As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."
Wednesday, October 07, 2009
Why The WellPoint Case Matters
Just a few thoughts about why this WellPoint case matters to the overall health care reform debate:
• Maine is a "swing state" for health care reform - Given its Senators, and given this behavior by the insurer who controls over 70% of the local market, obviously a scandal like this in Maine, where Anthem is literally suing the state to guarantee a profit, is deeply embarrassing to the political class if it spreads and becomes a big story.
• Regulation alone cannot work - Here we have a state where insurance companies are regulated much like a public utility. The Superintendent is vested with the power to protect consumers and ensure reasonable rates. And despite that, the insurance company sues for a better profit margin. This is not entirely abnormal among utilities, who troll for a friendly judge to allow them to raise their rates. In the area of health care, however, we are being told that tough regulations will solve the problem of skyrocketing premiums and get everyone covered. I think we know what to expect - lawsuits like this in every state, with private corporations arguing that their corporate personhood status somehow entitles them to a profit - that's basically what they're saying in this lawsuit.
• The for-profit health care system is doomed - in this case, the Maine Superintendent of Insurance allowed Anthem to raise their rates by 10.9% to reach an actuarial "break-even" rate. Over the past ten years, they have raised their rates by double digits 8 times. If you had an individual plan in Maine in 1999, today it probably costs FOUR TIMES as much. That's just not sustainable for anybody. Before long, people will simply not be able to carry health insurance. And they will easily reach the hardship exemptions in the individual mandate in the Congressional bills. If you have to raise your prices by 11% every year just to break even, your business doesn't work. Increasingly, insurance companies are losing market share and only staying in business due to growth in Medicaid and Medicare. Government subsidization of this private industry, in other words, is keeping them alive. So why keep them afloat at all?
In short, this is an important case to expose to understand insurance industry practices and the future of health reform.
Media Discovers WellPoint's "Right To Profit" Case
News outlets are starting to report on Anthem Blue Cross and Blue Shield, a subsidiary of WellPoint, suing the state of Maine to guarantee a 3% profit for themselves. Here's a report from the Maine Public Broadcasting Network:
The state and Maine's largest private insurer Anthem Blue Cross Blue Shield are locked in a legal battle over how much profit Anthem should be able to make. Earlier this year, Maine's insurance superintendent Mila Kofman denied Anthem's request to raise rates for its individual insurance products, calling it "excessive," and instead approved an increase that leaves Anthem without a profit margin for providing those 12,000 policies. Now Anthem has filed suit to get the decision overturned.
"Superintendent has noted that Anthem's done pretty well." Janet Mills is the Maine Attorney General who is representing the superintendent of insurance. Mills' office counters that Anthem averaged a 3.2 percent profit margin in its individual line of products for the nine years that the company has been in Maine. And that going a year without a profit from those products will not drain the company.
"She found that in fact that had contributed to $17.5 million and that its executives were pocketing rather large salaries and bonuses." Anthem spokesman Chris Dugan did not comment on the lawsuit beyond acknowledging that it had been filed. In a brief filed with the Maine Superior Court, however, Anthem calls a 0 percent profit margin unfair and unprecedented; it says it wants to have a profit margin of at least 3 percent.
Remember, the new rates offered by the Maine Superintendent do not prevent Anthem from making a profit; they can do that the same way other companies might do so in a recession, by cutting overhead costs and lowering executive salaries and taking up more efficient management of their business. But as I've reported and as Igor Volsky confirms, Anthem wants the state of Maine to guarantee a 3% profit as a Constitutional right:
A 0% risk and profit charge, by definition, builds in no cushion for any of the risk that Anthem BCBS takes on by selling Individual Insurance Products in Maine. In addition, with a 0% risk and profit charge under the Superintendent’s approved rates, Anthem BCBS will not be able to provide any contribution to the surplus of the Company…Anthem BCBS — a for-profit Company — cannot be required to operate its highly risky Individual Insurance Products essentially as a non-profit company that must offset losses generated by the Individual Insurance Products through its group insurance business in Maine.
