Fact check: What causes premiums to increase?
Posted by The Campaign on February 10, 2010 at 5:50 AM
Premiums increase when the cost of medical services go up. Government data show that in 2009 rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago. Unless steps are taken to address the underlying cost of medical care, health care costs will continue to grow at an unsustainable rate, making it even more difficult for families and small businesses to maintain health care coverage.
New Health Spending Projections
New health spending projections released by CMS last week found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in GDP share since the federal government began keeping track in 1960. The report, published in Health Affairs, notes that the “two primary drivers of growth…are medical prices and utilization”, which saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:
* “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
* “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
* “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
AHIP Letter on Factors Contributing to Premium Increases
AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. Here are a few highlights:
* These data show that increases in premiums are driven by the growth in the cost of health care services and that plan administrative costs are rising at far lower rates than the cost of care.
* With respect to specific cost factors, our health plans project that the underlying trends in health care service costs will continue into the future and adversely affect 2010 premium levels. Specifically, our plans are reporting:
* sharp increases in hospital and physician rate requests,
* increases in outpatient surgery costs,
* increased billing for more services provided per emergency room visit,
* increases in the use and cost of specialty drugs, and
* increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients during this economic downturn.
* As the number of uninsured Americans increases, health plans also report seeing an increase in uncompensated care associated with emergency room visits by persons who have no coverage and are unable to pay for the services they receive.
* In a number of markets, consolidation among hospitals and other health care providers also is increasing costs and health plans are reporting higher rate increases from provider systems or hospitals and medical groups with dominant positions. Indeed, approximately 82% of metropolitan areas in the United States have “highly concentrated” hospital markets under guidelines used by the Department of Justice and the Federal Trade Commission.
* A wide range of new state laws – including benefit mandates, regulations, and premium taxes – are contributing to higher health care costs for small employers.
* The current economic downturn is another issue that is playing a role in small employer health care costs. At a time when many small businesses are financially strained, our plans are observing that some companies with young, healthy workforces have stopped offering coverage. Another related trend is that as it becomes more difficult for small employers to continue offering coverage, some are forced to reduce the portion of the premium they cover and increase employee cost-sharing. In response to these decisions, more employees – usually those with below average health costs – are declining to participate. Similarly, few employers are hiring young, less experienced workers because of the weak economy, while others have been forced to lay off workers hired within the past several years. The net impact of these developments is that the remaining risk pool is more heavily weighted with older, less healthy persons, resulting in higher average costs per enrollee for those who maintain coverage.
In Case You Missed It: Los Angeles Times looks at the need to rein in rising health care costs
Posted by The Campaign on February 09, 2010 at 7:17 AM
The Los Angeles Times editorial page takes a hard look at the need for health care reform to seriously address ways to control health care costs. A few excerpts:
· Lawmakers are expected to pass a bill this week that would repeal the federal antitrust exemption that insurance companies have enjoyed since 1945 -- a move that makes for little more than a good sound bite.
· Removing the exemption won't do much to boost competition or spark a price war among insurers, however.
· (The Congressional Budget Office said that a similar proposal in the House's comprehensive healthcare bill would have no significant effect on premiums because state regulators already require insurers to price their coverage competitively.)
· The unfortunate reality in healthcare reform is that there is no quick fix to reducing premiums or even bringing their growth into line with inflation. The ever-increasing cost of insurance reflects the incessant growth in healthcare spending. And the solution is to reduce the supply of money for healthcare, lower the demand for medical services, or do both.
· Most Americans already have insurance, and they're less concerned about the growing ranks of the uninsured than they are about the climbing cost of their own policies. According to the Congressional Budget Office, the bills won't make much of a difference on that front. For example, it estimated that the Senate bill would bring about a slight decrease in group premiums in five years but a 10% to 13% increase in individual policy premiums, mainly because the latter would provide more comprehensive coverage than such policies offer today.
