On December 19, Senator Reid released his Manager's amendment to the health care reform legislation currently being discussed in the U.S. Senate. One provision in the amendment involved the $6.7 billion annual tax that will be levied on the health insurance industry. As the Congressional Budget Office has stated, this tax will get passed on to consumers through higher premiums. In his amendment, Senator Reid put forth that non-profit health insurance companies will be exempt from this tax -- in essence leaving for-profit plans, and their members, to shoulder the entire tax burden.
What does this mean to the nearly 91 percent (5,285,472) of Georgians that have health insurance provided by for-profit companies?
It means Georgia's share of the $6.7 billion tax will increase. It will directly impact Georgia's insured population and will cause premium amounts to increase even more under this legislation. Because a greater percentage of Georgians are insured by for-profit companies (91 percent) than the national average (55 percent), Georgia taxpayers will subsidize states like Michigan, which has a very low enrollment in for-profit health insurers (23 percent).
Any proposal to tax only for-profit health plans will further exacerbate the un-level playing field for not-for-profit plans, without improving access to health benefits coverage or enhanced health services. While some plans are not-for-profit, that does not mean they are not "profitable." Insurers are required to generate a "net income" in order to help ensure they can pay future claims by members. Not-for-profit simply reflects a tax status under the Internal Revenue Service Code. In many states, the net income on a per-member, per-month (PMPM) basis for not-for-profit health plans is actually higher than that of the for-profit health plans.
Over time, un-equal taxation will lead to the erosion and potential insolvency of for-profit plans, as a progressively smaller share of the overall market would bear the burden of sustaining the entire amount of the tax. Ultimately the government would receive no revenue from the tax when there are no for-profit entities remaining subject to the tax.
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Monday, December 21, 2009
Sunday, December 20, 2009
AHIP Statement On Senate Health Care Reform Legislation
/PRNewswire/ -- Karen Ignagni, President and CEO of America's Health Insurance Plans (AHIP), released the following statement today on the Senate health care reform legislation:
"The debate before us today is not whether insurance market reforms are needed. In fact, health plans proposed and support a complete overhaul of insurance market rules and new consumer protections to ensure all Americans have guaranteed access to affordable, portable coverage. The critical policy questions are whether the current legislation can bend the cost curve and result in a sustainable system. While the bill makes important improvements in access and takes steps towards cost-containment, it lacks accountability to ensure that costs are brought under control. Moreover, this bill includes provisions that will increase costs for families and small businesses and disrupt the quality coverage on which millions of Americans rely today."
Barriers to affordability:
-- A new $70 billion premium tax that will increase the cost of health
care coverage for millions of Americans and fall primarily on small
businesses and those who purchase coverage in the individual market.
-- More cost shifting to patients with private coverage as providers are
forced to make up for hundreds of billions in reduced Medicare
payments.
-- New market and rating rules that will increase premiums for
individuals and small businesses with coverage today.
Disruptions for current policyholders:
-- New regulatory requirements and benefit mandates that go into effect
beginning next year - before access provisions go into effect - that
will cause major disruption for millions who have already enrolled in
their plan for next year.
-- A new federal plan that would preclude many high-quality plans from
participating and increase complexity in the exchanges.
-- Arbitrary caps on administrative costs that will undermine essential
health care services, such as disease management and care coordination
programs, investments in health information technology, programs to
root out fraud and abuse in the health care system, and new
administrative simplification requirements.
-- Major cuts in Medicare Advantage benefits beginning next year that
will ultimately result in millions of seniors losing their current
coverage.
"These issues need to be resolved if the country is to make health care coverage more affordable and put the system on a sustainable path. Health plans will continue to work to solve the problems that have been identified."
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"The debate before us today is not whether insurance market reforms are needed. In fact, health plans proposed and support a complete overhaul of insurance market rules and new consumer protections to ensure all Americans have guaranteed access to affordable, portable coverage. The critical policy questions are whether the current legislation can bend the cost curve and result in a sustainable system. While the bill makes important improvements in access and takes steps towards cost-containment, it lacks accountability to ensure that costs are brought under control. Moreover, this bill includes provisions that will increase costs for families and small businesses and disrupt the quality coverage on which millions of Americans rely today."
Barriers to affordability:
-- A new $70 billion premium tax that will increase the cost of health
care coverage for millions of Americans and fall primarily on small
businesses and those who purchase coverage in the individual market.
-- More cost shifting to patients with private coverage as providers are
forced to make up for hundreds of billions in reduced Medicare
payments.
-- New market and rating rules that will increase premiums for
individuals and small businesses with coverage today.
Disruptions for current policyholders:
-- New regulatory requirements and benefit mandates that go into effect
beginning next year - before access provisions go into effect - that
will cause major disruption for millions who have already enrolled in
their plan for next year.
-- A new federal plan that would preclude many high-quality plans from
participating and increase complexity in the exchanges.
-- Arbitrary caps on administrative costs that will undermine essential
health care services, such as disease management and care coordination
programs, investments in health information technology, programs to
root out fraud and abuse in the health care system, and new
administrative simplification requirements.
-- Major cuts in Medicare Advantage benefits beginning next year that
will ultimately result in millions of seniors losing their current
coverage.
"These issues need to be resolved if the country is to make health care coverage more affordable and put the system on a sustainable path. Health plans will continue to work to solve the problems that have been identified."
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Thursday, December 17, 2009
States Get Bonuses for Boosting Enrollment in Children's Health Coverage
HHS Secretary Kathleen Sebelius today announced the award of more than $72 million to nine states for making significant progress in enrolling children in health coverage through Medicaid and improving access to children's coverage through Medicaid and the state children's health insurance program.
Funding for the "performance bonuses" was included in the Children's Health Insurance Program Reauthorization (CHIPRA) law. CHIPRA also set performance goals that states must meet to qualify for a bonus.
"Today, we're happy to reward states that have taken important steps to help insure more children and made a real difference in the lives of families across the country," said Secretary Sebelius. "These awards will provide crucial support and help states continue to serve children and families."
States receiving funds today include: Alaska, Alabama, Illinois, Louisiana, Michigan, New Jersey, New Mexico, Oregon, and Washington. (See below for a complete list of state awards.) Awards vary by state according to a formula set out in CHIPRA but total $72.6 million this fiscal year.
To receive these performance bonuses, states had to meet two types of performance goals set forth in the CHIPRA statute. States had to qualify by adopting at least five of eight listed program features-like providing 12 months of continuous eligibility, using a joint application for both Medicaid and the Children's Health Insurance Program (CHIP) and streamlining eligibility renewal processes-that are known to encourage enrollment and retention of eligible children. States also had to document significant increases in Medicaid enrollment among children over the course of the year.