This is a fantasy argument from a legal perspective. The Superintendent works for the people, not Anthem BCBS, and she is not required to provide a profit margin for it or any company as an inalienable right. Anthem is a very profitable company already, and the individual market they want to jack up 18.5% represents a small portion of their business (about 6%) which has brought in $17 million dollars over the last decade. The Superintendent can say no, under the law, to allowing Anthem to charge an "additional $12 million in annual premiums for the same level of benefits.” She does not have to guarantee Anthem a profit. WellPoint may be able to cut their own employee health care, but under the regulations of Maine, they cannot squeeze their customers without the Superintendent stepping in to protect them.
The Wonk Room has provided copies of the briefs in the case here and here.
It goes without saying that Maine is a linchpin of health care reform, given the position of their moderate Republican Senators. Maybe they should look into what's happening in their own state.
Yesterday, 6 protesters were arrested outside UnitedHealth Group headquarters in Minneapolis for blocking the entrance and refusing to leave during a demonstration. Here's some video of the arrests:
Dawn Smith, the brain tumor victim who's struggles to get CIGNA to cover her treatments have become national news, is headed to the headquarters of CIGNA CEO Ed Hanway in Philadelphia, to get some answers on why she was denied coverage. She is live-blogging the trip and has some video on her site as well.
Health Care For America Now has transformed the main homepages of UnitedHealth, CIGNA and WellPoint into virtual crime scenes, and they are mobilizing people to visit the headquarters of all these corporate bad actors with yellow police tape and declare them actual crime scenes. There are dozens of events in over 60 cities scheduled.
It is true that these events, scattered throughout the country, have been organized by health care advocacy groups. Of course, throughout the month of August, corporate front groups organized around town hall meetings, busing in folks from out of town and preparing them with talking points and rules to disrupt the events. Yet, in the eyes of the traditional media, only one of these two actions are seen as authentic:
For several months, HCAN—a national coalition of religious groups, community organizations, unions, senior citizen groups, health care professionals, and consumer advocates—has been organizing polite demonstrations, rallies, and public forums, trying to put faces on an industry that has spent multiple millions of dollars lobbying against reform, while angry protests at town meetings swelled August’s big national story. On Sept. 22, HCAN sponsored about 150 demonstrations at various insurance company headquarters around the country. The Los Angeles Times did not bother to report about the several hundred demonstrators at WellPoint’s California subsidiary office, located a few blocks from the newspaper’s office. Nor did The Philadelphia Inquirer note those who descended that day on CIGNA, nor The New York Times those outside UnitedHealth in midtown Manhattan.
The HCAN rallies did attract print and broadcast coverage in dozens of cities, but most reporters treated them as isolated local events rather than components of a nationally coordinated protest (its slogan, “Big Insurance: Sick of It”) and a burgeoning grassroots movement [...]
With Congress debating extensive health care reform, and companies like CIGNA, WellPoint, and UnitedHealth major protagonists, the organizers supposed that their protests would dramatize the exorbitant profits of the insurance industry and the imposing compensation they pay top executives (UnitedHealth’s Hemsley made $57,000 per day last year) while millions of Americans go without insurance or bankrupt themselves with medical bills.
HCAN was mistaken.
“At a certain point,” Indianapolis Star senior editor Jenny Green told us, the demonstrators are “not adding to the debate. They’re just one side saying exactly what you’d expect them to say.”
Her colleague, Greg Weaver, the Star’s deputy public service editor for business, maintained that the raucous town meetings of August, dominated by conservative activists shouting down Democratic Congressmembers, were newsworthy because they “are more of a public forum where you have many sides of the debate, whereas at the [HCAN] protest [at WellPoint CEO Bray’s house] you have only one side of the debate.”
“I did not think the protest at [Cigna CEO] Hanway’s house was news,” Philadelphia Inquirer business reporter Jane Von Bergen told us. “It was a staged event. It wasn’t real news. I avoid them. I can’t stand them. They don’t add anything. They don’t teach anything. If they go to his house, we don’t learn anything more about the health care debate.” The protest was “too manufactured,” said Von Bergen. “Just a bunch of people going blah-blah-blah.”
