Lamar Alexander Wants to Bail Out Regulators Who Misjudged Billions

When a state’s insurance market stands on the verge of collapse, as Tennessee Insurance Commissioner Julie Mix McPeak claimed in 2016, why would she and her colleagues fail to consider another potential change that could precipitate a full-on implosion? Congress should analyze this question as it examines Obamacare’s health insurance markets.

Unfortunately, however, Tennessee Sen. Lamar Alexander seems more interested in stuffing the coffers of the insurance industry than in conducting robust oversight of McPeak’s regulatory debacle.

A recent public records request confirms that when health insurers filed their 2017 rates in the summer of 2016, Tennessee’s Department of Insurance failed to contemplate that the incoming presidential administration could cancel the cost-sharing payments. As a result, Tennessee insurers will incur their share of the $1.75 billion in losses insurers face nationally this year. The department’s lack of planning and preparation left Tennessee consumers—to say nothing of health insurers themselves—exposed.

Tennessee Should Have Seen This Coming

McPeak cannot say she was not warned about the vulnerability of insurers’ cost-sharing subsidies. In May 2016, federal court Judge Rosemary Collyer ruled the payments unconstitutional, because Obamacare did not include an explicit appropriation for them. While Collyer stayed her ruling as the Obama administration appealed, I noted that month that the incoming president could easily concede the lawsuit and halt the payments unilaterally—exactly what President Trump did in October.

As one insurance expert noted recently, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet the recent public records request revealed that Tennessee regulators did not send so much as a single e-mail considering whether this “hand grenade” would explode—taking the state’s exchange down with it—before approving insurance rates for 2017 last fall.

Senators Seem to Prefer Bailouts to Accountability

Tennessee’s Alexander has played a leading role in ignoring insurance commissioners’ questionable behavior. In September, Alexander convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee he chairs to take testimony from insurance commissioners, including McPeak, about state insurance markets. At no point did Alexander or any other senator ask McPeak or her fellow commissioners why they failed to consider, let alone predict, the withdrawal of the cost-sharing payments last year.

Instead of examining the regulatory failures of commissioners like McPeak, Alexander has dedicated his energies toward solving the problem McPeak’s ignorance helped to create. His legislation would appropriate approximately $25 billion in taxpayer funds for the cost-sharing reduction payments to insurers.

Unfortunately, Alexander’s legislation would result in a major windfall for health insurers, according to the Congressional Budget Office (CBO). Because insurers have already raised their premiums for 2018 to compensate for the loss of the cost-sharing reduction payments, Alexander’s bill would effectively pay them twice. While the CBO believes insurers will rebate some—not all, but only some—of these “extra” payments back to the government, insurers could pocket between $4-6 billion in additional windfall profits thanks to Alexander’s legislation.

This post was originally published at The Federalist.

Exclusive: Congress Should Investigate, Not Bail Out, Health Regulators Who Risked Billions

What if a group of regulators were collectively blindsided by a decision that cost their industry billions of dollars? One might think Congress would investigate the causes of this regulatory debacle, and take steps to ensure it wouldn’t repeat itself.

Think again. President Trump’s October decision to terminate cost-sharing reduction (CSR) subsidy payments to health insurers will inflict serious losses on the industry. For October, November, and December, insurers will reduce deductibles and co-payments for certain low-income exchange enrollees, but will not receive reimbursement from the federal government for doing so. America’s Health Insurance Plans, the industry’s trade association, claimed in a recent court filing that insurance carriers will suffer $1.75 billion in losses over the remainder of 2017 due to the decision.

As Dave Anderson of Duke University recently noted, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet Congress has asked not even a single question of regulators why they did not anticipate and plan for this scenario—a recipe for more costly mistakes in the future.

A Brewing Legal and Political Storm

The controversy surrounds federal payments that reimburse insurers for lower deductibles, co-payments, and out-of-pocket expenses for qualifying low-income households purchasing exchange coverage. While the text of Obamacare requires the U.S. Department of Health and Human Services to establish a program to reimburse insurers for providing the discounts, it nowhere includes an explicit appropriation for such spending.

As the exchanges launched in 2014, the Obama administration began making CSR payments to insurers. However, later that year, the House of Representatives, viewing a constitutional infringement on its “power of the purse,” sued to stop the executive from making the payments without an explicit appropriation. In May 2016, Judge Rosemary Collyer ruled the payments unconstitutional absent an express appropriation from Congress.

The next President could easily wade into this issue. Say a Republican is elected and he opts to stop the Treasury making payments related to the subsidies absent an express appropriation from Congress. Such an action could take effect almost immediately….It’s a consideration as carriers submit their bids for next year that come January 2017, the policy landscape for insurers could look far different.

One week after my article, Collyer issued her ruling calling the subsidy payments unconstitutional. At that point, CSR payments faced threats from both the legal and political realms. On the legal front, the ongoing court case could have resulted in an order terminating the payments. On the political side, the new administration would have the power to terminate the payments unilaterally—and it does not appear that either Hillary Clinton or Trump ever publicly committed to maintaining the payments upon taking office.

