those who can't afford both the insurance and the cash pricing, provider options are going to become quite limited. The result will be an even more pronounced two-tier health care delivery system: direct care providers for folks with bucks to burn while the rest of us scramble to find any provider willing to take us (and our shiny new ObamaTax coverage).

Yippee.

Why Medicare will continue to be wrought with fraud

It has long been illegal to pay beneficiaries to receive services paid by Medicare. The fear being since the individual pays little of the cost or premium for Medicare any inducement to receive services could quickly lead to fraud. Countless court cases have held providers to account when they have engaged in this sort of activity. You would think a change would require our legislature to discuss the issue and pass a law changing precedent. Not with Obama's HHS they don't:

"The Department of Health and Human Services has given qualified approval for a Medicare provider to give away $20 grocery gift cards to induce seniors to get more taxpayer-funded health screenings, despite concerns the promotion could run afoul of federal anti-kickback laws."

“First, such programs can corrupt the decision-making process, resulting, for example, in over-utilization, increased costs, or inappropriate medical choices. Second, there is potential harm to competing providers and suppliers who do not, or cannot afford to, offer incentives to generate business. Third, these practices could negatively affect the quality of care given to beneficiaries,” the report noted.  “As providers and suppliers race to the bottom by offering increasingly valuable goods or services, the incentive to offset the cost of these inducements by cheating on the quality of the Medicare or Medicaid item or service increases proportionately.”

This is not some new phenomenon, we know exactly what happens when programs like this are allowed, that is why they are illegal. But just like Obama's naive belief in community rating and welfare, the politicians and academics behind this think they know better then everyone else.

Just another trainwreck waiting to happen. On the bright side, since it is only an HHS opinion, the next qualified individal to run HHS should be able to undo it quickly.  

1,000 Words

The ObamaTax....so far:

[Photo courtesy of Sen Mitch McConnell and NRO]

Crop (Insurance) Report: Timely Update

Almost a year and a half ago, we reported on the Federal crop insurance program, "a newfangled partnership of government and industry (insurance carriers). The first major change is that it became privatized, with the carriers (and their reinsurers) taking the bulk of the risk, and the Fed's acting as a last-ditch backstop."

So far, so good.

The problem, of course, is the "human equation."

To wit:

"Federal investigators have unraveled a massive scheme among dozens of insurance agents, claims adjusters, brokers and farmers in eastern North Carolina to steal at least $100 million from the government-backed program that insures crops."

This is most definitely not what we meant when we said "skin in the game."

More than 3 dozen individuals have been arrested so far, and more are likely to be implicated as the net widens. After all, this is a national system, so it stands to reason that the problems will also be national in scope.

One wonders what implications this offers for The ObamaTax...

Another Brick in the Wall

Looks like the list of employers suing Ms Shecantbeserious over the birth control convenience item mandate has grown a little longer:

"Westminster Theological Seminary announced today that it has initiated litigation against several federal governmental agencies ... The lawsuit challenges certain regulations enacted under the [ObamaTax] requiring Westminster to provide health insurance to its employees to cover drugs designed to induce abortions."

One can't help but wonder, of course, when all of these will finally filter up to the Supreme Court, and whether or not the Nine Robed Ones will find a way to tie them all together in one giant, writhing decision.

(Hint: it's a tax)

“No, Mr. Bond, I expect you to die”

Last week, Bob expanded on a statement that appeared in RealClear Markets that “the new health coverage will be austere” - yet as Bob points out, that is a radical re-definition of “austere” because ObamaCare will cost a bundle.

The writer at Real Clear Markets went on to point out that the new ObamaCare coverage could become even more expensive because of an insurance phenomenon called “adverse selection.” The article states "If this sort of adverse selection occurs, it will raise costs to insurers. To guard against this, insurers are likely to price the coverage at a premium."

I'm surprised RCM says this.  The statement suggests adverse selection is not likely - iffy - but, if it arises, no problem - the insurance companies will price "at a premium”.

