How the health-care bill affects insurers, hospitals and consumers

Mar 23, 2010

Post staff writer Alec MacGillis discusses his story about what changes consumers at different income levels can expect from doctors, hospitals and the insurance industry.

Read more: First wave of health-care changes will target insurers with new rules

Hello everyone, and thanks for joining us today. I'm here to take any questions about the health care bill's impact, from the impact on the health care industry, which I wrote about in today's paper, to the impact on consumers. Fire away!

Income being a number that's in the eyes of the beholder, what exactly do the caps refer to? Which line on one's tax 1040? total income? AGI? Is the anti-trust exemption in or out and what if any effect on consumers?

The income definitions in the bill are based on adjusted gross income, or perhaps a slightly modified version of it. There is no language on the anti-trust exemption in the bill -- the House has separately passed a bill ending the exemption, but its fate in the Senate is unclear. And some health care experts actually aren't sure that ending the exemption would have as much impact on encouraging competition as would other elements of the bill, such as the creation of the new regulated insurance marketplace, or "exchange," where people without employer-based coverage will buy plans for themselves.

How much do you think we can expect our premiums to rise next year? That seems to be the only option for the insurance companies with the additional rules that are being levied on them.... 50% or more wouldn't surprise me at all.

It is quite possible that insurers will keep rising rates in the next couple years in response to the new requirements they will face, but there are some measures in the bill that could  actually push the other way, limiting the increases.

For one thing, starting next year insurers will have to disclose just how much of the money they take in in premium dollars is spent out for medical claims as opposed to being used for profit or overhead. And they will have to spend at least 80 percent of the premium dollar on medical claims in the individual insurance market, and 85 percent of it in the employer-based insurance market.

Those ratios are higher than what some insurers spend now on medical claims, so that could limit rate increases somewhat. Then there is the basic fact of competition -- while many markets today have very few insurers in them, the whole idea of the new 'exchange' that will start in 2014 is that there will be many more insurers competing for customers. If insurers come into that market with rates that are exorbitantly high, they may lose out to lower-priced competitors. But no one can know for sure what will happen. One thing to keep in mind: most of the insurance regulations in the bill have to do with the individual and "small group" insurance market.

If there is volatility in rates in the next few years, it will likely be focused there. Employer-based premiums are expected to increase by roughly the same pace as they have been, at least for now, before some of the more systemic attempts to restrain health care spending kick in.

My 27-year-old son moved back into my house. He attends college full time and works part time. I can't add him to my health insurance (from my employer) because of his age. Does this bill do anything to help him afford insurance this year? I've read that some provisions don't take effect until 2014.

You're right -- most of the big provisions do not kick in until 2014. At that point, if he still does not have employer-based coverage, he will be able to go to the new 'exchange' and buy a plan there with the help of subsidies based on his income. There are provisions that go into effect before then but none of them will likely bear directly on his situation. Why is it taking so long for the main provisions to kick in? Well, it takes a while to set up the new exchanges. But also, by delaying the biggest costs of the bill, the Democrats were able to shrink the 10-year price tag. If the subsidies had kicked in sooner, the bill would have cost more than $1 trillion over the first 10 years, the magic number they were trying to stay below.

Concerning the new requirement that health insurance policies allow dependent children to remain on parent's policies until they are 26, does that apply to dependents who have already been dropped because of their age?

For example, would a 23-year old who had been forced off a policy now be allowed to get back on their parent's policy? I'm a retired federal employee and wondering how this will affect the Federal Employee Health Benefit Program.

To you first question: I am quite sure that dependents who have been dropped because of their age will be allowed to get back on their parents' plan until age 26. (And this is one provision that kicks in this year.)