Yet Commissioners Stood Idly By

In the midst of this gathering storm, what actions did insurance commissioners take last year, as insurers filed their rates for the 2017 plan year—the plan year currently ongoing—to analyze whether cost-sharing payments would continue, and the effects on insurers if they did not? About a week before the Trump administration officially decided to halt the payments, I submitted public records requests to every state insurance commissioner’s office to find out.

Two states (Indiana and Oregon) are still processing my requests, but the results from most other states do not inspire confidence. Although a few states (Illinois, Utah, and California’s Department of Managed Health Care) withheld documents for confidentiality or logistical reasons, I have yet to find a single document during the filing process for the 2017 plan year contemplating the set of circumstances that transpired this fall—namely, a new administration cutting off the CSR payments.

In many cases, states indicated they did not, and do not, question insurers’ assumptions at all. North Dakota said it does not dictate terms to carriers (although the state did not allow carriers to re-submit rates for the 2018 plan year after the administration halted the CSR payments in October). Wyoming said it did not issue guidance to carriers on CSRs “because that’s not how we roll.” Missouri did not require its insurers to file 2017 rates with regulators, so it would have no way of knowing those insurers’ assumptions.

Other states admitted that they did not consider the possibility that the incoming administration would, or even could, terminate the CSR payments. North Carolina said it did not think the court case was relevant, or that cost-sharing reduction payments would be an issue. Massachusetts’ insurance Connector (its state-run exchange) responded that “there was no indication that rates for 2017 were affected by the pendency of House v. Burwell,” the case Collyer ruled on in May 2016.

Despite the ongoing court case and the deep partisan disputes over Obamacare, many commissioners’ responses indicate a failure to anticipate difficulties with cost-sharing reduction payments. Mississippi stated that, during the filing process for 2017, “CSRs weren’t a problem then, as they were being funded.” Minnesota added that “it was not until the spring of 2017 that carriers started discussing the threat [of CSR payments being terminated] was a real possibility.” Nebraska stated that “I don’t think that there’s anyone who allowed for the possibility of non-payment of CSRs for plan year 2017. We were all waiting for Congress to act.”

However, as an e-mail sent by the National Association of Insurance Commissioners (NAIC) to state regulators demonstrates, federal authorities at the Centers for Medicare and Medicaid Services (CMS) stated their “serious concerns” with the Texas and New Mexico proposals. Federal law requires insurers to reduce cost-sharing for qualifying beneficiaries, regardless of the status of the reimbursement program, and CMS believed the contingency language—which never went into effect in either Texas or New Mexico—violated that requirement.

In at least one case, an insurer raised premiums to reflect the risk that CSR payments could disappear in 2017. Blue Cross Blue Shield of Montana submitted such request to that state’s insurance authorities. However, regulators rejected “contingent CSR language”—apparently an attempt to cancel the reduced cost-sharing if reimbursement from Washington was not forthcoming, a la the Texas and New Mexico proposals. The insurance commissioner’s office also objected to the carrier’s attempt to raise premiums over the issue: “We will not allow rates to be increased based on speculation about outcomes of litigation.”

Of course, had insurers requested, or had regulators either approved or demanded, premium increases last year due to uncertainty over cost-sharing reduction payments, they would not now face the prospect of over $1 billion in losses due to non-payment of CSRs for the last three months of 2017. But had regulators approved even higher premium increases last year, those increases likely would have caused political controversy during the November elections.

As it was, news of the average 25 percent premium increase for 2017 gave Trump a political cudgel to attack Clinton in the waning days of the campaign. One can certainly question why Democratic insurance commissioners who did not utter a word about premium increases and CSR “uncertainty” during Clinton’s campaign suddenly discovered the term the minute Trump was elected president.

However, at least some ardent Obamacare supporters just did not anticipate a new administration withdrawing cost-sharing reduction payments. Washington state’s commissioner, Mike Kreidler, published an op-ed last October regarding the House v. Burwell court case. He did so at the behest of NAIC consumer representative Tim Jost, who wanted to cite Kreidler’s piece in an amicus curiae brief during the case’s appeal. But despite their focus on the court case regarding CSRs, it appears neither Jost nor Kreidler ever contemplated a new administration withdrawing the payments in 2017.

Congressional Oversight Needed

The evidence suggests that not a single insurance commissioner considered the impact of a new administration withdrawing cost-sharing reduction payments in 2017, a series of decisions that put the entire health of the individual insurance market at risk. What policy implications follow from this conclusion?

First, it undercuts the effectiveness of Obamacare’s “rate review” process. That mechanism requires states to evaluate “excessive” premium increases. However, the program’s evaluation criteria do not explicitly include policy judgments such as those surrounding CSRs. Moreover, the political focus on lowering “excessively” high premium increases might result in cases where regulators approve premium rates set inappropriately low—as happened in 2017, where no carriers priced in a contingency margin for the termination of CSR payments, yet those payments ceased in October.