On the contrary, I think adverse selection is very likely and that increasing premiums is no solution.  Pricing at a premium is likely to make adverse selection worse, not better.  I think the administration knows this; I’m certain that the insurance companies know this; I’m surprised that Real Clear Markets does not.

When the buyers have a choice  - as they will under ObamaCare - richer plans always face an adverse selection risk.  That's because the higher premium for the richer plans is an incentive to buy a lesser, less-expensive option, especially for people who believe they are in good health.  Raising the premium for a richer plan increases the incentive to buy a lesser plan.  Therefore raising premiums is likely to make adverse selection worse.  This can eventually produce the so-called death spiral.

Here’s how that could happen. As fewer of the healthiest people buy the richer ObamaCare plans (or as more of the healthiest people drop out) the average health of the remaining ObamaCare insurance pools gradually worsens.   This drives premiums further upward; that results fewer healthy buyers and an even less-healthy covered population; which drives premiums further upward; that results in an even less-healthy covered population; which drives premiums further upward . . . etc.   That's the death spiral.

Under ObamaCare, everyone will have choices to buy insurance (1) thru the exchanges; (2) in the remaining private market if any; or (3) not to buy insurance at all and pay the "tax" or "penalty" (or whatever the administration is calling it today).

Many of the presently-uninsured middle class are young & healthy and have chosen not to buy insurance because of its cost; many of the presently-uninsured poor have not even enrolled in Medicaid.  Will the ObamaCare premium subsidies significantly change those decisions?  At this time, no one really knows, but the underwriter in me says:

(1) Yes, many of the very poor will enroll in an ObamaCare option.  That’s because their premiums will be heavily subsidized.  But on average the poor are less healthy than the general population.  Becoming insured is a good thing for them, and is also likely to drive up the cost of the insurance for everyone in the ObamaCare pool.

(2) No, many who are middle class and on average healthier than the general population will not enroll in an ObamaCare option.  They will choose as they do today – i.e.,the lowest-cost non-ObamaCare option they can find, or remain uninsured and pay the tax or penalty, because that will cost them much less than the ObamaCare insurance premium.  There's little risk in not buying insurance until they need it, because coverage thru the ObamaCare Exchanges will be guaranteed-issue, and must cover all pre-existing conditions.   Covering them only when they have medical expenses also likely to drive up the cost of the insurance for everyone in the ObamaCare pool.

So ObamaCare stands to experience adverse selection either way.  For that reason, "pricing at a premium" is an invitation to the death spiral.

In designing ObamaCare, the administration consulted competent actuaries.  These actuaries fully understand the dynamics of adverse selection.  Why would the feds design a scheme so clearly vulnerable to adverse selection?  I think that question suggests a couple of better questions:  was it the administration’s ultimate aim from the beginning to adopt a scheme that must fail, thereby discrediting the private market and ushering in the remaining alternative – a national, single-payer plan?  Does the administration expect ObamaCare to live?

Interesting ObamaTax End Run, Buckeye-style

Methinks we can file this under "Too Good to be True:"

Ohio state reps Young and Thompson have introduced an interesting bill called the "The Health Care Freedom Act" (no word yet on whether the acronym is intentional), which would prohibit any insurer seeking to do business in the Buckeye State from accepting any federal largesse.

Now, why in the Wide Wide World of Sports would a carrier agree to this?

Well, here's the thinking:

"According to the [ObamaTax], employers and individuals must purchase health insurance or they will be subject to tax penalties ... the price for the insurance companies accepting the federal subsidies is the tax penalty for citizens who don’t purchase insurance.  As long as the insurance companies do not accept federal subsidies, consumers will not be subject to penalty taxes."

So far, so good.

Here's the kicker:

"HCFA prohibits health insurance companies operating in Ohio from accepting any funding from the federal government ... If a company chooses to receive federal subsidies, their license would be suspended in the state"

This makes a perverse kind of sense: much like setting up Federally-run Exchanges render a state's citizens from receiving ObamaTax subsidies, prohibiting insurers from accepting federal funds exempts a state's citizens from the ObamaTax mandate. If they went ahead anyway, they'd be barred from writing any new business here (supposedly they could - and would - continue to service existing cases).