Performance bonuses are not the only federal incentive for states to maintain and expand their Medicaid programs. A short-term boost in Medicaid reimbursement rates authorized by the American Recovery and Reinvestment Act (ARRA) also provided relief to states with suffering economies, enabling them to extend care to eligible children.
"In the midst of the worst economic downturn since the Great Depression, decisive action in ARRA and CHIPRA, along with focused state activity, helped ensure that children got the health care they need," said Cindy Mann, director of the Center for Medicaid and State Operations within the Center for Medicare and Medicaid Services (CMS). "We are pleased to see the success these states have achieved as well as the actions to enroll eligible children taken by other states that we expect may qualify for the bonus next year."
Today's announcement closely follows the release of a study by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured which also credited ARRA and CHIPRA with enabling States to expand access to care for low-income, uninsured children. In a 50-state survey, the Commission concluded that 26 states expanded and/or simplified their Medicaid and CHIP programs in 2009. A copy of the complete report can be found at http://www.kff.org.
State award amounts today are:
Alabama $39.1 million
Alaska $789,000
Illinois $9.1 million
Louisiana $1.5 million
Michigan $3.7 million
New Jersey $4.2 million
New Mexico $5.1 million
Oregon $1.6 million
Washington $7.5 million
Total: $72.6 million
CMS today also released a letter to state health officials providing more detailed guidance on the criteria for qualifying for a bonus payment for 2009 and in future years. That letter will be available on the CMS web site at www.cms.hhs.gov/CHIPRA and also on the Insure Kids Now website at www.insurekidsnow.gov
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Funding for the "performance bonuses" was included in the Children's Health Insurance Program Reauthorization (CHIPRA) law. CHIPRA also set performance goals that states must meet to qualify for a bonus.
"Today, we're happy to reward states that have taken important steps to help insure more children and made a real difference in the lives of families across the country," said Secretary Sebelius. "These awards will provide crucial support and help states continue to serve children and families."
States receiving funds today include: Alaska, Alabama, Illinois, Louisiana, Michigan, New Jersey, New Mexico, Oregon, and Washington. (See below for a complete list of state awards.) Awards vary by state according to a formula set out in CHIPRA but total $72.6 million this fiscal year.
To receive these performance bonuses, states had to meet two types of performance goals set forth in the CHIPRA statute. States had to qualify by adopting at least five of eight listed program features-like providing 12 months of continuous eligibility, using a joint application for both Medicaid and the Children's Health Insurance Program (CHIP) and streamlining eligibility renewal processes-that are known to encourage enrollment and retention of eligible children. States also had to document significant increases in Medicaid enrollment among children over the course of the year.
Performance bonuses are not the only federal incentive for states to maintain and expand their Medicaid programs. A short-term boost in Medicaid reimbursement rates authorized by the American Recovery and Reinvestment Act (ARRA) also provided relief to states with suffering economies, enabling them to extend care to eligible children.
"In the midst of the worst economic downturn since the Great Depression, decisive action in ARRA and CHIPRA, along with focused state activity, helped ensure that children got the health care they need," said Cindy Mann, director of the Center for Medicaid and State Operations within the Center for Medicare and Medicaid Services (CMS). "We are pleased to see the success these states have achieved as well as the actions to enroll eligible children taken by other states that we expect may qualify for the bonus next year."
Today's announcement closely follows the release of a study by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured which also credited ARRA and CHIPRA with enabling States to expand access to care for low-income, uninsured children. In a 50-state survey, the Commission concluded that 26 states expanded and/or simplified their Medicaid and CHIP programs in 2009. A copy of the complete report can be found at http://www.kff.org.
State award amounts today are:
Alabama $39.1 million
Alaska $789,000
Illinois $9.1 million
Louisiana $1.5 million
Michigan $3.7 million
New Jersey $4.2 million
New Mexico $5.1 million
Oregon $1.6 million
Washington $7.5 million
Total: $72.6 million
CMS today also released a letter to state health officials providing more detailed guidance on the criteria for qualifying for a bonus payment for 2009 and in future years. That letter will be available on the CMS web site at www.cms.hhs.gov/CHIPRA and also on the Insure Kids Now website at www.insurekidsnow.gov
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Monday, December 14, 2009
NORD Calls for Immediate End to Lifetime Insurance Caps
/PRNewswire/ -- The National Organization for Rare Disorders (NORD) today called upon Congress to put an immediate end to lifetime and annual health insurance caps. In a full-page ad in The Politico, a newspaper distributed widely on Capitol Hill, NORD said the current Senate health reform bill includes loopholes that would allow caps to continue for most Americans, contrary to what many people believe.
"NORD supports health care reform and welcomes the promises made by President Obama and Congress to eliminate lifetime and annual caps," said NORD President Peter L. Saltonstall. "However, under the current version of the Senate bill, caps would continue for several years for many people and would never be eliminated for others."
Private insurers often set lifetime or annual caps on the amount of health care coverage an individual may have. For Americans with chronic diseases, rare disorders, or major medical crises, this can lead to financial crisis or bankruptcy when insurance benefits are exhausted.
The health care reform debate has focused a spotlight on this problem. President Obama promised this fall that the caps would be eliminated under health reform, noting that insurance companies would "no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime." Originally, the Senate health reform debate also advocated eliminating the caps.
However, the current version of the Senate bill provides for "grandfathering" existing insurance plans so that existing plans would be subject to annual lifetime caps indefinitely. The bill also allows self-insured plans to impose annual or lifetime caps indefinitely, which means that many people with employer-provided insurance would still be subject to caps. Even when the bill would require eliminating caps, it would not require doing so for several years.
Earlier this fall, NORD sent a letter to all members of Congress and President Obama outlining four measures that it considers essential to any health reform plan: prohibiting discrimination based on pre-existing conditions; protecting patients against catastrophic out-of-pocket costs and lifetime or annual caps; prohibiting insurers from canceling policies as a result of medical diagnoses; and including tax credits and other direct financing support to assure that all Americans can afford coverage.
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"NORD supports health care reform and welcomes the promises made by President Obama and Congress to eliminate lifetime and annual caps," said NORD President Peter L. Saltonstall. "However, under the current version of the Senate bill, caps would continue for several years for many people and would never be eliminated for others."
Private insurers often set lifetime or annual caps on the amount of health care coverage an individual may have. For Americans with chronic diseases, rare disorders, or major medical crises, this can lead to financial crisis or bankruptcy when insurance benefits are exhausted.
The health care reform debate has focused a spotlight on this problem. President Obama promised this fall that the caps would be eliminated under health reform, noting that insurance companies would "no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime." Originally, the Senate health reform debate also advocated eliminating the caps.
However, the current version of the Senate bill provides for "grandfathering" existing insurance plans so that existing plans would be subject to annual lifetime caps indefinitely. The bill also allows self-insured plans to impose annual or lifetime caps indefinitely, which means that many people with employer-provided insurance would still be subject to caps. Even when the bill would require eliminating caps, it would not require doing so for several years.
