The Regulatory State Reaches the Wellness Industry

The Equal Employment Opportunity Commission (EEOC) has finalized rules on how employers can use wellness programs. By current federal standards, the rules are concise: 19 pages pertaining to the Americans with Disabilities Act and 17 pages pertaining to the Genetic Information Nondiscrimination Act. Both laws are extremely popular. The ADA (1990) passed by 91-6 in the U.S. Senate and 377-28 in the U.S. House of Representatives. The GINA (2008) passed by 95-0 in the Senate and 414-1 in the House.

These laws are meant to prevent discrimination. However this bumps against the real world where health insurers cannot charge different premiums to individuals who are sick. The Accordable Care Act (2010) allows employers to offer incentives to workers who participate in wellness programs, and can offer financial incentives up to 30 percent of premium (or up to 50 percent for anti-smoking programs). However, participation in a wellness program also necessitates surrendering personal health information to an employer who would otherwise be barred from having it (under the Health Insurance Portability and Accountability Act, 1996).

Selling Health Insurance Across State Lines

(A version of this Health Alert was published by The Hill.)

Here we go again: Republican politicians are rolling out an easily digested sound bite: Allowing health insurers to sell coverage across state lines would solve the problem of high premiums. In the current presidential race, Donald Trump, Sen. Marco Rubio (R-Fla.), Sen. Ted Cruz (R-Texas), Sen. Rand Paul (R-Ky.), Rick Santorum, Gov. Bobby Jindal (R-La.), and the recently departed Gov. Scott Walker (R-Wis.) all proposed it. It has been a feature of Congressional Republican proposals since at least 2010.

The only problem is that such a reform has no effect. Back in 2010, Georgia sacrificed its sovereignty to regulate health insurance, but premiums didn’t change. The reason is that if a health plan wants to offer coverage in a state, it already can easily do so. Health insurers enter and exit markets all the time. Aetna and Cigna are domiciled in Connecticut, but that does not prevent them from offering plans in other states. Insurance commissioners do not discriminate between in-state and out-of-state insurers when they issue insurance licenses.

The Problem With Open Enrollment

Austin Frakt and Amitabh Chandra propose a common-sense idea at the New York Times: That insurers be able to offer a moveable feast of benefits. How to ensure that people won't just buy skinny plans when they are healthy and rich plans when they are sick? Open enrollment.

This is a feature of Obamacare, but it is inferior to health-status insurance. Read the entire column at NCPA's Health Policy Blog or The Independent Institute's Beacon blog.

Obamacare's Risk Corridor Bailout Just Got Bigger - Much Bigger

Last Friday, the Obama administration quietly released 280 pages of rules that, among other things, increases Obamacare’s risk corridors (a.k.a. insurers’ "bailout"):

An example reveals how much this change increases the “bailout.” Say an insurance plan with $10 million cost target versus $11 million of allowable costs. Actual medical claims are $8.8 million. Using the formula for calculating its payout from the risk corridor, allowing 20 percent of administrative costs, the plan gets a $410,000 “bailout”. If it can add administrative costs up to 22 percent of allowable costs, the payout increases to $635,641 — an increase of 55 percent.

Read the entire column at John Goodman's Health Policy Blog or The Independent Institute's Beacon blog.

Will the Federal Government Turn a Profit on Risk Corridors? That Can Be Stopped

I have written twice about the “risk corridors” in Obamacare’s health-insurance exchanges. The first post described how risk corridors will work in the exchanges. Risk corridors exist for three years and are designed to partially immunize insurers from losing money in the exchanges.


Originally, the Congressional Budget Office (CBO) had estimated (“scored”) that the risk corridors would be revenue neutral. That is, the amount of money that the federal government takes from the health insurers will be equal to the amount it has to pay out to the losers.

A few days ago, however, the CBO issued a new budget outlook that anticipates the government turning a profit of $8 billion during the risk corridors’ existence: $16 billion of revenue versus $8 billion of spending (see especially pp. 114-115). I find the CBO’s reasoning difficult to accept, and expect the risk corridors to lose taxpayers’ money. However, that does not matter: Congress is bound to take CBO’s estimates seriously.

Read the entire column at The Independent Institute's Beacon blog.

Improving the Senate Republicans' Health Reform Bill: Continuous Coverage

Three Republican Senators have released a health-care reform proposal that has attracted much attention. One of the three, Orrin Hatch, is likely to chair the Senate Finance Committee if the Republicans win the majority in the Senate.