But here's why I think this falls under the "Too Good to be True" rubric: first, it's not clear to me that the Ohio Department of Insurance has the authority to rescind a carrier's license pro-actively. Second, what's to stop HHS Secretary Shecantbeserious from issuing a waiver for any carrier that chose to flout this state law? Remember, The ObamaTax trumps the state DOI.

Cato's Michael Cannon (whom we regularly feature and generally admire here at IB) weighs in with his thoughts:

"Since [prohibited carriers] would no longer be licensed and in good standing with the state, they would no longer qualify under the [ObamaTax] as an issuer of “qualified health plans.” ... would therefore preclude them from writing new business or receiving subsidies through any Exchanges for as long as the suspension remained in place."

Again, while I respect Michael's opinion on the matter, I think he's assuming facts not in evidence: to wit, that carriers will actually be held to HCFA standards, and that the Feds would interpret the relevant ObamaTax reg's consistent with what they actually say. Remember, we were told that abortion would *not* be covered under the train-wreck, let alone become a mandated benefit. Why would we presume that this penumbra would be treated differently?

Of course, it may well be a moot point: the bill has yet to pass the Ohio House, let alone  past Governor Kasich.

Bad News for Vets

FoIB Holly R tips us to this rather disheartening item:

"The Department of Veterans Affairs has failed to provide key information ... that shows the agency’s ability to quickly provide service-related benefits has virtually collapsed ... delays newly returning veterans face before receiving disability compensation and other benefits are far longer than the agency has publicly acknowledged"

We've discussed the term shanda before; this certainly qualifies, as well.

Something to ponder here is that the VA is a de facto nationalized health care scheme. If the current regime can't provide services to a relatively small subset of the total population (ie veterans), what hope do we have that expanding the idea via The ObamaTax will work out any better?

How do companies like WSJ survive

Henry linked to a story in the WSJ. Sure that it'd be worth the read if Henry linked it, I clicked on over. I have the free subscription but this required a paid subscription; $21 a month seemed step for digital, no printing cost or delivery fee, but I was willing to take a chance. That is where it all went downhill and reminded me why I don't subscribe to many Main Stream Media outlets any more, print or digital.

After finally finding the link to subscribe, I completed the order form, gave them my credit card number and then was meet with one undecipherable error after another. Oddly, just clicking submit again made the first couple go away. When I got to "Security Question is required" that is where I got stuck for good. They don't ask a Security Question, making it very hard to answer said security question. 

so, figured I'd just call Customer Service and figure out what is wrong. That was the fatal mistake, and where I draw the line. If your customer service department serving America to take orders can't understand English well enough to carry a simple conversation you don't deserve my money. I find it impossible to believe with 7.7% unemployment you can't find and afford English speaking staff to take $21 a month from me. After 2-3 minutes of her not even being able to answer simple English questions I gave up and said I wasn't subscribing. 

Friday LinkFest

 For your weekend enjoyment:

■ Medical Tourism has been a frequent topic here at IB, and this growth industry keeps expanding:

"Priced at NT$500,000 (US$17,249), a seven-day package features a combination of Western-style physical checkups and clinical cosmetology, as well as Chinese preventive medicine."

Sign us up! 

■ Recently Nate schooled Time Magazine's Steve Brill on how health care delivery and financing actually works in the real world. This Wall Street Journal piece delivers the coup de grâce:

"[Brill] reiterates in lengthy detail perversities that are already well known, without offering a single useful insight on how it go that way, and even less on how to fix it ... he's also aware that these customers often pay little or nothing of what they are charged and hospitals reallocate the cost to the bills of other patients. He even notes that a hospital might collect as little as 18% of what it pretends to bill."

■ And, finally, remember The ObamaTax promise to lower our health insurance premiums by 3000%? Folks in the Golden State are learning that it lacked truthiness:

"Health insurance costs are skyrocketing in California, where many citizens will soon face double digit premium hikes."