Earlier this fall, NORD sent a letter to all members of Congress and President Obama outlining four measures that it considers essential to any health reform plan: prohibiting discrimination based on pre-existing conditions; protecting patients against catastrophic out-of-pocket costs and lifetime or annual caps; prohibiting insurers from canceling policies as a result of medical diagnoses; and including tax credits and other direct financing support to assure that all Americans can afford coverage.
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Insurance Now Subject to Federal Jurisdiction
/PRNewswire/ -- On December 9, 2009, the United States Court of Appeals, Tenth Circuit, affirmed the federal government's position that private insurance companies are "plans" and therefore subject to federal jurisdiction. (US vs. Frost)
Although other federal courts have held that contracts issued by insurance companies may be subject to federal jurisdiction under Title 18 Section 1347, US vs. Frost is the first case an insurance company itself has been held to be a "plan," because, as the government claimed in this case, all insurance companies are "plans." At trial and initially on appeal in this case, the government maintained the position that insurance contracts are "plans," but to avoid a constructive amendment, changed their theory claiming that all insurance companies are "plans" as a "matter of law" and the 10th Circuit agreed.
Ironically, the term "plan" was first adopted by ERISA in 1974. Although ERISA generally excluded insurance companies as "plans," the federal government now claims that health insurance companies are the private equivalent of Medicare and Medicaid which are "plans." Therefore, all insurance companies that make payments for the cost of medical services are "plans" under federal law. The 10th Circuit agreed and upheld the district court's finding that simply paying a medical claim qualifies an insurance company as a "plan."
Not only does this ruling open the door for the federal government to hold all insurance companies subject to ERISA, but it automatically and retroactively subjects all insurance companies to federal jurisdiction under Title 18, 669, 1035 and 1347 by qualifying them as "Health Care Benefit Programs" under 24(b).
If upheld by the Supreme Court, a quantum leap toward federal regulation of health insurance companies will be complete. Redcorn and Frost, the defendants in the case, stated they would ask the Tenth Circuit to reconsider the matter 'en banc' before they appeal to the Supreme Court.
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Although other federal courts have held that contracts issued by insurance companies may be subject to federal jurisdiction under Title 18 Section 1347, US vs. Frost is the first case an insurance company itself has been held to be a "plan," because, as the government claimed in this case, all insurance companies are "plans." At trial and initially on appeal in this case, the government maintained the position that insurance contracts are "plans," but to avoid a constructive amendment, changed their theory claiming that all insurance companies are "plans" as a "matter of law" and the 10th Circuit agreed.
Ironically, the term "plan" was first adopted by ERISA in 1974. Although ERISA generally excluded insurance companies as "plans," the federal government now claims that health insurance companies are the private equivalent of Medicare and Medicaid which are "plans." Therefore, all insurance companies that make payments for the cost of medical services are "plans" under federal law. The 10th Circuit agreed and upheld the district court's finding that simply paying a medical claim qualifies an insurance company as a "plan."
Not only does this ruling open the door for the federal government to hold all insurance companies subject to ERISA, but it automatically and retroactively subjects all insurance companies to federal jurisdiction under Title 18, 669, 1035 and 1347 by qualifying them as "Health Care Benefit Programs" under 24(b).
If upheld by the Supreme Court, a quantum leap toward federal regulation of health insurance companies will be complete. Redcorn and Frost, the defendants in the case, stated they would ask the Tenth Circuit to reconsider the matter 'en banc' before they appeal to the Supreme Court.
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Tuesday, December 08, 2009
Save Flexible Spending Plans Applauds Amendment to Protect Flexible Spending Accounts
/PRNewswire/ -- Save Flexible Spending Plans, a national grassroots organization dedicated to protecting flexible spending accounts (FSAs), praised Sen. Charles E. Schumer (D-NY) for filing an amendment to the Patient Protection and Affordable Care Act that would help protect the future use and value of FSAs. The amendment, filed yesterday afternoon, would adjust for inflation the currently pending $2,500 cap on FSAs, helping to ensure that participants will be able to meet their out-of-pocket health care needs over time.
"We are encouraged that Sen. Schumer filed an amendment to protect FSAs, a benefit relied upon by more than 35 million working American families to manage and hold down their health care costs," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks Inc., a benefits company based in San Mateo, CA. "Without indexing the $2,500 contribution cap for inflation, millions of participants, including those battling chronic illnesses, will see the value of their FSAs quickly erode. The Schumer amendment would solve this problem, ensuring that access to FSAs stays in line with increasing costs. Filing of the amendment further acknowledges the importance and support in the Senate for preserving FSAs as a valuable cost-saving benefit."
Failing to adjust the contribution cap for inflation, as had been crafted in legislation passed by the House of Representatives, will cause the value of a $2,500 FSA to plummet to less than half its worth within a decade.
"Following the September introduction of Sen. Baucus' (D-MT) health care reform legislation, Senate Finance Committee members from both parties offered amendments to protect FSAs," added Jackson. "We are hopeful that once again, Senators from both sides of the aisle will sign on in support of the Schumer amendment and his solution that is critical to protecting FSAs."
Beyond the need to adjust the contribution cap for inflation, there are still concerns about the unreasonably low amount of the cap, which has been proposed. The restrictions will force approximately 7 million hard-working Americans who use their FSAs to pay for out-of-pocket health care expenses greater than $2,500 to pay higher taxes and health care costs. Federal employees who currently enjoy a $5,000 limit on FSA contributions will see their access to FSAs cut in half. Additionally, state employees in 46 states who currently have FSA contribution limits set at $3,000 or more will be negatively impacted. Sadly, those with the highest out-of-pocket health care costs - the sickest - will be hit the hardest by restrictions on FSA use.
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"We are encouraged that Sen. Schumer filed an amendment to protect FSAs, a benefit relied upon by more than 35 million working American families to manage and hold down their health care costs," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks Inc., a benefits company based in San Mateo, CA. "Without indexing the $2,500 contribution cap for inflation, millions of participants, including those battling chronic illnesses, will see the value of their FSAs quickly erode. The Schumer amendment would solve this problem, ensuring that access to FSAs stays in line with increasing costs. Filing of the amendment further acknowledges the importance and support in the Senate for preserving FSAs as a valuable cost-saving benefit."
Failing to adjust the contribution cap for inflation, as had been crafted in legislation passed by the House of Representatives, will cause the value of a $2,500 FSA to plummet to less than half its worth within a decade.
"Following the September introduction of Sen. Baucus' (D-MT) health care reform legislation, Senate Finance Committee members from both parties offered amendments to protect FSAs," added Jackson. "We are hopeful that once again, Senators from both sides of the aisle will sign on in support of the Schumer amendment and his solution that is critical to protecting FSAs."
