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GRAY MATTERS: Wiggling Out of Health Care Reform

SaulFriedman75x75 Pulitzer Prize-winning journalist Saul Friedman (bio) writes the weekly Gray Matters column which appears here each Saturday. Links to past Gray Matters columns can be found here. Saul's Reflections column, in which he comments on news, politics and social issues from his perspective as one of the younger members of the greatest generation, also appears at Time Goes By twice each month.

Surprise! Surprise! The nation’s health insurance companies, while paying their executives handsomely, are trying every trick in their lobbyists’ books to wiggle out of some of the most important cost-savings and patient care provisions of the health care reforms.

One obvious reason can be found in the compensation paid in the last year to the CEOs of some of the top insurance companies as reported by Modern Health Care:

• Stephen Hemsley, UnitedHealth Group, $106.6 million

• H. Edward Hanway, Cigna, a retirement package worth $110.9 million

• His successor, David Cordani, $26 million for his first year

• Michael McCallister, Humana, $14 million

• Ronald Williams, Aetna, $13.6 million

• Allen Wise, Coventry, $10.2 million

• Angela Braly, Wellpoint, $10.1 million

All have sought steep increases in their premiums while enjoying healthier profits thanks to the health reforms which, among other things, requires that people obtain health insurance much of which will be subsidized by government.

Aside from satisfying our prurient interest about these outrageous salaries, there is a reason these compensation amounts are important; they may be counted as contributing to the quality of care, which helps the companies make a mockery of the new health reforms and the amount and quality of patient care they are supposed to deliver.

Their multi-million dollar salaries, bonuses, retirement packages and stock option dollars, in other words, come out of the premium money a large portion of which they are supposed to devote to patient care.

But here’s the ultimate in chutzpah: A spokesman for Wellpoint told the Los Angeles Times that the compensation reflects their effort to improve care and hit corporate goals, including profits. Yet the record of the insurance companies reflects their chiseling on patient care, not only through premium increases, but by arbitrarily droppng or refusing coverage for potentially expensive patients - a practice that eventually is supposed to be banned.

At issue are the requirements of Section 2718 of the Patient Protection and Affordable Care Act - that is, smaller insurance companies must spend 80 percent of the premiums on patient care; the larger companies, like those cited above, must spend 85 percent.

This is known as the Medical Loss Ratio (MLR). Some advocates say that a 15 to 20 percent margin is too generous, especially given the salaries of company executives. Yet the companies are trying to chip away at the MLR requirement, deducting more and more from the 80-85 percent, by labeling even more than the salaries as “medical expenses.”

The battle by the insurance companies over Section 2718 and the MLR took place recently at a meeting of the National Association of Insurance Commissioners, which has been charged by the law with reviewing and developing regulations that will be proposed by Kathleen Sibelius, the Secretary of Health and Human Services, who is supposed to oversee the implementation of the law.

Senator Jay Rockefeller, D-WV, who helped write the MLR into the law, said,

“I hope as the NAIC continues to meet...they will remember that the purpose of this law was to make sure Americans’ health insurance premiums are spent on actual care – not obscene CEO salaries and industry profits.”

Some of the best work monitoring the NAIC proceedings in Seattle was done by Ellen R. Shaffer, co-director of the California based EQUAL Health Network. In August she told Sibelius, in a detailed letter, that

“we are concerned that the standards” under consideration by the NAIC “include an edit that would allow the insurance industry to count marketing campaigns...in conjunction with state and local public health departments [including sales and brokers’ commission] as medical expenses.”

Thus, a company’s self-serving publicity advertising for “health awareness” campaigns would count as “activities that improve health care quality,” she wrote, “rather than the administrative expenses they are.

“The insurance industry has stated its intention to game the system by raising premiums to make up for any constraints imposed by the new law,” she added. And she noted that Rockefeller’ Senate Commerce Committee had “documented that Wellpoint has already ‘reclassified’ more than $500 million dollars of administrative expenses as medical expenses.”

