Supreme Court Upholds Health Reform Act: What Does It Mean?
A Tax Or Healthcare?
The Supreme Court ruled Thursday and upheld all of the pieces of the Patient Protection Act, thus paving the way for a significant victory for the Obama Administration and a huge win for bigger government. Let me start first by saying that I am not shocked that the decision came down in favor of the health care rule, but I am perplexed by the composition of the votes that affirmed the decision. I am also disturbed that Justice Roberts had to twist the Constitution and the law and create a total abomination of an opinion to come to the conclusion that Congress intended this to be a tax and therefore have the ability to compel Americans to purchase insurance. While Justice Roberts is correct, the PPCA of 2009 is a tax, it originated in the Senate (not in Congress) and was couched as anything but a tax. I would rather see a national VAT tax passed to pay for health care costs rather than to see the President, Congress, and the Senate lie to US citizens and suggest that the PPCA isn't a tax. Now, the majority of the Supremes have declared it a tax, can there be any doubt?
What Does It Accomplish?
Readers know that I did not support the bill as it is an attempt to cast a wide net over health care and begin to make strides to an eventual move toward universal health care. In the end we were told that passing this law would help "provide health care to millions" that never had access and it also promised to reduce costs. In this context, both of these major promises are lies. First, all of those Americans had access to health care in some form, they DID NOT have health insurance. Health insurance is a luxury, not a right and I am sick of Congress and politicians confusing the terms. Health insurance is a off-loading of risk and to obtain that insurance you need to pay a premium for it and a party assumes the risk you off-load as a result of the payment of that compensation. The key here is that 30,000,000 Americans couldn't obtain coverage or chose not to and many of them didn't obtain insurance simply because they didn't want to.
Second, you can't insure 30,000,000 more Americans and reduce costs to the government. The math just doesn't work. The cost savings we are told we are going to receive come in the form of reduced payments to providers and hospitals and they come in the out-years, not up front. We were also told we would have $500 Billion in fraud related savings and medical technology savings from electronic records with Medicare and have yet to see any of these tremendous promised cost reductions.
Cost Control Or License To Rip Us Off?
My greatest objection to the health care law is that it will not and does not cut costs and ultimately will be a crushing fiscal blow to our future generations. Just as Medicare Part D was a horrible give away by President Bush, this law will be a brutal assault on our ability to have a healthy economy in the future. We already have trillions of unfunded and unpayable liabilities resulting from Social Security and Medicare, we now have even more in our future. What is more, it will essentially cause health premiums for those that actually pay them to increase as this institutes an even bigger cost-shifting scheme to pay for new insureds.
So we have 30,000,000 new folks that will get coverage in 2014. Where will all the doctors come from to be able to service all the new demand from these folks that have low cost, subsidized, or free coverage? Be prepared to wait for appointments. I continue to believe that since 2% of all medical doctor candidates now become General Practitioners we will see massive shortages of the doctors. We'll begin to see Physician Assistants and Nurse Practitioners performing the role of doctors in the future. (Did you know it takes 26 months to be a PA? How confident are you that you will receive better care in this system?)
Now That We Have It, What Do We Have?
Enough about my objections, the decision has been made and now it is time to sort through the rubble and determine what we are really dealing with. Because I've laid out my issues with the bill, I won't even discuss them other than to say, there are more. I want to really focus on the things that will impact existing health insurance policy holders and even folks that haven't bought insurance....yet.
Good Stuff -
I speak with a people daily that struggle with their search to obtain health insurance because they have cancer, have obesity issues, back problems, or diabetes. We usually progress through the process of describing the PCIP program (Federal Pre-Existing Condition Insurance Program) where people with conditions that would cause them to receive a decline can search for a coverage alternative. Of course, only citizens that haven't had insurance for 6 months can apply, so most of the smart and responsible people that are referred to us or find us on the web cannot qualify for this plan.
Next, we discuss the Texas High Risk Insurance Pool and review the cost and the coverage. Many people go this direction since it is their only choice if they can afford the expense of this high-risk coverage.
Finally, if the person is a business owner we review their options to purchase coverage through their business where they cannot be denied coverage as long as they offer the health plan to their employees or business partners as well.
The conversations I had with people over the last year have all included a discussion about January 2014 and the hope that the Supreme Court would not overturn "Obamacare". Due to the ruling today, I am very happy for all of these people with these conditions because now we truly do have a date to look forward to as it will bring coverage to thousands that haven't been able to get it..... and if it is structured like the PCIP program, it will be more affordable than the Texas High Risk Pool and it will provide better health benefits.
Can You Afford It?
Now, notice we haven't said anything about the cost of premiums. Remember how this back-fired on the administration as insurers were required to offer coverage to children with pre-existing conditions? Yes, remember, insurance companies refused to offer child-only policies (Blue Cross is the only one now offering child only policies in our state..... better hurry and apply by June 30th 2012 because you can't apply after that date). Also, when a sick child did get added to a policy with an adult, the prices for these children were not mandated, so if a child that is healthy would cost $75 a month, a child with cancer could cost $900 a month! Effectively, insurers continued to game the system as the Congressional fix was no fix at all, and the previously uninsurable children simply couldn't afford the coverage that they could now buy. I am not sure what to expect from the new health exchanges and what premiums will be, so I can only hope that the cost will be similar or less than the PCIP program.