Beyond the need to adjust the contribution cap for inflation, there are still concerns about the unreasonably low amount of the cap, which has been proposed. The restrictions will force approximately 7 million hard-working Americans who use their FSAs to pay for out-of-pocket health care expenses greater than $2,500 to pay higher taxes and health care costs. Federal employees who currently enjoy a $5,000 limit on FSA contributions will see their access to FSAs cut in half. Additionally, state employees in 46 states who currently have FSA contribution limits set at $3,000 or more will be negatively impacted. Sadly, those with the highest out-of-pocket health care costs - the sickest - will be hit the hardest by restrictions on FSA use.
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Insurance Industry Facing Uncertain Regulatory Environment, Competitive Shake-Up, Says PricewaterhouseCoopers Report
/PRNewswire/ -- The insurance industry may not see a return to relative stability and certainty for a few years as it reacts to the effects of regulatory reform, increased government intervention and potential tax law changes in the aftermath of the financial crisis, said PricewaterhouseCoopers LLP in a report released today. Within five years, the industry landscape could look markedly different, and Americans may find their insurance policies underwritten by a handful of large, well-capitalized firms that can demonstrate financial strength and economies of scale.
The PricewaterhouseCoopers report, entitled "Emerging from the Storm: The Day After Tomorrow for Insurance," outlines nine key developments that are expected to reshape the insurance industry and their strategic implications during the next five years. The most significant of these developments for U.S. insurers will likely be sweeping regulatory changes resulting from proposed legislation to reform health insurance and increase federal oversight of insurance and financial industries.
The majority of regulation of insurance firms in the U.S. occurs at the state level, but there is political pressure to expand federal oversight. Creation of a Federal Insurance Office could provide federal policymakers with the information and resources to better respond to crises, mitigate systemic risks and help ensure a well-functioning financial system, but it could also lead to dual regulation at both the state and federal levels.
"Insurers are in the business of managing risk and measuring probability. They don't like uncertainty, yet they are facing two massive reform initiatives, the outcomes of which are unknown but could alter their destiny," said Bill Chrnelich, partner, PricewaterhouseCoopers' insurance sector. "Some insurers are taking a cautious, wait and see approach, while others see this period as a once-in-a-generation opportunity to shape their future."
According to PricewaterhouseCoopers, the insurers most likely to succeed once regulatory changes are enacted are those that closely monitor developments and create business strategies that anticipate the most likely possibilities for reform. In addition, they will carefully factor the following considerations into their business decisions:
-- Insurance Industry consolidation: The U.S. insurance market remains
highly fragmented, and the strong underlying rationale for
consolidation and restructuring means that merger and acquisition
activity may be set to accelerate rapidly, particularly as larger,
better-capitalized firms consume smaller firms. Consolidation is
expected to help to deliver the capital stability and economies of
scale that will be important in attracting customers and demonstrating
financial strength not only to ratings agencies but also to
third-party distributors whose "ownership of the customer" makes them
a key determinant of an insurers' fate.
-- The end of innocence for retail investors: The faith of investors, who
had become accustomed to high yields but were unaware of the related
risks, appears to have given way to shock, disillusionment and
caution. The pursuit of innovation appears to have been displaced by
a focus on stability, risk management and demand for simpler, more
straightforward and transparent policies and investment products such
as index-linked investments. An example of this is the recent
resurgence in demand for whole life insurance. The apparent desire
for guarantees, however, could create dilemmas for insurance companies
that want to scale back such products as they seek to limit risk.
Potentially higher costs of risk and guarantees, along with what may
be higher commission payments to distributors, could change product
economics, and insurers will need to better understand component
costs, pricing and profit profiles.
-- Mounting uncertainty over tax: As debts and fiscal deficits mount,
governments are looking for ways to increase their tax revenues. They
will look closely at insurance companies, as the industry is a major
source of potential tax receipts and has moved significant business
capacity to other jurisdictions in recent years. Accordingly,
insurers can expect renewed scrutiny of their tax planning techniques,
as well as more stringent requirements for transparency and
information exchange relating to clients.
-- Organic restructuring: As a result of the financial crisis, many
insurers have been forced to raise prices, restrict the pursuit of new
business or withdraw from high risk and peripheral markets. As
insurers withdraw from some of their geographic markets and scale back
particular lines of business, the market shares and opportunities for
those that remain could sharply increase, leading to a significant
reconfiguration in the list of leading players. Companies with a
better understanding of their risks are likely to be in a stronger
position to capitalize on potential openings that less-informed and
less-assured competitors may miss.
-- Rethinking insurance financial reporting: Many insurance executives
justifiably complain that their share prices fail to reflect the true
level of value being created within their business. Without an
industry consensus on a genuinely relevant, intelligible, and
comparable basis of accounting and disclosure, insurers may find it
increasingly difficult to compete for capital. With funds
constrained, many portfolio investors could simply choose to put their
money elsewhere, leaving the insurance industry with major challenges.
According to PricewaterhouseCoopers, it seems imperative that the
industry come together to develop a basis of relevant disclosures that
reflect the nuances of their business and satisfy analyst and investor
demands.
-- Blurring the lines between the public and private sector: The
relationship between the public and private sectors could change as
the government exerts a stronger influence over the insurance market
as a result of bailouts, regulatory reform, and greater control over
pensions, healthcare, trade credit and mortgage support.
-- Greater scrutiny of executive compensation: Two concerns raised by the
financial crisis were the lack of understanding of risk at the board
of directors' level and compensation for senior executives. With
appointment of the Special Master for TARP Executive Compensation, in
the United States, insurers are likely to base much more of their
performance-related pay on risk-adjusted measures, aligned to their
business strategy. They also are expected to face tougher regulation
over how compensation is governed.
-- Challenging prospects for reinsurers: While demand for reinsurance is
likely to increase within emerging markets, this is unlikely to offset
the decline in reinsurance buying in developed markets and may force
many reinsurers to rethink how they sustain profitability and growth.
The trend toward higher retention of straightforward risks could
accelerate. As companies become more risk-aware through advances in
enterprise risk management, they will be better able to choose what
risks to retain and which to reinsure.
"There is only one certainty for the insurance industry: change is coming and, as a result, the competitive landscape will be very different in five years from what exists today," added Chrnelich. "This will jeopardize some insurers' business, but it should also enable those who are better prepared to excel in a new environment. Success will likely depend on close monitoring of developments and the ability to quickly capitalize on opportunities as reforms and changes within the industry become clearer."
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The PricewaterhouseCoopers report, entitled "Emerging from the Storm: The Day After Tomorrow for Insurance," outlines nine key developments that are expected to reshape the insurance industry and their strategic implications during the next five years. The most significant of these developments for U.S. insurers will likely be sweeping regulatory changes resulting from proposed legislation to reform health insurance and increase federal oversight of insurance and financial industries.
