The Red Tape Blues

Employers are confused and fighting mad about the huge costs and paperwork burdens that will hit them as a result of Obamacare.

“We just need to know how much this is going to cost us,” one businessman said at a meeting of the Association of Washington Business in Blaine, Wash., on Wednesday.

But at this point, the answer is just not knowable, since regulators still have to write so many regulations, including what health services employers will be required to cover under mandatory insurance.

Other serious concerns:

Grandfathering. Business leaders are angry they were deceived and won’t be able to keep their current health-insurance plans, which would let them at least postpone some of the new federal mandates and rules. Sen. Mike Enzi (R., Wyo.) has filed a resolution of disapproval to force a Senate vote over the Obama administration’s too-strict grandfathering rules under the Congressional Review Act. Senator Enzi seeks to use Senate power “to overturn regulations that were drafted in secret, and which would result in more than half of all Americans with employer-sponsored coverage losing their current plan by 2013 — less than three years from now.” The resolution won’t pass this year but expect to see it on the docket again next year.

CLASS Ponzi scheme. Rep. Charles Boustany (R., La.) has responded to targeted businesses’ concerns about the CLASS Act, the long-term-care program created in the health-care law. In an article in Human Events, he writes that the law requires employers to automatically enroll all of their employees in the program unless a worker opts out through a federal application. The premiums are expected to cost $240 a month for workers and will add huge new paperwork burdens for employers.

Mandated higher costs. Business leaders are looking at higher costs for the “free” health benefits that were the focus of a White House media blitz this week, including preventive care at no cost to patients, allowing parents to add their 26-year-old “children” to their policies, and no yearly or lifetime limits on insurance payouts.

The Kansas City Star weighed in: “It’s absurd for the administration to pretend those changes won’t result in increased risk for insurers, which has to be covered by premiums. ‘This is a refusal to accept the economic reality of what she [Secretary Sebelius] and the president have caused,’ said Cary Hall, president of Benefits by Design, an Overland Park insurance broker. ‘You cannot expect insurance companies to do these things and not see premium increases.’”

The cost hikes are coming — adding up to 14 percent to the cost of individual policies and 8 percent for group plans, according to some insurance industry estimates.

Employers will drop coverage. An article from the BNA Daily Report for Executives shows employers are very skeptical about their ability to provide health insurance to workers over the medium or longer term:

    “There are huge administrative compliance and cost burdens on employer sponsors,” said Jim Klein, president of the American Benefits Council in Washington. Klein participated in a webcast sponsored by accounting firm Ernst & Young LLP titled Health Care Reform: It’s the Law.

    “The future of the employer-sponsored system as a result of a lot of that is very much sort of hanging in the balance, not in the short term, but clearly in the mid- to long term,” he said.

    Over time employers may decide to stop offering coverage to employees because it will be cheaper to pay fines under the Patient Protection and Affordable Care Act rather than pay for the cost of health insurance, Klein said.

    “Just looking at the numbers, the penalty is less than what it costs you to provide coverage to your employees,” Klein said. On the other hand, he added, “How long do you think that those penalties are going to remain at the level that they are?”

    There is “a great deal of skepticism” among employers that the health care law “is in any way going to reduce their costs,” that “I think it’s almost inevitable that virtually no one will have a grandfathered [insurance] plan…”

Polls that tell the story. Six months after enactment of the new health-care law, the U.S. Chamber of Commerce released a national bipartisan poll showing that nearly eight in ten small-business leaders expect their costs to increase as a result of the new law. Further, a majority say they will be less likely to hire new employees and more likely to reduce current health-care benefits.

“This poll shows that the very small business leaders who are being counted on to grow jobs are deeply unsettled about the present and concerned about the future, and a tremendous amount of that uncertainty is due to the new health care law,” according to Randy Johnson, senior vice president of labor, immigration, and employee benefits for the U.S. Chamber.

American Action Forum also has a new poll out, and it shows that people believe Obamacare will lead to significant changes in their health insurance, and a whopping 82 percent of them believe the changes will be for the worse. The poll listed a number of provisions in the law — including $500 billion in taxes and $500 billion in Medicare reimbursement cuts — and then asked people whether they support the law — 59 percent said they oppose the law, 50 percent of them “strongly.” And by a nearly two-to-one margin, people believe businesses will drop health insurance and dump their employees into taxpayer-funded coverage.