· …they should adopt a “fail-safe” mechanism along the lines that the National Coalition on Health Care has proposed, with a specific goal for healthcare savings and a means to push providers, insurers and drug companies to achieve it. That's not a call for price controls; it's a mandate for the industry to stay focused on the problem of rising costs.
For the full editorial, click here.
ICYMI: The Buffalo News: Need is for cost control first, not just coverage expansion
Posted by The Campaign on February 09, 2010 at 7:15 AM
At a time when health care costs are crushing the economy and gobbling up a larger portion of the GDP each year, the Buffalo News explores why the nation needs a long-term strategy to address the rising costs of health care. A few excerpts:
“But most Americans, as polls and the recent Senate election of a Republican in the most liberal state of the union have shown, do understand that the current proposals do little to curb the pain they feel from rising health care costs and spend more taxpayer money at a time of mushrooming deficits and economic recession. There’s not just a need to pass health care reform; there’s a vital need to get it right.”
“The issue is affordability. The Democrats’ health care reform package involves about $1 trillion in additional spending. The plan theoretically offsets that with $500 billion in increased taxes and $500 billion in Medicare and Medicaid spending cuts. Both have problems.”
“Health care reform is important. Expanding health coverage to all Americans is a good and moral goal. But health care spending now accounts for 17.3 percent of the American economy and nearly a quarter of all federal outlays, and the president is among those who have described the continuing escalation of health care costs as unsustainable. The imperative is to control costs first, and then add new costs by expanding coverage.”
“The need is for a supportable health care reform bill, one that realistically addresses the problems of cost.”
To read the full article, click here.
What They Are Saying About McCarran-Ferguson
Posted by The Campaign on February 09, 2010 at 7:10 AM
Los Angeles Times:
• “Lawmakers are expected to pass a bill this week that would repeal the federal antitrust exemption that insurance companies have enjoyed since 1945 -- a move that makes for little more than a good sound bite.” (Los Angeles Times, Back to the drawing board, 02/08/2010)
• “Removing the exemption won't do much to boost competition or spark a price war among insurers, however. (The Congressional Budget Office said that a similar proposal in the House's comprehensive healthcare bill would have no significant effect on premiums because state regulators already require insurers to price their coverage competitively.)” (Los Angeles Times, Back to the drawing board, 02/08/2010)
McClatchy:
• However, the effort to remove the 65-year-old exemption is a small step that's unlikely to have much direct impact on consumers, according to independent analysts. ‘I don't think this will have much effect. This is strictly political posturing,’ said Paul Ginsburg, the president of the Center for Studying Health System Change, a Washington research group.” (McClatchy, Analysts: Stripping health insurers' antitrust protection won't affect consumers much, 02/07/2010)
• “But rising costs, he said, stem from money passing through insurance companies to health care providers such as doctors and hospitals, and therefore ‘passing something focused on insurers like this is not going to do a lot. It's not the reform that's really needed.’” (McClatchy, Analysts: Stripping health insurers' antitrust protection won't affect consumers much, 02/07/2010)
• “In fact, Ginsburg said, insurers already are prohibited from colluding to raise prices and from merging at will. They can, however, pool information about risks, and it can be argued that that helps them manage ways of controlling costs and even rates.” (McClatchy, Analysts: Stripping health insurers' antitrust protection won't affect consumers much, 02/07/2010)
Kaiser Health News:
• “…many antitrust experts say that ending the exemption -- by repealing the 1945 McCarran-Ferguson Act -- wouldn't significantly increase competition or reduce premiums.” (Kaiser Health News, The Antitrust Exemption For Health Insurers: Meaningful Or Not?, 02/08/2010)
• “‘This is just barking up the wrong tree for health insurance,’ said Scott Harrington, a professor of health care management at the Wharton School at the University of Pennsylvania. While many lawmakers are eager to pass some kind of health care bill, they ‘don't have a clue how the antitrust exemption works. It might sound good, but I can think of very few things in the bill that would be less consequential for consumers of health insurance.’” (Kaiser Health News, The Antitrust Exemption For Health Insurers: Meaningful Or Not?, 02/08/2010)
