Bottom line up front: It's not a Health Care Reform Bill, It is Health Insurance Reform Bill. The bill does not have the same scope many of us think is necessary for a good reform bill. since this bill only really addresses the health insurance market.
Again, the health care bill is not a comprehensive reform bill. Just because health insurance companies are particularly unethical and easy to beat up on, they aren't the only source of problems. In order to manage a reenvisioning of the way health care is provided in America, a proper healthcare bill needs to address every sector of healthcare and how it interfaces with the public. This includes the way drugs are developed, marketed, deployed,and regulated. This includes the way doctors and health care providers asses their common wisdom and avoiding perverse incentives to provide more care, rather than better and more effective care. And finally it would need to deal with us, the consumers, when it comes to making healthy lifestyle choices and being a better prepared and educated public.However, despite that fact, the health insurance reform bill does attempt address the most abusive part of the healthcare system - the health insurance companies.
Come take a look at how the HIR bill scores:
Earlier this year, I wrote a diary where I laid out five points that market based reform should have in order to be successful at this more limited goal. During the evolution of the debate, I have learned a lot and will express those points in five statements. Let's look at those five points and score the bill against those original points. That diary is linked here.
The key points were:
- Flat pricing; no one pays any more than anyone else within a given plan. Numbers 2 and 3 here are intended to eliminate the individual profit motive; that health insurance providers will cherry pick the most profitable individuals,leaving sick people unable to obtain care or be priced out of the market.
- Standards for coverage by health plans.
- Accept and retain all comers. This means elimination of preexisting condition considerations. Everyone must have access to healthcare. In a broader sense, this means that insurance providers should sell coverage to all comers regardless of health status.
- A certain (high) fraction of health insurance premiums must go to actually paying for care. This is intended to tie the cost of the insurance to the cost of care covered. This is a strengthening of my original statement, because I had not fully learned at the time how low medical loss ratios were across the industry, and honestly, I was shocked.
- From a practical standpoint, things like waiting periods for upgrading plans need to be kept reasonable.
Since then I have learned a number of things, and I can't help but add them to the list:
*6) Many health insurance plans contain clauses putting a ceiling on the amount of money the plan is worth. This appears to make sense from a business perspective; it caps the losses on any particular person. Unfortunately just like a fixed income that is not adjusted for inflation, a finite cap shrinks in value as the costs of care increase, and it eliminates the catastrophic care safety net insurance is intended to provide.
*7) Recission for profit: It's one thing to have a legitimate problem with someone who lies to you to get a cheaper deal. It is another thing entirely to withdraw lifesaving medicine because it is expensive. The economic incentives for recission must be eliminated.
So let's look at the new healthcare bill and compare what is coming out of the senate with the minimum standards laid out above as a guiding factor. I am using the version of the bill as published here as the most recent version I am aware of. If I need to redo any of my analysis based on a better version, please let me know.
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Requirement 1: Flat Pricing
Fair Health Insurance Premiums: Section 2701
For the Individual and Small Group Markets: There is a 3-1 allowance for age discrimination (yuck) There is an allowance for rating 'areas' within a state for community rating. There is an allowance for a 1.5 to 1 penalty for being a smoker. Individual coverage does not need to cost the same as family coverage. Other than that, any other rate variations are prohibited. While this inserts age group and smoker status as degrees of variation, each person within their age group, smoker status and family status will pay the same for any given plan.
This box gets checked.
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Requirement 2: insurance means coverage, rather than fine print:
SEC. 2707. COMPREHENSIVE HEALTH INSURANCE COVERAGE.
`(a) Coverage for Essential Health Benefits Package- A health insurance issuer that offers health insurance coverage in the individual or small group market shall ensure that such coverage includes the essential health benefits package required under section 1302(a) of the Patient Protection and Affordable Care Act.
SEC. 1302. ESSENTIAL HEALTH BENEFITS REQUIREMENTS.
(a) Essential Health Benefits Package- In this title, the term `essential health benefits package' means, with respect to any health plan, coverage that--
(1) provides for the essential health benefits defined by the Secretary under subsection (b);
(2) limits cost-sharing for such coverage in accordance with subsection (c); and
(3) subject to subsection (e), provides either the bronze, silver, gold, or platinum level of coverage described in subsection (d).
(b) Essential Health Benefits-
(1) IN GENERAL- Subject to paragraph (2), the Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:
(A) Ambulatory patient services.
(B) Emergency services.
(C) Hospitalization.
(D) Maternity and newborn care.
(E) Mental health and substance use disorder services, including behavioral health treatment.
(F) Prescription drugs.
(G) Rehabilitative and habilitative services and devices.