As noted above, Montana’s regulators called out that state’s Blue Cross Blue Shield affiliate for proposing a rate increase relating to CSR uncertainty. The state’s insurance commissioner, Monica Lindeen, issued a formal “letter of deficiency” in which she stated that “raising rates on the basis of this assumption [i.e., loss of cost-sharing reduction payments] is unreasonable.” But events proved Lindeen wrong—those payments did disappear in 2017. Yet the insurer in question has no recourse after their assumptions proved more accurate than Lindeen’s—nor, for that matter, will Lindeen face any consequences for the “unreasonable” assumptions she made.

Second, it suggests an inherent tension between state authorities and Washington. Several regulators specifically said they looked to CMS’ advice on the cost-sharing reduction issue. Iowa requested guidance from Washington, and Wisconsin said the status of the payments was “out of our hands.” But given the impending change of administrations, any guidance CMS provided in the spring or summer of 2016 was guaranteed to remain valid only through January 20, 2017—a problem for regulators setting rates for the 2017 plan year.

Obamacare created a new layer of federal oversight—and federal policy—surrounding regulation of insurance, which heretofore had laid primarily within the province of the states. The CSR debacle resulted from the conflict between those two layers. Unless and until our laws reconcile those tensions—in conservatives’ case, by repealing the Obamacare regime and returning regulation to the states, or in liberals’ preferred outcome, by centralizing more regulatory authority in Washington—these conflicts could well recur.

Third, and perhaps most importantly, it should spark Congress to examine state oversight of health insurance in greater detail. The fact that insurance commissioners escaped the equivalent of a Category 5 hurricane—the withdrawal of CSR payments in January—and struggled through a mere tropical storm with payments withdrawn in October instead, had no relevance on their regulatory skill—to the contrary, in fact.

Unfortunately, Congress has demonstrated little interest in examining why the regulatory apparatus fell so short. The same Democratic Party that investigated regulators and bankers following the financial crisis has shown little interest in questioning why insurers and insurance regulators failed to anticipate the end of cost-sharing reduction payments. With their focus on getting Congress to appropriate funds restoring the CSR payments President Trump terminated, insurance commissioners’ lack of planning and preparation represents an inconvenient truth that Democrats would rather ignore.

Likewise, Republicans who wish to appropriate funds for the cost-sharing reduction payments have no interest in examining the roots of the CSR debacle. In September, Sen. Lamar Alexander (R-TN) convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee to take testimony from insurance commissioners on “stabilizing” insurance markets.

At the hearing, Alexander did not ask the commissioners why they did not predict the “uncertainty” surrounding cost-sharing reductions last year. HELP Committee Ranking Member Patty Murray (D-WA) asked Kreidler, her state’s insurance commissioner, about regulators’ “guessing games” regarding the status of CSRs with regard to the 2018 plan year. But neither she nor any of the members asked why those regulators made such blind and ultimately incorrect assumptions last year, by not even considering a scenario where CSR payments disappeared during the 2017 plan year.

Alexander and Murray claim the legislation they developed following the hearing, which would appropriate CSR funds for two years, does not represent a “bailout” for the insurance industry. But the fact remains that last fall, when preparing for the 2017 plan year, insurance regulators dropped the ball in a big way.

Ignoring their inaction, and appropriating funds for cost-sharing reductions without scrutinizing their conduct, would effectively bail out insurance commissioners’ own collective negligence. Congress should think twice before doing so, because next time, a regulatory debacle could have an even bigger impact on the health insurance industry—and on federal taxpayers.

This post was originally published at The Federalist.

Fact Check: “At the Mercy of Insurance Companies”

The Hill reports that, during his remarks to AARP this morning, the President attacked Republicans for leaving seniors “at the mercy of insurance companies.”  Well, in case you missed it, here are five ways the President and his Administration have left seniors at the mercy of one organization with insurance interests – AARP – by granting them special exemptions and ignoring their questionable insurance practices:

  1. AARP’s lucrative Medigap insurance was exempted in Obamacare from the ban on pre-existing conditions; medical loss ratio requirements; caps on insurance industry executive compensation; and the tax on all other health insurance plans.
  2. The Department of Health and Human Services didn’t think all these Obamacare exemptions were enough; last year they also exempted Medigap insurance from premium rate review – even though AARP, which carries the plan with the largest market share, earns greater profits the more seniors pay in premiums.
  3. At a conference hosted by America’s Health Insurance Plans in March 2010, HHS Secretary Sebelius encouraged the insurance industry to give up some of its profits, at a time when health insurance profit margins were about 2 percentYet neither Secretary Sebelius nor anyone else in the Administration ever criticized AARP for making a profit margin of nearly 5 percent on its Medigap insurance.
  4. In April 2010, the Administration engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than is required by the law.  But no one from the Administration has taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage.
  5. In a speech at an AARP conference in October 2010, Secretary Sebelius praised AARP as the “gold standard in cutting through spin and complexity to give people the accurate information they need.”  Yet the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements.  So Secretary Sebelius praised as the “gold standard” for “accurate information” an organization that has the types of financial conflicts her insurance commissioner colleagues have criticized as ripe for abuse.