Ooopsies!

Just for the record

As most everyone is probably aware by now, Queen Elizabeth was admitted to the hospital a few days ago. However, a less-reported part of the story is noted in the 6th paragraph of this NBC News online report:

"She was being treated at the King Edward VII Hospital in London, a private facility."

Well, then, that would not be an NHS Hospital, would it?

Captain Obvious in da house

As Bob spent most of the morning pointing out (here and here), The ObamaTax does little but increase our costs; whether they're called premiums or taxes is of little consequence to our checkbooks.

A new study by the National Center for Policy Analysis finds that, contra-ObamaTax expectations, "Americans, who on average fill a dozen prescriptions a year, would benefit from free competition."

No kidding.

In some ways, this is the Fox Butterfield Effect hard at work:

"[T]he study argues that the many new regulations, often enacted in the name of protecting consumers, are having the opposite effect, placing barriers to efficiency"

That is - and this will be no surprise to regular IB readers - the regs are there specifically to create those barriers. Anyone who's been paying attention the past 3 years understands this: decreased efficiency leads to more regulations, and thus more government overreach.

But then, that's been the real game all along.

The Glass Half Empty

Here's some helpful health news:

"A German study suggests that people who are overly optimistic about their future actually faced greater risk of disability or death within 10 years than did those pessimists who expected their future to be worse."

Oy.

Cavalcade of Risk #178: It's Olio Time

Health Business Blog's David Williams hosts this week's jam-packed episode of the Cavalcade of Risk. From skydiving to the ultimate bad-first-day-on-the-job, you're sure to find something interesting.

Kudos, David!

Another Ethical Conundrum [Updated & Bumped]

By now, you've probably read about the death of an elderly woman in a California "nursing home." While the loss of life is sad, it's important to cut through the chattering to look at what really seems to have happened.

As I read through various accounts, it became clear to me that the "nursing home" was anything but: it was a retirement "home" which offered little to no care. And, in fact, would-be residents sign a consent form acknowledging this. The home itself appears to be part of a three-level "continuum" of care: those with little or no need for medical help are in the retirement section; those who need some additional levels of care are in an assisted living facility; and those who need skilled care are in an area geared towards their special needs.

Assuming this is correct (and it seems to be), then the sequence of events makes sense: after all, if you live in (say) an apartment complex, you don't expect the landlord to do anything more than call 911. It seems to me that, despite the hue and cry of cold-hearted capitalism, the onus is on the retiree ("tenant"), not the folks at the front desk. If one has agreed - in writing - to a certain level of non-care, then that is what one should receive: no more, and no less.

What say you?

Should the retirement home be held accountable for the death of a resident?
	Yes
	No
	Depends (Please explain in comments)
pollcode.com free polls

[UPDATE] Thanks to FoIB Holly R, we now learn that the "victim" in this little tale had left explicit instructions that she "die naturally and without any kind of life prolonging intervention."

So, does that change the calculus here?

How about this, then:

"[T]he company issued a statement saying the employee's failure to heed a 911 dispatcher's was the result of a misunderstanding of the company's emergency medical practices."

Curioser and curioser.

[Originally posted March 5, 2013]

Florida Scott-free?

Well here's a switch. Even as (Republican) Gov Rick Scott agreed to ObamaTax-funded Medicaid expansion, his own state lawmakers handed it right back to him:

"Florida legislature rejects ObamaCare Medicaid expansion ... The House made the right decision today to not draft a committee bill expanding Medicaid under [The ObamaTax]."

Gov Scott, the ball's in your court.

Wasn't Ezekiel Emanuel sort of "Projecting" here?