Let me clarify though, in 2014 an insurance carrier (exchange) will not and cannot charge applicants different prices based on their health status or the fact that they have a pre-existing condition! Think about this for a moment, a person that is sick with a terminal disease cannot be charged more than a perfectly healthy 23-year-old person with no health problems! Talk about cost shifting or as politicians like to say...."fairness". I can hear it now, "is it fair that this dying person has to pay any more than a healthy person?" Actually, yes, because the unhealthy person consumes hundreds or thousands of times more health care services than a healthy person. The only possible outcome here is that under the new system, everyone will pay significantly more and the healthy will essentially be paying disproportionately more than they should.
Rescission - No More...
The Patient Protection Act also mandated that insurance companies could no longer drop their health insurance clients when they made large claims. As I've written in the past, I have never seen this activity in any of the carriers I have used with clients. I am sure that it has happened and frankly as a business owner if I owned an insurance company I would have my staff scour an application and search medical files to confirm that an insured didn't hide past treatments for these conditions. Wouldn't you if your company was faced with a million dollar bill? In fact, you would owe it to your owners and stockholders to do this due diligence rather than simply paying and not investigating potential fraud. In the coming years, insurance companies will not be able to drop a patient when or if they make claims, except in the case of fraud and purposeful omission of information (this is what electronic medical records is about as well).
Texas may be one of the states that is the most behind in the mandate to create health insurance exchanges where coverage offered by the plan will be similar across many companies and should be easy to compare. Several states like Vermont and California are way ahead and plan to roll their exchanges out soon, while Texas has delayed their planning and preparation and now must hurry to get their work done. If the health exchanges are not completed by 2014, the federal government will step in and offer plans for the state. As simple as the government and the states will try to make this effort, I think this is where your health insurance agent or broker will be the most helpful (if we still have a way to make an income). As many of you know we have helped our clients differentiate between insurance plans and carriers for years and then provided helpful service when clients needed assistance with claims or physician billing issues. I don't think the need for this guidance and service will go away because the state offers a slate of new health plans.
COBRA & Employer Funded Plans
I think some of the most significant changes will occur in the areas of COBRA and employed sponsored health plans. I will lay out a few bullet points to make this easier.
* If You Work For A Large Corporation - Not much will change with your plan except you may see additional services and benefits provided. You will see increases in premiums that you must pay and your employer must pay as insurance companies spread the costs from these "low benefit plans" that everyone will get to the employer sponsored plans.
* If You Work For A Small Company (between 50 & 100 employees)- Your employer will most certainly drop their group health plan and pay a penalty for not offering you health benefits. Fundamentally owners will simply look at the maximum cost of the penalty (around $750 per year per employee) and make a rational decision to pay the penalty and have their employees purchase coverage through the state offered exchange. Why would an employer pay $3,000 to $6,000 more a year when other coverage is easily available?
* COBRA - COBRA is a federal law that makes you eligible to keep your existing health insurance coverage for up to 18 months after you leave your employer. The coverage is exactly the same and you pay both portions of your premium (your part and the part your employer had previously been required to pay). In the future, you will not have the ability to continue your old employer plan when you separate from service, you will be immediately be placed into a state health exchange.
Taxes & Penalties
Starting in 2014 you will be required to obtain health insurance. If you do not, you will begin to accrue penalties that will be assessed by IRS and will essentially be added to your tax bill or will reduce your refund. Initially, the penalty for not purchasing the health insurance will be small (the greater of $95 or 1% of your gross income) but will progressively become larger through 2016.
Ultimately, the penalty won't matter for many of the poorest as they will qualify for all sorts of subsidies and even families of four that make as much as $88,000 a year will qualify for subsidized health premiums. While families that make $88,000 a year are not rich, I find it hard to believe that we'll be giving away some portion of the cost of this insurance and obviously if you make less you pay much less for your health care. Some reading this will celebrate and state that it is awesome that they won't have to pay for their health insurance or health care. I don't celebrate because ultimately their will be significant costs associated with this "free stuff" and we can't even contemplate the things we will give up in the future as a result of the give away. Effectively government is the cause of runaway prices in health care and our politicians have attempted to solve our health care price problems with more government intervention and regulation. It clearly won't work.
Medicare recipients will actually benefit as their Part D donut hole will be reduced. It is important to note that I believe that we'll continue to see increased premiums for medicare Part B and also Medicare supplements in the future.
Never Grow Up
Funny, 61% of Americans favor the idea that their adult children age 25 or lower can stay on their employer based health plan. I never understood this. This essentially forced employers to pay extra for an adult that frankly should have been purchasing their own individual coverage. The rule that allows adult children to stay on their parent's health plan will still be in effect, although I question this as we will have mandated coverage available on the state offered exchanges.
I think I've captured many of the facets of the Patient Protection Act, or as some call it the Affordable Care Act (there is nothing affordable about it). I will update more as I am able.
All of the pieces of the bill will be implemented in 2014 so we have some time to plan and prepare.
Jason W Bohmann
Texas Health Design