If the President is so worried about leaving seniors at the mercy of insurance companies, perhaps he should tell the people within his own Administration to stop granting political favors to Democrats’ cronies at the AARP.

The Obama Administration’s Protection Racket

Shortly, President Obama will be addressing the AARP convention via satellite.  He will undoubtedly say nice things about AARP’s role as a “senior advocate.”  But what he won’t discuss are the ways in which his own Administration has allowed AARP to continue making billions in profits on its insurance business:

  1. AARP’s lucrative Medigap insurance was exempted in Obamacare from the ban on pre-existing conditions; medical loss ratio requirements; caps on insurance industry executive compensation; and the tax on all other health insurance plans.
  2. The Department of Health and Human Services didn’t think all these Obamacare exemptions were enough; last year they also exempted Medigap insurance from premium rate review – even though AARP, which carries the plan with the largest market share, earns greater profits the more seniors pay in premiums.
  3. At a conference hosted by America’s Health Insurance Plans in March 2010, HHS Secretary Sebelius encouraged the insurance industry to give up some of its profits, at a time when health insurance profit margins were about 2 percentYet neither Secretary Sebelius nor anyone else in the Administration ever criticized AARP for making a profit margin of nearly 5 percent on its Medigap insurance.
  4. In April 2010, the Administration engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than is required by the law.  But no one from the Administration has taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage.
  5. In a speech at an AARP conference in October 2010, Secretary Sebelius praised AARP as the “gold standard in cutting through spin and complexity to give people the accurate information they need.”  Yet the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements.  So Secretary Sebelius praised as the “gold standard” for “accurate information” an organization that has the types of financial conflicts her insurance commissioner colleagues have criticized as ripe for abuse.

Why might the Administration look the other way despite these abuses?  Documents released by the Energy and Commerce Committee yesterday provide myriad reasons, showing all the political favors senior Administration officials asked of AARP as they rammed Obamacare through Congress:

  • Jim Messina, White House Deputy Chief of Staff: “We need [AARP CEO] Barry Rand to go meet with Ben Nelson personally and just lay it on the line.  ‘We will be with you, we will protect you.  But if you kill this bill, seniors will not forget.’  We are at 59 [votes in the Senate], we have to have him.” (page 7)
  • Jim Messina: “Can we get immediate robo calls into Nebraska urging [Ben] Nelson to vote for cloture?” (page 9)
  • Nancy-Ann DeParle, Director, White House Office of Health Reform: “Can AARP support accountable care orgs [sic] and some other delivery system reforms?” (page 26)
  • Jim Messina: “Latest top 25 targets list from House leadership” (page 35)
  • Ann Widger, Office of Public Engagement: “We would really like AARP to participate in this roundtable.” (page 37)
  • Ann Widger: “Did you guys put out any paper today on the McCain [Medicare] amendment?” (page 39)
  • Jim Messina: “[Rep. Larry] Kissel a problem…Help.” (pages 42-43)
  • Nancy-Ann DeParle: “Can you get me a copy of the [AARP] bulletin we discussed yesterday?” (page 64)

Secretary Sebelius has already admitted she has acted improperly in using her office to conduct political activities; the Office of Special Counsel last week concluded she violated the law to do so.  Given all of the above, it is not unreasonable to question whether the Secretary, and others within the Administration, made a calculated political decision to grant special favors to AARP – and ignore its questionable business practices – because AARP endorsed Obamacare.

Yesterday President Obama claimed that he changed Washington “from the outside” by enacting Obamacare.  The pattern of conduct described above suggests just the opposite: That the President rammed Obamacare through only by establishing what amounts to an inside-the-Beltway protection racket between the Administration and AARP – the former will allow the latter to continue overcharging seniors for insurance, so long as AARP uses its advocacy megaphone to endorse the President’s liberal causes.

 

The Honorable Kathleen Sebelius

Secretary

Department of Health and Human Services

200 Independence Avenue, S.W.

Washington, DC 20201

Dear Secretary Sebelius:

Today my office is releasing a report, “Profits Before Principles,” regarding the insurance practices of AARP. The report finds that AARP has a strong financial interest in keeping Medigap supplemental insurance premiums high – because the organization receives greater profits the more seniors pay in premiums. In addition, AARP’s financial interests have been aided by the Patient Protection and Affordable Care Act (PPACA), which AARP not coincidentally endorsed. Experts agree that PPACA’s provisions will have the effect of driving seniors out of Medicare Advantage health plans and into Medigap supplemental insurance – a market where AARP enjoys the largest market share.