Ezekiel Emanuel, brother of Rahm Emanuel and President Obama’s health care adviser during the Obamacare debate, conceded last month that medical insurance premiums are rising.  But, he suggests, the reason is a sinister insurance industry money grab because, don't forget, ACA will make them lower their medical insurance premiums next year:

“[It's] in anticipation of 2014 and the fact that we’re going to have real competition in the exchanges and rates are going to come down,” he said when asked why insurance rates are rising as much as 25 percent. “It’s in anticipation of this dramatically changed marketplace and I think that’s what they’re doing.  Everyone is sort of [saying] ‘well. we don’t know what the future is, so let’s lock in as much money as we can.”

Oh, is THAT the sort of argument that impresses state insurance rate regulators?

Yeah, right Ezekiel.

On the other hand Ezekiel, thank you for the insight into how the Obama administration sort of went about locking in as much federal spending as it did, when launching its own stunningly irresponsible federal spending spree:

First claim you will not add "one dime" to the deficit.

Then raise federal spending by 20%  (btw, not including ACA)

Finally throw up hands and dig in heels over a 2% reduction. 

So it appears our present government grabs for spending and locks it in, sort of based on "we don't know what the future is."  Maybe.  But Ezekiel, that is certainly not sort of how insurance premiums are set.

NAIC Hits Bottom, Keeps Digging

Another one that slid in under the radar. Seems that disgraced former US Senator Ben "CornHustler" Nelson has been tapped to head up the (also disgraced)  National Association of Insurance Commissioners:

"Nelson will lead the NAIC’s efforts to meet the needs of its members and represent their interests as the primary advocate and chief spokesperson in Washington, D.C. ... His rare and valuable combination of experience in insurance and government will be a tremendous asset to our organization"

Doesn't say a lot about the integrity of the NAIC, does it?

Unclear on the Concept: Part 47

Let me begin this mini-rant with the proviso that Allison Bell, who wrote the article on which it is based, did a great job of reporting, and I am not slamming her at all. Rather, my ire is directed entirely at Ms Shecantbeserious and her (equally) ignorant minions.

As we noted this morning, Ms Shecantbeserious has dumped another 700-plus pages of "clarifications" for our amusement and/or amazement. We touched on a few, but there are, in fact, quite a few more little "gems" hidden here. Let's look at a few of them:

1) "the nuts and bolts of how new health insurance risk management programs will work"

When your plan design requires Guaranteed Issue and Community Rating, you have forfeited the right to use the term "risk management." The correct term is "income redistribution."

2) "how insurers will go about paying for the programs"

That's easy: they won't. Insurers have never paid for any claims - that's what premium payers are for (note: this is different than how, for example, Lloyds works).

3) "how the new "advanced premium tax credit" (APTC) program will work"

Let's answer that with another question: from where, exactly, is the money to pay for these expected credits going to come? Here's a hint: see #1 above

4) "[The ObamaTax] requires [HHS Secretary Shecantbeserious] and states to set up exchanges, or Web-based health insurance supermarkets, for individuals and small groups by Oct. 1."

Oh, we know all about that deadline. Notice, though, that we haven't seen any recent news on its actual implementation. Wonder why that is.

But here's my fave:

5) "The Internal Revenue would use the APTC program to give people ... help with paying for health coverage bought through an exchange ...  Jane Doe, a taxpayer, expected to report 2014 income equal to 300 percent of the federal poverty level in March 2015, the IRS would use Jane Doe's income projection to make APTC tax credits available to Jane Doe in 2014, to help her pay for health coverage in 2014."

One word, folks, one word.

Another Day, Another 700+ Pages

Could someone please tell me that a 2600+ page bill (which no one read before they passed it) plus untold hundreds (perhaps thousands) of additional pages of regulations implementing it, could possibly make our health care delivery and finance systems more efficient?

"The four rules, which are scheduled for publication in mid-March, finalize both major and minor parts of the [ObamaTax]"

A ream-and-a-half of paper for FOUR new rules?

Whatever happened to the KISS (Keep it simple) Principle?

[Hat Tip: FoIB Holly R]

Horsin' Around with Insurance

Do YOU have "Wrong Equine Coverage?"