People are not misinformed about Obamacare. They know all too well what is in it! That’s why the chorus of voices demanding repeal continues to grow.

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Employers are fighting mad about the huge costs and paperwork burdens that will hit them as a result of ObamaCare, as I heard first-hand over the last week in talks with employers from Washington D.C. to Washington State.

In a talk Wednesday to the Association of Washington Business in beautiful Blaine, WA, (as far as you can go northwest and still be in the U.S.), employers are confused, anxious, and even angry over the uncertainty.

“We just need to know how much this is going to cost us,” one businessman said.

“That is just not knowable at this point,” I said, “because the regulators still have to write so many of the rules, including what health services you will be required to cover under mandatory insurance.”

Also, the 1099-rule drew a broad groan — a mandate they see as reflective of how out-of-touch government is with their businesses. Congress is sputtering to a close and likely will go home without repealing the hugely unpopular provision.

Other serious concerns:

  • Grandfathering: Business leaders are mad many won’t be able to keep their current health insurance plans and postpone the avalanche of new federal mandates and rules.

    Senator Mike Enzi, R-WY, has filed a resolution of disapproval to force a Senate vote over the Obama administration’s rules which makes it very hard for companies to grandfather their current plans.

    He bases his resolution on the Congressional Review Act, which we wrote about in a Wall Street Journal commentary a month ago. Sen. Enzi seeks to use Senate power “to overturn regulations that were drafted in secret, and which would result in more than half of all Americans with employer-sponsored coverage losing their current plan by 2013 — less than three years from now.”

     

    It won’t pass this year, but expect to see it on the docket again next year.

  • CLASS Ponzi scheme: Rep. Charles Boustany, a physician representing Louisiana, has targeted businesses concerns about the long-term care program created in the health overhaul law.

    In an article in Human Events, he writes the law requires employers to automatically enroll all of their employees in the program unless a worker opts out through a federal application. The premiums are expected to cost $240 a month for workers and will add huge new paperwork burdens for employers.

  • Mandated higher costs: And all of the flurry of media attention this week focused on the new mandates on health insurance plans, such as preventive care at no cost to patients, allowing parents to add their 26-year-old “children” to their policies, and no yearly or lifetime limits on insurance payouts.

    But business leaders are looking at higher costs for these “free” benefits. The Kansas City Star weighed in: “It’s absurd for the administration to pretend those changes won’t result in increased risk for insurers, which has to be covered by premiums.

    “This is a refusal to accept the economic reality of what she [Sebelius] and the president have caused,” said Cary Hall, president of Benefits by Design, an Overland Park insurance broker. “You cannot expect insurance companies to do these things and not see premium increases.”

    The cost hikes are coming — adding up to 14% to the cost of individual policies and 8% for group plans, according to some insurance industry estimates.

  • More market disruption: Sick children will have a harder time getting coverage as a result of ObamaCare. Insurers in some markets are dropping children-only health insurance because of the huge risk of “adverse selection” from the new requirement that they must write policies for anyone who applies.

    Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, said extending such coverage in child-only policies “provides a very powerful incentive for a parent to wait until their child becomes very sick before purchasing coverage.”

    In markets where parents can buy childrens’ only policies and insurers are forced to sell them on demand, insurers rightly see a death spiral coming where only children with expensive medical conditions will remain in the pool as premiums go higher and higher.

We need to solve this problem the right way.

Small hr

Polls that tell the story:

  • U.S. Chamber: Six months after enactment of the new health reform law, the U.S. Chamber of Commerce released a national bipartisan poll, showing that nearly 8 in 10 small business leaders expect their costs to increase as a result of the new law.

    Further, a majority say they will be less likely to hire new employees and more likely to reduce current health care benefits.

    “This poll shows that the very small business leaders who are being counted on to grow jobs are deeply unsettled about the present and concerned about the future, and a tremendous amount of that uncertainty is due to the new health care law,” according to Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber.

  • American Action Forum has a new poll out as well showing that people believe the health overhaul law will lead to significant changes in their health insurance, and a whopping 82% of them believe the changes will be for the worse.

    The poll listed a number of provisions in the health overhaul law — including $500 billion in taxes and $500 billion in Medicare reimbursement cuts — and then asked people whether they support the law; 59% said they oppose the law, 50% of them “strongly.”