• “An analysis by the Congressional Budget Office estimated that repealing the antitrust exemption for health insurers ‘would have no significant effects on either the federal budget or the premiums that private insurers charged for health insurance.’” (Kaiser Health News, The Antitrust Exemption For Health Insurers: Meaningful Or Not?, 02/08/2010)
National Public Radio:
• “…other analysts, including both the Congressional Budget Office and the Congressional Research Service, say they doubt that eliminating the antitrust exemption will have much of an impact on competition or premiums.” (National Public Radio, Bill Would Apply Antitrust Laws To Insurance, 02/08/2010)
• “In fact, says Kevin Bingham of the American Academy of Actuaries, ‘quite honestly, it would lead to what I believe and what the academy believes would be reduced competition, and potentially higher rates.’ Bingham says that's because what the exemption was meant for in the first place was to allow insurance companies to share data about insurance risk. That's important, because without that data, insurance companies could end up setting premiums too low. Then the insurance companies could become insolvent, and unable to pay claims. Large insurers — the ones Democrats say are taking over the health insurance markets — probably wouldn't even be affected by the repeal, says Bingham, because they collect data themselves. But the effect could actually be negative on smaller or start-up companies, he says, ‘and without that ability to look at that industry data and kind of looking at cost estimates, it might push them away from getting involved at all.’ And if small companies stay on the sidelines, competition could actually be reduced.” (National Public Radio, Bill Would Apply Antitrust Laws To Insurance, 02/08/2010)
Congressional Quarterly:
• “…bill supporters have little evidence to support claims that the antitrust exemption leads to higher costs. In fact, their statements in support of the bill sometimes suggest the opposite.” (CQ, House Democrats Push Bill to Eliminate Insurance Antitrust Exemption, 02/05/2010)
• “Yet there are indications that requiring insurers to comply with federal antitrust law in addition to state regulations could actually decrease competition in the industry.” (CQ, House Democrats Push Bill to Eliminate Insurance Antitrust Exemption, 02/05/2010)
• The Congressional Research Service (CRS) noted in a Jan. 14 report that smaller insurance companies rely on data collected from their larger competitors and shared industrywide — something that would be forbidden under the Democratic bill — in order to accurately set their rates. ‘Should additional data be unavailable to small insurers in some way, further consolidation in the insurance industry as small insurers merge in order to gain the competitive advantage of additional information is a likely, albeit, ironic, possibility,’ CRS said.” (CQ, House Democrats Push Bill to Eliminate Insurance Antitrust Exemption, 02/05/2010)
• “State insurance commissioners say that they already sufficiently regulate health insurers and are opposed to the Perriello-Markey legislation and to similar proposals.” (CQ, House Democrats Push Bill to Eliminate Insurance Antitrust Exemption, 02/05/2010)
Ezra Klein:
• “The policy takeaway is that the CBO estimates that repeal will have no measurable impact on premiums or coverage…” (The Washington Post, Ezra Klein, A primer on the antitrust exemption for insurers, 02/08/2010)
• “On the other hand, since it doesn't matter much, and it's good politics either way, Democrats may as well go after it. They just shouldn't fool themselves into thinking they've actually done anything useful when they've finished.” (The Washington Post, Ezra Klein, A primer on the antitrust exemption for insurers, 02/08/2010)
ICYMI: AHIP Statement on New Health Spending Projections
Posted by The Campaign on February 04, 2010 at 12:14 PM
AHIP Statement on New Health Spending Projections
Washington, DC – Karen Ignagni, President and CEO of America's Health Insurance Plans (AHIP), released the following statement today in response to new health spending projections released by CMS which found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in GDP share since the federal government began keeping track in 1960:
“Rising health care costs are crushing our economy and adding a burden on working families and employers across the country. The new CMS data confirm that rising health care costs are driven by increases in underlying medical costs, not health plan administrative costs. In fact, the proportion of health insurance premiums that go towards administrative costs is declining as overall health care costs continue to soar. Without a national, long-term strategy to address the rapid growth in underlying medical costs, health care spending will continue to grow far faster than the economy as a whole, crowding out other important domestic priorities, such as education, energy, and deficit reduction."
