Catching Up on Health Care Reform

Hello. It’s been awhile. Hope you’re all well. To all who have inquired, my thanks for your concern, but all’s good. Hectic, but good. Lot’s going on (more on that later) and an awful lot of travel. I’ve had a chance to meet and talk with brokers in various parts of the country, including a few places I’ve never been before or haven’t been to for years: Boise, Omaha, Denver, Nashville. It’s been a great time to learn, recharge and stay a bit too busy to write any meaningful posts. While staying busy appears to be the new constant, I’ll try to find something worthy to share on a more regular basis. For now, however, let’s play some catch-up:

We’ll start with some (relatively) good news. One of the more popular elements of the Patient Protection and Affordable Care Act is the ability for children up to age 26 to remain on their parents’ medical insurance. The Department of Health and Human Services estimated 1.2 million young adults would take advantage of this opportunity. A story at Kaiser Health News indicates the actual number may be much higher: at least 600,000 young adults have already obtained coverage under their parents’ health plans. While most of the growth has apparently been in self-insured groups, fully insured plans are experiencing the same upsurge in membership. WellPoint, for example, reports adding 280,000 young adult dependents nationwide and the federal government added a similar number (although the article didn’t state what percentage of these were in fully-insured plans).

Of course, when it comes to health care reform every silver cloud has a gray lining. The Kaiser Health News article quotes Helen Darling, CEO of the National Business Group on Health, as noting “I don’t think anyone is eager to spend more money. This is not something employers would have done on their own.” She further cites the unfairness of asking employers to cover adult children who may be employed elsewhere. And businesses (and their employees) will pay a bit more due to this expansion of coverage to young adults – about one percent more according to estimates. And while its unclear how many of these individuals would not be able to obtain coverage elsewhere, but the general thinking is that a large majority of these young adults would be uninsured or underinsured, but for this provision of the PPACA.

Next let’s pause to note how rate regulation can be big business for consumer groups. In some states, regulators must approve health plan rate increases before they take effect. In others carriers may need to file their rate changes with regulators, but so long as the rate increases are actuarially sound they move forward. California, where rate increases tend to generate national news, is in the latter camp. The state’s Insurance Commissioner, Dave Jones would like to change that. (Actually he’d like to put health insurance companies out-of-business by implementing a single-payer system, but that’s another matter). However, he and others are pushing to change that. Assembly Bill 52, authored by Assemblymen Mike Feuer and Jared Huffman. This legislation would give the Department of Insurance (which regulates insurers in the state) and the Department of Managed Care (which regulates HMOs) to reject rate or benefit changes the agencies determine to be “excessive, inadequate, or unfairly discriminatory.”

In the findings section of the bill (which are the “whereas” clauses justifying the bill), the legislation cites rising premiums and the need for the state to “have the authority to minimize families’ loss of health insurance coverage as a result of steeply rising premiums costs” are among the problems the bill is intended to address. The solution: give politicians and bureaucrats the power to reject rate increases. No need, apparently, to address the underlying cost of medical care. The assumption seems to be that the way to reduce health care spending is to clamp down on premiums. This, of course, is like saying that the way to attack rising gas prices is to limit what gas stations can charge at the pump. One might conclude that, to be charitable, the legislation is addressing only a part of the problem.

Not only does AB 52 give medical care providers a free pass, it is likely to result in a windfall for the consumers groups supporting its passage. Politico Pulse notes that AB 52 requires insurance companies to pay for costs incurred by groups representing consumers at rate hearings. For groups like Consumer Watchdog this can represent a substantial amount of income. The Politico Pulse post reports that “Under a similar California provision for property and auto insurance, Consumer Watchdog has recouped approximately $7 million in legal fees since 2003”

Then there’s the 4th Circuit Court of Appeals hearing on two Virginia law suits seeking to have the Patient Protection and Affordable Care Act declared unconstitutional. A ruling from the three judge panel is expected in July. Much has been made of the fact that two of these three Appeals Court Judges were appointed by President Barack Obama – and the third by President Bill Clinton. While those so inclined are likely to consider this a conspiracy of cable news worthy dissection ad nauseum, it’s important not to make too big a deal about this.