    And by a nearly two-to-one margin, people believe businesses will drop health insurance and dump their employees into taxpayer-funded coverage.

Don’t tell me that people are misinformed about this law. They know all too well what is in it!

Small hr

Employers will drop coverage: An article from the BNA Daily Report for Executives (subscription required) today shows employers are very skeptical about their ability to provide health insurance to workers over the medium or longer term:

“There are huge administrative compliance and cost burdens on employer sponsors,” said Jim Klein, president of the American Benefits Council in Washington. Klein participated in a webcast sponsored by accounting firm Ernst & Young LLP titled Health Care Reform: It’s the Law.

“The future of the employer-sponsored system as a result of a lot of that is very much sort of hanging in the balance, not in the short term, but clearly in the mid- to long term,” he said.

Over time employers may decide to stop offering coverage to employees because it will be cheaper to pay fines under the Patient Protection and Affordable Care Act (PPACA, Pub. L. No. 111-148) rather than pay for the cost of health insurance, Klein said.

“Just looking at the numbers, the penalty is less than what it costs you to provide coverage to your employees,” Klein said. On the other hand, he added, “How long do you think that those penalties are going to remain at the level that they are?”

Mr. Klein observed there is “a great deal of skepticism” among employers that the health care law “is in any way going to reduce their costs,” that “I think it’s almost inevitable that virtually no one will have a grandfathered [insurance] plan?”

Businesses are spring-loaded to fight back against the broken promises of ObamaCare.

Small hr

The pledge: And I have to say that I think the Republicans’ Pledge to America is terrific. People are quibbling over the details, but the real issue is the vision it sets out:

“Like free peoples of the past, our citizens refuse to accommodate a government that believes it can replace the will of the people with its own. The American people are speaking out, demanding that we realign our country’s compass with its founding principles and apply those principles to solve our common problems for the common good.”

The left is saying that this is just more of the same kind of misguided nonsense that “got us into this mess in the first place.”

Hello? What country do you live in?

CLIP OF THE WEEK

Health Insurers Fault New Law For Higher Rates

On FOX Business, Grace-Marie explains the reasons behind rising premiums for health insurance.
Watch now >>

 

GALEN IN THE NEWS

ObamaCare’s Mandates Mean Ever-Rising Costs for U.S. Consumers

Grace-Marie Turner, Galen Institute
The Sacramento Bee, 09/23/10

Insurers say rates are increasing, some into double-digits, due to rising medical costs and new services and benefits the health overhaul law requires. This has caused a brouhaha between insurers and government officials, Turner writes. HHS Secretary Kathleen Sebelius sent a threatening letter to insurers for explaining that the new mandated benefits will contribute to higher premiums and threatened to ban them from participating in the new government-run health insurance exchanges if they don’t keep quiet. Many factors influence health costs, from increased use of medical services and diagnostics, to new technologies and mandates. ObamaCare got it wrong because of a complete misunderstanding of how markets work. That’s why voters and politicians on both sides of the aisle are now calling for repeal of legislation that independent studies show is not solving the central problems of health costs and, in fact, is making them worse.
Read More »

How to Tame the ObamaCare Leviathan

Grace-Marie Turner, Galen Institute
Investor’s Business Daily, 09/21/10

Turner describes five key strategies for dismantling ObamaCare’s worst provisions:

  • Starving the beast: The new Congress can refuse to provide funds to hire some 16,000 new IRS agents needed to enforce all the new taxes, penalties, and fees spawned by ObamaCare.
  • Scuttling the worst of health care reform: A new Congress should single out provisions opposed by sizable contingents of Democrats in the health reform debate.
  • Preventing cuts to popular programs: Congress should block cuts to the Medicare Advantage program that more than 10 million seniors have chosen to get their health coverage.
  • Sidetracking provisions obviously aimed at imposing a government-controlled single payer chokehold on America’s health sector: For example, proposed rules that dictate how much private insurers must spend on direct medical benefits are arbitrary and already are causing havoc with health insurance.
  • Stay relentlessly on message: the major concerns of hardworking Americans are jobs, the spiraling deficit and an expansion of government control over health care.

