Premiums Go Up–AND Up

There’s been some amount of outrage over the recent actions of WellPoint, an insurer that raised some premiums by 39%. But did you know that some people’s premiums went down 20%? State House Call contributor John R. Graham explains in a column elsewhere.

“Federal and California laws and regulations fragment health coverage, which makes it impossible for insurers to pool risk effectively.“

Government Partly Responsible for 39% Insurance Hike

Insurance companies have done enough on their own to invite populist vengeance, which President Obama and other politicians are all too eager to manipulate. But laws governing insurance help contribute to the need for the recent 39% increase that Anthem Blue Cross announced.

California Dreamin’–A Nightmare of Single-Payer

If you’re up for a good horror story, take a look at SB810. It’s California’s single-payer proposal, and it has passed the state’s Senate. The bill  provides that “no health care service plan contract or health insurance policy, except for the California Healthcare System plan, may be sold in California for services provided by the system.”

But don’t worry about losing the insurance you have, and being herded into a government program. The Legislature cares for you: “The bill would create the Office of Patient Advocacy within the agency to represent the interests of health care consumers relative to the system.”

I’ve got a better idea. With enough motivation and information, patients can be their own advocates. They don’t need a government program to deliver their health care, nor an “advocate” within such a program.

More on Anthem Blue Cross California Rate Hikes

I recently suggested that Anthem Blue Cross California’s astonishing rate hikes in the individual maket are caused by an adverse-selection spiral, and pointed my finger at recent changes in rules governing rescissions of individual policies.

An insurance agent of my acquaintance tells me that policies with maternity benefits are experiencing the biggest hikes.  Because only women get pregmant, that reminded me of a recent state law that drove up premiums for women.  In 2008, the legislature passed a bill mandating a number of benefits, of which at least one, unlimited gynecological testing beyond that which is medically indicated, was expected to be very expensive.  Since that time, the legislature has entertained more mandated benefits, which drive premiums up.

The Los Angeles Times quotes a Blue Cross spokesman who claimed that healthy people are forgoing health insurance if they lose their jobs, leaving relatively sicker people in the policies.

This may make sense for the healthy people: Federal and state law discourage continuous coverage, because an employer must offer health benefits to all its employees without discrimination.  In the small-group market, insurers must offer policies to every small group in a region at almost the same rates, no matter what their employees’ health status is. 

So, if you got laid off from your job at Cisco or Hewlett-Packard, you can go without insurance, and then form a garage-based hi-tech start-up of two or three people, and apply for group coverage whenever you decide it serves your needs.

So, there are a number of possible explanations for what’s behind this rate hike.  Anthem’s “greed” is not a plausible one.

What’s Behind Anthem’s Huge California Rate Hikes?

Californians with individually purchased health insurance were rocked last week by news that Anthem Blue Cross was planning to raise rates for some individual policies by 39 percent.  U.S. Secretary of Health & Human Services Kathleen Sebelius has got into the act, demanding an explanation (even though she has no authority over rates in California’s individual market).

Anthem Blue Cross claims that rising medical costs are the culprit, but there’s no way that underlying medical costs are going up at that rate.  California’s individual market must be suffering from adverse selection.

What’s causing it? My speculation is that California’s new regulations on rescission are one cause of the spiral.  I’ve written a long thread on the topic.  Previously, an applicant for individual coverage could lose her policy if she had not told the truth about her health status on her application.  California changed the rules to require the carrier to prove willful misrepresentation by the applicant – even with objective evidence that she had neglected to fully inform the carrier of a condition.  If an applicant “forgets” or doesn’t “understand” what her health condition is, the carrier will not be able to rescind a policy that was written with incomplete information.

I’ve heard from insurance agents that policies with maternity benefits are suffering the biggest increases.  That’s a pretty strong signal of a selection problem.  I wish Anthem Blue Cross would give us the full story.

California’s New HMO Regulations

Perhaps the greatest absurdity of California state senator Mark Leno getting his single-payer bill passed in the state senate is that it happened the same month the Department of Managed Health Care announced its new regulations limiting waiting times for HMOs. 

The new regulations will require that telephone calls be returned within 30 minutes; that health professionals be available 24/7; that appointments with general practitioners take place within ten days, or 15 days for specialists.  

There are standards that a single-payer plan could not hope to achieve.  Indeed, California’s current government-run health plans can’t achieve them.

The new regulations are a result of years of negotiations between HMOs, the government, and self-styled “consumer advocates”, who lobby for laws and regulation friendly to trial lawyers.  Indeed, Anthony Wright, ED of Health Access California, the “statewide health care consumer advocacy coalition” is actually listed on the DMHC’s press release as “sponsor of the original 2002 law.”  (Can you imagine the outrage if Pfizer or Eli Lilly were listed on a government press release as “sponsor” of a law concerning prescription drugs?)  According to Cindy Ehnes, Director of the DMHC, “Californians are literally sick of having to wait weeks to see a doctor.”

Well, I’m sure they are.  But what of the poor Califorians enrolled in Medi-Cal, our Medicaid program? Only 11 percent of cardiologists in Los Angeles accepted Medicaid patients, and the highest accepting specialty was dermatologists: 58 percent.

Lengthy waits for medical services, as doled out by government bureaucrats, are characteristic of so-called “universal” health care.  In my home country of Canada, we don’t measure waiting times in days, but in months – over four months, to be precise, according to The Fraser Institute’s 2009 annual survey of waiting lists for twelve specialties in each of Canada’s ten provinces.

Read more here.

