Stuffing the Genie Back in the Bottle…

Before I get into the meat of my message today, I want to vent for a moment.  I have a small addiction to cable news, talk radio and the pundits that populate that cultural phenomenon. I am also mildly addicted to social media outlets such as Facebook and Twitter, mainly as a way to keep my finger on the pulse as to the feelings and attitudes of my peers, family and friends.  With that background in mind, I have a serious request…STOP CALLING The Affordable Care Act HEALTH CARE!!!!  This act has absolutely nothing to due with HEALTH CARE, it is all about health insurance, and there is a huge difference.  Health Care is a good or service provided by a doctor, nurse practitioner, X-ray technician and the list goes on.  Saying that the Affordable Care Act provides a person with health care is like saying that my car insurance is providing me with Auto Care, which simply is not the case.  My car insurance exists to aid my financial burden in the event that I injure another person due to an act, intentional or unintentional, as well as assist in the repair to my vehicle should the need arise.  Health insurance acts in the same manner, and people have FORGOTTEN that fact.  The truth of the matter is that ALL AMERICANS have access to HEALTH CARE, but few want to PAY the cost that comes along with that care.  We are not upset with the doctors who charge the prices they charge, we are not concerned at the hospitals who shift costs from patients who can’t afford the service to those who can, we don’t flinch at the cost of a prescription drug that will improve our quality and quantity of life dramatically, but we are all LIVID  at the audacity that insurance companies, who pay roughly 80% of those costs, charge us increasing premiums to achieve those “rights” in the face of an economic reality that we apparently  don’t mind or even know exists. OK, I feel better now.  So please stop calling the Affordable Care Act health care.

I got on a plane last Thursday to head to a board meeting for the KRMCA, one of my large client groups.  I had a good idea of what my message would be regarding health insurance and the general state of affairs with regard to the Affordable Care Act and what the prudent measures would be moving into 2014.  The trip was about an hour and 45 minutes, and when I landed my phone was blowing up with news that President Obama had reversed course on a key component to the implementation, primarily based on the backlash of a promise made to the American people.  If you like your current health plan, and your current doctor, you can keep them, period.

Well that sounds all well and good in a sound byte and headline format, but how exactly does that look to those who are charged with making that happen?  More importantly, who is this going to affect and who are the winners and losers in this new deal?  Candidly, I don’t know how the President has the authority to arbitrarily change a provision of the law that was enacted after it passed Congress, but that is not why I am writing this blog.  But let us be clear, there will be losers as a result of this policy shift.

Let’s start with the monetary outlay that the health insurance companies have absorbed over the last 3 years getting ready for the 2014 deadline for compliant plans.  My guess is that collectively these companies have spent hundreds of millions of dollars changing benefit platforms, addressing the more mundane rating issues with state regulators, realigning markets to meet the standards, assessing the risks associated with being in the exchanges versus not participating.  The sheer regulatory weight of this law is incredible, and yet, most insurers were ready for things to move forward January 1, 2014.  Oh, wait…that may not be a great idea…they say on November 14^th, one and a half months prior to the anticipated start.   Really?  How can this be a good thing?  How much have we paid in excess premiums already for those administrative gymnastics?  You know that it was passed along to the consumers at some level.  Tell them who the loser is Don Pardo……  The CURRENT POLICY HOLDERS!

Next, lets look at all of those employer firms who were given the option of taking an “early renewal” to postpone the negative effects of the ACA.  According to what I am reading, those people will have to renew their policies at some point in 2014, most opting for December, and subsequently be subject to ACA at that time.  Now you may be thinking, that’s fair,

1.        they were offered a chance to delay ACA for up to 11 months

2.       they exercised their right to make that choice

3.        they were never guaranteed more than that

They should be good, right?  Well technically speaking you are correct; however, if the decision to delay the full implementation of ACA had come in July, the majority of those firms would have stayed on their original anniversary dates and not taken a rate increase early to avoid the eventual negative effects of this law.  These people are clearly the losers in this decision. They are paying more in premiums now, rather than later.   If you recall in a previous blog post, my recommendation to all who would listen was to either renew early or get in to a “bona fide” association plan.  It seems that now, only 50% of that statement would be the right thing to do. Tell them who the loser is Don Pardo……  The COMPANIES THAT RENEWED EARLY AT A HIGHER COST!!!!