[Hat Tip: SoIB Joyce F]

Friday Afternoon ObamaTax tidbit(s)

Had an interesting meeting with our Anthem rep this morning, and two items she shared with me stand out:

First, I've been wondering for a while about how insurance sales will work outside the Exchanges. That is, since only Exchange-compliant plans will be acceptable coverage under The ObamaTax, why would carriers bother to have two different product lines? I had guessed that they wouldn't, but our rep told me that the plans available on the Exchanges would, in fact, differ from those sold outside of them.

Exchange-based plans will be eligible for subsidies (which does not mean that purchasers will actually receive them), and have much tighter (smaller) networks. Plans sold outside the Exchanges won't be eligible for any subsidies, but will have bigger networks, and thus more offer more choice in actual health care.

The second thing she told me had to do with so-called "grandfathered" plans. I was surprised to learn that up to 50% of Anthem's individual plans are still grandfathered in. She also told me that they're expecting a major influx of fourth quarter new business.

Hunh?

It makes sense: non-grandfathered plans will stay in effect until their first renewal after January 1st. So if your plan has (for example) a February effective date, then you're most likely going to be buying a new Exchange-compliant plan early next year. But if you buy a new plan with (say) an October effective date, you've got most of 2014 before you have to switch.

Oh, and Anthem also has a consumer-friendly ObamaTax guidance tool, just click here.

Live and learn.

[Hat Tip: FoIB Beverly D]

Cavalcade of Risk #178: Call for submissions

David Williams hosts next week's Cav. Entries are due by Monday (the 4th).

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

PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like). And please only submit if you are willing to link back to the carnival if your submission is accepted.

And this is News?

It must be quite frustrating to be HHS Secretary Shecantbeserious - she's almost a "reverse Midas." That is, pretty much everything she and her minions touch become massive fails.

Latest case in point:

"Medicare paid billions in taxpayer dollars to nursing homes nationwide that were not meeting basic requirements to look after their residents ... One out of every three times patients wound up in nursing homes ... they landed in facilities that failed to follow basic care requirements laid out by [Ms Shecanthbeserious]"

This is basic, day-one stuff, not advanced health care metrics. And yet we expect these ... people ... to run our entire health care system with any more competence?

Riiiight.

Health Wonk Review: Insightful Nuggets edition

Jaan Siderov hosts this week's compendium (hey, I thought we were the only folks who used that term!) of wonky healthcare-related posts. As usual, he does it with elan and good humor (not to mention modest acumen).

Wednesday LinkFest

■ As we've long noted (most recently here), The ObamaTax has proven quite lethal to the job market. As if more evidence was needed, we offer this little tidbit:

"Henderson Properties in Charlotte, has 48 employees and seven job openings. But he’s considering a hiring freeze ... if he hires two more employees, he’ll reach the 50-employee threshold that [triggers the ObamaTax Employer Mandate]"

Mr H best be thinking outside that box, as well: too many part-timers and he's screwed, too.

■ The science is settled! You and your fellow passengers can now breathe easier (or maybe not):

"A three-thousand word treatise published by The New Zealand Medical Journal on Friday has given anxious flyers prone to bouts of flatus good cause to breathe easy again, after a highly-scientific conducted by actual scientists produced empirical evidence supporting those in favour of farting on planes"

Ah, fresh air!

■ And because it's making its way - rapidly - across the 'net, here's more proof that ObamaTax advocates remain clueless:

Matt's Missed Mark

Sometimes I despair of the modern media. Case in point, Matthew Yglesias and his inane take on a recent Time article on the cost of health care. As co-blogger Nate pointed out, the magazine got almost everything wrong. But that doesn't stop the illustrious Mr Yglesias from piling on, only adding to the torrent of misinformation.

To wit:

"Time’s long investigation of American health care prices missed one thing: We pay our doctors way too much."

Really, Matt? That's what Brill missed?

First, though, it's only fair to point out that Mr Y acknowledges one rather obvious elephant in the room, one that the press routinely ignores:

"[T]he best deal of all goes to the biggest insurer around: the federal government"

This simple statement goes a long way towards explaining how programs like Medicare and Medicaid distort the cost of health care for the rest of us.