California Senate Advances Single-Payer Proposal

The California Senate has moved forward on another single-payer proposal — despite the state’s budget problems. After an 18-14 vote, the Senate passed SB 810, which is estimated to cost more than double the entire current state budget. However, SB 810 is more of a political move by Democrats. Gov. Schwarzenegger, a Republican, has vetoed similar bills in the past, and we fully expect him to do so again if it gets to his desk. And the legislature does not have the votes to override his veto.

From Health “Reform” To Government Retiree Bailout

The behind-closed-doors squabble over the so-called “Cadillac” tax on high-cost health benefits is that it’s really about bailing out public-sector retiree health benefits, especially at the state and local level. Today’s New York Times reports that the tax won’t hit these folks until 2018. If I were a betting man I’d guess that that date will be pushed out even farther before this deal sees the light of day.

The tax is now going to hit plans that cost $8,500 for an individual and $23,000 for a family, which is way higher than the current cost of employer-based health benefits.

Until recently, state and local government employers did not have to report retiree health obligations on their balance sheets like private employers do. Of course, this meant that weak local authorities negotiating with strong union leaders resulted in unfunded liabilities that are unexpected and out of control. A recent study estimated such liabilities to be $558 billion nationwide, although the extent of the crisis varies a lot between states. There are no prizes for guessing that New York, New Jersey, and California fare the worst.

The Congressional Budget Office has yet to score this partial bailout of public-sector retiree benefits, but it will certainly send the (already debunked) pledge of deficit neutrality into the dustbin of history. Unless, of course, they figure out yet another tax to patch the hole in the CBO’s score.

Will the “Brightest and Best” Help California?

Speaking of California, the San Jose Mercury News says “The Legislature will get a whole lot smarter in 2010, thanks to an influx of highly educated scientists and engineers who will be on loan from major universities from across the country.” It mentions health care policy as one topics the experts will address.

Curiously, there are no economists in the list.

Would You Like a California Cash Cow or New York Pork With Your Florida Flim Flam?

California’s recent budget deficits will look bush league relative to the fiscal hurricane that federal health reform will unleash on California and many other states.   The problem stems from the expansion of Medicaid, the program for low-income residents, jointly funded by the federal and state governments.

Most observers anticipate that if President Obama does sign a bill this year, it will look more like the Senate bill (an amendment to H.R. 3590), which would pull millions of Americans into government dependency for their access to medical services via an expansion of Medicaid.

The Congressional Budget Office (CBO) reckons that 15 million more people will enroll in Medicaid if the Senate bill becomes law (p. 8), which is just a whisker less than half the total number of persons the CBO forecasts will be newly insured, 31 million, as a result of the “reform.” This is like the government stating that it will reduce the number of jobless by putting millions more on welfare and classifying them as “employed.”

From 2014 through 2016, the federal government would cover the entire cost of roping these people into Medicaid. By 2019, however, the federal government would pay only about 90 percent of the costs of Medicaid expansion, leaving the states to pick up 10 percent. That’s how it was supposed to work, until we learned about elements in the bill such as the “Cornhusker Kickback.”

Senate Majority Leader Harry Reid bought Senator Ben Nelson’s vote in favor of the bill by promising that Nelson’s state of Nebraska would never have to pay for any of the Medicaid expansion. The federal government or, more properly, the taxpayers of California and 48 other states, would pay for Medicaid expansion in Nebraska. Similar deals for other senators were labeled the “Louisiana Purchase” and the “Florida Flim-Flam.”

Some governors are getting pretty uncomfortable with the way the deal has been hammered out. In a pre-Christmas letter to Speaker Nancy Pelosi, Governor Schwarzenegger charged that the federal plan levied an unfunded mandate on California that would cost the state $4 billion to $5 billion.  But he’s unlikely to get a “California Cash Cow.”

Many states, including California, have long since convinced the federal government to allow them to increase Medicaid eligibility. Of course, this has allowed them to draw down even more federal dollars. (Before the February 2009 “stimulus” bill, the federal government paid for 57 cents of each Medicaid dollar, on average.) Because these states have already bloated their Medicaid programs, they will not enjoy the bailout the federal “reform” offers states that have limited Medicaid enrollment to date.

One of the 24 measurements in the U.S. Index of Health Ownership is the level of Medicaid eligibility. A state scores low if it has recklessly expanded government dependency in this way. In the third edition (2009), California ranks 30th out of 50 states but plenty of states do worse. Consider New York, a lowly 45th in the Index’s measurement of Medicaid eligibility.

“We are, in a sense, being punished for our own charity,” moaned Governor David A. Paterson, in response to the proposed Medicaid funding formula. “Charity” is an interesting noun to describe the Empire State’s approach to Medicaid. Last July, New York State and New York City agreed to pay the federal government $540 to settle allegations from the U.S. Department of Justice that they had submitted false Medicaid claims! A December 26 audit by state Comptroller Thomas DiNapoli accused the state’s health bureaucrats of recently approving $92 million in fraudulent payments.

Wendy Saunders, New York’s Deputy Secretary of Health, now shamelessly suggests a heaping plate of “New York Pork.” She thinks the federal government should throw an extra $30 billion New York’s way over 10 years, above what’s currently in the Senate bill. Unfortunately, in order to convince its stenographers in the media that the “reform” is deficit neutral, the majority took such drastic steps as proposing a luxury tax on tanning salons and cutting about $400 billion from seniors’ Medicare benefits.

All this comes in order to fund a significant expansion of government, a plan supposedly too big to fail. Governors Schwarzenegger and Paterson, and their long-suffering taxpayers will soon learn, however, that the feds are unlikely to find the dollars for more bailouts.