The Federal Employee Health Benefit Program will remain mostly unaffected for now. If some of the systemic reforms in the bill actually work, then the FEHBP premiums may increase at a slightly slower rate than they have been (they went up about 8 percent on average last year, I believe.) If the plans' premiums continue to increase at a fast clip, though, the more generous of the FEHBP plans could be subject to the new tax that will go into effect in 2018 on high-priced plans (those worth more than $27,500 for a family plan.) Presumably, the government will do everything it can between now and then to keep the value of the plans from going above that threshold -- that may mean shifting to somewhat higher deductibles and co-pays.

The penalty will likely be less than the cost of getting health insurance so what is the incentive for someone young and healthy to get insurance ?

This is one of the biggest challenges looming for the new law. Its success depends to a great extent on how  many young and healthy people can be brought into the insurance pool to balance out the older and sicker people who insurers will be required to cover. The insurers argued for a bigger penalty to make sure people got coverage, but the bill's authors worried about the political fallout from a big penalty. The hope is that the bill and the mandate will create a sort of cultural expectation that people get covered -- Massachusetts, for one, has managed to get most people to observe its mandate despite a penalty that at the outset was also quite small (though it's now up around $1,000.) They accomplished that through a very aggressive public education/propaganda campaign (even the Red Sox got involved!) But then again, that was Massachusetts, a liberal state with relatively few uninsured. Whether people in Texas or Colorado will follow suit remains to be seen. One final thought: while there are plenty of 'young invincibles' out there who will pay the penalty instead of getting coverage, we should keep in mind that there are also plenty of young people who have been uninsured not because they don't think they need it but because they couldn't afford it. So they go ahead and buy it.

I keep my current insurance. I get to pay more taxes. Excuse me for being less than thrilled.

I don't know your exact situation but I wouldn't be so sure that you're paying more taxes under this bill. Is your insurance plan a very high-end one that is worth more than $27,500, the level at which plans will be taxed, and not until 2018 -- only a tiny percentage of plans are now above that value. Do you earn more than $250,000? If so, you'll be paying higher Medicare payroll taxes and a new tax on your investment income. But if you're income is below that, you're not paying any new taxes on this. Sure, the costs of this bill may, down the line, force the raising of taxes more broadly if the numbers in the bill don't work out as planned. But for now, the impact on your wallet may be minimal.

After being downsized two years ago, I have been unable to find employment since. My age is a factor. Will I be required to pay an insurance firm monthly premiums even though I have no income, and am depleting my savings?

You will be required to buy insurance starting in 2014 and you will receive subsidies based on your income to help  you do so. If you're income is very low, you will be paying a very low share of your income for your premiums. (You may even qualify for Medicaid, which is being expanded up to everyone at 133 percent of the poverty level, or about $29,000 for a family.) BUT...if you truly cannot afford to buy insurance even with the subsidies, you will be granted a 'hardship exemption.'

Good morning, Alec. My question is one from the consumer point of view. I currently receive partially funded insurance through a large private employer. I've watched over the years as both the costs to my company and my paycheck deductions have risen while at the same time my copays have risen for both doctor visits and prescription medication. While I understand that I may not be directly affected by this legislation, what is the likely effect that HCR will have on the costs of insurance to myself and to my employer, and how soon will any changes start to show?

This is the position that the vast majority of people find themselves in -- with employer based coverage, in plans where premiums and out of pocket costs have been increasing. The bill will not have a direct, immediate impact on you -- it's main target really is the uninsured, small businesses and the people who have to buy insurance in the wild west of today's individual insurance market. But, if the more systemic reforms in the bill work -- getting hospitals and doctors to practice more cost-effective care, making sure people get care when they need it instead of waiting til their conditions worsen -- then the hope is that the growth of health care costs, and of even employer-based premiums, will slow over time.

My husband and I both have pre-existing health conditions and currently have no health insurance. He owns a small company which employs under 20 people (both full and part-time).

Do you think it would be better for us to get health insurance under my husband's company or should we look around for an individual policy. If I understand the new policy correctly, uninsured, pre-existing people will be in the immediate health care reform (not the "five-years out" class). Did I read this one right?