One important part of the proposal that has not received enough critical attention is “continuous coverage protection,” in Section 202 of the summary. This is basically a “super-HIPAA” provision, and it has problems not immediately apparent to the casual reader. There is a better way.

Read the entire column at John Goodman's Health Policy Blog or The Independent Institute's Beacon blog.

Will Republicans Repeal Obamacare's Risk Corridors?

This blog’s readers are better informed than most about the (somewhat complicated) question of how health insurers will be compensated for bearing risk in ObamaCare’s health insurance exchanges.

A previous entry explained the basics “risk corridors”, which exists only for three years, 2014 through 2016, and were put in the legislation because health insurers were not confident that they could accurately price premiums in Obamacare’s early years.

On January 9, Humana, a large insurer, reported in a filing to the Securities and Exchange Commission (SEC) that the “risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected.” Corporations cannot spin filings with the SEC: The CEO and CFO can go to jail if they mislead investors. So, they have to tell us more about what is going on in the exchanges than the Administration does.

Republican politicians believe that shutting down the risk corridors will force health plans to withdraw from exchanges in 2015, contributing to ObamaCare’s ignominious end.

Likely? Not according to Senator Marco Rubio and many other Republicans, who see discouraging health insurers from participating in ObamaCare’s exchanges as a good way to finally chip away important industry support for ObamaCare.

Read the entire article at John Goodman's Health Policy Blog or The Independent Institute's Beacon blog.

Risk Adjustment, Risk Corridors, and Reinsurance: Understanding the Death Spiral in Obamacare's Exchanges

One month after the worst product launch in modern history (yes, worse than “New Coke”), the big question is: Will the federal government be able to rescue health insurers who will lose lots of money in the ObamaCare exchanges?

The Wall Street Journal reported on November 4th that young people are avoiding the exchanges in droves. Priority Health, a Michigan insurer, reported that the average age of new applicants is 51, versus 41 in the previous individual market.

It certainly looks like health insurers’ ObamaCare exchange adventure will be very expensive. By 2015, they will likely be asking the federal government for a bail out. The Administration has no flexibility in this regard. Finally, the initiative will fall to the House of Representatives, which has pledged to repeal ObamaCare. It will be an interesting negotiation.

Read this entire article at John Goodman's Health Policy Blog  or at the Independent Institute's Beacon Blog.

GAO Confirms Obamacare Insurance Rating Rules Increase Premiums for Young People

In a recently published (but under-reported) brief, the Government Accountability Office (GAO) confirmed that states which prevent actuarially accurate pricing of health-insurance premiums impose higher premiums on young people.

The GAO has used data from the U.S. Department of Health & Human Services' own website. This is the department which tells us ceaselessly how beneficial Obamacare is for young people.

Read the entire article at John Goodman's Health Care Blog.

n an under-reported brief published last week, the Government Accountability Office confirmed that states which prevent accurate underwriting of health-insurance premiums by age impose higher premiums on young people. There has been no shortage of actuarial analysis of ObamaCare’s coming “rate shock” for young adults, but the GAO has used data from the U.S. Department of Health & Human Services’ own website. This is the department which tells us ceaselessly how beneficial ObamaCare is for young people. - See more at: http://healthblog.ncpa.org/government-accountability-office-confirms-health-insurance-rating-rules-hike-premiums-for-young-people/#sthash.hP7AI9mf.dpuf

n an under-reported brief published last week, the Government Accountability Office confirmed that states which prevent accurate underwriting of health-insurance premiums by age impose higher premiums on young people. There has been no shortage of actuarial analysis of ObamaCare’s coming “rate shock” for young adults, but the GAO has used data from the U.S. Department of Health & Human Services’ own website. This is the department which tells us ceaselessly how beneficial ObamaCare is for young people. - See more at: http://healthblog.ncpa.org/government-accountability-office-confirms-health-insurance-rating-rules-hike-premiums-for-young-people/#sthash.hP7AI9mf.dpuf

n an under-reported brief published last week, the Government Accountability Office confirmed that states which prevent accurate underwriting of health-insurance premiums by age impose higher premiums on young people. There has been no shortage of actuarial analysis of ObamaCare’s coming “rate shock” for young adults, but the GAO has used data from the U.S. Department of Health & Human Services’ own website. This is the department which tells us ceaselessly how beneficial ObamaCare is for young people. - See more at: http://healthblog.ncpa.org/government-accountability-office-confirms-health-insurance-rating-rules-hike-premiums-for-young-people/#sthash.hP7AI9mf.dpuf

Interstate Purchase of Health Insurance? No Magic Bullet

Many conservatives promote the idea of interstate purchase of health insurance as a solution to the health-insurance crisis. What exactly does this mean?

