Are Health Exchanges 'Built to Fail?'

The Affordable Care Act, often called simply 'Obamacare', has called for the establishment of health care exchanges in order to allow for the education and enrollment in new health care programs.  The idea is that individuals can go to these exchanges to compare plans purchase plans on a wider scale and less expensive basis than currently offered.  While this idea sounds great in principle, is it doomed to fail from the start?  This is exactly the question posed by Director of the Manhattan Institute's Center for Medical Progress Paul Howard and University of Minnesota Insurance Industry Chair of Health Finance Stephen T. Parent e in a guest opinion piece for Kaiser Health News.

While the merits of the exchanges have been debated often before, Howard and Parent e bring up a unique criticism of the logistics of such a massive collaboration:

"Logistically, these requirements present a massive challenge. For the first time, secure data feeds from the Departments of Homeland Security (establishing legal immigrant or US citizen status), Justice (for felon history), Treasury (for tax return information to impute income) and the Social Security Administration (establishing that the recipient is not deceased) would have to be combined. These data feeds would then have to be securely coordinated by the Department of Health and Human Services. There is no history of these agencies ever bringing their data together at this scale. It would qualify as the largest IT integration project in U.S. history. "

 Given this perspective, it is difficult to imagine that implementing health care exchanges will actually cause administration costs to decrease, as widely proclaimed by proponents of an exchange system.  Add this new found skepticism of the exchanges administration abilities to the existing merit-based criticism of exchanges in the first place and it is clear Howard and Parent e have posed an apt question: Are these health exchanges built to fail?

Many Employers Set to Drop Health Coverage in 2014, Obama displeased

A McKinsey & Co. study says 30% of all employers will “definitely” or “probably” stop offering their workers health insurance once the bulk of the healthcare reform law’s mandates take effect in 2014.

That figure jumps to 50% among employers with a “high awareness” of the reform law’s requirements, the study found.

While the Obama administration was quick to question the study, the numbers do not surprise me.  As more and more small business owners, mid market accounts and large group administrators examine the repercussions of Health Care Reform, they are finding that there is an economic disincentive to provide coverage as outlined in the law.  Many owners find that paying the penalty and providing alternative compensation to their employees makes more fiscal sense for their business.  This strategy seems sound, as the same study found that 85% of employees would stay at their employer even if they were to drop coverage, and only 60% would expect some kind of additional compensation for their loss of coverage.

 As a small business owner, what will you do in 2014?  What are you doing in the meantime?  As always, you can use the same tools insurance professionals and insiders use to quote your current group.  Alternatively, if you are one of those employers (and specifically, small business owners) who has decided to drop coverage already, you and your employees can go here to find an individual plan.

Not-for-Profit Entity Blue Shield of California Announces Cap on Profit

With health care costs rising for both insurers and consumers alike, it seems like rate "adjustments" are always going upward, and we never actually hear about rate reductions.    Blue Shield of California recently revealed that they will cap their profits.  Specifically, they have made a commitment to keep only 2% of net revenue, dispersing any additional funds back to policyholders and the community. While this is not the long term lowering of rates many would like to see, it is a step in the right direction. In an op-ed piece in the San Francisco Chronicle, Blue Shield of California Chairman and CEO Bruce Bodaken declared:

"If at the end of any year our net income is more than 2 percent because medical costs were lower or investment income was higher than we had projected, we'll return that amount to our members and the community. This is a long-term commitment and, we believe, the first of its kind in the country. We are committed to the 2 percent pledge"

He went on to enumerate exactly how this would be handled for the 2010 business year:

"We will apply this new policy beginning with our income in 2010, the year health reform was enacted. Our net income last year exceeded the 2 percent target by $180 million. As a result, we will give back $180 million this year: $167 million to our policyholders; $10 million to physicians and hospitals that invest in new ways to coordinate care through accountable care organizations; and $3 million to the Blue Shield of California Foundation to support the safety net."

To the surprise of many, especially those who have received rate increases in the last year, Mr. Bodaken admitted that this rebate was not enough to satisfy policyholders or Blue Shield alike, as he called on others in the industry to follow his lead:

"While we are taking this action to help our customers pay for their health care coverage, we know that this is not enough. We have long advocated for health care reform to expand coverage, reduce costs and improve quality. We have developed innovative programs to restrain the rising cost of medical care, but we can't make a major dent in rising health care costs on our own.

That's because making coverage affordable is not something any company can do by itself. We all need to take better care of ourselves. Insurers, hospitals, drug companies, physicians and government must look inward, think creatively and take bold action to reduce costs. That's what we're doing - and we invite others to join us."

It will be interesting to see if others heed Mr. Bodaken's call, or simply dismiss his Op-Ed as unnecessary and redundant.  Blue Shield of California is, after all, a not-for-profit organization.  Should their declaration to limit profits really garner such headlines?

Health Care Reform Watch - PPACA: The Bad Nuts and the Bad Bolts

PPACA: The Bad Nuts and the Bad Bolts

A brief but informative look at the Patient Protection and Affordable Care Act ( PPACA's) impact on employers with small group health plans.  It looks like "if you like your plan, you can keep it" is not the case for these folks, and many others like them.