A sea of uncertainty
Policies written or renewed after Sept. 23 will include the first wave of reforms
- August 30, 2010
For Alan Crane, buying health insurance for his company’s 60 employees is an annual headache that isn’t getting easier. Crane’s highway-construction business, R.L. Rider & Co. in Warrenton, has signed up with Anthem for the past two years, most recently in February under a contract that cost 20 percent more than the year before.
But in the wake of this year’s passage of the federal Patient Protection and Affordable Care Act, Crane is under more pressure than ever, because he can’t figure out what’s coming. There are tax credits that might apply, new rules for small businesses and an undetermined penalty for businesses that opt to not offer coverage. For Crane, it’s too early to tell whether the law will be good or bad.
Nearly six months after sweeping new health reform legislation was signed into law, there’s good reason for confusion. Many crucial details still are being written. In midsummer, for example, the White House issued new rules that require health insurance companies to cover the full cost of dozens of preventive-care screenings and laboratory tests. The idea is that, by making it easier for people to get screenings, employees will be healthier, reducing health costs.
The White House also announced rules that allow consumers to appeal denials of coverage, something most states already offer. What all this will mean to a company’s bottom line remains a mystery. For people like Crane, the uncertainty itself is a challenge. “That’s my problem, I’m confused about what’s really going to happen,” he says. “It’s disgusting and aggravating. We’re a small business … and I can’t figure it out.”
Trying to prepare for health-care reform is, as Doug Gray, puts it, “like riding a bike while you’re building it.” Gray, executive director of the Virginia Association of Health Plans, says, “The legislation is a set of intents and hopes. The regulators are trying to figure out how to implement each piece.”
Stipulations that have been clearly expressed are easy to implement, he adds. It’s the rules still coming down that cause worry. “You can’t prepare for implementation until you know what the regulations say. There’s a lot of hurry up and wait to this legislation.”
For example, the benefits in a basic policy are yet to be determined. Gray anticipates that when they are announced it will be “incredibly controversial. The minute people see what isn’t included, they’ll want to have it added. Gastric bypass? In vitro fertilization? Educational services for children? And every time they add a benefit, it will add a cost,” he says.
Insurance policies written or renewed after Sept. 23 will include the first wave of reforms. These include free coverage for dozens of screenings, lab tests and other preventive care. In addition, insurers now are prohibited from imposing lifetime limits on benefits, and they cannot rescind coverage. For employers that already offer generous benefits, the changes may not be that noticeable. But for those who cover few preventive services, their policies will have to expand.
Perhaps the biggest immediate change is that unmarried children up to 26 years old can be covered under a parent’s policy. As a result of this change, Anthem Blue Cross and Blue Shield kept young adults on policies where coverage might otherwise have been discontinued.
To educate customers, Anthem representatives conducted a series of seminars on health-care reform. Yet, they weren’t able to answer all questions.
“People are starving for information,” says Jeff Ricketts, a vice president of sales at Anthem, “but so much of what they’re looking for is information that hasn’t been released yet.”
Also in the dark about many of the details are state officials. That’s partly because Virginia decided not to get involved in a key part of the new law — the creation of temporary high-risk pools for people who have been denied coverage because of pre-existing conditions or are eligible only for high-premium plans.
Virginia is one of 21 states that decided not to run its own high-risk pool, choosing instead to let state residents sign up for a federal plan. Gov. Bob McDonnell, in a letter last April to Health and Human Services Secretary Kathleen Sebelius, said Virginia believed the $113 million in federal funding for a state program would run out in 22 months and leave Virginia to cover the cost overrun.
Since then, “they haven’t asked us for anything, and they haven’t told us anything” about the federal program, says Dr. William Hazel, Virginia’s secretary of health and human resources. Plus, the state is preparing for a 2013 tryout of another requirement of the new law — the creation of a health insurance exchange, where persons who aren’t offered employer-based health coverage can buy their insurance. “Right now we do not know what the minimal requirements will be,” Hazel says. “I think of all the health reforms, what worries states the most is how we’re going to do this.”
