Wednesday, October 5, 2016

No Joy in These Numbers

It's that joyous time of year again: when we find out how much those of us who buy our health insurance through the individual market will have to pay on January 1. Each year since the start of the Affordable (cough) Care Act, the increases have been substantial, and this year is no different, ranging from 50 to 67 percent.

I don't know yet how much my family's insurance will increase. We currently pay about $14,000 a year for three people (ages 60, 57, and 22), with a deductible around $6,000. In other words, our insurer has made substantial money on us this year, since almost all the care we used was well less than the deductible.

Assuming our plan increase is at the low end of the newly announced range of price increases, our costs will be $21,000 a year, or $1,800 a month. And for all that money, we get preventive care — which I appreciate — and coverage in the event of a catastrophe. (I hope others in our circumstances will be eligible for tax deductions under the ACA; we are not. In 2016, the subsidies cut out around $80,000 a year in pre-tax income for a family my size. Even if that limit goes up to $100,000 with the new rates, how are you supposed to pay $21,000 for insurance?)

Here are two things I've heard about why these increases are happening. First, the Centers for Medicare & Medicaid Services is investigating whether dialysis centers are "steering" their high-cost patients into the individual market, since the dialysis centers can bill higher rates that way. Dialysis patients are some of the highest cost patients, and plunking a bunch of them into a relatively small pool like the individual market would artificially increase the average cost per patient.

Second, health care lawyer David Feinwachs wrote in today's Star Tribune that Minnesota's HMOs are using state laws to jack up prices without proof their costs require it:

Market segmentation is, in fact, the real problem. We allow the health plans to choose those segments that give them incredible profits and are funded by taxpayers, then we allow them to walk away from, limit and/or price-gouge the segments they don’t like. Why? The whole theory of insurance is based on the pooling and spreading of risk. Our “nonprofit” health plans make billions of dollars in profits over time operating the state’s Medical Assistance (Medicaid) and MinnesotaCare programs (all funded by taxpayers). They claim they are losing hundreds of millions in the individual market. We don’t really know if this is true — we just take their word for it.

Rather than allowing them to engage in market segmentation, we could simply say that doing business in Minnesota is a package deal (contract bundling). We could require that these “nonprofit” corporations must absorb the losses associated with the individual market as a contractual condition of being allowed to run and profit enormously from Medicaid and other very lucrative government programs. The state can and should use its contractual leverage to achieve a result that benefits all of its citizens rather than permitting the HMOs to do whatever they please.

As always, the trade association for the HMOs acts as if the HMOs’ role in this system is some sort of hereditary right. Oddly enough, our Minnesota Department of Commerce seems to encourage this point of view with a steady stream of justifications for the total lack of any regulatory intervention; justifications that are illogical and incorrect.
He ends with this somewhat complex paragraph, but if you follow it through to the end, it's clear:
Minnesota has required a bundled-contract (you can’t pick and choose market segments or programs) approach with providers such as hospitals, doctors and other licensed health care providers for many years. We made it part of Minnesota law. It is found in Minnesota Statute 256B.0644. Health insurers claim that it applies to them as well. But it does not. Hospitals, doctors and other health providers each have only one type of license. Our nonprofit health plans have the option of two. They can be licensed as HMOs and/or insurance companies. Minnesota Statute 256B.0644 applies only to their HMO license. That’s how and why health insurers can escape the bundled-contract requirement. They just use an insurance license rather than their HMO license. And that is why all the health plans use an insurance license when they sell products on the exchange. We let them do this. Now you know how it works. The only remaining mystery is why we allow it to continue.
In the same edition, the Star Tribune editorial board called for a special legislative session to deal with the dramatic rate hikes. They called for action similar to what Alaska did in these circumstances: using reinsurance as a method to bring down rates for its citizens:
Numbers from the state Commerce Department suggest strongly that a state-run reinsurance program would bring down claim costs and thus monthly premiums. “If the top 0.65 percent most expensive individuals had been removed from the market (those with claims $200,000 and higher), average claims would have dropped 29 percent. If the top 1.79 percent most expensive individuals had been removed ... (those with claims $100,000 and higher), average claims would have dropped 45 percent,” officials said.

Other options to consider include allowing the public to buy into the state-run MinnesotaCare program. Minnesota leaders urgently need to explore and enact innovations. Why they haven’t yet done so also urgently needs an answer.
I would gladly buy into MinnesotaCare. It's the public option we should have had all along.

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