The last group of people affected by this decision is the employers who for whatever reason, did not opt to renew early.  There are three scenarios’ that would cause an employer to do this.

1.       They were unaware of the option

2.        Too busy to mess with it

3.       They were an unhealthy group and were looking forward to getting into the health care exchange, where they would likely see their premiums reduced due to community rating

This population of employers, estimated to be around 30% of the employers who had an active group insurance program in 2013 will likely come out ahead due to the President’s decision.  The employers who had unhealthy people in their group plans will still be able to access the health care exchanges beginning in 2014, therefore, as a result of community rating, they may actually see a decrease in the premiums they pay, although they will likely experience the other shoe that will drop and that is access to the doctors that they want to use.  I have written about Skinny Networks in the past, and the skinny networks are a staple in the exchanges.  So those employers might be WINNERS from a premium perspective, but LOSERS from a doctor and hospital choice perspective.

The first two categories listed above are the clear cut WINNERS in my opinion.  They either chose not to make a move by omission or due to circumstance. Either way, they will get the longest reprieve from the effect of ACA than any of the other groups of employers that we have talked about.  Let’s suppose that your company had an anniversary date of July 1, 2013.  You renewed your contract and choose not to early renew again in December of 2013.  Therefore, under the old rules, your company would need to be compliant with ACA on July of 2014….follow me?  Now the way that the new rules are being interpreted, your company can renew the plan you currently have in July 2014 for 12 additional months which in effect keeps you out of ACA compliant plans until July of 2015.

This is a long post, but the fact is this is a confusing subject.  If you have questions about ACA or what you might do to deal with the changing landscape, hit  us up  at Logan Lavelle Hunt.

Is The Website the Crisis…or is it something else entirely??

The technical issues are very frustrating for people who are trying to enroll in the Affordable Care Act programs for January.  It has been less than smooth, to say the least.  But I want to let you know what the next dilemma will be with the direction that we are traveling.  The problem is not one of ideology, but rather one of basic insurance structure.  When you build a structure on a foundation that is not strong, the end result is a structure that will eventually fail.

Insurance 101.  Insurance is based on “spreading the risk” of the few, across the financial buy in of the many.  From the earliest insurance products this simple fact has prevailed.  I have been taught that the concept of insurance started with villages or cities asking its citizens to contribute to a “fund” in the event that a fire or perhaps crop damage should occur.  These risks were catastrophic in nature, and the premise was that if everyone contributed a little of their treasure, (money) there would be money to repair or replace the few that suffered a loss.  As time went by, this became a business, and risk became more predictable as more data was compiled.  This is true of auto, home, fire, life ,health,  disability, workers comp, boat, RV’s, etc. etc.  If you have something of value, and you would like to protect the value of that “investment” insurance allows you, for pennies on the dollar in most cases, to accomplish that goal of protection. Here in lies the rub.

By using the law of large numbers, mathematicians are able to determine how likely a person or object is to suffer a loss based on known risk attributes.  If a house is located by a river, it will likely experience a flood.  If a person works on an oil well, or is a firefighter, the will likely be more prone to injury than the person who works in an office setting.  Therefore, the dollar amount that those higher risk folks would pay into the system would be more than that of people who chose a location or profession that was less likely to suffer the same type of loss.  That makes sense.  But there is one thing that we haven’t taken into account.  It is the underlying cost of replacing or repairing that “asset” if it were to suffer a loss.  That is what most folks fail to consider when talking about insurance.