The report, published today in Health Affairs, notes that the “two primary drivers of growth…are medical prices and utilization”, which saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:
• “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
• “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
• “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
This is consistent with national data and information received from health plans showing that health care costs are expected to increase even further due to the underlying growth in the cost of health care services.
To read the full report in Health Affairs, please click here.
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Providing Health Benefits for Over 200 Million Americans.
FACT CHECK: Small Businesses and Health Care Costs
Posted by The Campaign on February 03, 2010 at 5:57 PM
In December, AHIP sent a letter to Capitol Hill discussing the cause for rising health care costs particularly for small businesses. Below are some key highlights from this letter:
Data from NHE "...show that increases in premiums are driven by the growth in the cost of health care services and that plan administrative costs are rising at far lower rates than the cost of care."
"...all 50 states and the District of Columbia impose restrictions on the premiums that may be charged for health insurance coverage and require certification that premium increases be consistent with actuarial standards with respect to cost trends and benefits provided."
For more click here for the full letter.
ICYMI: Fortune Magazine discusses the importance of structuring reform properly
Posted by The Campaign on February 03, 2010 at 9:41 AM
Fortune Magazine’s editor-at-large, Shawn Tully, takes a look at several of the health care reform provisions with broad support and how they need to be structured in order to work well.
A few excerpts:
In the battle over health care reform, two ideas seems to bridge the divide between Democrats and Republicans: Private insurers should be required to cover Americans with pre-existing conditions and be banned from charging older, sicker people much more. But where the two camps jibe could also cause the most damage to health care.
The two ideas: Guaranteed Issue and Community Rating.
Guaranteed Issue forces private insurers to accept any and all applicants, regardless of their medical condition. Community Rating bans carriers from charging a different rate, say, for someone with diabetes than a buff tri-athlete. It also imposes tight bands on premiums for customers of different ages, even though older patients cost far more to insure than younger ones.
The pool dries up: So what is the problem with obliging insurers to accept everyone and try to keep pricing uniform? First, the young and healthy -- the group whose premiums carriers count on to make insurance work -- will be less likely to buy in. Community Rating forces them to pay far more than their anticipated medical expenses. Shunning insurance actually makes sense: They can wait to sign up if they get diabetes, cancer or another chronic condition. Remember, under Guaranteed Issue, insurers can't turn them down.
Boosting penalties: A system mandating that insurers take all comers at close to the same premium can work -- but only if it also imposes a powerful "individual mandate" requiring that everyone buy insurance.
To read the full article, click here.
What You Need to Know: McCarran-Ferguson Act
Posted by The Campaign on February 03, 2010 at 9:15 AM
National Association of Insurance Commissioners letter (10/21/2009):
“The potential for bid rigging, price fixing and market allocation is of great concern to state insurance regulators and we share your view that such practices are harmful to consumers and cannot be tolerated. However, we want to assure you that these activities are not permitted under the McCarran-Ferguson Act and are not tolerated under state law. Indeed, state insurance regulators actively enforce prohibitions in these areas.”
To read the full letter, click here.
Congressional Budget Office analysis (10/29/09):
“The analysis also takes into account the provisions of section 262 of Division A regarding the application of federal antitrust laws to health insurers. CBO estimates that implementing those provisions would have no significant effects on either the federal budget or the premiums that private insurers charged for health insurance. For an analysis of a similar proposal, see CBO’s cost estimate for H.R. 3596, the Health Insurance Industry Antitrust Enforcement Act of 2009 (October 23, 2009).”
To read the full analysis, click here.
