Almost all of the major health insurance companies are spending more on medical care this year than they have in the past, Axios’ Bob Herman reports.
The big picture: Rising prices and more services for some sicker patients are among the many reasons why this is happening. That uptick in spending has freaked out Wall Street, even though insurers are still quite profitable.
Driving the news: Almost all of the eight major publicly traded insurers have shown their medical loss ratio — the percentage of premium revenues they’re spending on medical claims — is rising this year.
Between the lines: Medical loss ratios are often higher for health plans that cover more older adults, the disabled and the poor, because those groups typically need more care or are in the hospital more frequently.
But costs have been climbing in some commercial markets, too.
The bottom line: Health insurance companies closely track their medical loss ratios and aim to hit those targets most often by charging higher premiums, denying care, forcing people to use lower-priced providers or declining to cover people they deem to be too expensive.
Elizabeth Warren on Friday detailed how she intends to pay for Medicare for All without raising costs for middle-class households. The senator from Massachusetts said her plan will cover everyone in the country without raising overall spending, “while putting $11 trillion back in the pockets of the American people by eliminating premiums and virtually eliminating out-of-pocket costs.”
Warren’s plan relies in large part on redirecting existing spending toward a universal, federal health care system, while adding new revenues from taxes on the wealthy, the financial sector and large corporations. “We can generate almost half of what we need to cover Medicare for All just by asking employers to pay slightly less than what they are projected to pay today, and through existing taxes,” Warren said.
Some key details from the Warren plan:
Much lower cost estimate: Warren starts with the Urban Institute’s estimate that the federal government would need $34 trillion more over 10 years to pay for Medicare for All, but she slices that number dramatically — down to $20.5 trillion — by using existing federal and state spending on programs including Medicaid to fund a portion of her proposal, along with larger assumed savings produced by a streamlined system paying lower rates to hospitals, doctors and other health care providers.
Total health care spending stays about the same: Warren projects about $52 trillion in national health care spending over 10 years, close to estimates for the existing system, despite covering more people and offering more generous benefits, including long-term care, audio, vision and dental benefits. Applying Medicare payment levels across the health care system is projected to produce substantial savings that would be used to finance the expanded size and scope of the plan.
Heavy reliance on employer funding: The employer contribution to Medicare for All is pegged at $8.8 trillion, with employers required to contribute to the federal government 98% of what they would pay in employee premiums. Businesses with fewer than 50 employees would be exempt.
Public spending continues: State and local governments would be still on the hook for the $6 trillion they currently spend on Medicaid, the Children’s Health Insurance Program and public employee premiums.
New taxes on the wealthy: Warren proposes a new 3% tax on household wealth over $1 billion — and that’s on top of her proposed wealth tax, which calls for a separate 3% tax on wealth over $1 billion (and a 2% tax on wealth between $50 million and $1 billion). Combined with an annual capital gains tax on the top 1% of households, her proposal projects that the new health-care-focused wealth taxes would produce $3 trillion.
Taxes on business and finance: Warren says she can raise $3.8 trillion through “targeted” taxes on big business and financial transactions, including a financial transaction tax of .01% on the sale of stocks, bonds and derivatives.
Reduced tax evasion: Cracking down on tax evasion is projected to bring in $2.3 trillion. “The federal government has a nearly 15% ‘tax gap’ between what it collects in taxes what is actually owed because of systematic under-enforcement of our tax laws, tax evasion, and fraud,” Warren said. “By investing in stronger enforcement and adopting best practices on tax reporting, withholding, and filing, experts predict that we can close the tax gap by a third.”
Revenue increase from higher take-home pay: Employees would no longer pay premiums for health insurance, providing a pay hike and higher tax revenues, estimated to total $1.4 trillion.
Abolishing the Overseas Contingency Operations fund: Warren is calling for reduced military spending, with a focus on what some call the “slush fund” that covers the cost of overseas military operations. Eliminating this off-budget spending is projected to save $800 billion.
Immigration reform: Expanded legal immigration would bring in $400 billion in revenue as more incomes are subject to taxes, Warren says.
A record tax cut? Once the new revenues and cost savings are added up, Warren says her plan will deliver what amounts to an historic tax cut. “No middle class tax increases. $11 trillion in household expenses back in the pockets of American families. That’s substantially larger than the largest tax cut in American history.”