In the case of health insurance, people tell me all the time that they are sick and tired of health insurance premiums increasing at 15% to 20% per year.  They would like to blame someone, and the easiest target is the “big, bad insurance company”.  I get it, it is frustrating.  But let’s look a little closer at some little reported truths.  The largest segment of consumer inflation in our country is in the health care space. Notice I didn’t say Health Insurance space.  There is a difference.  Health care is the delivery of a good or service at the doctors office, hospital, urgent treatment center, dialysis clinic, pharmacy, chiropractor, and the list goes on and on. Those services year after year continue to escalate seemingly uncontrolled and unnoticed.  It baffles me that there is no real, rational correlation in the marketplace to this fact.  So, let’s put on our reasonable hats here and ask ourselves the question…If the cost of gall bladder surgery increases 15% from 2012 to 2013, how can my insurance company, who pays for the majority of the costs of this procedure remain constant???  It can’t, and if you are being honest with yourself, there is no denying that fact.  Some might say, yeah, but once I have my gall bladder removed its gone and I don’t have it anymore, why should I pay higher premiums then.  Let’s remember the concept of insurance, contributions of many to cover the losses of the few.  The premiums you pay in, don’t remain in a bucket strictly reserved for you, they are used to offset the losses of the people you don’t even know.  So the insurance company knows that it will pay for 200,000 gall bladder surgeries this year and 200,000 gall bladder surgeries next year.  If the underlying cost of all procedures increase by 15%, how long do you think that the pool of money would last if there were not an increase in premium to offset the increase in price??  At some point, there would be no money left in the bucket to pay for YOUR procedure, when you eventually need it.  I am not defending the insurance companies here; I am simply talking about math. 

My point is this.  Insurance has always been designed to cover people for catastrophic loss.  We have somehow morphed that concept into paying a little money for a policy that takes care of all my huge bills.  That is not what it was ever intended to do.  I have never been able to predict all of the possible risks I may encounter looking forward, but I do try to rationally determine what I may or may not wish to cover from an insurance point of view. I also realize that if the price of fixing what I do have continues to increase, I should expect to pay more in premiums to cover it.

If you have questions about the Affordable Care Act, give us a call here a Logan Lavelle Hunt.  We can assist you in making an informed decision.  That is what we do!  Think about what you have read, there is no spin on math, from the beginning of time 2 +2 has always equaled 4.

Peace

Bumps in the Road? It can happen…

So I took last week off to be with my family, get away for some rest and relaxation and refill the tank a bit.  It seemed to help, and I think that perhaps my time away gave me a perspective that I was starting to lose with regard to what is happening in health insurance these days.  Therefore, I am going to try to bring some perspective to what we have heard in the news and on talk radio for hours on end. The Health Care Exchanges have gotten off to a rough start…

Let me say that those of us who actually make a living selling health insurance have seen this coming since the inception of this law.  Good, bad or indifferent, the regulatory decisions that have been made for the past two years have made this inevitable.  I am not saying that I told you so, but…many have in fact told anyone who would listen that this was going to happen.  Now that I have that off my chest, let’s move on. 

I, like many of you who read this blog, live in Kentucky.  We have Kynect as our state health insurance exchange.  It has performed rather well I must admit.  Our governor was even on national news exclaiming what a bang up job our state has done with its exchange.  Well done Governor, we do have a model that is workable, but what have we gained?  Reports that I have been reading have indicated that nearly 85% of the enrolled individuals through Kynect have gone to Medicaid.  My guess, and this is just a guess, is that the other 15% of those enrolling were previously enrolled in Kentucky Access (high risk pool) because their coverage will be terminating on January 1, 2014.  They have no other choice but to enroll in this plan.  But keep in mind, these people were already doing the right thing by being covered in the first place!!! 

My point is that nearly 100% of the enrollment in Kynect is comprised of people who qualified for Medicaid (and we should have been caring for all along) or people who could afford insurance in the high risk pool, and made health insurance a priority by actually purchasing a policy.  No where in this scenario do we find a mid income person who was previously uninsured suddenly finding that the premiums in the Kynect exchange have compelled them to purchase a policy.  Thus, those folks who make too much to have Medicaid assistance, but too little to feel compelled to spend discretionary dollars on insurance will remain uninsured.  I think that this will be the case across the nation. 

The federal exchange web site may be unreliable, but people’s behavior is predictable.  If something takes too long, costs too much, looks too cumbersome, feels too clunky, they just aren’t going to buy it.   While I do think that reform may have been needed for “health care” in general, I still feel that trying to fix one leg of a wobbly three legged stool still leaves you with a wobbly stool.  If our leaders don’t understand that premiums increase because the cost of the underlying services increase annually, your premise is flawed from the beginning.

So we are left with many unintended consequences that will be contrary to the intent of the act.  Blame will be flung far and wide.  Congress will have hearings, the spin will be incredible, the truth indistinguishable, the outrage indescribable and yet the costs will continue to rise, still uncontrollable.

Peace