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Pay Role

The government’s healthcare reform will soon drive up insurance premiums, but the rhetoric keeps pinning the blame on health insurers.

By  Joel Wood

One of the big clichés of the year is that the passage of healthcare reform represented not the end, but the “end of the beginning” of reform, what with the hundreds of areas of regulatory deference and years of implementation timetables. For those in the health insurance industry, as torturous as the debate was, the ugliest political assaults apparently are yet to come.

You don’t have to look far to find the vitriolic rhetoric. As Health and Human Services Secretary Kathleen Sebelius said on June 24: “Americans across the country have been at the mercy of insurers for far too longwhen it comes to premiums and prices.Finally, the power is shifting back to consumersthanks to the strong actionson the part ofthe states and new protections and accountability under the Affordable Care Act.As wework to turn this new law into reality for families everywhere, we will continue working closely with the states, providing them with more resourcesto hold insurers accountable and get the American people the quality, affordable health insurance they deserve.”

Evincing further alarm within the industry was yet another White House photo op in late June with President Obama chastising and warning health plans that they must conform to all of the new market reforms without “excessive” rate increases. To the credit of the industry representatives, there was a bit of actual conversation about restraint of underlying healthcare costs that are essentially unaddressed by the healthcare reform legislation. There was even some grudging admission by administration officials that—shock!—some elements of unsustainably rising healthcare costs may not be the fault of blood-sucking health plans. Of course, that got about one inch of copy at the bottom of every national news story—if that.

As Sen. Lamar Alexander, R-Tenn., has pointed out, you could confiscate all the profits of the health insurance industry—every dime—and pay for exactly two days of healthcare in America.

To be sure, there are other rhetorical elements to the administration’s rollout of healthcare reform. Among them was the June announcement of $23 million in grants for states to “support efforts to evaluate patient safety approaches and medical liability reforms.” Compared to the trillions that healthcare reform will cost, this “medical liability reform” initiative is like a cockscomb on a rooster—all red and showy, but serving no purpose whatsoever.

HHS also released some guidelines for what will constitute “grandfathered” health plans, touting it as proof of the principle that “if you like your health plan, you get to keep it.”

But smart consultants are counseling their clients that they shouldn’t count on it; there is enough regulatory flexibility that any employer foot fault could result in a plan losing its grandfathered status.

Council staff members have been engaged for countless hours in the tangled effort to work with state regulators and HHS to come up with a workable definition of “minimum loss ratios” for the purposes of curtailing administrative expenses of health plans. For individual and small-group plans, insurers must pay out 80% of claims on medical expenses; 85% in the case of groups of more than 100. Consumer groups, liberals in Congress (led by Sen. Jay Rockefeller, D-W.Va.) and HHS have pushed back repeatedly on the idea that health plans should exert controls on the cost of anything in the healthcare pipeline, except, of course, the cost of insurance itself.

Meanwhile, limited benefit (or “mini-med”) plans remain endangered. HHS released guidance that individuals in such plans “would not be denied access to needed services or experience more than a minimal impact on premiums.” HHS is erecting a regime under which waivers could be sought for mini-med plans, but there are no guarantees that these plans that provide limited protection to millions of Americans will even be around by the time healthcare reform is fully implemented.

Finally, the administration has again signaled its support for legislation championed by Sen. Dianne Feinstein, D-Calif., that would create a federal insurance price-control office at HHS. Such an HHS rate authority was debated during the healthcare reform battle but discarded at the time because it didn’t fit into the “reconciliation” groove that was necessary to get the bill to the congressional finish line. Many on the Hill and within the administration want such an office to regulate broker compensation, as well.

You don’t have to squint to see where this is going. The healthcare reform legislation establishes vast new market reforms that are going to be expensive. The legislation, from the standpoint of providers and drug companies, does not constrain the exploding cost of healthcare, nor does it address the thorny issues of chronic disease, an unhealthy and aging population, or the costs of defensive medicine. It imposes a multitude of new taxes that will be passed directly to consumers.

Do the math. Insurance premiums are going to rise, not fall. The administration has methodically, repeatedly and loudly made the case that health insurers are responsible for health insurance premiums. The federal government’s boot is on the neck of the industry and has been for many months. As the premium increases come, the stage is being set to squeeze the industry’s jugular even more.

Wood is The Council’s senior vice president of Government Affairs.


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