Health Reform Insights By Fred Hunt

There is a bubbling trend from both states, and now “encouragement” from President Obama to let states create their own versions PPACA.  He told states: “If you can create a plan that covers as many people as affordably and comprehensively as the Accordable Care Act does…without increasing the deficit…you can implement that plan.” 

HOWEVER, what it really means is very different from first impression.  Translation:  If your state can create a plan that gives the same coverage to virtually 100% of your population at the same cost as the phony optimistic cost & revenue estimates for PPACA and without asking Uncle Sam for more money or adding to the US deficit, go for it.

It is an impossible goal.  If it were possible, it would have  been done decades ago.  So, it is an invitation & permission from Uncle Sam that means nothing.  Meanwhile states’ ideas of having their own program would include cuts in eligibility, limits on benefits, and reduced payments to providers in order to stay afloat financially. 

It is a mis-match, but this is the political dance that you will be watching for months or until 2014.  So, this is just to let you see it for what it is.  In the end, if states can’t meet the impossible goal, and if PPACA is still around in some form, and there is a PPACA-supportive President at the time, the law as it stands then can be forced own everyone’s throat, because it is the law.

ACTUARIAL THOUGHTSAn actuarial spokesman, when asked what he thought employers & plans would do to lessen the anti-selection problems if the individual mandate is killed in the courts, said that he thought plans would likely come up with ideas such as open enrollments, waiting periods, penalties for late enrollment, or perhaps allowing non-covered persons to only enroll in the bronze (lowest) benefit level plan.

 Meanwhile, when leading actuarial firms were asked what they were seeing or hearing about the possibility of employers dropping health benefit plans, they said they have not seen it yet, and they don’t expect “prudent employers” to consider such moves until state exchanges have been through a couple of renewal cycles to prove they work and are cost efficient (far from a certainty).  So, that would put decision times in 2016 or 2017. 

 In the Great-Minds-Think-Alike department, this is precisely the same insight TPAs have been reporting from their clients, except that the TPA clients, who tend to have a closer connection tot their workers, aren’t even talking about making a decision, because they want a good plan for their workers, and they don’t want their businesses hurt by employees caught in slow or poorly-designed/funded government plans.  So, TPA clients are seeing employee health coverage in the future more like the necessity of having a service contract on valuable equipment needed for the work.


The White House Office of Health Reform is being pretty much shut down.  This does NOT mean that the Obama administration feels PPACA is dead.  It is simply that the duties and many of the people are being diverted into other sections of the White House or HHS staff (perhaps in case de-funding happens; PPACA workers would be invisible in other offices).

 States differ not only among themselves, but also internally about whether the Vinson/FL court decision means that the state does not have to proceed in implementing PPACA.  For example, in AK, the Governor says no need to heed PPACA, the AK Senate says yes.  In WA, the Governor says yes, and the Attorney General says no.   We expect  the DOJ-requested “clarification” on this from Judge Vinson any day, but even that is not a national final decision.

 The PPACA Early Retiree Program now has 5,000 employers signed up, and has paid out $535 million as of the end of 2010.  What kinds of employers?  47% are State & Local governments;  27.5% Commercial companies;  15.1% Non-profits;  10% unions;  and .04% Religious groups.

 1099 repeal of the all-corporate requirement in PPACA was on the fast track.  Both parties want it to go away.   But to off-set the loss of predicted revenue the 1099 requirement was expected to raise, a provision was added to take that money from what would have been subsidies to individuals in state exchanges.  The Democrats are now stalling because they don’t want that off-set from the subsidies.  (If the subsidies are less or for fewer eligible people it also makes the state exchanges less appealing for employees to bail out of employer plans.)  So, the 1099 repeal which all sides want may end up stalled in the Senate or not be signed by the President.

 Drug Benefit News magazine reports that the number of areas of potential disagreement in proposals & contracts between PBMs and plan sponsors has grown tremendously.  It is not only things such as whether single-source generics should be priced the same as multi-source generics, but also whether the PBM follows the traditional approach or a more transparent model in cost disclosure.  So, read PBM proposals & contracts extremely carefully.

The final item today should probably be in that syndicated news feature called News of the Weird:  The government GAO reports that Medicare lost $48 Billion in 2010, and 10% was fraud or other improper payments.  Can you believe that people think that  a “public option” or government coverage health plan for the country would be cheaper, better or even sustainable?!?!!

Fred Hunt