By contrast, said Von Bergen, who covered the rowdy town meeting in August where right-wing activists confronted Sen. Arlen Specter, the news value of that event was “readily apparent.” “It involved public figures”—members of Congress. So political reporters picked up the story.
Isn’t Hanway a public figure? we asked. He’s well known in the business community, she said, but not among the general public—a condition that HCAN is trying to change, but can’t do if the media won’t cover their events.
This is a revealing set of quotes, showing the true orientation of corporate-run media. They are willing to blind themselves to the corporate front groups who organize town hall meetings, but call demonstrations of insurance companies "staged events." This is not the work of a neutral arbiter in the debate; it looks more like one class is being protected while the other is being savaged.
I don't know what the value of street protests are in the digital age. But I certainly know they have little value if they go unreported. Apparently such protests can get coverage, but only if they feature people with tea bags attached to their hats and guns in their side holsters.
Subsidiary Of WellPoint Sues Maine To Raise Insurance Premiums 18.5%
A wild story out of Maine.
Anthem Health Plans of Maine, a subsidiary of WellPoint, is suing the state because they want to increase premium rates by 18.5% on their 12,000 individual insurance policy holders, so they can guarantee themselves a 3% profit margin. This story shows how silly it would be to solely rely on regulation to rein in insurance industry practices.
Like many other states, Anthem Health Plans hold a monopoly on the individual insurance market in Maine, controlling 79% of all the plans. Also like many other states, they are licensed to sell insurance through the Department of Insurance, who must clear all rate increases prior to implementation. Originally, Anthem Health Plans were a nonprofit Blue Cross and Blue Shield corporation licensed to practice in Maine since 1939. In 1999, Anthem bought the business and began to operate it as a for-profit company. Since that point, Anthem has raised premium rates 10 times, and 8 of those times have been double-digit rate increases.
The average individual Maine rate-payer is paying four times as much for insurance than they did ten years ago.
But this isn't good enough for Anthem Health Plans. They first proposed a 14.5% rate increase for its individual insurance products, then they revised it up to 18.1% and finally 18.5%. This is an average increase. Some plans would see increase of 24.5%, some 38.4%, and for its Preventive Care and Supplemental Care Accident rider, which is part of 1/3 of all their policies, Anthem proposed a rate increase of 58.2%. This amounts to Maine consumers paying $12 million more in annual premium dollars for the exact same level of benefits.
Anthem isn't hurting for profit. Their Maine operations have generated an average annual return of $70 million dollars over the last five years. Anthem paid dividends to their parent company, WellPoint, of $75 million dollars last year alone, and $152 million since 2006. Their nine highest-paid employees totaled over $4.3 million in compensation. The individual market, while a smaller portion of their overall business, still generated $5.4 million in profit over the last two years.
The reason Anthem desires these rate raises is because their actuarial charts show they can guarantee a 3% profit through this increase. That's an estimate, however, and in 8 of the last 10 years the profit margin achieved has actually been higher. The Maine Superintendent of Insurance ruled in May 2009 that the 3% profit and risk margin sought was "excessive and unfairly discriminatory," as per the laws of the state, and instead approved a rate increase of 10.9% for Anthem. Given the recession, the financial health of the company, and the years of large rate increases, there was no way she could approve anything higher.
So Anthem sued the state. But not after filing revised rates at a 10.9% increase so they could get that going while they litigated for an even higher rate.
The Superintendent of Insurance explained in a court filing that there is no statute mandating that Maine must provide Anthem or any other insurer with a guaranteed profit. Given Anthem's ability as a large operation to cut costs, just as any family must do during a recession, the Superintendent argued there is nothing preventing them from making a profit with a 10.9% rate of premium increase. But Maine is under no obligation to guarantee one. That would be a "socialized profit," which Anthem is asserting the right to without any legal basis in fact. Furthermore, policyholders have contributed $17.4 million in profit to Anthem's bottom line over the past decade, which should be more than enough to cover potential losses from just the individual insurance line this year.
