Archive for July 8th, 2010

Thursday, July 8th, 2010

Wednesday, July 7, 2010                                                                                                                    THE WALL STREET JOURNAL



The Massachusetts Health-Care ‘Train Wreck’

The future of ObamaCare is unfolding here: runaway spending, price controls, even limits on care and medical licensing.




President Obama said earlier this year that the health-care bill that Congress passed three months ago is “essentially identical” to the Massachusetts universal coverage plan that then-Gov. Mitt Romney signed into law in 2006. No one but Mr. Romney disagrees.

As events are now unfolding, the Massachusetts plan couldn’t be a more damning indictment of ObamaCare. The state’s universal health-care prototype is growing more dysfunctional by the day, which is the inevitable result of a health system dominated by politics.

In the first good news in months, a state appeals board has reversed some of the price controls on the insurance industry that Gov. Deval Patrick imposed earlier this year. Late last month, the panel ruled that the action had no legal basis and ignored “economic realties.”

In April, Mr. Patrick’s insurance commissioner had rejected 235 of 274 premium increases state insurers had submitted for approval for individuals and small businesses. The carriers said these increases were necessary to cover their expected claims over the coming year, as underlying state health costs continue to rise at 8% annually. By inventing an arbitrary rate cap, the administration was in effect ordering the carriers to sell their products at a loss.

Mr. Patrick has promised to appeal the panel’s decision and find some other reason to cap rates. Yet a raft of internal documents recently leaked to the press shows this squeeze play was opposed even within his own administration.

In an April message to his staff, Robert Dynan, a career insurance commissioner responsible for ensuring the solvency of state carriers, wrote that his superiors “implemented artificial price caps on HMO rates. The rates, by design, have no actuarial support. This action was taken against my objections and without including me in the conversation.”


Mitt Romney signs health-care reform into law as Ted Kennedy (third from right) looks on, April 2006.

Mr. Dynan added that “The current course . . . has the potential for catastrophic consequences including irreversible damage to our non-profit health care system” and that “there most likely will be a train wreck (or perhaps several train wrecks).”

Sure enough, the five major state insurers have so far collectively lost $116 million due to the rate cap. Three of them are now under administrative oversight because of concerns about their financial viability. Perhaps Mr. Patrick felt he could be so reckless because health-care demagoguery is the strategy for his fall re-election bid against a former insurance CEO.

The deeper problem is that price controls seem to be the only way the political class can salvage a program that was supposed to reduce spending and manifestly has not. Massachusetts now has the highest average premiums in the nation.

In a new paper, Stanford economists John Cogan and Dan Kessler and Glenn Hubbard of Columbia find that the Massachusetts plan increased private employer-sponsored premiums by about 6%. Another study released last week by the state found that the number of people gaming the “individual mandate”—buying insurance only when they are about to incur major medical costs, then dumping coverage—has quadrupled since 2006. State regulators estimate that this amounts to a de facto 1% tax on insurance premiums for everyone else in the individual market and recommend a limited enrollment period to discourage such abuses. (This will be illegal under ObamaCare.)

Liberals write off such consequences as unimportant under the revisionist history that the plan was never meant to reduce costs but only to cover the uninsured. Yet Mr. Romney wrote in these pages shortly after his plan became law that every resident “will soon have affordable health insurance and the costs of health care will be reduced.”

One junior senator from Illinois agreed. In a February 2006 interview on NBC, Mr. Obama praised the “bold initiative” in Massachusetts, arguing that it would “reduce costs and expand coverage.” A Romney spokesman said at the time that “It’s gratifying that national figures from both sides of the aisle recognize the potential of this plan to transform our health-care system.”

An entitlement sold as a way to reduce costs was bound to fundamentally change the system. The larger question—for Massachusetts, and now for the nation—is whether that was really the plan all along.