Congressional Research Service analysis (8/31/2009):
“Given the courts’ narrowing definition of the ‘business of insurance,’ they would not be likely, in any event, to find such activities as market allocation, tying, or monopolization protected by McCarran-Ferguson from the application of the antitrust laws.”
American Academy of Actuaries letter (1/21/10):
“These analyses of aggregated data serve several purposes; those purposes align with the original intent of the McCarran-Ferguson Act and assist state regulators charged with overseeing the pricing of insurance coverage and solvency of insurers. A few of these purposes are:
1. To provide credible data upon which to base loss estimates and premium rates.
2. To enhance competition by providing access to industry information to enable existing companies to offer products in new markets or for different types of exposure by reducing the uncertainty associated with determining loss estimates and premium rates.
3. To further support competition by providing data to newly-formed companies or self-insurers looking to begin covering medical professional liability exposure.
4. To guide companies, self-insurers, and regulators in reducing the likelihood of insolvencies, a long-term and recent concern. Through the review of industry data, companies, self-insurers, and regulators are better able to evaluate whether too little is being charged or not enough is being set aside in reserves for a given exposure situation.”
To read the full letter, click here.
AHIP letter to Senator Leahy and Representative Conyers (10/8/09):
“In our view, the two bills under consideration may be based on a misperception of the scope and impact of the McCarran-Ferguson Act on health insurers. The Act does not preclude regulation of insurers, but, instead, recognizes that the states play a central role in conducting oversight of health and other insurers.”
To read the full letter, click here.
AHIP letter to Representative Conyers (10/21/09):
“The narrow nature of the Act, as interpreted by courts, means that the types of anticompetitive activity contemplated by the bills already are subject to federal and state antitrust laws. We believe that health insurers have not been engaging in anticompetitive conduct and that McCarran-Ferguson does not provide a shield for such conduct. Thus, the bills attempt to remedy a problem that does not exist.”
“We ask you to consider our strong concerns that such legal uncertainty could chill or limit newly developing activities that will benefit consumers and doctors (e.g., physician portals now developing to streamline administrative processes and data aggregation efforts that are designed to respond to physician concerns that they not be evaluated only through the lens of an individual health plan’s patient population) and add to the already substantial cost that litigation imposes on the health care system.”
To read the full letter, click here.
Scott Harrington op/ed (WSJ, “Competition and Health Insurance”, 11/6/09):
“Repealing the antitrust exemption for health insurers would not significantly increase competition, and it would not make health-insurance coverage either less expensive or more available. There is no evidence that the exemption has increased health insurers' prices or profits or contributed to higher market concentration.”
“In other words, the insurance industry's antitrust exemption is inconsequential to the health-care reform debate. It just distracts attention from important issues and further demonizes private health insurance.”
To read the full article, click here.
BNA article (“Bills to Repeal McCarran-Ferguson Act for Health, Malpractice Insurers Introduced”, 9/23/09):
“Attorneys who spoke to BNA said, however, there is no evidence that the act has been an impediment to either federal or private efforts to prevent or curtail anti-competitive conduct in these sectors.”
The article also quoted Jack A. Rovner, with The Health Law Consultancy in Chicago: “While the law does not have much impact on the health insurance industry, it makes a good political target,” he said. “This is more about politics than an effort to correct anti-competitive conduct by health insurers because the fact of the matter is that repeal would not make a significant difference with respect to either compliance or enforcement,” Rovner said. “McCarran-Ferguson has never been a valid defense to the price-fixing or other per se antitrust law violations targeted by the legislation, whether pursued by government or private parties,” he added. “While repeal could have a significant impact on the balance of state and federal relations, the proposed legislation will not change a lot in the legal landscape concerning the way health and malpractice insurers are regulated,” he said.
To read the full article, click here.