Anthem argued that they were discriminated against relative to other companies in Maine because one other individual insurer was provided a 3% profit and risk margin (that company, MEGA, asked for 2.2% rate increase back in 2007, a far different scenario). This, the corporation said, violated their equal protection rights under the federal and state Constitutions. This is a laughable claim, that the state must guarantee a profit for every insurance company licensed to provide a product. It's nowhere to be found in the Maine Insurance Code, and the Superintendent of Insurance is allowed under Maine law to consider each company's situation individually. In this case, she ruled that a 18.5% increase in premiums would be unfair and excessive.
This is a very revealing case. Those arguing against a public option claim that insurance regulations alone will be sufficient to provide an affordable product for everyone. Here's a case where Maine is attempting to regulate the industry, and the industry sues the state in an effort to grab more profit. While claiming to be on the side of reform, they will fight tooth and nail, and can be expected to do so for every regulation in the national health care bill, right down the line.
Brave New Films has put together a video exposing the practices of Anthem and its parent company WellPoint. You can send your friends in Maine the news about this lawsuit, to highlight this practice. Maine Superior Court will consider this case on Wednesday.
From Maine Superior Court, Civil Action, Docket No. AP-09-29 Anthem Health Plans of Maine, Inc., d/b/a Anthem Blue Cross and Blue Shield v. Superintendent of Insurance, et al.
...Arthur Delaney now has this story up at The Huffington Post. He notes that Anthem lied about their individual market performance:
In its filing, Anthem said it had lost $3.7 million on its individual insurance products over the past five years. The AG says Anthem has made $5.4 million from individual consumers over the past two years, and points out that Anthem paid $75.7 million in dividends to WellPoint in 2008, $40.4 million in 2007, and $35.6 million in 2006. And its executives paid themselves pretty well, too.
Lots of groups are taking action against the insurance industry and their attempts to get a forced market for themselves and increase their profits at the expense of their customers.
Health Care For America Now has a new ad spotlighting Stephen Helmsley, the CEO of UnitedHealth Group, and his $57,000-an-hour lifestyle, contrasted against the thousands of families who have experienced a medical bankruptcy:
In connection with that, SEIU is encouraging supporters to take out Craigslist ads seeking to rent a room in an insurance company CEO mansion. They have the Craigslist sites for Philadelphia (CIGNA's Edward Hamway), Minneapolis (UnitedHealth's Stephen Helmsley) and Indianapolis (WellPoint's Angela Braly), and sample "room for rent" ads to work from. A sample:
Bankrupt Mother of Two, Seeking Room @ Insurance CEO Mansion
I'’m seeking a room to rent in Cigna CEO Ed Hanway’s $13.6 million dollar mansion. (We'’ll take a room in one of his three beach homes, too.) My family would be very quiet and courteous housemates, and given the size of Ed's mansion, he won't even hear us! I'll be bringing along my two twin girls, both of whom were diagnosed with cancer at the age of four. CIGNA is refusing to pay for the human growth hormone they need to grow properly - and the out-of-pocket expenses for this treatment are…
What makes you think you can treat sick people this way? When will you stop doing this to me and the thousands of people like me who are suffering? And if you solve this latest problem, how do I know you won't do this to me again next week--that you're actually changing your ways and not just trying to make your PR problem disappear?
Please answer these questions. I need to know, for the sake of my health and my life. Many others have signed this letter too, to support me and make sure I get answers.
Matt Kapp has a great piece on the salary structure in the health industry, including the insurance companies. It's really mind-blowing to see these numbers.
With median annual compensation of more than $12.4 million, C.E.O.’s at the big health-care companies make two-thirds more than their counterparts in finance and are the highest paid of any industry. The health-care industry’s total annual profit has grown to an estimated $200 billion, and it doled out nearly $170 million in campaign contributions in 2007 and 2008. It now spends more than any other industry lobbying the federal government—$3.5 billion over the past decade and a record $263 million in the first six months of this year. That’s six lobbyists and nearly half a million dollars for each member of Congress. It’s been a good year on K Street, too [...]