Warren won plaudits from some analysts and policy wonks for releasing a plan, but the details she laid out are also being picked apart by critics and rivals, with some experts already expressing doubts about her assumptions and numbers. Here’s some of the reaction:
Congratulations from a conservative: “Kudos to Senator Warren for actually releasing a plan,” said Scott Greenberg, formerly an analyst with the right-leaning Tax Foundation. “There are a lot of things in here that will draw attacks from the left and from the right, and it might have been politically easier not to release it at all. But Warren has stuck by her commitment to explain her proposals.”
Criticism from a key rival: “The mathematical gymnastics in this plan are all geared towards hiding a simple truth from voters: it’s impossible to pay for Medicare for All without middle class tax increases,” said Kate Bedingfield, deputy campaign manager for Joe Biden. Bedingfield argued that employees would end up paying the tax on employers.
Dire warnings from the White House: “It is the middle class who would have to pay the extra $100 billion or more to finance this kind of socialist government takeover of health care,” said Larry Kudlow, President Trump’s top economic adviser. “It would have a catastrophic effect on the economy and all these numbers that we’re seeing, all these numbers, on incomes per household, on wage increases, on jobs, all these numbers would literally evaporate and by the by, so would the stock market.”
Tax vs. premium: Warren’s plan will likely kick off a debate about the difference between taxes and health care premiums, and whether that difference matters, says William Gale of the Brookings Institution. “Does [the Warren plan] raise ‘taxes’ on the middle class?,” Gale asked Friday. “Short answer — it does not raise ‘burdens’ on the middle class.”
Cost reduction is crucial: “The key to Warren’s plan for financing Medicare for all is aggressively constraining prices paid to hospitals, physicians, and drug companies. We’d still have the most expensive health system in the world, but it would be less expensive than it is now,” said Larry Levitt of the Kaiser Family Foundation. “Warren’s plan to aggressively constrain health care prices under Medicare for all would be quite disruptive. On the other hand, every other developed country has managed to figure it out, so we know it’s possible.”
And the battle is ultimately political: “In laying out the specifics of her Medicare for all plan, Warren’s challenge is more about politics than arithmetic,” Levitt continued. “She is taking on the wealthy, corporations, and pretty much every part of the health care and insurance industries. Those are some powerful enemies.”
So don’t expect major legislation soon: “Experts will argue for months whether [Warren is] being too optimistic — whether her cost estimates are too low and her revenue estimates too high, whether we can really do this without middle-class tax hikes,” said economist Paul Krugman. “You might say that time will tell, but it probably won’t: Even if Warren becomes president, and Dems take the Senate too, it’s very unlikely that Medicare for all will happen any time soon.”
Consumers will have more health insurance choices next year under the much-debated Obama health care law and premiums will dip slightly for many, the Trump administration announced Tuesday.
President Donald Trump was elected on a promise to repeal “Obamacare.” But despite his repeated efforts the program has stabilized three years into his administration. That may be short-lived.
The administration is asking a federal appeals court in New Orleans to overturn the entire Affordable Care Act as unconstitutional, an overhang of uncertainty clouding its future.
For now, the Department of Health and Human Services is touting a second consecutive year of positive-sounding numbers. An additional 20 insurers will participate for 2020, expanding consumer choice in many states, officials said. Nearly 70 percent of customers will have three or more insurers from which to pick a plan.
About 10 million people are covered through the health law’s insurance markets, which offer taxpayer-subsidized private plans for people who aren’t covered on the job. Former President Barack Obama’s namesake law will be 10 years old next year.
Premiums for a hypothetical 27-year-old choosing a standard plan will decline 4% on average in 2020 for states served by the federal HealthCare.gov website, the Trump administration said. About a dozen states run their own sign-up websites, but most rely on HealthCare.gov.
A low-cost midrange plan for that hypothetical 27-year-old will charge monthly premiums of $374 next year, officials said. The law’s income-based subsidies can drop that to around $50.
However, people who don’t qualify for income-based assistance must pay full price, and that’s before any deductibles and copays. Unsubsidized customers may just decide to go uninsured, particularly if they’re healthy.
A previous Republican Congress repealed the law’s unpopular penalty to get more people signed up — fines for going without coverage.
Six states will see premiums decline by 10% or more, officials said. They are Delaware, Montana, Nebraska, North Dakota, Oklahoma and Utah.