“If you’re going to do health-care cost containment, it has to be stealth,” said Jon Kingsdale, speaking at a conference sponsored by the New Republic magazine last October. “It has to be unsuspected by any of the key players to actually have an effect.” Mr. Kingsdale is the former director of the Massachusetts “connector,” the beta version of ObamaCare’s insurance “exchanges,” and is now widely expected to serve as an ObamaCare regulator.

He went on to explain that universal coverage was “fundamentally a political strategy question”—a way of finding a “significant systematic way of pushing back on the health-care system and saying, ‘No, you have to do with less.’ And that’s the challenge, how to do it. It’s like we’re waiting for a chain reaction but there’s no catalyst, there’s nothing to start it.”

In other words, health reform was a classic bait and switch: Sell a virtually unrepealable entitlement on utterly unrealistic premises and then the political class will eventually be forced to control spending. The likes of Mr. Kingsdale would say cost control is only a matter of technocratic judgement, but the raw dirigisme of Mr. Patrick’s price controls is a better indicator of what happens when health care is in the custody of elected officials rather than a market.

Naturally, Mr. Patrick wants to export the rate review beyond the insurers to hospitals, physician groups and specialty providers—presumably to set medical prices as well as insurance prices. Last month, his administration also announced it would use the existing state “determination of need” process to restrict the diffusion of expensive medical technologies like MRI machines and linear accelerator radiation therapy.

Meanwhile, Richard Moore, a state senator from Uxbridge and an architect of the 2006 plan, has introduced a new bill that will make physician participation in government health programs a condition of medical licensure. This would essentially convert all Massachusetts doctors into public employees.

All of this is merely a prelude to far more aggressive restructuring of the state’s health-care markets—and a preview of what awaits the rest of the country.

Mr. Rago is a senior editorial writer at the Journal.

Protected: How to Make $1 Million a Year Selling Health Insurance

Thursday, July 8th, 2010

This content is password protected. To view it please enter your password below:

Who Really Pays the Tax?

Thursday, July 8th, 2010

With ObamaCare taking full effect in 2014, employers who dont provide health insurance will be subject to an 8% payroll tax. Who will really pay that?

Suppose annual company payroll is $1 million. An 8% punishment tax comes out to $80,000. If the employer reduces payroll by 7.5% (sorry, times are tough and I just had no choice. If you dont like it, go find another job), he saves $75,000 and his punishment tax is $74,000. 

Employees benefit by reduced taxes too – a win win situation it seems.

So Uncle Sam gets $74,000. Employer makes $1,000. Employees get screwed but pay less taxes.

This is really nothing new – employees have been funding 100% of Social Security and Medicare all along. And, they have been funding 100% of employer sponsored health care too.

This makes perfect economic sense doesnt it?

Thursday, July 8th, 2010

Wednesday, July 21, 2010   Add to CalendarAdd to Calendar
3:00 PM Eastern 2:00 PM Central  
1:00 PM Mountain 12:00 PM Pacific  

Join us for a special live Webinar on how to set the stage for success with health insurance, sponsored by Insurance Journal and Channel Harvest.

What’s the upside of national healthcare reform? Find out! This unprecedented opportunity for property/casualty broker and agency principals, producers and account reps will focus on the strategic issues firms should consider from the outset and over the 2010-2014 period when exploring business opportunities in the new health insurance era. This is a must-attend event for those looking to increase their business.

The new law–and the regulations still being written–will create opportunities for independent agencies who position themselves to take advantage of them. Agents who participate in this unique Webinar will be able to “make it happen”—while others are wondering “what happened”?

This Live 90-minute Session Will Address Emerging Health Insurance Issues:

  • Most likely directions Congress and regulatory agencies will influence the implementation of health insurance reform.
  • The new role of independent agents in the purchase of health insurance.
  • Positioning an agency as a go-to life/health/benefits provider and multi-line source.
  • Using the new health insurance reform as a strategic opportunity to deepen relationships with personal and commercial lines customers, and grow cross-sale revenue.
  • Likely changes in broker compensation and agency value, including a look ahead at how Medical Loss Ratios (MLRs) can affect your revenue opportunity.
  • What we can learn from the Massachusetts and Utah experiences.