You may want to explore getting insurance through his company because there is going to be a new tax credit available to help small business buy health plans, starting  this year. For individuals with pre-existing conditions, the help is actually not as immediate as many would like -- insurers are not required to sell you policies until 2014, when the mandate goes into effect (because if they had to insure more costly people before the healthy people come into the pool, their business model would collapse.) It's only kids with preexisting conditions that are required to be covered starting now. The one interim provision now for people with preexisting conditions is the creation of a new federal high-risk pool. But I'm not sure what the rules are for who will be eligible for it, and how much the premiums for it will cost. Some experts worry that this pool is not designed or funded as well as it needs to be to be successful. And in any case it will be only temporary, before the main provisions hit in 2014.

I've heard a lot of talk of the uninsured and even the underinsured, but no one mentions the vulnerably insured.

My husband and I are starting a business and have individually purchased health insurance. We were left terrified when our previously healthy 5-year-old daughter had H1N1, then pneumonia, then bronchitis.

We were scared to lose our insurance and did not bring her to a pediatric pulmonologist. We're still frightened that our insurance will skyrocket next year even though she's mostly recovered (we hope).

I think folks like us go unmentioned. I am thrilled with the reform, though I know it's not perfect. We shouldn't be forced to choose between our daughter's health and our family's health insurance.

This is a very important point. While most people think the bill has been mainly about covering the uninsured, it applies just as much to people who today have coverage in the individual insurance market, where the rules vary widely from state to state, and where, in many states, people all too frequently see their coverage revoked or payment denied in situations like the one you describe here. Starting this year, insurers in the individual market will have to cover kids with preexisting conditions. And starting this year, they will not be able to revoke coverage once people get sick by claiming to have discovered flaws in people's initial applications -- so called "rescissions."

Are lifetime limits on insurance coverage banned starting in six months, or starting in 2014? I've seen conflicting info on this.

Lifetime limits are banned this year. Additional rules regarding annual caps on benefits go into effect in '14.

I'm pleased that progress has been made on this issue, but as a self-employed person, I'm still left paying huge premiums for not-very-good coverage. Is there any hope left for a public option?

It's quite possible that the push for the public option will revive if rates in the new exchange continue to rise sharply. But keep in mind -- as a self-employed person you will be getting subsidies to help you buy coverage, assuming your family income is $88,000 or below. And even if it's above that, you will have more of a choice of plans in the exchange than you do now.

Hello, I am a grad student with a pre-existing condition (ulcerative colitis) that makes it too expensive to get private insurance. I currently get insurance through a part time job (make about $8k/year), but I'd like to quit so I can focus on classes more.

What immediate effects will this bill have to make insurance more affordable for me, and what will change with my student loans. In other words, how much free money can I expect?

You  may qualify for the new federal high-risk pool that is being created as an interim measure. In 2014, you will get subsidies to help you buy individual coverage and insurers will have to take you on even with your condition. Your student loans will likely see little impact from the new student loan law -- rates will remain unchanged for most people. There will be more money avialable for people who qualify for Pell grants.

Can someone detail how the various impacts of this bill hit small businesses- tax credits, penalties for not covering employees, sizes of business affected, which businesses can buy into exchanges, etc?

Lots of detail, please. Synergistic explanations of how the moving parts affecting a business with 15 employees that pays the median American worker's wage to all staff and makes a hypothetical profit of $150,000 a year would be wonderful. Then, what about $250 k profit and $500k profit? Thanks.

In brief: companies with fewer than 25 employees, where the employees make less than $50k on average, will qualify this year for new tax credits to help them buy coverage. Companies with under 50 employees also will be exempt from the employer mandate to provide coverage. Companies with more than 50 employees will need to provide coverage or pay a $2,000-per-worker fee. And to qualify for meeting the mandate, the coverage will need to be of a certain minimum value to the worker.

I can't be here for the discussion but I'd really appreciate it if you could answer this question. What exactly does the health care bill say about abortion funding? If the answer to this question is too lengthy do you know where one can find it in the bill and read about it?