Gambling investors’ money on exotic securities in pursuit of outsize returns may be a dubious profit model, but what could be worse than the health-insurance industry’s core model: screwing sick people to boost margins. President Obama has taken aim at big health-insurance companies and their “record profits.” While it’s true they’ve managed to more than triple their profits over the last eight years, they’ve still only lifted their average margin to percent, enough to place 87th out of 215 industries. But they shouldn’t be complaining about lackluster profits when they’re paying their C.E.O.’s and executives as extravagantly as they are. Dishing out this much scratch, it’s a wonder they’re making any profits at all: Aetna C.E.O. Ronald Williams has helped purge millions of members from the company’s rolls; his total annual compensation in 2008 was $24,300,112. Angela Braly, who has promised that WellPoint “will not sacrifice profitability,” also saw a raise, to $9,844,212. Cigna’s Edward Hanway saw his pay cut in half and still hauled in $12,236,740, but he was forced to manage a major P.R. crisis after the company initially refused to approve a liver transplant for a 17-year-old girl, which it said was “outside the scope of the plan’s coverage.” She died just hours after Cigna changed its mind and decided it would pay for a new liver after all. Despite a 75 percent pay drop in 2008, cutting him down to a humiliating $3,241,042, UnitedHealth Group’s Stephen Hemsley put on a brave face for Congress, assuring legislators: “Our mission at UnitedHealth Group is to help people live healthier lives.” UnitedHealth has been fined tens of millions of dollars for claims-processing violations (i.e., stiffing patients and doctors). Hemsley’s predecessor, William McGuire, resigned amid a stock-options backdating scandal in 2006. He still walked away with nearly half a billion dollars in stock options. Hemsley surrendered $190 million in options himself, but with $744,232,068 left over, he should be fine.
Even C.E.O.’s at “not-for-profit” insurance companies (like most state Blue Cross and Blue Shields) collect multi-million-dollar compensation packages, even as their companies pay little in the way of taxes. Blue Cross of Massachusetts’s C.E.O., Cleve Killingsworth, got a 26 percent raise in 2008, to $3.5 million, and Blue Cross of North Carolina’s C.E.O., Bob Greczyn, pulled down nearly $4 million after a 19 percent raise. Gail Boudreaux left Blue Cross of Illinois in December 2007 with $15.3 million. The not-for-profits can be just as freewheeling with expense accounts. In early September, a state audit found that Blue Cross of North Dakota used premiums to pay for a $238,000 sales managers’ retreat in the Cayman Islands and a $34,814 retirement party for an executive.
It's just as bad for the CEOs of hospital operators, lab companies and drugmakers. But I want to loop back to the insurance industry. Defenders always latch on to that 3.4% profit margin to cry poor for the insurance industry. That is a meaningless statistic. In the first place, 3.4% on one-sixth of the US economy, approximately all the insurance premium pass-throughs, is a staggering number. In the second, those profit margins do not include these pay packages. Salaries and compensation fall into the category of operating expenses.
These are the same insurance executives who told Congress this week that denial of insurance claims could be fatal.
It's not hard to make the connection. CEOs take home millions upon millions in take-home pay. They maximize profits and expand their pay packages by paying as little in claims as possible. They admit that this denial of care can lead to fatalities. The dots connect themselves.
When WellPoint CEO Angela Braly was questioned on the immoral practice of denying coverage and dropping customers, she lied so blatantly that even Maria Bartiromo had to correct her. Yes, THAT Maria Bartiromo.
HAINES: I believe you just said very cleverly worded 87 cents of every premium dollar goes to the delivery of healthcare. But in fact why don’t we look at your, the amount of payments you make per dollar you take in. It’s more like 80 cents, is it not? You pay 80 cents in benefits for every dollar. [...]
BARTIROMO: According to your 10k, the number is more like 80 or 81 cents.