The majority of regulation of insurance firms in the U.S. occurs at the state level, but there is political pressure to expand federal oversight. Creation of a Federal Insurance Office could provide federal policymakers with the information and resources to better respond to crises, mitigate systemic risks and help ensure a well-functioning financial system, but it could also lead to dual regulation at both the state and federal levels.
"Insurers are in the business of managing risk and measuring probability. They don't like uncertainty, yet they are facing two massive reform initiatives, the outcomes of which are unknown but could alter their destiny," said Bill Chrnelich, partner, PricewaterhouseCoopers' insurance sector. "Some insurers are taking a cautious, wait and see approach, while others see this period as a once-in-a-generation opportunity to shape their future."
According to PricewaterhouseCoopers, the insurers most likely to succeed once regulatory changes are enacted are those that closely monitor developments and create business strategies that anticipate the most likely possibilities for reform. In addition, they will carefully factor the following considerations into their business decisions:
-- Insurance Industry consolidation: The U.S. insurance market remains
highly fragmented, and the strong underlying rationale for
consolidation and restructuring means that merger and acquisition
activity may be set to accelerate rapidly, particularly as larger,
better-capitalized firms consume smaller firms. Consolidation is
expected to help to deliver the capital stability and economies of
scale that will be important in attracting customers and demonstrating
financial strength not only to ratings agencies but also to
third-party distributors whose "ownership of the customer" makes them
a key determinant of an insurers' fate.
-- The end of innocence for retail investors: The faith of investors, who
had become accustomed to high yields but were unaware of the related
risks, appears to have given way to shock, disillusionment and
caution. The pursuit of innovation appears to have been displaced by
a focus on stability, risk management and demand for simpler, more
straightforward and transparent policies and investment products such
as index-linked investments. An example of this is the recent
resurgence in demand for whole life insurance. The apparent desire
for guarantees, however, could create dilemmas for insurance companies
that want to scale back such products as they seek to limit risk.
Potentially higher costs of risk and guarantees, along with what may
be higher commission payments to distributors, could change product
economics, and insurers will need to better understand component
costs, pricing and profit profiles.
-- Mounting uncertainty over tax: As debts and fiscal deficits mount,
governments are looking for ways to increase their tax revenues. They
will look closely at insurance companies, as the industry is a major
source of potential tax receipts and has moved significant business
capacity to other jurisdictions in recent years. Accordingly,
insurers can expect renewed scrutiny of their tax planning techniques,
as well as more stringent requirements for transparency and
information exchange relating to clients.
-- Organic restructuring: As a result of the financial crisis, many
insurers have been forced to raise prices, restrict the pursuit of new
business or withdraw from high risk and peripheral markets. As
insurers withdraw from some of their geographic markets and scale back
particular lines of business, the market shares and opportunities for
those that remain could sharply increase, leading to a significant
reconfiguration in the list of leading players. Companies with a
better understanding of their risks are likely to be in a stronger
position to capitalize on potential openings that less-informed and
less-assured competitors may miss.
-- Rethinking insurance financial reporting: Many insurance executives
justifiably complain that their share prices fail to reflect the true
level of value being created within their business. Without an
industry consensus on a genuinely relevant, intelligible, and
comparable basis of accounting and disclosure, insurers may find it
increasingly difficult to compete for capital. With funds
constrained, many portfolio investors could simply choose to put their
money elsewhere, leaving the insurance industry with major challenges.
According to PricewaterhouseCoopers, it seems imperative that the
industry come together to develop a basis of relevant disclosures that
reflect the nuances of their business and satisfy analyst and investor
demands.
-- Blurring the lines between the public and private sector: The
relationship between the public and private sectors could change as
the government exerts a stronger influence over the insurance market
as a result of bailouts, regulatory reform, and greater control over
pensions, healthcare, trade credit and mortgage support.
-- Greater scrutiny of executive compensation: Two concerns raised by the
financial crisis were the lack of understanding of risk at the board
of directors' level and compensation for senior executives. With
appointment of the Special Master for TARP Executive Compensation, in
the United States, insurers are likely to base much more of their
performance-related pay on risk-adjusted measures, aligned to their
business strategy. They also are expected to face tougher regulation
over how compensation is governed.
-- Challenging prospects for reinsurers: While demand for reinsurance is
likely to increase within emerging markets, this is unlikely to offset
the decline in reinsurance buying in developed markets and may force
many reinsurers to rethink how they sustain profitability and growth.
The trend toward higher retention of straightforward risks could
accelerate. As companies become more risk-aware through advances in
enterprise risk management, they will be better able to choose what
risks to retain and which to reinsure.
"There is only one certainty for the insurance industry: change is coming and, as a result, the competitive landscape will be very different in five years from what exists today," added Chrnelich. "This will jeopardize some insurers' business, but it should also enable those who are better prepared to excel in a new environment. Success will likely depend on close monitoring of developments and the ability to quickly capitalize on opportunities as reforms and changes within the industry become clearer."
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Friday, December 04, 2009
Medicare Open Enrollment Begins: Now Is The Time To Review Your Plan
(NAPSI)-You may know that new Medicare prescription drug and health plan choices are offered each year. Medicare's Open Enrollment Period runs through December 31.
Open Enrollment is your chance to review your current plan-including your Original Medicare coverage-compare it with your other options and make sure you're getting the best available coverage for your health care needs.
Your current health plan may have changed its cost or coverage for 2010, or maybe you'd like a plan with a lower deductible.
If you've had any changes in your health, it's particularly important for you to double-check your coverage during Open Enrollment so you can make sure that any new treatments or drugs are covered by your plan.
Since coverage varies by plan, know what's important for you. For example, make a list of the drugs you take so you can make sure they're covered by the plans you're considering.
If you are in Original Medicare and don't have prescription drug coverage, you can join a Medicare drug plan during Open Enrollment.
Medicare has several ways to get you the help you need to find a plan that works for you.
• Visit www.medicare.gov, where you can get a personalized comparison of the costs and coverage of the plans available in your area.
• Call 1-800-MEDICARE (1-800-633-4227) to find out more about your coverage options. TTY users should call 1-877-486-2048. Medicare customer service representatives are available 24 hours a day, seven days a week with multiple language options and resources for people with disabilities.
• Watch your mailbox for the 2010 "Medicare & You" handbook. The handbook is mailed to all Medicare households each fall and includes a listing of all plans in your area. This handbook is also conveniently available online at www.medicare.gov.
• Meet one on one with a trained expert for personalized assistance. Call 1-800-MEDICARE or visit www.medicare.gov to find a Medicare specialist in your area. Select "Find Helpful Phone Numbers and Websites."