I am greatly concerned by AARP’s questionable business practices, and by the numerous exemptions granted to Medigap insurance – both legislatively and through your Department’s regulatory process – as a result of PPACA. Therefore, I ask you to respond to the following questions:

  1. The text of PPACA exempts Medigap supplemental insurance plans from several new requirements: Section 1103 exempts plans from medical-loss ratio requirements; Section 1202(2)(A) exempts plans from the prohibition on pre-existing condition exclusions; Section 9014 exempts plans from caps on industry executive compensation; and Section 10905(d) exempts plans from the tax applied to all other health insurers. Does the Administration support all these special exemptions for Medigap plans? Why or why not?
  2. My staff attended a PPACA implementation briefing for Senate Republican staff in April 2010. At that time, Jeanne Lambrew of your Department’s Office of Health Reform admitted that PPACA exempted Medigap insurance from the law’s new regulatory regime. If in fact the Administration does NOT support PPACA’s numerous exemptions for Medigap plans, why has your Department done nothing to publicize that fact in the intervening two-plus years since that briefing?
  3. Your Department continues to claim that PPACA “ended many of the insurance industry’s worst abuses” – even though you are fully aware that these changes do not apply to Medigap plans. For instance, HHS previously released a publicity brochure that says “starting in 2014, discrimination based on a pre-existing condition by an insurer will be prohibited in every state.” Why has your Department continued to repeat these misleading slogans, even though your staff admitted that seniors applying for Medigap insurance remain subject to pre-existing condition discrimination due to the special carve-outs included in PPACA?
  4. In your speech to the Democratic National Convention on September 4, 2012, you criticized Republicans for “let[ting] insurance companies continue to cherry-pick who gets coverage and who gets left out, priced out, or locked out of the market.” Likewise, during his speech at the Democratic National Convention, President Obama said that “no American should have to spend their golden years at the mercy of insurance companies.” Please detail the specific provisions included in PPACA that place new limits on Medigap insurers’ ability to “cherry-pick who gets coverage and who gets left out, priced out, or locked out of the market,” and ensure that no applicant for Medigap coverage with a pre-existing condition will be left “at the mercy of insurance companies.”
  5. In a speech on September 8, 2012, President Obama claimed that Medicare premium support proposals would lead to billions of dollars in greater profits for insurance companies. But a 2011 House Ways and Means Committee member report found that PPACA itself could lead to billions in profits for AARP, because the law’s cuts to Medicare Advantage will reduce enrollment in that program, and encourage seniors to purchase supplemental Medigap insurance instead. Do you agree with the Ways and Means Committee report’s premise that PPACA will lead seniors to migrate from Medicare Advantage coverage to Medigap plans – thereby increasing profits to AARP? If not, on what basis do you disagree with the non-partisan experts at the Congressional Budget Office and the Medicare Office of the Actuary, who have concluded the law will reduce Medicare Advantage enrollment by millions?
  6. In addition to the above exemptions, your Department added yet another Medigap carve-out to the ones included in the statute, by exempting Medigap insurance from PPACA’s rate review process. Why do seniors not deserve this supposed protection? If PPACA’s benefits are so good, why didn’t your Department extend them to seniors as well?
  7. Did AARP, or anyone associated with or paid by it, influence or attempt to influence the Administration regarding the numerous exemptions given to Medigap insurance in PPACA, or the regulatory interpretations of PPACA? If so, please provide details as to the dates, persons, positions, and circumstances of said efforts.
  8. The 2011 House Ways and Means Committee member report noted that for its Medigap plans, AARP receives 4.95% of every premium dollar paid by seniors. As a former insurance commissioner, do you think it’s appropriate that AARP has a perverse financial incentive to keep Medigap insurance premiums high?
  9. In a speech at an AARP conference in October 2010, you praised that organization as the “gold standard in cutting through spin and complexity to give people the accurate information they need.” As a former insurance commissioner, how exactly do you believe AARP can serve as a “gold standard” giving seniors “accurate information” about Medigap insurance plans, when the organization has a financial incentive to sell seniors more insurance than they may need or want?
  10. As a former insurance commissioner, you are no doubt aware that the National Association of Insurance Commissioners (NAIC) has previously expressed concern about the potential for conflicts-of-interest associated with percentage-based compensation arrangements. In fact, Section 18 of NAIC’s Producer Model Licensing Act recommends that states require explicit disclosure by insurer affiliates, and clear written acknowledgement by consumers, of any percentage-based compensation arrangement, due to the potential for financial abuses. Did you undertake any due diligence to ensure that AARP’s Medigap percentage-based compensation model was in full compliance with both the letter and spirit of Section 18 of the Producer Model Licensing Act prior to making your assertion that AARP constitutes the “gold standard” for giving seniors “accurate information?” If not, why not?
  11. Given that AARP holds the largest share of the Medigap market, why did your Department grant a special exemption for Medigap insurance from PPACA rate review? Why do you believe that AARP can act in a proper manner to control premium increases – even though the organization gains profits for every additional dollar Medigap premiums rise?
  12. At a conference hosted by America’s Health Insurance Plans in March 2010, you encouraged the insurance industry to give up some of its profits, at a time when health insurers were earning between 2 and 3 cents of profit for every dollar of revenue, according to Fortune 500 estimates. If you criticized other insurers for earning between 2 and 3 cents of every premium dollar in profits, why haven’t you criticized AARP for taking 4.95 cents of every Medigap premium dollar as pure profit?
  13. In April 2010, the Administration and you personally engaged in very public efforts to “encourage” insurance companies to ban rescissions and extend coverage to young adults earlier than was required by PPACA. Why haven’t you taken similar steps to encourage AARP to stop discriminating against sick seniors applying for Medigap coverage?
  14. At the April 2010 Senate Republican briefing, staff asked whether your Department would write a letter to AARP asking them to stop denying Medigap applications for individuals with pre-existing conditions. Jeanne Lambrew of the Office of Health Reform promised to look into the matter, but the letter was never sent. Why has your Department waited more than two and a half years to ask AARP to stop discriminating against sick and disabled individuals applying for Medigap insurance?
  15. Finally, please forward copies of any and all Administration documents – including those originating from outside your Department – from January 20, 2009 through today inclusive regarding: 1) the Medigap exemptions included in PPACA, and the Administration’s viewpoints and/or technical assistance provided regarding same during the drafting process; 2) the Administration’s administrative interpretations of the Medigap exemptions during the rulemaking process; 3) AARP’s positions on Medigap insurance plans, including but not limited to the exemptions included in PPACA; and 4) AARP’s position on PPACA, including but not limited to any policy changes AARP said it required to be included in the legislation for the bill to receive the organization’s endorsement.