BRALY: Yeah I’m citing a Pricewaterhouse Coopers study for the industry overall. 87 cents on the dollar is going to healthcare costs, in the industry–
HAINES: Well there you go again, that’s too cleverly worded. Going to healthcare costs? [...]
BRALY: Relative to other margins in the healthcare industry — biotech’s at 18, pharma’s at 16 — you know really we’re a low cost, low margin provider in the healthcare equation.
The excuses are pitiful, and the game is clear. Insurance companies make money off of studiously ignoring your well-being.
I alluded to it before, but here's the draft framework for Max Baucus' plan from the Senate Finance Committee. If you don't have the time to read all 16 pages, Ezra Klein has posted a summary.
I'm trying to figure out who, if anyone, gets better health care coverage from this plan. So far I can only come up with one class: people making 100-133% of federal poverty level who can now qualify for Medicaid. For everybody else, the quality of coverage looks to my eye to be worse, though I could be missing something.
Folks in Medicare get 50% off of any prescription drugs that fall in the donut hole, but the grants of patents well beyond current law will cost them more for drugs they could be getting generically in the long run. We don't know the effects of making Medicare more efficient, but they're designed to be invisible, i.e. offering the same care at a lower cost to the government. So I'd call that a wash.
Those in the exchanges will get subsidies, of dubious affordability, up to 300%, and between 300-400% the cost of premiums will be capped. However, the coverage itself can be crappier than current law, and almost certainly will be. The out-of-pocket limits are good, but that only exists for "covered services" - for anything else you're on your own. Those covered services have to include the following:
...preventive and primary care, physician services, outpatient services, emergency services, hospitalization, day surgery and related anesthesia, diagnostic imaging/screenings (including X-rays), maternity and newborn care, pediatric services (including dental and vision), medical/surgical care, prescription drugs, radiation and chemotherapy, and mental health and substance abuse services that meet minimum standards set by federal and state laws.
They also would restrict caps on lifetime benefits. Which is fine. But there will now be a whole insurance industry sector in how to properly define what falls inside and outside primary care, surgical care, hospitalization, etc. And remember, the entire regulatory apparatus for these major insurance reforms, which will be fought in court by multi-billion dollar companies, is a state-level ombudsman's office. And even with those credits, the coverage doesn't appear to be affordable.
If you get insurance through an employer, your health care coverage is about to get a whole lot worse.
Employer Responsibility. Employers would not be required to offer health insurance coverage. However, employers with more than 50 full-time employees (30 hours and above) that do not offer health coverage must pay a fee for each employee who receives the tax credit for health insurance through an exchange. The assessment is based on the amount of the tax credit received by the employee(s), but would be capped at an amount equal to $400 multiplied by the total number of employees at the firm (regardless of how many receive a credit in the exchange). Employees participating in a welfare-to-work program, children in foster care and workers with a disability are exempted from this calculation.
As a general matter, if an employee is offered employer-provided health insurance coverage, the individual is ineligible for the tax credit for health insurance purchased through an exchange. An employee who is offered unaffordable coverage by their employer, however, can be eligible for the tax credit. Unaffordable is defined as 13% of the employee’s income. The employee would seek an affordability waiver from the exchange and would have to demonstrate family income and the premium of the lowest cost employer option offered to them. Employees would then present the waiver to the employer. The employer assessment would apply for any employee(s) receiving an affordability waiver. Within five years of implementation, the Secretary must conduct a study to determine if the definition of affordable could be lowered without significantly increasing costs or decreasing employer coverage.
A Medicaid-eligible individual can always choose to leave the employer’s coverage and enroll in Medicaid. In this circumstance, the employer is not required to pay a fee.
Coverage offered by an employer of any size, including fully insured and self insured plans, is not required to comply with the list of benefits required of plans in the non-group and small group markets. Employers must provide first dollar coverage for prevention services (except where value-based insurance design is used), however, and cannot have a maximum out-of-pocket limit greater than that provided by the standards established for Health Savings Accounts (HSAs).
