The reality of these organizations is now becoming known through pilot programs that have been established. POLITICO

On May 12, 10 medical groups participating in a Medicare pilot program that paved the way for the ACO program declared that none would participate if the rule were not substantially modified. This is a huge blow to the ACO model. The providers that have participated in these programs have declared the risk of financial loss is to high.

This is very bad for health care reform because this program was the only staple of trying to control health care costs.

Here is the Governor’s letter to  Kathleen Sebelius Secretary U.S. Department of Health and Human Services.

This letter is stating that the states should have the right to setup the health exchange without the federal governments mandates.  This is a huge statement!  These governors realize that the federal mandates will make the plans in the exchange unaffordable. So the states want to develop the plans with cost in the equation. Not everyone needs or wants the same level of benefits.

The other major factor here is the medicaid. The states cannot afford the expansion of medicaid either in enrollment or increased benefits.

The list of Governor’s that signed
Governor Rick Perry of Texas
Governor Gary R. Herbert of Utah
Governor Scott Walker of Wisconsin
Governor Dennis Daugaard of South Dakota
Governor Bill Haslam of Tennessee
Governor Tom Corbett of Pennsylvania
Governor Nikki Haley of South Carolina
Governor Terry E. Branstad of Iowa
Governor Sam Brownback of Kansas
Governor Bobby Jindal of Louisiana
Governor Paul R. LePage of Maine
Governor Haley Barbour of Mississippi
Governor David Heineman of Nebraska
Governor Brian Sandoval of Nevada
Governor Susana Martinez of New Mexico
Governor John R. Kasich of Ohio
Governor Mary Fallin of Oklahoma
Governor Robert J. Bentley of Alabama
Governor Nathan Deal of Georgia
Governor C.L. “Butch” Otter of Idaho
Governor Mitch Daniels of Indiana

 If a group is running rich benefits then some of the employee are unable to afford their portion of premium.  This can happen when small group owners are more concerned about their families benefits than the entire group. There are a couple of fixes that might help here and the first one is to have the employer pick up a larger portion of the premium.  This is not a popular fix with owners! The 2nd is to look at changing the plan design to make premiums more affordable. This comes in the form of cost shifting.

Another issue that can add to lack of participation is employer contribution. If the employer pay 50% of the employee portion that might work for most of the company but if there are lower compensated employees this could be a problem. It’s important to look at contribution levels to see if they are realistic for all of the employees.

Aging population can add to a decline in participation. If a group is running age base premium rates then it can be difficult for older employees to afford them. A easy fix to this is composite rates where all the employees pay the same rate. Now composite rates can all have a negative impact on younger employees. If the premium is averaged out then some of the younger employee could go out to market and pick up individual plans. These type of situations one really has to look at the demographics of the group.

High claims can be the big obstaclefor a small group or any group for that matter. High claims can increase the premiums very quickly and then all of your healthy people come off the plan because of high premiums. This is a form of adverse selection. When high claims become obviously a owner or controller has to get to work. Tough decisions have to be made about plan design, wellness programs, and disease management.  If high claims are not addressed the group health plan can go into a death spiral with in a couple of years and then you have no more group health plan.

We have seen all of these situations and more when it comes to participation. Carriers do have the ability to audit your group for participation and they can drop you if you do not get compliant.

Keep an eye on your participation!

There are different levels of approval. Preferred Best would be the best rating which means you have no ongoing health conditions. Standard 2 would be the highest risk where a Insured has multiple conditions that are being treated or high risk.

In 2010 carriers were excepting standard 2 clients. Now we are seeing a shift where they are declining them. In Indiana its very common in our population to have someone overweight and suffering from high blood pressure or cholesterol. These people we use to be able to obtain a policy but now they are being declined.

Many people are not organized with their own health conditions. It’s very important while you are looking  for a policy that you communicate all of your conditions to your broker before you apply.  Some carriers will decline those condition while others will rider them. Speak to a professional that can guide you through this process before submitting applications to a carrier.