Three states — Indiana, Louisiana and New Jersey — will see premiums increase 10% or more.
Even as it pursues “Obamacare’s” demise in the courts, the Trump administration is trying to take credit for the program’s current stability.
“Until Congress gets around to replacing it, the president will do what he can to fix the problems created by this system for millions of Americans,” HHS Secretary Alex Azar said. “The president who was supposedly trying to sabotage this law has been better at running it than the guy who wrote it.”
Independent experts say it’s more complicated than that.
They credit the Trump administration for working with a dozen states to approve waivers that can bring down premiums by setting up a backstop system to pay bills from the costliest patients.
However, experts say the original design of the law’s subsidies is probably the major stabilizing force. People eligible for financial assistance are insulated from price spikes because they pay only a fixed percentage of their income. Because their own costs didn’t change much, customers with subsidies kept coming back to the market through years of double-digit increases in list-price premiums.
“As long as the subsidies are in place the changes that are happening … are not going to push this market off a cliff,” Standard & Poor’s director and lead analyst Deep Banerjee said.
Experts say yet another factor is that insurers that have stuck with the program have learned over time how to operate profitably.
Although the program is stable, enrollment has been slowly eroding since Trump took office, from 12.2 million in 2017 to 11.4 million this year. The slippage has come mainly in the HealthCare.gov states, where the federal government runs sign-up season. Slashing the ad budget was one of the Trump administration’s early actions.
The nonpartisan Government Accountability Office has recommended that the administration follow standard federal practices by setting sign-up goals and actively managing the program to meet enrollment targets. Seema Verma, head of the Centers for Medicare and Medicaid Services said the administration doesn’t believe such targets are needed and instead her agency has focused on keeping the HealthCare.gov website running smoothly and improving the enrollment experience for customers.
Verma also disclosed that the administration has made some “minor” changes in how it reports data about the program. While those tweaks appear to be in the weeds, they’re likely to get close attention from Democrats who accuse Trump of “sabotage” of the health law.
Sign-up season starts Nov. 1 in most states and runs through Dec. 15. States that run their own open enrollment may have different dates. Coverage starts Jan. 1.
The appeals court in New Orleans could issue its ruling during this time, but Azar said he’s not concerned even if the judges say the whole program should be tossed.
“Our messaging would be to keep calm and carry on,” he said, noting that the case is expected to go to the Supreme Court. “There will be no immediate disruption to anyone.”
That trend would be lower than the 3.9% increase employers experienced this year, with local organizations spending $16,059 per active employee. That’s more than 20% higher than the average cost per employee nationwide.
The benefits consultant broke out the responses of 170 employers in New York City, its surrounding counties, northern New Jersey and southern Connecticut for Crain’s from its 2019 National Survey of Employer-Sponsored Health Plans.
Companies are looking to telemedicine and management programs for their highest-cost members as ways to keep fees down, said Mary Lamattina, a senior consultant at Mercer. She said most clients she works with have at least one beneficiary with $1 million in annual medical expenses.
“Employers are getting away from cost shifting and looking at other ways to tackle affordability,” she said.
Nationwide, employers spent 3% more on health costs this year, driven in part by specialty drug spending. Costs for specialty drugs rose 10.5% this year.
Ninety percent of employers with 500 workers or more said they viewed monitoring or managing high-cost claimants as important or very important. One strategy companies reported using was introducing a tech-enabled chronic care management program for conditions such as diabetes.
About 88% of large employers said they offer telemedicine as an option, but only 9% of eligible employees had taken advantage of the programs.
Lamattina pointed out that utilization was nearly four times higher at organizations that waived a copay for telemedicine use, compared with employers that charged a $40 copay. “
“Utilization can be driven by the cost,” she said. “Convenience is really key to getting people to use the benefit.” —Jonathan LaMantia
With a contract impasse in its third week, a Gainesville-based health system is spending millions of dollars so that thousands of patients are not having to pay more when visiting the system’s doctors and hospitals.
Northeast Georgia Health System’s contract with Anthem ended Sept. 30, which means that since then, Georgians with Anthem insurance have been out of network for NGHS facilities and physicians.
But in an unusual move, the Northeast Georgia system is making up the financial difference between in-network and out-of-network prices through Dec. 31. That way, Anthem patients won’t pay higher fees when visiting NGHS medical providers, the system said.