Business Week article (“Reviving an Old Threat in Health-Insurance Battle”, 10/19/09):
“’There would be quite a bit of confusion and legal action on the state and federal level as regulators try to figure out who's responsible for regulating what,’ says Joseph Paduda, principal of Health Strategy Associates, a managed-care consulting firm in Madison, Conn.”
“Austin Frakt, a health economist and assistant professor at Boston University's School of Public Health, says lawmakers also would have to take into account the other parties that contribute to driving up health-care costs—including doctors, hospitals, and drug companies—which McCarran-Ferguson does not address.”
“Threatening a repeal of McCarran-Ferguson ‘doesn't seem like it has been thoroughly thought through,’ says Frakt. As with every aspect of the proposed reform, the question of whether to regulate insurance at the federal or state level ‘requires a nuanced approach.’”
To read the full article, click here.
Health insurance is one of the most regulated industries in America at both the federal and the state level: http://bit.ly/PJuzm
ICYMI: The market clout of Massachusetts providers is a “main driver of the state’s spiraling health care costs”, investigation finds
Posted by The Campaign on January 29, 2010 at 4:30 PM
A year-long investigation into the rising costs of health care in Massachusetts, which are growing by 7.5 percent each year, found that hospitals and physicians are leveraging their market power and driving up health care costs in the state. The Boston Globe reports on the investigation by the state attorney general’s office. Here are some key findings:
- “Massachusetts insurance companies pay some hospitals and doctors twice as much money as others for essentially the same patient care, according to a preliminary report by Attorney General Martha Coakley. It points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs.”
- “Coakley’s staff found that payments were most closely tied to market leverage, with the largest hospitals and physician groups, those with brand-name recognition, and those that are geographically isolated able to demand the most money.”
- “’These rising costs are unsustainable. If we don’t do something about it, the only thing we’ll be able to afford is health care. No one will have money for food or housing,’[said Coakley].’’
- “The report shows that a small group of about 10 hospitals statewide command significantly higher payments than the other 55, ranging from 10 to 100 percent more than their competitors for similar work.”
- “Investigators found that Massachusetts health care costs, which are growing by 7.5 percent annually, are mostly the result of rising prices, not patients getting more imaging tests, surgery, and other procedures.”
For the full article, click here.
To read the preliminary report, click here.
Fact Check: Fast Facts about Fraud
Posted by The Campaign on January 28, 2010 at 10:14 AM
$60 billion: the estimated amount of fraud within Medicare each year
$17 million: the average annual amount of money saved by each health plan’s anti-fraud operations
$7.60: the average amount of money a health plan returns to the company and policyholders for every one dollar invested in anti-fraud operations – which keeps health care costs down for businesses and working families
Source: Anti-Fraud Management Survey Report for 2007 by the National Health Care Anti-Fraud Association
Health care fraud leads to higher costs for businesses, workers, and families. The overwhelming majority of health claims are legitimate and paid on-time, but for those that might be fraudulent, health plans use a variety of measures to prevent and detect them, including:
· Education and awareness campaigns: Policyholders, providers, and the public are encouraged to report any suspected fraud through telephone hotlines and websites.
· Commitment to safety: Health plans ensure their networks include only credentialed providers to protect consumers from unlicensed providers.
· Cross-disciplinary teamwork: Employees from a variety of backgrounds investigate potential fraud and collaborate across a health plan in order to weed out only potentially fraudulent claims for investigation.
· Communications with policyholders: Policyholders are encouraged to monitor their explanation of benefit forms for medical services they did not receive and to report known instances of health fraud.
· Monitoring and collaboration: Working with external law enforcement agencies at the state and federal levels, health plans prevent and protect consumers from fraud.
· Use of sophisticated software: Analyzing claims data helps predict potential fraud and weed out the “outliers” for further investigation, allowing effective and efficient investigation of the few claims with potential for fraud.
· Commitment to professional excellence: Health plans require credentialing and ongoing annual training for their staff dedicated to investigating health fraud in order to keep up with changes in technology and laws and effectively weed out health fraud and abuse.