I look forward to receiving your response on these issues within two weeks. If you have any questions, feel free to contact Alec Aramanda or Chris Jacobs of my staff. Thank you for your time, and I look forward to your reply.

How 13.5 Million People Could Lose Their Current Coverage

America’s Health Insurance Plans is out this morning with its annual survey of Health Savings Account (HSA) eligible insurance plans.  The survey finds that as of this January, 13.5 million Americans are enrolled in insurance plans compatible with HSAs – an increase of more than 18% compared to January 2011.  What’s more, enrollment remains evenly distributed along age and gender lines, disproving the notion that HSA insurance policies favor the young and healthy.  And the survey also demonstrates that most HSA plan holders have access to tools, including price and quality data, that can make them better consumers of health care.

Unfortunately, Obamacare could quickly change all these positive developments.  Several provisions in the law, and accompanying regulations, will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans:

  1. Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered.
  2. Obamacare’s medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage.
  3. The Obamacare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards.  And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration’s approach, not all contributions into an HSA will count towards the new minimum federal standards – meaning some HSA policies will not be considered “government-approved.”
  4. The law also includes several new tax increases related specifically to HSAs and to consumer-directed health plans in general, several of which have already sparked controversy – and all of which violate the President’s “firm pledge” not to raise taxes on middle-class families.

Both individually and collectively, these provisions in Obamacare will have the effect of limiting access to new and innovative consumer-directed health plans like Health Savings Accounts.  Even as today’s study confirms that HSAs are gaining more followers, Obamacare’s looming threat means millions of Americans could lose access to these innovative and popular plans.

More on Employers Dropping Coverage

Yet another consulting firm has released a survey regarding employers dropping coverage.  In this case, Towers Watson’s annual survey of retiree health coverage found that nearly three in five employers who offer coverage to retirees under age 65 are assessing new alternatives in light of the law.  Nearly nine in ten (87%) of employers responded that the new insurance options available under the law are influencing their strategy for offering benefits to retirees.  Last week’s Associated Press story about how early retirees making as much as $64,000 can receive “nearly free” health care courtesy of federal taxpayers will only further encourage these firms to drop coverage for their former workers.

Meanwhile, Bloomberg Government ran a story Friday about how “employers may prefer paying fines” to offering coverage.  The article indicated that “business groups are dubious” of economic models claiming firms will not drop coverage, “and say the more negative findings” of McKinsey’s health survey “provide a better indication” of employer responses.  Among the reactions in the piece:

  • The National Retail Federation said it is “not bullish on the future of health care coverage in the private sector;”
  • A representative of the Employee Benefit Research Institute said that “even if companies don’t drop their health plans entirely, ‘a significant number’ are looking at alternative arrangements” – which could involve reorganizing their firms so that low-wage workers receive government subsidies in Exchanges, while keeping employer-provided insurance for high-income workers; and
  • A representative from America’s Health Insurance Plans noted that “almost all employers are taking a look at their health care strategy…many will keep their options open, and if their competition drops, they will too.”

A June Gallup poll found nearly 10 million adults have lost employer-based coverage since President Obama was elected President.  These latest surveys once again confirm that, thanks to Democrats’ unpopular health care law, millions more Americans are about to follow suit.