Hazel’s office is spearheading the state’s Health Care Reform Initiative, announced in May, which is supposed to get the state ready for the implementation of health reform by planning for the expansion of Medicaid eligibility. Part of that initiative includes the creation of a 25-member advisory work group appointed by Hazel to help plot details of the state’s strategy. It will include HHR staff members and legislators and “various stakeholders interested in health-care reform. Our goal is to figure out what Virginia should be doing to solve Virginia’s problems.”
The state also is organizing a purchaser’s group, Hazel says, made up partly of businesses, to find a cheaper way to buy health care. “We believe that to get sustainable long-term improvements in health care, we’re going to have to look at changes in the delivery system and payment system,” he says. What those changes will be is still unknown.
Challenge to new law
While the state is taking steps to prepare for implementing the new law, Attorney General Ken Cuccinelli is pushing a court challenge, arguing that the federal mandate requiring almost everyone to get health insurance by 2014 is unconstitutional. Hazel says the state is “in kind of a Catch-22, where we need to do the prudent thing and do all the planning” in case Cuccinelli’s lawsuit is rejected. In early August, U.S. District Court Judge Henry E. Hudson denied a motion brought by lawyers for the Obama administration to dismiss the lawsuit, allowing it to continue.
For employers, a big question in planning is whether to grandfather an existing policy. There’s no easy answer for that, either, Ricketts says. The grandfather rule was issued only in June. It allows employers to keep their existing policy, as long as they make only routine adjustments in premiums and benefit offerings. Trying to decide what to do now to benefit the company four years from today is tricky, says Ricketts. “For smaller companies that offer richer benefits for their higher-paid employees, a management plan versus an hourly wage plan, and that want to keep that structure after 2014, they might want to try to grandfather their existing plan. New plans will be subject to discrimination testing, but that applies only to non-grandfathered plans,” he says.
In 2014, the rating restrictions come into play, too. Today, insurers can adjust premium levels based on risk in the group or the age of the employees. It’s expected that in four years, there will be more of a pool rate, with everyone paying about the same. “If you have a young, healthy population of employees, the community rating may hurt you, so you might want to consider grandfathering your policy,” Ricketts explains.
The challenge is that these employers cannot significantly cut benefits or increase prices for the next four years. “You can’t double your deductible or your co-pay to save the company money,” he says. “You have to keep your benefits close to where they are today.” And you have to gamble that the rules written today will still apply in four years.
Even with the unknowns, health-care providers and insurers are trying to position themselves for the future. Laurens Sartoris, president of the Virginia Hospital and Healthcare Association, compares the situation to the federal ITECH Act, which would provide stimulus money for doctors who incorporated “meaningful use” of electronic health records. Announced more than a year ago, the regulations defining meaningful use came out only in July. “People went ahead and began implementing technology, even without the definition of what meaningful use was. Now that they know, they can go back and look at what they’ve done,” he says. Many health providers and insurers are handling health reform the same way. “Even if the broad new coverage doesn’t start until 2014, people need to move forward where they can,” Sartoris says.
That’s easier said that done. For example, to fix the current incentive for health providers to order more tests and services, they may receive a set amount of money to deal with patient populations or certain diagnoses. That type of system offers a greater incentive to keep patients healthy and provide more preventive care. “The task of dividing the pie becomes a problem for the providers in the accountable care organization, or whatever it might be called,” Sartoris says.
Insurers and employers agree that it’s a good thing to keep people healthy and to avoid long-term complications. But preventive care, while potentially saving big money in the future, costs money now. “Employers from time to time switch insurance carriers to get lower premiums. So the insurance carriers may not want to invest” when they may not be the ones reaping the rewards, notes Sartoris.
However, Anthem’s Ricketts said the insurance carrier justifies the investment in preventive care in two ways. “With our market share and our persistence, we don’t tend to churn a lot of business,” he says, noting that many companies have been with the insurer for 10 or 20 years. “We retain a pretty high percentage of our business, so it’s easier to justify when we believe there’s a great chance those people will still be with us in five or 10 years.”
Secondly, the writing is on the wall, he says, in terms of needed change on paying for health care. “If you believe it will control costs overall, adapting it will make us more competitive. Employers will want to be with a carrier that helps their employees and helps them keep employees healthy.”