Does the President Understand What Taxing Insurers Will Do?
Over the weekend Senate Finance Committee Chairman Max Baucus (D-MT) proposed a new tax on health insurance premiums -- about $6 billion a year -- as a way to help pay for the Democrats' health care reform legislation.

If anyone wants to know why the government-run public option will be a stacked deck, just look at this proposal.

Any economist will tell you that a $6 billion annual tax would increase private sector health insurers' administrative costs and eventually filter down in the form of higher premiums. Which, of course, leads to our elected representatives complaining about how much more expensive private health insurance is than some public option run by the government.

Would the public option also pay the tax? Of course not. Would it pay the premium tax that states already assess on health insurers operating in the state? Of course not. Oh, and does the tax apply to all the nonprofit health insurers?

But can't health insurers just take that tax out of their profits? Despite all the harangues about windfall profits, health insurance is one of the least profitable industries -- about 2.2 percent. According to a recent article on CNBC's Jim Cramer's The Street, "If business stayed the same during the last three months of 2008, it's likely that [health insurers'] net income dropped to less than $11.6 billion for the year, compared with $17.1 billion in 2007." So a $6 billion new tax would cut profits in half, to perhaps a little over 1 percent.

You have to sit back and marvel at the hubris of elected officials complaining about the high price of health insurance even as they consider new taxes on health insurers that would make premiums even higher.

And when even more people who can't afford the higher prices imposed by the politicians decide to drop their coverage, those same politicians will say: "I told you so; that's why we need the public option."

-- Merrill Matthews, Executive Director, Council for Affordable Health Insurance

Can Companies Compete with the Post Office?
During his town hall meeting in New Hampshire, President Obama claimed that the post office is a great example of a case in which private companies compete effectively against government entities: "I mean, if you think about -- if you think about it, UPS and FedEx are doing just fine, right? No, they are. It's the post office that's always having problems." His point was that critics shouldn't oppose the government-run public option because the private sector can compete with government-sponsored entities.

But while the president was right that the post office has had extensive financial problems and growing losses, he completely misrepresented the facts.

U.S. law gives the post office exclusive access to your mailbox (which is why packages are delivered to your door), and exclusive delivery of first and third class mail. So sure, UPS and FedEx can deliver packages, but that doesn't mean they're competing against the post office.

It's this role of the government as both referee and competitor that creates problems. The post office has a monopoly, and it is only through a loophole that companies are even allowed to deliver packages to your house at all.

Some may argue that the postal monopoly is justified, in part because of its universal service obligation. The post office loses money delivering in some areas, such as rural and sparsely populated areas, and so it needs to make up for those loses by charging more in urban areas. But according to FedEx's website, it's home delivery system "serves virtually 100 percent of the U.S. population," and the company seems to do so without losing money.

Equally problematic is the way the post office modifies its own rules to ensure it keeps business. A 1997 New York Times article cited the effort to protect "junk mail."

So while the Postal Service is legally bound to cover its costs on each class of mail, it bends the rules to keep down rates by allocating proportionally less overhead to junk mail. In 1996, third-class mail represented 40 percent of postal volume but carried just 18 percent of what the Government calls '"institutional costs." As a result, much of the fixed costs of the system are borne by first- class mail.

In the end, President Obama's analogy about the post office probably is more apt that he would like to admit.

-- JP Wieske, Director of State Affairs, Council for Affordable Health Insurance

Will Covering Young Adults Make Health Insurance More Affordable?
As one of his "Health Insurance Consumer Protections," President Obama intends to extend a family-policy's coverage to young adults up to 26 years old.

He's following a state trend. The Council for Affordable Health Insurance tracks all state health insurance mandates -- there are currently 2,133 state mandates nationwide -- and more and more states are mandating health insurers cover young adults. Some states are even pushing the age limit up to 30. It's often called the "slacker mandate" because these adults are still on their family's policy.

But far from making health insurance less expensive -- remember, the president promised family premiums would go down $2,500 a year by the end of his first term -- imposing this mandate makes coverage more expensive, especially for young families, which tend to be least able to afford the additional costs.

When a couple chooses "family coverage" they are given the option of adding children to the policy for relatively little additional premium. There's a good actuarial reason for those low prices: Children between the ages of 2 and 18 are the healthiest segment of the population. As a group they use very little health care and the premiums reflect that limited utilization.

When those children become adults, their expected health care costs go up, including the fact that women at age 26 are well into their child-bearing years. If health insurers are forced to include young adults in a premium intended for children, premiums will rise. And that will hurt families with the youngest children, which typically have the lowest incomes.