In fact, health insurers "sell across state lines" already. Generally speaking, large insurers either have separate subsidiaries in different states (e.g. WellPoint) or write policies from a balance sheet in the state in which they are domiciled (e.g CIGNA).

But interstate purchase as described by conservative activists is somewhat different. In a podcast produced by the Heartland Institute, I explain why it is an impractical solution.

Listen to it here.

Health Premiums Rising Fast, Even Though Medical Spending Constrained

Obamacare is primarily responsible for the fact that health-insurance premiums are outpacing the growth in underlying medical claims. See my op-ed in the Washington Times here.

Real Insurance Could Never Operate With An 85% Loss Ratio

Obamacare demands that most health plans operate with a medical loss ratio (MLR) of 85 percent (or 80 percent for the individual market).

Politicians, bureaucrats, and people in general are very fixated on how much of our premiums go to administrative costs, including executive salaries and profits, of health plans. It’s easy to understand a politician winning applause for promising that she’ll ensure health plans spend more of their revenue on patient care.

But there is an even more fundamental question: Why are politicians not attacking other (non-health) insurers who spend only 70, 60, or even 50 cents on the dollar in claims? Surely these insurers are even “greedier” than health insurers.

Read the entire article at John Goodman's Health Policy Blog.

Health Spending Grows, While Premium Growth Accelerates

As I wrote in my last Health Policy Prescription, Obamacare has resulted in increasing administrative costs and margins of insurers.  Here is a shorter, bloggy, version of the article.

If Health Spending is Increasing Slower, Why Are Premiums Increasing Faster?

The short answer: Blame Obamacare.  For the detailed answer, please read this month's Health Policy Prescription here.

Competition in Health Insurance: What Should Government Do?

A condensed version of my latest Health Policy Prescription, at John Goodman's Health Policy Blog.

Over Regulation Reduces Choice in Health Insurance: An Update

Earlier this year, the Pacific Research Institute published a study demonstrating one way that Obamacare will dramatically reduce Americans’ choice of health insurance. By encouraging states to pass laws giving politicians control of health plans’ premiums, Obamacare creates incentives for politicians to impose populist limits that threaten health plans’ solvency.

Furthermore, common measurements and tools used to determine whether health insurance is “competitive” are deeply flawed, leading even well-intentioned regulators astray as they seek to control the cost of health insurance. This month's Health Policy Prescription incorporates new data to test whether the conclusions of the earlier study persist. It finds that they do.

Read the updated article here.

Obamacare Will Drive Health Insurers Out of Business: Good or Bad Outcome?

Over at Forbes.com, a liberal blogger has finally confessed the truth - Obamacare will lead to a government-monopoly, so-called "single-payer" system.  It's led to a spirited response amongst my Forbes.com colleagues.

Read my contribution here.

Prostate Cancer, Mammography, & Avastin: How to Choose?

There is a flurry of reactions to a draft recommendation from the U.S. Preventive Services Task Force. Although not formally released, the USPSTF is now recommending against PSA tests for prostate cancer. The American Urological Association, on the other hand, continues to assert that the PSA test is appropriate preventive care. (Ann McDonald of Harvard Medical School’s publishing arm has a nice summary of the reaction to the news.) The USPSTF previously sparked controversy in 2009, when it bumped up the recommended age for mammography from 40 to 50 years of age.

What type of health system would best respond to constantly evolving information like this?

Read the entire column at John Goodman's Health Policy Blog.

Rick Perry's Texas: It's Better to Create More Jobs Than More Medicaid Dependents

As Texas governor Rick Perry makes a splash in the Republican presidential primaries, one place where people are looking for evidence of poor executive leadership is his record on health care. Fellow conservatives have focused on his 2007 executive order that girls entering grade 6 should receive a vaccine, Gardasil™, which protects against the Human Papilloma Virus (HPV).

A criticism that will likely carry more weight as the campaign develops is Perry’s record on Medicaid and the uninsured. We see this in an article written by Noam N. Levey in the Los Angeles Times, which declared that Texans’ access to health care is “withering” under Perry. As Levey notes, Texas has the highest rate of uninsured in the nation, over one quarter of the population. This is important, but not in the way Levey believes.

Read the entire article in this month's Health Policy Prescription here.

Health Insurers' In States' Crosshairs

The Orange County Register published an op-ed by me, which describes the effects of states' emerging rules imposing political control of health-insurance premiums, which are prompted by Obamacare.  The op-ed is at this link.

The column is based on a my study, which PRI recently published, available at this link.