Washington (State) Rations with Its Eyes Open

Speaking at the AHIP convention in San Francisco yesterday, former Majority Leader Tom Daschle praised Obamacare’s board of unelected bureaucrats that will be empowered to make changes in Medicare policy: “I can’t think of anything…that is more important than ultimately giving some real authority to someone to make these tough decisions.”  Sen. Daschle’s 2008 book Critical likewise praised the idea of having unaccountable bureaucrats make “tough decisions,” writing that “We won’t be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost-effective.”

Washington – the state, not the city, that is – has given a board of bureaucrats the power to do just that, and its experience is illustrative of what all Americans can expect when Obamacare’s bureaucratic board finally convenes.  The Seattle Times reports on the state’s board, which meets later this afternoon:

If you want trouble, try telling a mother that insurance will no longer pay for her diabetic teenager to test his blood-sugar levels as often as she thinks he should.

Or tell a man who was crushed in a workplace injury that he can’t have the spinal injections for pain control he says are the only thing keeping him going.

That’s the job of the state’s oft-vilified Health Technology Assessment committee, a group of 11 health professionals charged with deciding whether taxpayer dollars should be spent on certain types of medical care for injured workers, people on Medicaid and state employees.

In an effort that’s unique in the country in depth and scope, the committee decides — at open meetings — which procedures, treatments and tools are effective and cost-efficient, and thus worthy of state dollars.
Far more persuaded by empirical data than personal anecdotes, the committee has passed judgment on newer technology such as upright MRIs and virtual colonoscopy, and on the more familiar — such as cardiac stents, arthroscopic knee surgeries, hip resurfacing and breast MRIs.

And despite the Administration’s claims that Obamacare’s board will be pollinated by experts, the Seattle paper notes that the Washington state board’s members “are, by design, not experts in the technologies they review… as a consequence, they sometimes appear less-than-fully informed — critics would say clueless — about the technologies they are assessing.”  The board members ARE however “experts in evaluating evidence” when it comes to the cost-effectiveness of treatments, meaning whether a particular course of action may be too expensive for the government to cover it.

To sum up:  A board of “experts” – who may or may not actually BE “experts” – gather in a room and pass judgment on whether the government will cover procedures like colonoscopies, breast screenings, diabetes test strips, and cardiac stents.  If you want a preview of the future under Obamacare – what Medicare Administrator Donald Berwick called “rationing with our eyes open” – you would be well advised to make a trip to the Pacific Northwest.

11.4 Million Americans Could See Higher Taxes — AND Lose Their Current Coverage

America’s Health Insurance Plans released their annual Health Savings Account survey this morning, which found that at least 11.4 million Americans participated in high-deductible health plans associated with HSAs – an increase of 14% compared to last year’s report.  This increase is particularly noteworthy because of provisions in Obamacare that could harm HSA users:

  • Individuals now cannot use HSA funds for over-the-counter medications without first obtaining a doctor’s prescription.  The Wall Street Journal previously noted how this provision is causing paperwork headaches for patients and physicians alike.
  • HSA users who withdraw funds for non-health purposes are subject to higher penalties – increases that could make HSAs a less attractive savings vehicle compared to IRAs and 401(k)s.
  • Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing that will prevent at least some current HSA plans from being offered.
  • Worst of all, many more individuals could lose their HSA plan, depending on how HHS bureaucrats define “insurance.”  The law does not specify that cash contributions made to an HSA will be counted towards the new minimum federal requirements.  Section 1302(d) of the statute states very clearly that those parameters will be defined “under regulations issued by the Secretary.”  Despite requests from state governors for clarity on this issue, the Secretary has refused to answer whether HHS will give all HSA plans a “safe harbor” to allow individuals to keep their current HSA plan.  (HHS has provided waivers that have gone disproportionately to union plans – why shouldn’t HSA participants get a waiver from this Obamacare mandate…?)

Below are data from the AHIP report providing state-by-state enrollment data – so you can see how many constituents in your home state could have their coverage affected by the Obamacare provisions outlined above.  As a reminder, candidate Obama promised that “For those who have insurance now, nothing will change” – and that middle-class families would not see “any form of tax increase – not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”  Today’s report once again illustrates how candidate Obama’s rhetoric has fallen short when compared to the reality of the law President Obama signed.