(H) Laboratory services.
(I) Preventive and wellness services and chronic disease management.
(J) Pediatric services, including oral and vision care.
In addition there are some interesting gems; emergency services must be covered without pre-authorization requirements. There are also limitations to cost-sharing, and:
(d) Levels of Coverage-
(1) LEVELS OF COVERAGE DEFINED- The levels of coverage described in this subsection are as follows:
(A) BRONZE LEVEL- A plan in the bronze level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the plan.
(B) SILVER LEVEL- A plan in the silver level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the plan.
(C) GOLD LEVEL- A plan in the gold level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the plan.
(D) PLATINUM LEVEL- A plan in the platinum level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 90 percent of the full actuarial value of the benefits provided under the plan.
While this law only establishes a framework, there is some extensive stuff here. While the actual regulations that come out of DHHS for such plans based on this law is interesting, it makes clear that a bankruptcy caused by an ambulance ride necessitated by a drunk driver crossing the median will no longer be an issue. This bill clearly meets the 'set standards' requirement, even if we may not all agree on the standards set.
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Item Three: Accept and Keep all comers without regard to health status:
GUARANTEED AVAILABILITY OF COVERAGE section 2702
(a) GUARANTEED ISSUANCE OF COVERAGE IN THE INDIVIDUAL AND GROUP MARKET.—Subject to subsections (b) through (e), each health insurance issuer that offers health insurance coverage in the individual or group market in a State must accept every employer and individual in the State that applies for such coverage.
The only section laid out here is (b), which allows health insurance companies to establish enrollment 'periods' rather than requiring enrollment to be an on-demand situation.
‘SEC. 2703. GUARANTEED RENEWABILITY OF COVERAGE.
(a) IN GENERAL.—Except as provided in this section, if a health insurance issuer offers health insurance coverage in the individual or group market, the issuer must renew or continue in force such coverage at the option of the plan sponsor or the individual, as applicable.
It is interesting to note that nothing follows section (a)
In addition, we have the preexisting conditions(community Rating) sections 2704/2705 -
SEC. 2704. PROHIBITION OF PREEXISTING CONDITION EXCLUSIONS OR OTHER DISCRIMINATION BASED ON HEALTH STATUS.
‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not impose any preexisting condition exclusion with respect to such plan or coverage.’’;
Sec 2705. Prohibiting discrimination against individual participants and beneficiaries based on health status.
‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan or coverage based on any of the following health status-related factors in relation to the individual or a dependent of the individual:
(1) Health status.
(2) Medical condition (including both physical and mental illnesses).
(3) Claims experience.
(4) Receipt of health care.
(5) Medical history.
(6) Genetic information.
(7) Evidence of insurability (including conditions arising out of acts of domestic violence).
(8) Disability.
(9) Any other health status-related factor determined appropriate by the Secretary.
This is pretty impressive, almost to the point of beating a dead horse. Multiple mutually reinforcing sections make it abundantly clear that health status will no longer be a determining factor in acceptance for health insurance. They even manage to do a passable job at changing the underlying dynamics of the perverse incentive for recission. I think this box can get
checked off.
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Requirement 4: Medical Loss Ratios:
While long, it is worth reading; this is covered in two key places:
SEC. 2718. BRINGING DOWN THE COST OF HEALTH CARE COVERAGE.
`(a) Clear Accounting for Costs- A health insurance issuer offering group or individual health insurance coverage shall, with respect to each plan year, submit to the Secretary a report concerning the percentage of total premium revenue that such coverage expends--
`(1) on reimbursement for clinical services provided to enrollees under such coverage;
`(2) for activities that improve health care quality; and
`(3) on all other non-claims costs, including an explanation of the nature of such costs, and excluding State taxes and licensing or regulatory fees.
The Secretary shall make reports received under this section available to the public on the Internet website of the Department of Health and Human Services.
`(b) Ensuring That Consumers Receive Value for Their Premium Payments-
`(1) REQUIREMENT TO PROVIDE VALUE FOR PREMIUM PAYMENTS- A health insurance issuer offering group or individual health insurance coverage shall, with respect to each plan year, provide an annual rebate to each enrollee under such coverage, on a pro rata basis, in an amount that is equal to the amount by which premium revenue expended by the issuer on activities described in subsection (a)(3) exceeds--
`(A) with respect to a health insurance issuer offering coverage in the group market, 20 percent, or such lower percentage as a State may by regulation determine; or
`(B) with respect to a health insurance issuer offering coverage in the individual market, 25 percent, or such lower percentage as a State may by regulation determine, except that such percentage shall be adjusted to the extent the Secretary determines that the application of such percentage with a State may destabilize the existing individual market in such State.