With underwriting guidelines changing it extremely important to speak with an agent that knows the market place.

If you are an employee that is 60 on a small group health plan you could be paying a large sum for health insurance.  One of the calculations for group premiums is age. The older an employee is the higher the premium.  This is true for both composite and aged based groups.  If you are an employee on a group health plan that has aged based rates then the premiums could be very high for you. If you are with a company that is using composit then that could help you a great deal if the rest of the group is young.

A difficult decesion for small groups (under 20 lives)  is if they should set the health plan with composite or aged based rates.  As it stands there is really no technique available that is going to reduce your premiums. Our current health insurance system is based on age.

The one technique that is aviable is to go out to market and pick up an individual plan. This is a great way to reduce premiums but you have to be able to get through underwriting. Genetics is tough enough but then if we add a unhealthy life style then it can be very difficult to find a policy.

In the large group arena there is a real concern with the baby boomer generation and what kind of claims they are going to have. If a company is self funding the first $100,000 in claims you understand the worry. 

Time will tell if this generation in the next 5-10 years makes life style changes to reduce claims.

For example a male that is 5’9″ if he ways 128-188lbs then he could qualify for Preferred 1. This would be the best risk factor you can get which mean your premium are the lowest for that plan design.  Now let’s take the same example 5’9″ and you weight 255 lbs now your are automatically in a standard 2 rate class which is the highest costing. The difference in cost from Preferred 1 and Standard 2 could be 100% more. Not only are you going to pay more in premium if you are over weight but now you could be declined. There is a good possibility if you are 60+ lbs over weight you could also suffer from High Cholesterol, High Blood Pressure, Hypertension, Sleep Apnea and so on. With the combination of being over weight and having health conditions you are an automatic decline for a Individual health policy from a private carrier. Now your options for coverage are a lot less and more expensive.

If you control your weight you could pay a great deal less in health insurance premium and pay a lot less for medical services.

The best way to get your individual health premiums low is t0 take care of yourself.

With todays technology there are all kinds of smart phone applications that can assist you with counting calories. Any Doctor in the country can point you in the right direction for a health diet.

This type of approach for health insurance is being entertained in both individualand small group health markets.  These plans show a change in how we view health insurance. People are willing to take out a plan that covers the most expensive aspect of health care and that is surgeries.

A typical hospitalization and surgical plan has a lot of craves out that in the past have been automatic with health coverages. A big carve out is coverage for diagnostic services. So if a customer is on one of these plans and needs a MRI on their knee then they half to pay for it out of pocket but could still get the network discount. We are seeing plan designs that carve out all prescription drugs.

Someone might look at this plan and think this is too much risk to take on. Not really! If you look for a plan that covers all the carve outs on an inpatient basis then the coverage can be satisfactory.

As we move along with health care reform there is no premium relief in site. These type of plans are going to continue to get serious looks from consumers because they usually are 50%-60% less in premium than a traditional.

Do not confuse these plans with limited liability policies! Hospitalization and Surgery plans are true forms of insurance.

More expensive technology, used more often — No
doubt, modern medicine is amazing and can save lives.
And as better tests and more expensive equipment
and pharmaceuticals emerge, we can expect to see an
increase in the use of these services. Technology is the
key driver of health spending, accounting for an estimated
half to two-thirds of spending growth.

 Inflation — Just as we spend more today for a gallon of
milk than we did 20 years ago, we spend more today for
the same medical services than we did in years past. This
medical price inflation outpaces general inflation and is
driving 51% of the growth in health care spending.

Cost shifting — When government programs like Medicaid
and Medicare underpay for medical services that patients
receive, private insurance companies have to pick up the
balance. A 2008 report — issued by an independent firm that
researches health care trends — estimates the total annual
cost shift from Medicare and Medicaid to private insurers is
more than $88 billion. The report also estimates cost shifting
accounts for $1,788 of the annual health care costs for a
typical family of four, or 10.7% of their total costs.
 