This is not just another training session that regurgitates information found on the Internet. This is a rare opportunity to learn directly from those involved in influencing the new government requirements, and those who have already dealt successfully with similar state-level efforts! Your Webinar registration includes these added benefits:

  • Conference attendance for you and your entire team.
  • A conference manual with a program outline, speaker bios and presentations.
  • A full transcript, emailed to you when you take our post-conference survey.
  • The opportunity to connect with the speakers during the audience Q&A session—a favorite part of these events.

If you have any registration questions, you can call our Registration Desk (866) 872-5840 (international callers, please call 972-588-8036) or email:

For one low price—when you register by July 12, you and your entire staff (in one location) can participate in this exclusive Channel Harvest audio conference without ever having to leave your office. You’ll come away with first-hand, actionable information.

What is a Streaming Webinar?

It’s a seminar that you can view and listen to online. No need to dial in on the telephone! You’ll also have the opportunity to submit your questions online through our chat feature. To participate in this event, simply follow the instructions that will be emailed to you. Now you can train your team for one low price per dial-in site! Additional online connections and/or phone lines require additional registrations.

What is On-Demand?

An On-Demand is a link to the recording of the live event. Once you receive the link via email you will have the the ability to access and listen to the webinar recording — anytime — anywhere. All you need is an Internet connection!

Please use the form below to register for this webinar.

You will receive an email confirmation shortly after you complete the registration. Don’t forget to add to your whitelist!

If you are unable to register online or did not receive your confirmation email (don’t forget to check your Junk folder), please contact our Registration Desk at 866-872-5840 (international callers dial 972-588-8036). You can also contact us by email Send Email

If you have a promotion code, please type it in the Promo Code field below and click Send. You may then continue the registration process once the screen is returned to you with the updated price. Don’t forget to click on the checkbox of your choice!

  Webinar    $159 USD
  Webinar plus CD    $171 USD
  Webinar plus On-Demand    $171 USD
  CD Only    $159 USD
  On-Demand Only    $159 USD


NOTE: Your credit card charge will appear as “PayPal * BEACONCOMMU”.

REFUNDS: Cancellations before 5:00 PM on July 19, 2010 may receive a full refund less a $25 service charge (no refunds after receipt of conference manual). 

First Name* Firm/Organization*
Last Name* Address*
Title City*
Email* State/Province*
Secondary Email Zip*
Phone* Country*
*Required field      
Total charges to credit card:   $ USD

Thursday, July 8th, 2010

The inevitable future of the health care system

Stephen Cecchetti
7 July 2007
Print   Email
Comment   Republish
Technology will force private health insurance to disappear; social pressure to provide equal access to care will remain. The inevitable result will be that health care systems everywhere will provide universal coverage and be publicly run.

Economists believe in markets. Market-determined prices allocate scarce resources efficiently, encouraging individuals to put them to their best possible uses. This improves everyone’s welfare. But there are times when private markets break down, and insurance is one of them.  When markets fail, the government inevitably has to step in and provide insurance.  That’s the case with deposit insurance as well as with insurance against the devastation from natural disasters.  The future is one in which health care will fall into this same category.  Even in countries like the United States, the government, not the market, will ultimately control the level and cost of the medical care we will receive.<!–[if !supportFootnotes]–>[1]<!–[endif]–>

A single-payer, publicly run, health-care system is the inevitable consequence of the nearly continuous scientific revolution in molecular genetics that began a half century ago.  One day it is James Watson, one of the discoverers of the structure of DNA, being handed the complete genetic code inside his own cells.  The next day, researchers tie yet another chronic disease to the presence of specific patterns on individual chromosomes.  And then, a few days after that, we learn that scientists are learning to make stem cells from skin cells.