`(2) CONSIDERATION IN SETTING PERCENTAGES- In determining the percentages under paragraph (1), a State shall seek to ensure adequate participation by health insurance issuers, competition in the health insurance market in the State, and value for consumers so that premiums are used for clinical services and quality improvements.
`(3) TERMINATION- The provisions of this subsection shall have no force or effect after December 31, 2013.
(c) Standard Hospital Charges- Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital's standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.
`(d) Definitions- The Secretary, in consultation with the National Association of Insurance Commissions, shall establish uniform definitions for the activities reported under subsection (a).
This section basically hands the issue of regulating medical loss ratios to the states, with a strong guideline of 80% until 2013. Why is there a sunset provision on this section? I have no idea. Blame a republican? However, the requirement that for 3 years medical loss ratios are set at a minimum of 80 percent and then must be reported thereafter does put a limit on this.
And the other part:
SEC. 9016. MODIFICATION OF SECTION 833 TREATMENT OF CERTAIN HEALTH ORGANIZATIONS.
(a) In General- Subsection (c) of section 833 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
`(5) NONAPPLICATION OF SECTION IN CASE OF LOW MEDICAL LOSS RATIO- Notwithstanding the preceding paragraphs, this section shall not apply to any organization unless such organization's percentage of total premium revenue expended on reimbursement for clinical services provided to enrollees under its policies during such taxable year (as reported under scecion 2718 of the Public Health Service Act) is not less than 85 percent.'.
You can find the appropriate section of the tax law here
Basically it appears that the bill is designed to use the tax code to control medical loss ratios, with the goal being 85%. This appears to apply only to "non-profit" healthcare providers. A tax lawyer would be better at interpreting this part than I.
I'd like to see the medical loss ratio requirements made permanent. On the other hand, I'd like to see them made permanent at 95% and not just 80%. As far as the publication and reporting of loss data, this is a permanent requirement, and meets the needs of my original diary, while the newer medical loss requirements meet even the expanded need, if with a sunset provision. This box can be checked.
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Requirement 5: Waiting Periods
Waiting Periods, Sec 2708 -
Waiting periods are limited to 90 days. Resonable or unreasonable, this section reduces this problem to a debate about what waiting periods are 'reasonable' for plan changes, and how to properly control the tendency (real or perceived) to upgrade the plan only when one becomes sick. This box can be checked.
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Issue 6: Limits on coverage:
Lifetime/AnnualLimits - 2701
(1) lifetime limits on the dollar value of benefits for any participant or beneficiary; or
(2) unreasonable annual limits (within the meaning of section 223 of the Internal Revenue Code of 1986) on the dollar value of benefits for any participant or beneficiary.
(b) Per Beneficiary Limits-
Subsection (a) shall not be construed to prevent a group health plan or health insurance coverage that is not required to provide essential health benefits under section 1302(b) of the Patient Protection and Affordable Care Act from placing annual or lifetime per-beneficiary limits on specific covered benefits to the extent that such limits are otherwise permitted under Federal or State law.
How well this section fills its intent all depends on how well the annual limits are managed. I recall reading in a few places that this has been amended, but that appears to not yet have been published?. Much of this depends on how the definition 'essential health services' pans out vs 'nonessential' ones.
Sill, this section addresses the issue of coverage limits, and as such this box can be checked off.
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Issue 7; Recission - (2712)
Can't cancel coverage unless four conditions are met:
- commits fraud or intentionally misrepresents material facts as prohibited by the plan.
- prior notice must be given to the enrolee. (How much is not specified)
- must comply with sections 2702(c) "PAYMENT ADJUSTMENT FOR HEALTH CARE-ACQUIRED CONDITIONS" which governs payments to medicaid beneficiaries when doctors make mistakes.
This section appears to extend the prohibition in such a way that two things happen: a) when a doctor makes certain mistakes, the doctor is required to fix it free of charge, and b) the healthcare provider cannot rescind coverage or penalize the patient for it.
- must comply with 2742(b) (missing from the bill?)
It might appear at first glance that 1 and 2 provide a loophole to the 'no recission' rule, but that's not actually the case. First, the way that the bill is written, the burden of proof is on the insurance provider to demonstrate fraud or intent before canceling coverage. Second, even if that breaks down, prior notice of cancellation of coverage means that an insurance plan cannot cancel coverage retroactively, eliminating the 'expensive condition' trap. Finally, looking at section 2702, every provider is required to accept all applicants during their designated open season.
Finally, section 2719 "Appeals Process" requires coverage to remain in force during the course of appeals.