Even a blind squirrel...

Unfortunately, that's the  last time he makes sense. Consider this example of his craft:

"America has the highest-paid general practitioners in the world. And our specialists make more than specialists in every other country except the Netherlands."

So. What?

Hey Matt, ever hear of tort law? Malpractice insurance? RAC's?

In fact, our own Kelley Beloff destroyed this myth almost three years ago:

"Government has mandated that all physicians implement an Electronic Medical Records system by 2014 or face punishments ... Government has mandated that all physicians must have on staff a certified coder by 2012 or face punishment ... Any efficient medical office needs three staff members to every provider."

And the list goes on. Hey Matt, who do you think pays for all that?

But this barely hidden gem is the real prize of his vapid little excercise:

"If doctors earned less money, fewer people would want to be doctors"

Wow, Matt, that's some brilliant, almost Krugmanesque economic and financial insight there. Good thing we have a glut of practitioners to handle the influx of all those newly insured folks thanks to The ObamaTax.

Wait, what?

[Hat Tip: FoIB Holly R]

Sorry, Pool's Closed

As promised, the gates to the ObamaTax High Risk Health Insurance Pool are quickly closing.

Via email from Medical Mutual:

"[HHS Secretary Shecantbeserious] directed us to suspend enrollment for new applicants into the Ohio High Risk Pool as of the end of the day March 2, 2013 ... We will accept applications until Saturday, March 2."

Now, this (ostensibly) doesn't affect folks already on the plan, which is slated to sunset at the end of this year, when the power of the fully functioning ObamaTax goes into effect.

Oh, goody.

Hmmm . . . Freelancers? . . . Freelancers? . . .

Oh yeah, now I remember.  The Washington Examiner has the story:

“A health insurance company headed by an old friend from when President Obama was an Illinois state senator got a $340 million federal loan to establish Obamacare co-ops in New York, New Jersey and Oregon despite having a chronic record of consumer and regulatory complaints.. . . The New York-based Freelancers Insurance Company has been rated the "worst" insurer for two straight years by state regulators”

[Hat Tip: InstaPundit]

Please read the whole thing.  But - first - I would check my supply of Milk of Magnesia.  I think we're all beyond surprise and shock when stuff like this comes to light, but plain old nausea is harder to stifle.

You can read even more here where InsureBlog commented on the Freelancers' CEO giggling over her big score a couple months ago:

“It’s like venture capital for health care,” said Sara Horowitz, the group’s executive director." 

Just what we need – a federal snowstorm of high-stakes venture-capital wagers, based on political calculations, not business calculations. Another wager like Solyndra. 

Can I be the only one who is beginning to think that ACA functions best when used as a cover for laundering & distributing political pork?

MassMutual Takes the (Reverse) Plunge

As we've long noted, Long Term Care insurance rates have been headed ever higher. While John Hancock may have led the charge, other carriers haven't been lagging, and now MassMutual is set to raise new business rates in a few days. From email:

"Effective March 1, Illinois, Ohio, Puerto Rico and Vermont will be added to the list of jurisdictions approved for the SignatureCare® 500 long-term care insurance (LTCi) updated rates"

There doesn't seem to be a specific percentage available at this time. We'll update this post if that changes.

Oh, the message?

If you're thinking about buying Long tern Care insurance, don't wait too* long to make up your mind. It'll cost ya.

MVNHS© Fail: Private vs Public

We've been highlighting the many failures of the Much Vaunted National Health System© since 2006, and explaining why our own private-sector system - while flawed - is superior. Of course, we bring a certain bias to the discussion (and by "bias" we mean "factual analysis").

It's certainly easy to dismiss these items as self-serving, but perhaps this news from the home of the MVNHS© will put to rest such criticism:

"The first NHS trust to be run entirely by a private firm has one of the highest levels of patient satisfaction in the country ... the trust has slashed losses at the hospital by 60 per cent and will soon begin to pay off burgeoning debts built up over years of mismanagement"

Well, well, well.