The time is fast approaching when we will have an inexpensive test that is capable of revealing a person’s genetic propensity to contract a broad array of chronic diseases.  That means that we will be able to accurately assess the cost of medical treatment over their lifetime.

I grant that there are a number of things about my medical future that I would rather not know. For example, I am not anxious to learn about my genetic predisposition to develop Alzheimer’s disease or my propensity to contract heart disease or type 2 diabetes.

While I may shy away from knowing the details, I am interested in the medical equivalent of my credit score – call this my “health score.”  Without revealing the specifics of any future diseases I am likely to contract, a health score will summarise my overall health-care risks.  And, each year, with new information on my weight, blood-pressure, and the like, my score will be refined.

The fact that we will all have health scores has profound implication for insurance; or, more accurately, for the failure of market-based insurance.<!–[if !supportFootnotes]–>[2]<!–[endif]–>  If I have the information revealing that I am likely to be healthy, living a long and low-medical-care-cost life, this knowledge alone will create adverse selection, causing me to forgo insurance for everything except treatments arising from accidents, which can never be forecasted.

To understand the problem, think about a simple case in which there are only two kinds of people, those with high and low expected future medical-care-costs lives. Imagine that the insurance company can’t distinguish the two types, so it charges all comers the average cost across the entire population.  For the healthy people, the cost of the insurance will look very high, so they won’t buy it.  That means that the only people who will buy the insurance are the unhealthy.  Realising this, the insurance company will have to raise their price further to compensate for the fact that only the high cost people are willing to buy insurance.  This is the classic “lemons” problem that causes markets to fail and was first described by George Akerlof.<!–[if !supportFootnotes]–>[3]

Alternatively, if my insurance company can obtain my health score, then, in the same way that lenders use my credit score to calibrate the interest rate they offer on a loan, they will adjust my health insurance premium based on their precise estimate of the cost of my future medical care. And, importantly, a clever insurance company that is precluded from learning my health score directly will find a pricing scheme that leads me to reveal it to them through the choices that I make.<!–[if !supportFootnotes]–>[4]

The fact that private insurers can accurately compute customer premiums to reflect expected future payouts means that the insurance market will break down. Insurance is about shifting risk, pooling large groups of undifferentiated individuals.  When either the insurer or the insured can forecast future events, and accurately distinguish one person from another, the rationale for insurance disappears.

In thinking about the provision of medical care, it is important to realise that we view it differently from other goods and services.  When it comes to housing, cars, vacations, and the like, we are fairly tolerant of disparities between rich and poor.  Our focus is on equal opportunities, not equal outcomes.

Granted, Americans accept greater inequality than the citizens of many other countries do.  Not so for health care.  Members of wealthy societies share the view that their members are entitled to high quality medical care.  Social justice demands that the rich and poor among all of us receive roughly comparable treatment.

Over the past decade, there have been several attempts to reform the American health care system.  The US spends nearly 15½% percent of our GDP on medical care, roughly 50% more than countries like France, Germany and the Netherlands.  And, as measured by life expectancy and infant mortality, Americans’ health outcomes are worse than those in much of the industrialised world.  Something has to change. But change is politically and socially difficult, so in designing the new system we should make changes that are likely to last.

Looking into the future, we see that technology will force private health insurance to disappear at the same time that the social pressure to provide equal access to care will remain.   This makes it inevitable that health care systems everywhere will provide universal coverage and be publicly run.  Governments will replace markets, insuring that the poor and uninsurable receive medical treatment at the same time that the healthy are forced to participate in a comprehensive system.

Unfortunately, we will be forced to restrict access to the most expensive treatments, but even so, everyone is going to receive adequate health care. The operation replacing my disintegrating brain and over-worked liver with the new ones grown from my skin cells may not be covered; but then again, maybe it will.  Regardless, I’m off to my wine cellar to ponder the best way to design a publicly run, single-payer health care system.