 

Alabama 77,311

Alaska 33,709

Arizona 174,270

Arkansas 55,653

California 1,073,319

Colorado 347,002

Connecticut 212,935

Delaware 34,356

District of Columbia 16,873

Florida 656,243

Georgia 315,251

Hawaii 1,432

Idaho 49,446

Illinois 690,509

Indiana 384,772

Iowa 132,175

Kansas 71,440

Kentucky 153,444

Louisiana 201,535

Maine 60,195

Maryland 335,493

Massachusetts 115,406

Michigan 408,758

Minnesota 507,307

Mississippi 32,526

Missouri 177,925

Montana 59,346

Nebraska 120,732

Nevada 53,121

New Hampshire 74,350

New Jersey 262,938

New Mexico 23,035

New York 452,031

North Carolina 310,834

North Dakota 14,865

Ohio 728,868

Oklahoma 68,841

Oregon 107,407

Pennsylvania 297,869

Rhode Island 28,470

South Carolina 158,600

South Dakota 19,393

Tennessee 276,725

Texas 844,832

Utah 107,886

Vermont 42,006

Virginia 223,671

Washington 230,459

West Virginia 19,545

Wisconsin 301,216

Wyoming 13,851

Uncategorized* 276,989

United States 11,437,165

Regulations, Premiums, and the First Amendment

Perhaps unsurprisingly, most of this morning’s headlines center around the September 23 six-month benchmark of the health law’s enactment, and the many new health care regulations taking effect on Thursday.  The Wall Street Journal reports on the President’s anticipated involvement Wednesday, with both a speech and a meeting with insurance commissioners, followed by a series of rallies by health care supporters on Thursday.  However, the Journal also notes that health insurance carriers’ need to raise premiums to pay for the new mandates included in the law have been “muddying the Democrats’ contention that the law will rein in sharply rising premiums.”

As previously noted here, HHS Secretary Sebelius earlier this month wrote an ominously worded letter to AHIP attacking “misinformation and unjustified rate increases.”   But as a very good column in yesterday’s Kansas City Star points out, the Sebelius letter “defies economic reality:” “It’s absurd for the Administration to pretend [insurance] changes won’t result in increased risk for insurers, which has to be covered by premiums….What may (or may not) work out for an industry average won’t necessarily apply to particular plans.”

A CBS News piece asked a related question about Secretary Sebelius’ letter: “Don’t the insurance companies have a right to make their own analyses and claims to their customers?”  Sebelius’ quoted response: “We just want to make sure that communication is as accurate as possible.”

Insurance companies are being asked to provide more benefits to consumers beginning this week, and those benefits come with costs attached.  In some cases, plans in the individual and small group markets could require significantly higher premiums, if they did not previously include many of the new required benefits.  Yet the Administration’s talk of enforcing the “accuracy” of communications between businesses (i.e., insurance carriers) and their clients could strike some as an attempt to infringe upon companies’ First Amendment rights.

Moreover, the Administration has yet to release the methodology behind its claim that the health care law will raise premiums by only 1-2 percent, despite a Congressional request made nearly two months ago.  Finance Committee Republicans also wrote to Chairman Baucus on Friday requesting a hearing on premium increases, specifically asking for testimony from Medicare actuary Rick Foster and HHS’ Jay Angoff.  It will be worth watching to see whether the Administration and Democrats in Congress, having pushed for transparency with respect to insurers’ premium increases, will be similarly transparent with regards to their own estimates of the impact of the law on premiums.

Update on 1099 Amendments; Berwick U-Turn on Rationing?

Politico has two articles this morning on the 1099 amendment votes expected today: One outlining the state of play of the Johanns and Nelson amendments, and a second on an Administration letter sent to the Hill yesterday supporting Nelson and opposing Johanns.  The letter from Secretaries Sebelius and Geithner opposes the Johanns amendment’s reduction in funding for the Prevention and Public Health Fund, which some have characterized as a source of wasteful federal spending on pork projects like jungle gyms.  Perhaps most notably, a Wall Street Journal article quotes a Treasury official as stating the Administration wants to “keep the [1099] proposal…as a means to ensure tax compliance,” while slightly mitigating its impact on small businesses.  (The news that the Administration does not want to repeal the 1099 reporting requirement outright may come as a surprise to the 239 House Democrats who voted for a complete repeal of the new requirement back in July.)  Meanwhile, small businesses themselves continue to highlight the problems that this onerous new reporting requirement will cause, while advocating for the complete repeal of the 1099 provision: The NFIB sent a key vote letter supporting Johanns and opposing the Nelson side-by-side, while US Chamber of Commerce Executive VP Bruce Josten has a Roll Call op-ed on the issue.

Meanwhile, CMS Administrator Don Berwick made news of his own yesterday; the Associated Press reported that in an address at AHIP’s convention in Washington, Berwick “[spoke] out against rationing,” claiming that reducing costs should not involve “withholding from us, or our neighbors, any care that helps.”  Unfortunately, the story also notes that Berwick once again “left without taking questions from reporters,” so no one could question him about how his lengthy prior history of support for rationing “with our eyes open” comports with the comments in his speech.  (The speech is not posted online, so it’s unclear based on the reported excerpts whether “care that helps” will be defined on cost-effectiveness grounds, as Dr. Berwick has previously supported.)  Sens. Grassley and Hatch however sought to remedy Dr. Berwick’s continued failure to answer questions, by writing him yesterday to request that he either 1) ask Finance Committee Chairman Baucus to hold a hearing where he can testify or 2) commit “to appear before a panel of interested senators” in the event Sen. Baucus still refuses to call a hearing.