Government Regulations —
Private health insurers spend over $339.2 billion in order
to comply with government health care regulations. While
we spend some of this money paying for benefits that
we’re required to cover like certain screenings and certain
prescription drugs, more than half of the money is spent on
regulatory costs such as filing and reporting requirements.

 Patient lifestyles — Increasing numbers of patients
who are challenged by obesity, smoking, drug abuse,
poor nutrition and physical inactivity contribute to an
increase in the use of, and therefore the cost of, health
care services.8 These preventable risk factors9 can also
contribute to chronic diseases, which account for 75% of
the money spent on health care in the U.S. each year.

 Obesity — The percentage of obese adults now
exceeds the percentage of healthy weight adults.

 Tobacco use — One in five adults smoke.
 

Sedentary lifestyle — Less than one-third of adults
report getting regular exercise.

Poor nutrition — One in six adults has high cholesterol

The next few years these grandfathered plans either group or individual could become very valuable. If you have a plan where the premium is 35% lower than market condition you will not want to let that plan go.

What is a “grandfathered” health plan?

A “grandfathered” health plan is any group health plan or individual coverage that was in effect on the date of the Acts’ enactment on March 23, 2010. “Grandfathered” status is important under the Acts as certain provisions of the Acts do not apply to grandfathered plans (or at least to many participants under “grandfathered” plans), or apply to such plans at a later date. There remain many questions regarding “grandfathered” plans and the extent to which “grandfathered” status will apply

What provisions of the Acts apply to “grandfathered” health plans
 
The following lists some of the key provisions of the Acts that apply to “grandfathered” health plans with plan years beginning on or after September 23, 2010:

• Dependent Coverage Until Age 26 – The Acts require group health plans (including “grandfathered” health plans) that cover dependents to provide coverage for dependent children until they reach age 26, regardless of student status or marital status. However, for plan years beginning before January 1, 2014, coverage need not be offered by a “grandfathered” plan if a dependent is eligible to enroll for coverage under another employer-sponsored group health plan.
• Restrictions on Annual and Lifetime Limits – Group health plans (including “grandfathered” health plans) may not impose lifetime limits or “unreasonable” annual limits on the value of “essential benefits” for any plan participant or beneficiary. 
• Prohibition on Retroactive Cancellation of Coverage – Group health plans (including “grandfathered” health plans) may not retroactively cancel a participant’s coverage once the participant is enrolled in the plan unless the individual has engaged in fraud or made an intentional misrepresentation of a material fact. 
• Restrictions on Preexisting Conditions – The Acts mandate that group health plans (including “grandfathered” health plans) may not impose any preexisting condition exclusions for eligible children under age 19.

It is very possible if these are the only acts that are imposed on the grandfathered health plans they very well might end up costing much less.

What provisions of the Acts do not apply to “grandfathered” health plans?

“Grandfathered” health plans are excluded from the following provisions of the Acts so long as the plan maintains its “grandfathered” status:

• Preventative Care Benefits – For plan years beginning on or after September 23, 2010, the Acts require that group health plans (other than “grandfathered”  health plans) offer certain preventative care benefits, such as immunizations and breast cancer screening, on a first-dollar basis, without cost to participants.
• Nondiscrimination Testing – Currently, the existing Internal Revenue Code rules for nondiscrimination testing apply only to self-insured plans. For plan years beginning on or after September 23, 2010, the Acts require that fully-insured health plans (other than “grandfathered” health plans) apply the same nondiscrimination tests in an effort to discourage plans that cover only high-ranking employees.
• External Review of Claim Denials and Appeals – For plan years beginning on or after September 23, 2010, group health plans (other than “grandfathered” health plans) must provide a mechanism in their claims procedures for an external review process, among other things.

Since these acts do not apply these plans should cost the carriers less in claims which means less in premium for the policy owner.

Time will tell.