First, courtrooms are not like the floor of Congress: partisan leanings have far less influence there. Second, as the Associated Press article points out, there are 14 judges on the court. Which of them hear a particular appeal is randomly determined by a computer program. There’s nothing sinister about the three judges selected for these appeals being appointed by Democrats, it’s just the way things turned out. No black helicopters are involved. Third, whatever this panel decides will be appealed by whichever side loses. The appeal could go to a hearing before all 14 Appeals Judges in the 4th Circuit or it could go straight to the Supreme Court. Finally, even if the appeals remain at the circuit level for another round, the final decision will be made by the Supreme Court. Everything going on in the lower courts (and there’s a lot of other suits out there needing to go through their appropriate Circuit Courts), is simply prelude. Yes, what the appeals court decide influences the Supreme Court Justices, but in a matter of this magnitude, far less than one might imagine. What happens at the District and Circuit levels is not unimportant, but it’s far from definitive.

While we’re playing catch-up: my previous post noted that Congress was likely to repeal the 1099 provision in the health care reform law. They did and the President Obama signed the law removing the tax reporting requirement from the PPACA. The PPACA no longer impacts 1099 reporting. I know you already knew that, but I wanted to close the loop on this issue. It’s now closed – and repealed.

Finally, a note about broker commissions and the medical loss ratio calculations required by the health care reform law. Where we last left our heroes, the National Association of Insurance Commissioners was debating whether to endorse bi-partisan legislation (HR 1206) that would remove broker compensation from the MLR formula used to determine a health plan’s spending on claims and health quality initiatives. The NAIC task force dealing with this issue wants time to review data being pulled together by the National Association of Health Underwriters, carrier filings and elsewhere.  Pulling together all this information, much of which has never been gathered before and is not maintained in a centralized data base, took a bit longer than initially anticipated. According to Politico Pulse, however,  the task force no”now believes it has all the data it will be able to get.” Which means the task force’s final report on broker commissions and the MLR calculation is now expected by May 27th.

Stay tuned.

And thanks again for staying tuned to this blog.  I look forward to continuing the dialogue with all of you.

Health Care Reform on Judicial Fast Track

The wheels of justice, as the cliché goes, grinds slowly. Given the complexity of the Patient Protection and Affordable Care Act this poses a bit of a problem. Federal District Court judges are reaching contrarian conclusions concerning the constitutionality of the PPACA. Everyone knows the validity of the health care reform law will be decided by the U.S. Supreme Court. In the meantime, however, should states continue to implement the law or hold off on complying? The sooner the Supreme Court weighs in the sooner federal and state regulators (let alone carriers, employers, brokers, and consumers) will know what’s what.

Remember the law suit filed by 26 states (and the National Federation of Independent Businesses) in Florida? That’s the one in which U.S. District Judge Roger Vinson decided that the PPACA’s requirement that individuals obtain health care coverage or pay a penalty/tax/fine/whatever was unconstitutional. In making his decision Judge Vinson stated the law’s violation of the Commerce Clause made the entire Act unconstitutional, but he declined to issue an injunction to stop implementation of the health care reform law. Some states used the the Judge’s ruling to stop work on implementing the law; others did not.

This is the suit likely to move things to the Supreme Court the fastest. Because in an attempt to bring some clarity to the situation, the Justice Department asked Judge Vinson to clarify whether he intended to halt the law – at least in the 26 states party to the suit. They got their answer from Judge Vinson in a response that, when you weed out the criticism of the Justice Department, comes down to yes, he did mean to halt implementation of the law, but he would stay his ruling (which means he’d delay making it effective) so long as the federal government appealed his decision on an expedited basis.

The Department complied and the 11th U.S. Circuit Court of Appeals has put a hearing of Judge Vinson’s decision on a fast track. For a case of this magnitude, the Court set a short timetable. Lawyers for the Obama Administration must file its first briefs by April 4th. The states will have until May 4th to make their case. Federal attorneys will have until May 18th to respond to the states’ filing.

Usually appeals of this nature are heard by a panel of three Circuit Court judges. The losing party may then appeal the case to the all the judges in the Circuit (referred to as an “en banc” hearing). Some of the states involved in the suit have are seeking to skip the panel and have all 10 judges in the Circuit consider the case. This approach would more quickly get the case to the Supreme Court. In any event, oral arguments before the 11th Circuit will likely occur this summer. Given the importance of their decision, a decision by the Court could take a few months.

This is not the only case moving through the system concerning the constitutionality of the PPACA. And even with this expedited timetable the odds are the Supreme Court will announce its decision in the midst of the 2012 elections. Which means there’s plenty of time for Congress to modify the law, for other suits to address non-Commerce Clause issues, and for health care reform to dominate the presidential campaign and the fight for Congress. Which means the Supreme Court’s decision will not be the end of America’s health care reform process, regardless of what they rule it will only be the start of the next round of America’s health care reform process.