This is a very complicated part of the law, but here's the basics: insurers on the new 'exchange' will be able to offer plans that include abortion coverage (as most private insurance plans today now do.) But anyone choosing that plan, whether a young woman or a guy or an older woman, will need to write two separate checks for their premiums -- one to cover the bulk of the coverage, and a second tiny one, like $1 a month or so, to cover the abortion part of the plan. This could be very unwieldy and unpopular with customers, and it's possible that insurers as a result will not offer plans with the coverage, which is why abortion rights groups are not at all happy with the final language, even though it was also deemed unacceptable by anti-abortion groups.

Doesn't this bill really just change the concept of insurance to not be insurance? I can't run my car into a tree, call up my insurance company and claim a preexisting condition on my car. Because there is no way Democrats will let insurance companies charge these people the price they should pay we will all be paying for it. It's a hidden tax.

Car insurance is different than health insurance, and it always has been. People who work for large employers -- most Americans -- have already been paying for their co-workers. Everyone's part of a big pool and pays the same rate. This is an attempt to make the individual insurance market a similar big pool where costs are spread more broadly.

How are the payments by Medicare and Medicaid to physician offices/hospitals going to be affected by this bill? I don't think people realize that the payments that are provided by Medicaid do not even cover the costs of a physician's office staff (let alone the physician) for the time of seeing such patients.

Many physicians consequently do not see Medicaid patients. Yet Medicaid is suppose to be expanded by this bill. Medicare payments themselves have recently been cut back. Patients get upset when their primary care physician only spend 10-15 minutes with them. This will only get worse if no improvement is made by Medicare and Medicaid reimbursements.

You're right, doctors and hospitals say Medicare and Medicaid reimbursement rates are too low. The bill does raise Medicaid payment rates -- whether it's enough to persuade more doctors to keep seeing Medicaid patients, we'll see. It also raises Medicare payment rates for primary care providers, in recognition of the fact that it would be better for the health care system if more people saw primary care providers instead of costly specialists and if primary care docs were paid better, bringing more people into that line of work.

Is the health care bill going to cut down on price gouging by hospitals?

This is the area where the bill arguably could have done a lot more. It focuses mainly on reforming the insurance industry, and to the extent that it addresses the costs on the provider side of the equation, it focuses mainly on finding ways to reduce the utilization of health care, not the actual price charged by providers. This is the argument being made by insurers, who say that it's hard for them to keep premiums in check when hospitals keep raising rates. But then again insurers were opposed (along with hospitals) to one of the provisions that many experts thought would restrain hospital prices: a public option, which would have given the government more leverage to drive provider prices down. This is going to be the next big battle in health care reform, more directly addressing high prices on the provider side.

I saw that eventually companies will no longer be able to charge higher rates based on a person's medical health. While drastic differences should be discouraged, how does it make sense that a healthy person should have the same cost as someone who is continually in the hospital. This sounds unrealistic to the cost structure of providing health care. Just as all drivers are not the same risk, neither are all patients.

See my answer above on this: we're already sharing the costs of coverage between healthy and less healthy people in the employer-based market. That said, insurers in the new exchanges for individual insurance will be able to charge older people more -- but the ratio will be lower than what they now charge in many states. In Texas, for instance, insurers can charge one person 25 times more than another. Under the law, the maximum age ratio is either 5-1 or 3-1 (Senate bill and House bill were different, and I can't remember offhand which prevailed.)

I heard a MA state senator say the reason that HCR was so successful in MA was because most of the people had policies with non-profit companies. This is not true of many states.

Not really. Massachusetts did have several advantages -- it had many fewer uninsured than most other states even before the law passed, and it had a very strongly regulated state insurance market, so that it wasn't that much of a leap for insurers and regulators to move to the even more regulated world created by the universal coverage law. But the nonprofit status of insurers matters only so much these days -- a lot of the former Blue Cross plans that are nonprofit are raising rates just as much as the ones that become for-profit, and they're also paying the executives similar multi-million dollar salaries.