Read More »

 

 

Plan Stymies Innovation and Increases Costs

 

Grace-Marie Turner, Galen Institute
The Buffalo News, 09/19/10

The American people were promised they would save money and that their jobs and health insurance would be more secure if health reform passed. But the promises already are being broken, and workers will pay the price for ObamaCare’s failures, Turner writes. Health costs will rise, taxes will go up, millions will lose the health insurance they have now, wages will flatten and businesses will find it harder to create new jobs. This is not a prescription for a more prosperous future.
Read More »

HEALTH COSTS

Out-Of-Pocket Theory for Health Spending Cutbacks Is “Clueless”

Thomas Miller, American Enterprise Institute
Health Affairs Blog, 09/24/10

AEI’s Tom Miller once again relies on actual data to challenge a new study published by the National Bureau of Economic Research. The study reports that the economic crisis in the U.S. reduced use of routine medical care – but observed that such cutbacks are much deeper here than in countries with universal health care systems. And the supposed culprit was the usual villain – higher out-of-pocket (OOP) health care costs in the U.S., compared to those in Britain. But Miller cites a wealth of credible data showing that the United States is far from a high cost-sharing outlier among industrialized nations and, in fact, Americans remain at the lower end of the cost-sharing continuum, compared to citizens in other comparable industrialized nations.
Read More »

2010 Health Care Trend Survey

Aon Consulting, Summer 2010

Medical plan costs are forecasted to increase at double-digit rates in the next 12 months, according to Aon Consulting, a global benefits and human capital solutions business — by 10.5% for HMOs, 10.6% for POS plans, 10.7% for PPOs, and 11% for consumer-directed plans. Aon Consulting says the health overhaul law is expected to add 2 to 5% to the medical trend over the next three years. Additional costs will become apparent as health carriers pass along costs from additional regulation and excise taxes. In addition, providers subject to reductions in Medicare reimbursement may try to shift costs to the employer-based system.

Read More »

HEALTH REFORM

Still No Good News for ObamaCare

Joseph Antos, Ph.D., American Enterprise Institute
The American, 09/23/10

There is no question that the U.S. health system is in need of reform, but ObamaCare is not the answer, Antos writes. In its attempt to reform health care, the administration has created overlapping layers of laws and regulations intended to anticipate everything that could go wrong and prevent it. Every problem — the uninsured, rising insurance premiums ineffective and expensive care — is addressed. Every solution further centralizes power and decision making in Washington. The promises do not come cheap. We need to look elsewhere. Market-based health care is no panacea, and will not produce an instant cure for every problem in the health system. It does, however, provide the tools necessary to make the health care system more effective, efficient, and responsive to patient needs. That is the most anyone could ask for.

Read More »

The Next Endangered Species: Doctors

Jason D. Fodeman
National Review Online: Critical Condition, 09/22/10

Despite recent efforts to open new medical schools and increase the size of existing medical school classes, a severe physician shortage looms on the horizon, Fodeman writes. Unfortunately, the health overhaul law will only exacerbate this trend, with the corollary being increased wait times for appointments and the inevitable rationing of care. ObamaCare transfers more control of important health care decisions typically made between doctor and patient to faceless unaccountable in Washington, D.C. it creates roughly 159 new committees, agencies, and bureaucracies with virtually limitless power to dictate physician decisions. As a result, doctors will encounter increasing bureaucracy, paperwork, diminishing autonomy, and declining job satisfaction. They will be compelled to waste more time complying with the regulations and, as a consequence, have less time to devote to patients and the practice of good medicine.

Read More »

STATE ISSUES

The Oregon Health Plan: A “Bold Experiment” That Failed

Eric Fruits, Ph.D., Andrew Hillard, and Laura Lewis
Cascade Policy Institute, 09/10

The Oregon Health Plan serves as a warning to those with ambitious goals of simultaneously expanding coverage, controlling costs, and fostering provider participation, write Fruits, et al. The plan was an attempt to expand coverage to a larger share of the population without busting the state budget. To satisfy these clashing goals, the plan would limit which services are covered under the plan rather than which people are covered. Within two years of its rollout, the Oregon Health Plan began to see the warning signs that the plan was fiscally unsustainable. Hoped-for cost containment never materialized, provider reimbursements declined, and physicians began restricting access to Medicaid patients. The result is a unique state health care bureaucracy that has achieved approximately the same outcomes that a less ambitious program likely would have achieved.