“While it will cost millions of dollars per month to protect our patients from out-of-network costs, we’d rather do that than agree to a proposal that would jeopardize the health of our community for years to come,’’ Steve McNeilly, vice president of managed care for NGHS, said.
Most contract disputes between health systems and insurers get resolved before the end of the previous deal, although some agreements come just hours before the end of the expiring pact. The terminated contract between NGHS and Anthem is an exception, and this particular stalemate doesn’t show any sign of progress. Neither side has mentioned any negotiations or even indicated that talks are being scheduled.
The standoff comes at a time when many Georgians are entering their open enrollment period for the 2020 health plan year.
Anthem is by far the state’s biggest health insurer. Northeast Georgia’s hospitals in Gainesville, Braselton, Winder and Dahlonega, as well as its urgent care facilities and many physician group locations, are now out of network for Anthem patients.
“Anthem has only contacted NGHS once since the end of September – and that was only to inform us that they would be processing all claims as out-of-network,’’ McNeilly said. He said Northeast Georgia has proposed a contract with concessions, but that Anthem “refuses to take any meaningful action.’’
“Unfortunately, it appears that Anthem intends for us to be out of network for an extended period of time, so we’re urging patients to switch to a different health insurance plan during open enrollment,’’ McNeilly added.
Northeast Georgia said patients can call its Patient Access Service Center at (770) 219-7678 to get a personalized estimate of hospital charges for upcoming surgeries or procedures. If patients have questions about charges for physician office visits, they can call their physician’s office for more information, NGHS said.
Anthem said Monday that it is “standing firm for our consumers who need greater affordability.’’
The latest proposals from NGHS would increase costs “well above other health systems in the state,’’ Christina Gaines, an Anthem spokeswoman, said. “These increases place a significant burden on consumers because any substantial price increase in the services at these facilities would be directly reflected in increases in medical expenses covered by employer-sponsored group health plans, as well as to member premiums and cost share amounts.’’
What NGHS proposed “was simply not sustainable’’ for Anthem members, she said.
“We provided a revised proposal to them two days before the contract expired and did not receive a response,’’ Gaines said. “We are willing to resume talks so we can come to a new agreement that is fair, provides flexibility and protects affordability.”
Anthem said it can’t guarantee that Northeast Georgia will continue to charge patients the same rates as under the previous contract.
“To protect against unexpected balance billing, and other expenses associated with out-of-network providers, we are urging members to use in-network physicians and facilities,’’ Gaines said. “Anthem continues to have a broad, statewide provider network that delivers access to other quality health care options that remain in-network for our consumers.” Anthem directed consumers to visit www.anthem.com/nghs for information.
Craig Savage, a consultant with CMBC Advisors in North Carolina, said he had not heard previously of a hospital-based system covering the cost gap for patients who are forced out of network by a contract dispute.
“I think it’s a demonstration of good faith to patients,’’ Savage said. “It puts a little marketing pressure on Anthem.’’
But he added that even losing the business of 40,000 patients is “not going to have a huge [financial] impact on Anthem in Georgia.’’
And Savage said the contract standoff may put pressure on local physicians who could lose many patients to another insurer during open enrollment season.
House Speaker Nancy Pelosi’s (D–Calif.) long-anticipated drug pricing plan — the Lower Drug Costs Now Act of 2019 (H.R. 3) — has shaken up the drug pricing debate. It gives Medicare the ability to negotiate drug prices, further fueling the partisan divide between Democrats and Republicans, but also includes policies similar to those championed by Senate Finance Committee Chair Chuck Grassley (R–Iowa), such as caps on price increases in Medicare Parts B and D, as well as changes to the Part D benefit design. The way the bill approaches drug price negotiation is similar to the Trump administration’s supposedly soon-to-be-released international price index (IPI) proposal, which has been under review at the Office of Management and Budget since June.
The following tables compare H.R. 3 based on the legislative text advanced by key committees of jurisdiction and key provisions of related proposals: the Prescription Drug Pricing Reduction Act of 2019 (S. 2543), advanced by the Senate Finance Committee in July; and the Advanced Notice of Proposed Rulemaking (ANPRM): Medicare Program, IPI Model for Medicare Part B Drugs, issued by the Centers for Medicare and Medicaid Services last October.