We had competitive free market fire companies in colonial America. They didn't work. Whole sections of Philadelphia had little fire protection because the companies did not want to offer contracts where the likelyhood of fire was high. So now we have socialized fire departments.

All other indutrialized countries (except Germany) had competitive free market health insurance at one time. None of them could get it to work. Now they all have universal government run systems.

Economists tell us that competition just doesn't work for items you want everyone to have like fire or police protection or roads care. What makes us believe that our system will be an exception to the rule or to history?

This is the argument for single-payer health insurance. But it's worth  noting that some European countries actually don't have pure single-payer programs and instead maintain the semblance of a private insurance industry, though one in which insurers are so heavily regulated that they are, in effect, like public utilities. This is the direction we are moving in. Post-2014, our insurance market will remain more independent than those European countries, but if even that proves unable to restrain costs and controversial insurance practices, we may take another step along that spectrum.

With the children's pre-existing condition clause going into affect immediately, I'm just curious if this takes the place of s-chip.

No, S-chip remains in place for now, since it is for a whole swath of low-income children, not just those with preexisting conditions. The ban on denying coverage to kids with preexisting conditions applies to families who now buy coverage for themselves in the individual market.

Alec, Why are people so angry over this issue? In the last eight years there have been way more important things to be anger about, but this issue seems to evoke some pretty strong emotions. Whats your take on this?

Good question and one that requires far more thought and space than I'll have here. Clearly, the anger goes beyond the bill in question. The fact is, this bill is, in the grand scheme of health care reform, relatively moderate, incremental and market-based. It is based on the plan that Mitt Romney signed in Massachusetts and on ideas that came out of the Heritage Foundation. It more closely resembles what Nixon proposed in the 1970s and moderate Republican senators proposed in the early 1990s than it does the dreams of single-payer believers.

How are other countries able to get better results as measured by all the bottom line statisitcs at half the cost per person? If we could emulate their programs, we would get better care and SAVE $1.3 TRILLION each and every year.

There's a lot that goes into this difference, but health care reformers point to three main factors: we demand and use more high-priced medical care (we don't spend more days in the hospital, but we get more treatments while we're there); we pay our doctors and hospitals and drug makers and device makers higher prices than in other countries; and we have a private health insurance system that absorbs plenty of money in profit and overhead.

I'm wondering if Insurance companies will react like the banks did when they realized that new laws would impact their ability to make a profit at the consumer's expense and they used the time before the law went into effect to raise rates on just about everyone... Is there any provision in the bill that protects consumers from that?

I touched on this concern above -- in brief, starting next year insurers will have to show that they are spending more than 80 percent of premiums on actual medical claims. That will make it harder for them to just raise rates willy-nilly.

As I understand it, the bill eliminates the subsidies to employers for providing drug coverage for retirees. I've read and heard that the GAAP (Generally Accepted Accounting Principles) treatment of this change will cause many employers to eliminate this benefit. Is this true?

This is an important and overlooked issue that I touched on in today's article. You're right. The Medicare drug benefit also extended a subsidy to large employers so that they would keep providing drug coverage to retirees. This bill taxes that subsidy starting in 2013, likely making it less attractive to some employers to keep providing drug coverage to retirees. And for accounting purposes, employers must declare very soon whether they plan to keep providing the coverage and pay the tax, or drop the coverage. If they drop the coverage, their employees will take the Medicare drug benefit instead. It's worth noting that the Medicare drug benefit will be much more appealing an option than it is today since the 'donut hole' in coverage will be phased out in the next few years.

Well, that's all I have time for today, unfortunately. Thanks for all the good questions and sorry I couldn't get to even more of them. Clearly, there's a great demand for information on all this, so we'll be sure to have another session soon. Join us again then.

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Alec MacGillis
Alec MacGillis covers government and national politics for The Washington Post.
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