Important Medicare Enrollment Dates:
Dec. 31: Open Enrollment ends. Last day to join or change your Medicare drug plan.
Jan. 1: Your new plan coverage begins.
This message is brought to you by the U.S. Department of Health & Human Services.
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Open Enrollment is your chance to review your current plan-including your Original Medicare coverage-compare it with your other options and make sure you're getting the best available coverage for your health care needs.
Your current health plan may have changed its cost or coverage for 2010, or maybe you'd like a plan with a lower deductible.
If you've had any changes in your health, it's particularly important for you to double-check your coverage during Open Enrollment so you can make sure that any new treatments or drugs are covered by your plan.
Since coverage varies by plan, know what's important for you. For example, make a list of the drugs you take so you can make sure they're covered by the plans you're considering.
If you are in Original Medicare and don't have prescription drug coverage, you can join a Medicare drug plan during Open Enrollment.
Medicare has several ways to get you the help you need to find a plan that works for you.
• Visit www.medicare.gov, where you can get a personalized comparison of the costs and coverage of the plans available in your area.
• Call 1-800-MEDICARE (1-800-633-4227) to find out more about your coverage options. TTY users should call 1-877-486-2048. Medicare customer service representatives are available 24 hours a day, seven days a week with multiple language options and resources for people with disabilities.
• Watch your mailbox for the 2010 "Medicare & You" handbook. The handbook is mailed to all Medicare households each fall and includes a listing of all plans in your area. This handbook is also conveniently available online at www.medicare.gov.
• Meet one on one with a trained expert for personalized assistance. Call 1-800-MEDICARE or visit www.medicare.gov to find a Medicare specialist in your area. Select "Find Helpful Phone Numbers and Websites."
Important Medicare Enrollment Dates:
Dec. 31: Open Enrollment ends. Last day to join or change your Medicare drug plan.
Jan. 1: Your new plan coverage begins.
This message is brought to you by the U.S. Department of Health & Human Services.
-----
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Thursday, December 03, 2009
Sebelius Statement on Benefits of Health Insurance Reform for Businesses
HHS Secretary Kathleen Sebelius today highlighted the benefits of health insurance reform for businesses and released a new fact sheet regarding a recent analysis from the Congressional Budget Office.
"Businesses across the country are struggling under the weight of high health care costs," Secretary Sebelius said. "Health insurance reform will help lift this burden, help businesses prosper, and ensure workers have the affordable, quality health care they need."
A fact sheet regarding the analysis is included below.
Fact Sheet: New CBO Analysis Confirms Benefits of Health Insurance Reform for Businesses
American businesses know the health care status quo is unacceptable. Since 2000, premiums have more than doubled, a rate three times faster than the growth in wages. Between 2000 and 2009, the percentage of firms offering coverage fell from 69 to 60, with much of that drop occurring in the past year alone. Small businesses in particular struggle under the current health care system. For firms employing less than 10 workers, the erosion in coverage is striking -- from 57 percent offering coverage in 2000 to 46 percent offering coverage in 2009. If we do nothing, over the next ten years, health care costs for large businesses are projected to reach $28,530 per employee, a 116 percent increase from 2009.
A new analysis by the Congressional Budget Office (CBO) affirms that businesses' health insurance costs will be lower under health insurance reform -- even though the analysis does not take into account the full range of policies that will benefit businesses.
Health Insurance Premiums for Businesses According to CBO. In a November 30 letter to Senator Evan Bayh, CBO assesses the impact of the Patient Protection and Affordability Act on premiums for the individual, small-group, and large group markets. In 2016, CBO estimates that 159 million or 83 percent of privately insured people will be insured through employers.
Premiums for small business will go down. Small businesses are likely to see premiums drop by 1 to 4 percent under the proposal due to lower prices. These lower prices come from:
-- Lower administrative overhead. Right now, each small business
has to consult with a broker or hire someone to collate plan
information, assist employees with decisions, and handle issues as they
arise. Under reform, in the exchange, there will be people whose job it
is to provide plan information and facilitate enrollment. The exchange
centralizes what is otherwise a process that is extremely duplicative,
streamlining administrative costs and lowering premiums.
-- Greater competition. CBO attributes savings to "providing a
centralized marketplace in which consumers could compare the premiums of
relatively standardized insurance products." This includes competitive
pressure from a public health insurance option.
-- Administrative simplification. Physicians spend on average about
140 hours and $68,000 a year just dealing with health insurance
bureaucracy. By simplifying and standardizing paperwork and
computerizing medical records, doctors will be able to focus on caring
for their patients instead of dealing with bureaucracy. CBO estimates
nearly $20 billion in Federal savings over 10 years, with additional
savings accruing to businesses and families.
Up to 3 percent premium savings as the risk pool for employer-based coverage improves. Today, businesses have seen their premiums skyrocket every year, with many facing double digit percentage increases in their premiums. Health insurance reform will stop this trend.
With nearly 30 million additional Americans gaining health insurance, the purchasing pool for businesses will expand and, largely, improve. Big businesses will save from 0 to 3 percent on premiums due to the changing risk pool while small businesses could save 1 percent on
premiums.
Better options for small businesses. Small businesses would gain access to the health insurance exchanges and new benefit options and tax credits under reform.
-- 3.6 million small businesses could qualify for a tax credit to
help pay their premiums.[vii] An estimated 12 percent of people insured
through small businesses will qualify for tax credits that lower
premiums by 8 to 11 percent. This translates into $620 to $860 for
individuals and $1,540 to $2,120 for families assuming that the coverage
is comparable to what they get today.
-- Today, small businesses often have coverage that has high
deductibles and gap-ridden benefits. The legislation offers such
businesses better options that CBO assumes businesses will take. Such
better coverage has premiums that are 0 to 3 percent higher than the
average plans today, but will save money for employees by ensuring they
are not forced to pay high out-of-pocket costs for services not covered
by their current insurance.
-- In the current health insurance system, small businesses may see
premiums skyrocket if just one or two workers fall ill and accumulate
high medical costs. Health insurance reform will prevent insurance
discrimination based on health status, meaning that small businesses
will no longer be unfairly penalized if a worker falls ill.
9 to 12 percent premium savings for high-premium plans under current law. By assessing high-cost plans, the excise tax encourages businesses and individuals to streamline coverage, leading to lower premiums over time.
-- CBO estimates that the 19 percent of people in employer-coverage
in high-cost plans today will pay 9 to 12 percent less under reform.
This translates to premium savings of at least $835 for single and
$2,070 family policies.
-- This could yield increases in workers wages, by around $70
billion in 2019.
Nearly $10 billion in savings for small businesses.
-- Under current law, CBO estimates premiums to be $7,800 for
single policies and $19,300 for families in the small group market.
-- Small businesses that opt for comparable coverage under reform
could save up to $390 for single policies and $965 for family policies.