So as we (metaphorically, one hopes) throw out our own baby with the bathwater, perhaps we should stop a moment and consider the consequences. The ObamaTax (based substantially on the Brits' system) looms on our horizon, yet the folks who actually live under that system now can plainly see that it is a failure:

"Hundreds of hospital patients died needlessly. In the wards, people lay starving, thirsty and in soiled bedclothes, buzzers droning hopelessly as their cries for help went ignored. Some received the wrong medication; some, none at all."

That way lies madness, no?

Does its 3% admin cost mean Medicare is efficient?

Many people believe the admin cost for original Medicare (Part A and Part B) is lower than private insurance admin cost, because  Medicare's cost is "only 3%".  These people also believe that private insurance admin costs are much higher, up to 20% or 30%.  So Medicare, they believe, is obviously more efficient.  Well, let's look at it.  
 

Original Medicare Projected 2013 Admin Cost

Based on CBO projections of Medicare benefit costs for 2013, a 3% admin cost for original Medicare is equivalent to about $31-$32 per month, per enrolled person.  

Here are my calculations:

1.  CBO Part A and Part B benefit costs         $528 bn 

2.  Less M'Care Advantage benefit costs        $145 bn

3.  Net Part A and Part B benefit costs           $383 bn

4.  Allowance for admin @3%  (divide by:)      0.97  

5.  Cost of benefits + admin                            $395 bn

6.  Base administration cost ($395-$383)       $   12 bn

7.  Plus CBO mandatory admin add-ons        $      2 bn

     (ACA mandated e.g. quality, fraud, others)             

8.  Total admin cost                                        $    14 bn

9.    CBO Medicare enrollment                           51 mn

10.  Less M'Care Advtge enrollment                   14 mn

11.  Net Medicare enrollment                              37 mn

The monthly per person admin cost is therefore $31-$32      

                         $14 bn / (37 mn x 12)

Private large-group admin costs

Current admin costs for large groups generally run in the range of $20 to $25 per person per month.  I’ve seen lower and I’ve seen higher, but most fall within that range.   (By “large” group plans, I mean plans covering more than 20,000 persons; large, but nowhere near as large as Medicare.)

Conclusions

Comparing these results suggests the typical per-person admin cost for large private group plans is distinctly less than original Medicare, using the assumption that original Medicare admin is "only 3%" of its total cost.  Even if one excludes the ACA-mandated add-ons from the analysis, the Medicare admin cost per person, per month works out to $27 which still leaves large private groups with an admin cost advantage.

This result makes sense for several reasons.  Most important, seniors have higher medical costs than the working-age population, mainly because of chronic conditions related to age.  That's why Medicare premiums are so much higher than for working age people. But higher claims don't mean higher admin expenses; it does not cost 100X's as much to adjudicate a $10,000 claim vs a $100 claim.  A (%) of premiums uses the much higher Medicare premiums in the denominator.  Using this higher denominator produces a lower answer, which says nothing about the actual relationship between admin costs.  So comparing Medicare admin expenses to other insurance as a percentage of premiums is faulty.  Comparing admin expenses to enrollment is analytically superior.  Keep in mind that private insurance companies administer original Medicare under contract with HHS; there is no reason their admin charges should differ greatly between their large private groups and their Medicare contracts.  Nor is Medicare otherwise regarded as an efficient federal bureaucracy.  (If there is one.)

So yes, “3%” may be arithmetically correct – but it's misleading nevertheless.  It leads to the mistaken notion that Medicare is more efficient than private insurers when in fact the reverse is most likely true.   

Whenever you hear someone claim that Medicare admin is "only 3%" the smart follow-up questions are "3% of what?" and “compared to what?”  The preceding analysis suggests an answer for both of these follow-up questions.   

I've relied on CBO Medicare projections for 2013.  The private plan information is from my own experience working in three major insurance companies, a national consulting firm, and head of benefits for a large employer.  The analysis is approximate, but I believe basically sound.