So small businesses can opt out of giving their employees health insurance and pay a fraction of the cost, about $20,000 for 50 employees. That will become the chic thing to do. If the employees aren't paid more than the requirement for Medicaid, employers can scrap coverage and let their employees take Medicaid and pay no fee. They are incented not to give their employees a living wage, in other words. And if they make coverage available for those above 133% FPL, they are bound by no standards like that coverage on the exchange, and their employees couldn't reject that coverage for something half-decent. Assuming regression to the mean, virtually every employer will immediately move to offering the shittiest coverage imaginable. They could only get to the exchange if the employer coverage is unaffordable, or 13% of their total income. So an employer, "AlmartWay" in Marcy Wheeler's construction, could conceivably take 12.9% of an employer's income for offering a plan that probably wouldn't cost that much.
Hell, if I were a rapacious manager like AlmartWay's completely hypothetical managers were, I'd turn employee health care into a profit center because (if I read this right) you could require employees to pay back 12.9% of their income for health care, and the only thing you'd really have to promise in return is preventative care. So I predict, if this bill passes in anywhere near this form, that AlmartWay will start making its own employee health care a big profit center because they will be stuck.
By golly. This is even a health care plan Blanche Lincoln and Mark Pryor and their biggest constituent could love!! Though frankly, Bad Max's plan is even worse than Wal-Mart itself--with a call for part time mandates and no disability discrimination--called for (though maybe Wal-Mart was thinking of the free subsidy for its Medicaid eligible employees all along).
And... there is no employer mandate, but the "free rider" aspect of the coverage will, in all likelihood, incentivize employers not to hire anyone who doesn't have family money.
Under the proposal, employers who do not offer health coverage would have to pay the full cost of the subsidies provided to employees who purchase coverage through the new health insurance exchange and qualify for a subsidy because their family income is below 300 percent of the poverty line. [1] But employers would not have to contribute to the health insurance costs of employees with higher family incomes. The new requirement would apply to firms with 50 or fewer employees.
The proposal would make it considerably more expensive for employers to hire workers from lower-income families than workers from higher-income backgrounds to do the same job. As a result, it would distort hiring decisions. Employers would have strong incentives to tilt hiring toward people who have a spouse with a good income (or have health coverage through a family member), teenagers whose parents make a decent living, and people without children (since the eligibility limit for the subsidies in the new health insurance exchanges will increase with family size). Low-income women with children in one-earner families would be particularly disadvantaged [...]
While language could be included to try to ban such discriminatory effects, it would be virtually impossible to enforce effectively. It would be extremely difficult to prove in court that an employer has passed over one applicant and hired another because of the health surcharge that employers would face if they hired people receiving health insurance subsidies.
Moreover, most low-income job applicants who do not get hired could not afford to hire attorneys to initiate legal proceedings. For the tiny number that might be able to institute proceedings, the legal complaint likely would take months and, more likely, years to adjudicate. In short, the fact that low-income workers would cost an employer up to several thousand dollars more to perform the same job could not easily be overcome.
This differential treatment of workers based on their family income also would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession. Workers from low-income families would cost the firm significantly more to retain than other workers who are paid the same wage to do the same job.
Although this clearly is not intended, the proposal likely would have discriminatory racial effects on hiring and firing. As noted, it would discourage the hiring of lower-income people. And since minorities are more likely to have low family incomes than non-minorities, a larger share of prospective minority workers would likely be harmed.
This is essentially legalized class-based discrimination.
So, worse coverage for employers, arguably worse coverage for individuals and small businesses, same for Medicare patients, probably better for a sliver of Medicaid patients. And it criminalizes people for not giving 13% or so of their paycheck to private health insurers. The affordability credits are nice, but don't look sufficient. Here's a contrary view.
The legislation really would protect millions of Americans from medical bankruptcy. It really would insure tens of millions of people. It really will curb the worst practices of the private insurance industry. It really will expand Medicaid and transform it from a mish-mash of state regulation into a dependable benefit. It really will lay down out-of-pocket caps which are a lot better than anything people have today. It really will help primary care providers, and it really will make hospitals more transparent, and it really will be a step towards paying for quality rather than volume.