Read More »

Massachusetts Health Care Reform Has Left Small Business Behind: A Warning to the States

Joshua D. Archambault
The Heritage Foundation, 09/16/10

Implementation of the Massachusetts health care reform has largely failed to address the needs of small businesses and their employees, Archambault writes. The state’s decision to offer virtually free insurance to Massachusetts residents has come at the expense of helping small businesses, which could employ these same individuals if they had received rate relief in their health insurance. These implementation decisions have cost the state millions in additional subsidies that could have been averted if some of these individuals were covered under an employer-sponsored plan. Given that 90% of the roughly 185,000 businesses in Massachusetts are small companies, which historically create two-thirds of all new jobs in Massachusetts, state officials’ failure to consider the needs of small businesses is bad economic policy, especially during a downturn.

Read More »

PRESCRIPTION DRUGS

Explaining the Drug Drought

Kenneth Kaitin, Ph.D., Tufts University School of Medicine and Eve E. Slater, M.D., Columbia University’s College of Physicians and Surgeons
Pharmaceutical Executive, 09/10

Slater and Kaitin examine the challenges to innovation facing the pharmaceutical industry. Without a substantive course correction, the pressures on the traditional model of drug discovery and development will constrict what remains of the pharmaceutical industry’s ability to innovate. But to declare defeat and advocate a dismantling of what remains of the industry’s extended R&D infrastructure could cripple the best weapon we have against the ever-changing panorama of chronic disease, which is biomedical innovation. It is up to industry to take the lead in defining problems in its own shop, and to then build a global policy consensus on how to fix them. For example, industry’s chief scientists – the company heads of R&D – should state plainly as a group that more help is needed from payers, patient groups, and other stakeholders to make better decisions on what compounds to bring into development. The need for incentive-based policies will become apparent, which will drive a new level of engagement – with government and other partners – for the one proven engine of innovation, which is the private research enterprise. Protecting this rich resource is good for patients and society. This opportunity must not be squandered.

Read More »

 

CONSUMER CHOICE MATTERS® NEWS

A Randomized Trial of a Telephone Care-Management Strategy

David E. Wennberg, M.D., M.P.H., and Others
The New England Journal of Medicine, 09/20/10

A carefully designed and executed care management program can cut costs, according to this NEJM study. Health Dialog Services Corporation conducted a stratified, randomized study of 174,120 subjects and showed that empowering patients to participate in their treatment decisions generated considerable net savings. The study assessed the effect of telephone-based care management on medical costs and resource utilization. Subjects were randomly assigned to either a usual-support group or enhanced-support group. After 12 months of intervention, medical and pharmacy costs per person in the enhanced-support group were $7.96 lower than those in the usual support group. Further, with the cost of the intervention at less than $2.00 per person per month, a $6.00 per person per month net savings was generated. A 10.1% reduction in annual hospital admissions accounted for the majority of these savings.

Read More »

 

Events

New and Improved: Registries for Evaluating Patient Outcomes and HIT
Agency for Healthcare Research and Quality Live Webcast
Monday, September 27, 2010
8:00am – 9:30am Eastern

15th Annual Wall Street Comes to Washington Conference
Center for Studying Health System Change Event
Tuesday, September 28, 2010
9:00am – 12:00pm
Washington, DC

Mass-Care and the recently passed federal health-care law: Do they bode well for the future of American medicine?
Benjamin Rush Society Debate
Tuesday, September 28, 2010
5:30pm
Boston, MA

The Debate: Is health care a right?
Benjamin Rush Society Debate
Wednesday, September 29, 2010
5:30pm
Washington, DC
Grace-Marie Turner will participate in a debate with Jeff Anderson, PhD, Dr. Robert Zarr, and Dr. Harvey Fernbach.

More Than Meets the Eye: Long-Term Care Provisions in the New Reform Law
Alliance for Health Reform Briefing
Friday, October 1, 2010
12:15pm – 2:00pm
Washington, DC

Comparative Effectiveness Research Enters New Era
Health Affairs Briefing
Tuesday, October 5, 2010
8:30 a.m. – 2:00 p.m.
Washington, DC

U.S. Healthcare Reform: Universal Insurance or Affordable Care?
The George Washington University Regulatory Studies Center Event
Wednesday, October 6, 2010
1:00pm- 2:00pm
Washington, DC
For more information, contact RegulatoryStudies@gwu.edu.

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