The health reforms give the insurance companies exemptions for certain insurance company taxes in calculating the MLR, which lowers their income. But Shaffer asked the NAIC and Sibelius to “discourage efforts by insurance companies to create and benefit from insubstantial programs that masquerade as clinical treatments.”

Judy Dugan, of Consumer Watchdog, reported from the NAIC meeting that despite the intent of Congress to limit the taxes the insurance companies may claim as part of patient care, lobbyists and lawyers argued to allow industry to deduct “every tax on every part of their business when they’re calculating how much they spend on actual health care.”

The companies even argued to deduct taxes on investments from their premium revenues.

The NAIC came to a unanimous agreement, which some advocates hailed as a victory for consumers. But Don McCanne, of Physicians for a National health Program said,

“We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purpose.”

Now, we await Sibelius and the regulations and more lobbying from the insurance companies, which, according to Bloomberg News, are shifting their financial support to help Republicans who voted against the reforms.

In the meantime, there’s some good news from the health care reforms – “Promoting Prevention Through the Affordable Care Act” – which is the subject of a paper written for a recent issue of The New England Journal of Medicine by Sibelius and public health physician Dr. Howard K. Koh, assistant secretary for health. I know, everyone talks about prevention, but few have taken it seriously, until now.

As the paper says,

“The Act provides individuals with improved access to prevention services...For example new private health plans and insurance policies beginning on or after September 23, are required to cover a range of recommended prevention services at no cost.”

These may include vaccinations, screening for colon, breast and cervical cancer and for men, prostate cancer. These are the same prevention services available to Medicare beneficiaries, except as of January 1, there will be no cost for Medicare patients and for the privately insured.

As you may have read, the new health care reforms include, as of September 23, coverage with no cost sharing of tobacco-use counseling and evidence-based tobacco-cessation interventions as well as risk, alcohol-misuse counseling, depression screening and immunizations, along with obesity screening for adults and children.

In 2014, states will be forbidden from excusing from Medicaid coverage, drugs to help people quit smoking.

Alas, 45 million Americans still smoke, including 5.5 million on Medicare. They are high risk for the lung cancer that is killing a good friend. She quit, but too late.

For more information on preventive health and the Affordable Care Act, see the Health and Policy Reform section of The New England Journal of Medicine.

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The Republicans and some foolish Democrats scuttled the Public Option that would have given some recourse to the bloated insurance industry's power. Sigh!

Important reporting by watchdogs, and information outlining significant prevention benefits that should be better promoted to the general public. Thanks again, Saul, for doing what needs to be done.

Just another sign of the onset of the decline & fall of the Unholy American Empire. Like all mighty empires before us, we will self-destruct by providing the ruling class with more and more at the expense of the common citizens. "Rob from the poor and give to the rich"

I'd like to see the health care bill repealed except for pre existing conditions and dollar ceiling. The bill would then be about one page, maybe two paragraphs long.

So you want to give ALL the power and control back to the insurance companies? They don't have enough already? As Saul Friedman's article points out, health insurance companies often do not have their customers' best interests at heart. Their motivation, which is perfectly understandable given that they're in business to maximize profits, is to make money. This may work out just fine for airlines and auto companies, but for human beings? Not so much!

I agree that the health care bill is lengthy and overly complex. I'd like to see it simplified, but I'm 100% opposed to repeal. The insurance companies already have a sweet deal. The health care bill begins to level the playing field for sick kids, those with pre-existing conditions and many others.

Oh, Saul! You surely hit the nail on the head with this post. I'm one of those West Coast folk Wellpoint is, to put it politely, screwing with a ridiculous unjustifiable rate. Blue Cross in a state on the opposite East Coast raised a single mother's rate $100 per month earlier this year -- highway robbery. There seems to be no way to stop them, since the large powerful group policy under which I'm covered seems unable to curb them in. But then, those operating that group, once thought to be above reproach, have been taken to task for their own excesses. My husband died confident our insurance was remarkable and never would be of concern.

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