The worst case scenario assuming the appeals process and the fraud-determination process break down is a temporary interruption of coverage until the next open season.
I do see a possible problem here. Unless there is a 'timeliness of payment' clause for covered procedures and protection against grab-backs, insurance companies could continue limited abuses in one of two ways, but only if the fraud determination protections for consumers break down:
- Stonewall payment for a 'covered' procedure until the appeals process resolves, and then refuse to pay if the appeal goes against the consumer. (this would be difficult as in contracting, the presumpion is that 'covered' procedures when a plan is in force would be paid for. That being said, contracts can say all sorts of bad things for the consumer.
- write the insurance agreements to contain an exorbitant 'penalty' in the case of recission, and then use that to extort money out of people with expensive conditions, even though those conditions are 'covered'.
Still, I think that this bill fundamentally changes the whole issue of recission, by removing it from the purely profit oriented arena, and putting much moe balanced a burden on the insurance company, and I think we can give this section a passing grade.
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What about the individual mandate? The individual mandate is addressed in sections 1501, 1502, and 1555.
The 'freedom to not participate', section 1555,is meaningless. It states that no person or organization may be compelled to participate in any government run program... but without the public option, this doesn't do anyhing significant.
Sections 1501 and 1502 are basically what you'd expect; an individual mandate, a penalty for not participating in a 'qualified' plan, and a massive laundry list of exemptions for participating. Exemptions range from temporary interruptions in coverage to religious exemption, as well as hardship waivers.
The individual mandate is an acceptable balancing factor for the 'accept all comers' clauses, since it spreads the financial risk evenly. Without the individual mandate, it becomes difficult to provide subsidies to low-income people and not have that money used for other purposes rather than healthcare. If we maintain the individual mandate, it does two things;
first, it forces the government, by establishing a responbsibility, to also ensure empowerment (the subsidies must be maintained as sufficient to the task). Secondly, it ensures the risk is spread as evenly as possible throughout society, and makes sure that low income folks actually bite the bullet and get and use health insurance.
I think I am OK with it given the rest of the context of the bill. I particularly like the fact that, in a very real way, it ties the government's hands to make sure that the care is affordabe.
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As another gem, here is something that comes right out of both Obama's campaign speeches and his speech to the joint session of Congress:
Right to maintain existing coverage: 1251
This is the 'you can keep the coverage you want' section. Nothing particularly interesting here, except for the possible conflict about whether junk insurance can be grandfathered in to this bill.
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So what is the rest of the bill? Simply put, the rest of the bill contains 'other stuff' with words derived from 'improve' found predominantly throughout. With the exception of the key reforms to the health insurance market, the rest of the changes are a huge laundry list of 'nice to have' improvements. None of them in particular will have the impact of the sections described above, but there is small goodness, and probably a number of people meaningfully helped by each one.
What about the exchanges vs the public option? The exchanges are intended to provide more people with access to group coverage under a private model. The public option actually could fit into the exchange system as a qualifying health plan (medicare buy-in, for example?). In fact the exchanges set up the framework for a public option to be introduced later.
President Obama laid out that the goal of his health insurance reform effort was to reform the existing system rather than to eliminate and reinvent it. While I (and most of the DKos community) appear to disagree with that goal, I will give him grudging credit that he has accomplished this goal. My personal verdict is this: Good start. This bill does a lot of good things and represents an excellent overhaul to the private insurance market. Don't think the job is done there. I look forward to reading the next set of reform bills.
***Update 1***
More than one commenter have raised a similar question: "Health insurers can't discriminate based on health status for enrollment in plans, but what about within plans, or with deadly customer service?"
I think that these three sections limit, but do not eliminate, this potential problem.
SEC. 2717. ENSURING THE QUALITY OF CARE
SEC. 2706. NON-DISCRIMINATION IN HEALTH CARE
SEC. 2705. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS.
Section 2705 eliminates the obvious problem of health insurance providers denying access to certain plans for people with certain health conditions.
2706 limits some of the payment abuses, since no insurance provider may discriminate against any care provider. An insurance provider could not, for example institute a 90 day delay for payments to oncologists. It is not clear if there are other dodges that providers could use to generate similar effects.
2717 imposes requirements on what must be covered, which limits the ability of insurance providers from refusing to cover or pay for certain conditions on a 'conditional' basis written into the plan, especially when combined with the 'acceptall comers' clauses.
Given what banks and cellphone companies, among others have already done with terms of service, we must be extremely watchful. I anticipate we'll need another reform bill in 6 or 7 years as insurance providers get clever again.
That being said, this does present an excellent argument for a public option.