Assuming all 25 million people insured through small business save at
least $390 (more for families), this will yield nearly $10 billion in
savings in 2016 alone.
-- Additional savings will accrue to low-wage, small businesses
that newly offer coverage in the exchange. CBO estimates that roughly
12 percent of people in the small group market would get the credit
which would reduce premiums by about 10 percent in 2016. Multiplying
this by the population and average premiums in the report, this suggests
that about one and a half million people would save roughly $780 per
person on premiums in 2016.
-- Even those that CBO estimates will "buy-up" will save, paying
$100 less per family for coverage that is more protective.
At least $13.4 billion in savings for large businesses.
-- Under current law, CBO estimates premiums to be $7,400 for
single policies and $20,300 for families in the large group market.
-- CBO estimates that, under reform, large business premiums will
drop by $100 per single policy and $200 per family policy. With 134
million people enrolled in such coverage, this translates into at least
$13.4 billion in savings in 2016 alone.
Businesses can keep what they have.
-- CBO affirms that any proposed benefit mandates would not affect
the small or large group markets: "The requirement would have relatively
little effect on premiums in the small group market, however, because
most policies sold in that market already cover those services and would
continue to cover them under current law."
-- CBO also affirms the effectiveness of the grandfather policy:
"Further, small group policies that are maintained continuously would be
grandfathered under the proposal."
-- In the large group market, CBO affirms that "[Benefit]
requirements would have no significant effect on premiums in the large
group market."
No cost-shifting to the employer-based insurance market.
-- CBO states: "... CBO's assessment is that the legislation would
have minimal effects on private-sector premiums via cost shifting."
Additional Policies To Benefit Businesses. CBO does not include in its analysis several additional policies in the Patient Protection and Affordable Care Act that would benefit businesses.
Reinsurance for businesses that cover early retiree plans.
-- The proportion of employers that offer retiree coverage has been
declining precipitously over time, from 66 percent in 1988 to 29 percent
in 2009.
-- The proposal would provide a time-limited, Federal reinsurance
program to cover some of the cost of covering early retirees. This
translates to savings of up to $1,200 off the premium of every family
plan offered by that company.
Policies to slow health care cost growth.
-- Insurance oversight: In recent years, several states' insurance
commissioners have rejected unjustifiably high premium increases in the
small group and individual insurance markets. Health insurance reform
will allow insurance commissioners to continue to play this important
role and require transparency and oversight of premium increases.
-- Delivery system reform. Health insurance reform will invest in
care innovations such as accountable care organizations, make healthcare
providers more accountable and efficient through value-based purchasing,
and improve quality and patient safety, including reducing preventable
readmissions. A recent report by the Business Roundtable found that if
many of the delivery system reforms were adopted by the private sector,
large businesses could save $3,000 per employee by 2019.
-- Lowers expensive drug costs. Biologic drugs are some of the most
expensive drugs on the market, and yet there is no streamlined avenue to
get generics on the market to provide lower-cost alternatives. Reform
will create an expedited process to make generic biologic drugs
available, significantly lowering drug costs.
Immediate benefits. While the CBO report provides savings estimates for 2016, several of the policies discussed above would take effect immediately, including early retiree reinsurance, administrative simplification, small business tax credits, and increased oversight of the insurance industry.
Benefits to Businesses Beyond Lower Costs. CBO focused exclusively on health insurance premiums which are critical to businesses. There would be other benefits of health reform for businesses as well.
Improved workplace productivity.
-- The Institute of Medicine found that lost productivity due to
untreated illness among uninsured workers cost businesses between $75
billion and $150 billion per year. Expanding coverage to the uninsured
will create a more productive workforce.
-- Current job-lock (inability to leave current employment if it
will result in loss of health insurance) has been demonstrated to hurt
the economy through reduced productivity, and prevents an employee from
taking a job with potentially higher wages. By ending limitations on
coverage based on pre-existing conditions and expanding portable
coverage options through the health insurance exchange, reform will
increase the flexibility and productivity of the workforce.
New jobs.
-- Bringing down the cost of healthcare will enable investments in
business and job creation. The President's Council of Economic Advisers
(CEA) estimated that if the annual growth rate of health spending slows
by 1.5 percentage point, new jobs could rise by 500,000.
-- The health insurance exchange will expand options for coverage,
making small businesses a more attractive place for people to work, and
encouraging people to start up businesses of their own.
-- Health insurance reform could save 80,000 jobs in the small
business sector by 2019 and increase take-home pay by almost $30
billion.
-----
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"Businesses across the country are struggling under the weight of high health care costs," Secretary Sebelius said. "Health insurance reform will help lift this burden, help businesses prosper, and ensure workers have the affordable, quality health care they need."
A fact sheet regarding the analysis is included below.
Fact Sheet: New CBO Analysis Confirms Benefits of Health Insurance Reform for Businesses
American businesses know the health care status quo is unacceptable. Since 2000, premiums have more than doubled, a rate three times faster than the growth in wages. Between 2000 and 2009, the percentage of firms offering coverage fell from 69 to 60, with much of that drop occurring in the past year alone. Small businesses in particular struggle under the current health care system. For firms employing less than 10 workers, the erosion in coverage is striking -- from 57 percent offering coverage in 2000 to 46 percent offering coverage in 2009. If we do nothing, over the next ten years, health care costs for large businesses are projected to reach $28,530 per employee, a 116 percent increase from 2009.
A new analysis by the Congressional Budget Office (CBO) affirms that businesses' health insurance costs will be lower under health insurance reform -- even though the analysis does not take into account the full range of policies that will benefit businesses.
Health Insurance Premiums for Businesses According to CBO. In a November 30 letter to Senator Evan Bayh, CBO assesses the impact of the Patient Protection and Affordability Act on premiums for the individual, small-group, and large group markets. In 2016, CBO estimates that 159 million or 83 percent of privately insured people will be insured through employers.
Premiums for small business will go down. Small businesses are likely to see premiums drop by 1 to 4 percent under the proposal due to lower prices. These lower prices come from:
-- Lower administrative overhead. Right now, each small business
has to consult with a broker or hire someone to collate plan
information, assist employees with decisions, and handle issues as they
arise. Under reform, in the exchange, there will be people whose job it
is to provide plan information and facilitate enrollment. The exchange
centralizes what is otherwise a process that is extremely duplicative,
streamlining administrative costs and lowering premiums.
-- Greater competition. CBO attributes savings to "providing a
centralized marketplace in which consumers could compare the premiums of
relatively standardized insurance products." This includes competitive
pressure from a public health insurance option.
-- Administrative simplification. Physicians spend on average about
140 hours and $68,000 a year just dealing with health insurance
bureaucracy. By simplifying and standardizing paperwork and
computerizing medical records, doctors will be able to focus on caring
for their patients instead of dealing with bureaucracy. CBO estimates
nearly $20 billion in Federal savings over 10 years, with additional
savings accruing to businesses and families.