To put it more starkly, it really will be the most important progressive policy passed since Lyndon Johnson. The subsidies should probably sit at 400 percent of poverty, and the employer mandate should be reworked, but such failures are relatively easy to fix, and may well be patched over by the time the legislation arrives on the Senate floor. The fact that a bill of this size and scope can still be considered disappointing is evidence that the doors of the possible have been thrown wide open.
This ignores the reality that most insurers, like now, won't abide by the rules because there's no policeman to enforce them (an ombudsman? Really?). As well as the reality that the subsidies don't make health care affordable. And it will be hard to expand on this reform, considering that there's no public option, a weak insurance exchange and useless co-ops. In fact, considering that it cements in the broken system we already have and just fills in the cracks, it looks basically like it was written by the industry itself. That's because it was.
NYT's Insurance Industry Tearjerker Tries To Change The Subject From Industry Practices
The New York Times published a very nice press release from the desk of Humana, one of the nation's largest health insurance companies. The reporter interviewed a bunch of employees at Humana, all of whom were horrified to see themselves depicted as "villains" in the health care debate. I agree with Yves Smith, this is an absurd angle for a story, an extreme example of selection bias. The people who work at Humana probably have a sense that their employer, um, pays their salary, and thusly, what's good for the employer is probably good for them. Similarly, most people hold a favorable opinion of themselves just as a matter of getting through the day. Not to mention the fact that their understanding of the functioning of Humana is limited to their job description. It is not possible to gain much of a perspective on the health care debate or industry practices by asking a midlevel manager "Do you think you're the worst person alive?"
Since when is it legitimate, much the less newsworthy, to get a company's perception on its embattled status, at least without introducing either some contrary opinion or better yet, facts, to counter the views of people who will inevitably see what they are doing as right? I hate to draw an extreme comparison to make the point, but staff in Nazi concentration camps also thought they were good people. It is well documented that for all save the depressed, people's assessments of their own behavior is biased in their favor.
There is some revelatory stuff in the article, however. David Sirota flags one employee saying that Humana believes in keeping down costs by "controlling utilization":
Now, I know we're supposed to think that private for-profit health care companies don't ration care, while government-run programs like Medicare do - but as the insurance industry admits right here for all to see, that's just not the case. The obvious truth is that the health insurance industry works hard to "control utilization" - that is, it works hard to make sure that when you need a costly medical service, you are "controlled" (read: prevented) from getting it.
Sure, we're all against excessive testing - and there are good ways to deal with those inefficiencies. But that's not what the insurance industry is talking about. It is talking about its practice of rationing care - and now that reality is right there in black and white for all to see.
The truth of the matter is that many of the charges that insurance companies like WellPoint level at the public option and regulatory changes sought in the health reform bill mirror accepted industry practices. WellPoint, which emailed its own customers yesterday attacking the Democratic plan, claimed that health reform will “increase the premiums of those with private coverage.” Yet WellPoint routinely hikes their own premium prices by close to double digits annually, leading to ever-increasing profits. The email stated that millions of Americans would lose their private coverage and be forced onto a government-run option if the Democratic bill passed (nothing could be further from the truth); yet WellPoint routinely uses the practice of rescission to drop their own customers from coverage if they ever try to use it, and they've admitted they would continue doing so unless forced to stop by law.
The email is an example of the astroturf practices from the industry, including, no doubt, pitching to the New York Times a story putting the human face on insurers. Many of these astroturf efforts spring from the same sources as the corporate lobby groups activating the tea party protests at town hall meetings throughout the country this August. They're trying to change the subject, away from facts, like how they're spending less of their premium revenue on medical care over the years, from 90% in the early 1990s to around 80% today. Or how they use rescission and pre-existing condition to make profits off cherry-picking the healthy and denying everyone else care. House and Senate leaders have requested more and more information about insurance company practices; Dennis Kucinich has joined that effort. But the insurance industry, while nominally siding with reform, wants to keep the focus on efforts against it, in service to de-fanging it.
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