Up to 3 percent premium savings as the risk pool for employer-based coverage improves. Today, businesses have seen their premiums skyrocket every year, with many facing double digit percentage increases in their premiums. Health insurance reform will stop this trend.
With nearly 30 million additional Americans gaining health insurance, the purchasing pool for businesses will expand and, largely, improve. Big businesses will save from 0 to 3 percent on premiums due to the changing risk pool while small businesses could save 1 percent on
premiums.
Better options for small businesses. Small businesses would gain access to the health insurance exchanges and new benefit options and tax credits under reform.
-- 3.6 million small businesses could qualify for a tax credit to
help pay their premiums.[vii] An estimated 12 percent of people insured
through small businesses will qualify for tax credits that lower
premiums by 8 to 11 percent. This translates into $620 to $860 for
individuals and $1,540 to $2,120 for families assuming that the coverage
is comparable to what they get today.
-- Today, small businesses often have coverage that has high
deductibles and gap-ridden benefits. The legislation offers such
businesses better options that CBO assumes businesses will take. Such
better coverage has premiums that are 0 to 3 percent higher than the
average plans today, but will save money for employees by ensuring they
are not forced to pay high out-of-pocket costs for services not covered
by their current insurance.
-- In the current health insurance system, small businesses may see
premiums skyrocket if just one or two workers fall ill and accumulate
high medical costs. Health insurance reform will prevent insurance
discrimination based on health status, meaning that small businesses
will no longer be unfairly penalized if a worker falls ill.
9 to 12 percent premium savings for high-premium plans under current law. By assessing high-cost plans, the excise tax encourages businesses and individuals to streamline coverage, leading to lower premiums over time.
-- CBO estimates that the 19 percent of people in employer-coverage
in high-cost plans today will pay 9 to 12 percent less under reform.
This translates to premium savings of at least $835 for single and
$2,070 family policies.
-- This could yield increases in workers wages, by around $70
billion in 2019.
Nearly $10 billion in savings for small businesses.
-- Under current law, CBO estimates premiums to be $7,800 for
single policies and $19,300 for families in the small group market.
-- Small businesses that opt for comparable coverage under reform
could save up to $390 for single policies and $965 for family policies.
Assuming all 25 million people insured through small business save at
least $390 (more for families), this will yield nearly $10 billion in
savings in 2016 alone.
-- Additional savings will accrue to low-wage, small businesses
that newly offer coverage in the exchange. CBO estimates that roughly
12 percent of people in the small group market would get the credit
which would reduce premiums by about 10 percent in 2016. Multiplying
this by the population and average premiums in the report, this suggests
that about one and a half million people would save roughly $780 per
person on premiums in 2016.
-- Even those that CBO estimates will "buy-up" will save, paying
$100 less per family for coverage that is more protective.
At least $13.4 billion in savings for large businesses.
-- Under current law, CBO estimates premiums to be $7,400 for
single policies and $20,300 for families in the large group market.
-- CBO estimates that, under reform, large business premiums will
drop by $100 per single policy and $200 per family policy. With 134
million people enrolled in such coverage, this translates into at least
$13.4 billion in savings in 2016 alone.
Businesses can keep what they have.
-- CBO affirms that any proposed benefit mandates would not affect
the small or large group markets: "The requirement would have relatively
little effect on premiums in the small group market, however, because
most policies sold in that market already cover those services and would
continue to cover them under current law."
-- CBO also affirms the effectiveness of the grandfather policy:
"Further, small group policies that are maintained continuously would be
grandfathered under the proposal."
-- In the large group market, CBO affirms that "[Benefit]
requirements would have no significant effect on premiums in the large
group market."
No cost-shifting to the employer-based insurance market.
-- CBO states: "... CBO's assessment is that the legislation would
have minimal effects on private-sector premiums via cost shifting."
Additional Policies To Benefit Businesses. CBO does not include in its analysis several additional policies in the Patient Protection and Affordable Care Act that would benefit businesses.
Reinsurance for businesses that cover early retiree plans.
-- The proportion of employers that offer retiree coverage has been
declining precipitously over time, from 66 percent in 1988 to 29 percent
in 2009.
-- The proposal would provide a time-limited, Federal reinsurance
program to cover some of the cost of covering early retirees. This
translates to savings of up to $1,200 off the premium of every family
plan offered by that company.
Policies to slow health care cost growth.
-- Insurance oversight: In recent years, several states' insurance
commissioners have rejected unjustifiably high premium increases in the
small group and individual insurance markets. Health insurance reform
will allow insurance commissioners to continue to play this important
role and require transparency and oversight of premium increases.
-- Delivery system reform. Health insurance reform will invest in
care innovations such as accountable care organizations, make healthcare
providers more accountable and efficient through value-based purchasing,
and improve quality and patient safety, including reducing preventable
readmissions. A recent report by the Business Roundtable found that if
many of the delivery system reforms were adopted by the private sector,
large businesses could save $3,000 per employee by 2019.
-- Lowers expensive drug costs. Biologic drugs are some of the most
expensive drugs on the market, and yet there is no streamlined avenue to
get generics on the market to provide lower-cost alternatives. Reform
will create an expedited process to make generic biologic drugs
available, significantly lowering drug costs.
Immediate benefits. While the CBO report provides savings estimates for 2016, several of the policies discussed above would take effect immediately, including early retiree reinsurance, administrative simplification, small business tax credits, and increased oversight of the insurance industry.
Benefits to Businesses Beyond Lower Costs. CBO focused exclusively on health insurance premiums which are critical to businesses. There would be other benefits of health reform for businesses as well.
Improved workplace productivity.
-- The Institute of Medicine found that lost productivity due to
untreated illness among uninsured workers cost businesses between $75
billion and $150 billion per year. Expanding coverage to the uninsured
will create a more productive workforce.
-- Current job-lock (inability to leave current employment if it
will result in loss of health insurance) has been demonstrated to hurt
the economy through reduced productivity, and prevents an employee from
taking a job with potentially higher wages. By ending limitations on
coverage based on pre-existing conditions and expanding portable
coverage options through the health insurance exchange, reform will
increase the flexibility and productivity of the workforce.
New jobs.
-- Bringing down the cost of healthcare will enable investments in
business and job creation. The President's Council of Economic Advisers
(CEA) estimated that if the annual growth rate of health spending slows
by 1.5 percentage point, new jobs could rise by 500,000.
-- The health insurance exchange will expand options for coverage,
making small businesses a more attractive place for people to work, and
encouraging people to start up businesses of their own.
-- Health insurance reform could save 80,000 jobs in the small
business sector by 2019 and increase take-home pay by almost $30
billion.
-----
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