Moreover, this Obama "protection" simply isn't needed because provisions have been made for most of the special cases. For example, many health insurance policies voluntarily cover "dependent children" who are attending college and even graduate school. Plus young men and women too old to continue on their family's policy can transfer (assuming it's "creditable coverage" under federal law) to a policy under their own name and cannot be denied coverage. And in 2008 President George W. Bush signed "Michelle's Law," which allows seriously ill college students on their parents' health plan to continue that coverage for up to a year even if they have to take a medically necessary leave from college.

President Obama and the Democratic leadership continue to demonize the health insurance industry for engaging in practices the Democrats think are wrong, even "immoral." But those practices are based on actuarial science, not politics -- which is more than we can say for the president's consumer protections.

-- Dr. Merrill Matthews, Executive Director, Council for Affordable Health Insurance

Can Health Insurers Refuse to Renew a Policy?
One of President Obama's recently proposed "Health Insurance Consumer Protections" is "Guaranteed Insurance Renewal," which requires insurance companies to "renew any policy as long as the policyholder pays their premiums in full."

We agree that's an important issue. What the president hasn't explained -- and maybe neither he nor his advisors are aware of it (which would be a real cause for concern) -- is why he thinks the public needs this "consumer protection" since guaranteed renewability has been the law of the land for 13 years.

In the Health Insurance Portability and Accountability Act (HIPAA) of 1996 it says with regard to the "individual" (i.e., non-group) health insurance market:

In General -- Except as provided in this section, a health insurance issuer that provides individual health insurance coverage to an individual shall renew or continue in force such coverage at the option of the individual.

And of the small and large group market, HIPAA says:

In General -- Except as provided in this section, if a health insurance issuer offers health insurance coverage in the small or large group market in connection with a group health plan, the issuer must renew or continue in force such coverage at the option of the plan sponsor of the plan.

As noted above, there are some exceptions. Non- payment of premiums is one. Fraud is another. And occasionally an insurer will cancel its whole block of business, perhaps because it's getting out of the health insurance line but more often because a state has passed such onerous restrictions that the company feels it can no longer do business in the state. In that case, everyone is dropped, not just one person. And an insurer can cancel a specific plan provided it offers a replacement plan.

But as a general principle, health insurers must renew policies if an insured person or group wants to do so. So why has the president included guaranteed renewability in his list of consumer protections?

If he thinks the law has some loopholes, he needs to explain what those are and suggest ways to fix them. But, as seems more likely, if neither the president nor his staff is even aware that guaranteed renewability is federal law, well, maybe these aren't the best people to be attacking health insurers and radically restructuring the whole health care system.

-- Dr. Merrill Matthews, Executive Director, Council for Affordable Health Insurance

Is There a Solution to the Problem of Rescissions?
President Obama and the Democratic leadership in Congress have decided to attack health insurers as part of their health care reform marketing plan. House Speaker Nancy Pelosi has started to describe insurance companies as "villains." And one of the practices that she and President Obama are targeting is rescissions. For example, the president has identified rescissions as a practice he wants to end, bluntly asserting, "No dropping of coverage for seriously ill." Here's what the president didn't say.

Rescissions occur when an insurance company -- any type of insurance -- cancels a policy because it has discovered that the applicant made material misstatements, whether intentional nor not, on the insurance application.

Rescissions are rare but necessary to protect insurers and their clients from the costs of people who are looking to game or defraud the system by applying after they know or suspect they have a medical condition but failing to note it on the insurance application. In most states, a rescission can only be executed within two years of receiving coverage.

CAHI has analyzed this issue (See http://www.cahi.org/cahi_contents/resources/pdf/n150Rescissions.pdf) and promoted some common-sense solutions. Taken in context, our solutions not only end the abhorrent and often illegal practices by a few outliers, but they will also instill public confidence. Some of the solutions we have suggested to policy makers over the years include:

1. A closer review by regulators of insurance applications to ensure the applications are both clear and understandable.

2. Encouraging best practices in underwriting that will limit rescissions. For example, some companies have found success in adding telephone interviews to the underwriting process.

3. A ban on the practice of basing employee compensation on denied claims, including rescinded coverage. Reviews of insurance company employees should be based on making correct decisions, not denials.

4. Allowing all rescission decisions to be reviewed by an external review entity -- approved by the state's department of insurance -- and paid for by the insurer.

5. Ensuring we have an adequate safety net. In most states, everyone has some access to health insurance -- whether they are sick or not. However, some high risk pool policies provide limited coverage or are expensive. We need to better fund these risk pools.

Legislators can and should be focused on solutions that will make the system easier to navigate and ensure that rescissions become rarer, and provide a fair opportunity to challenge insurance company decisions. It is a far better use of their time than cynically playing politics.

--JP Wieske, Director of State Affairs, Council for Affordable Health Insurance

Does Taxing "Gold Plated" Health Plans Make Sense?
Now let's see if we have this straight. After several months of searching for what amounts to the "path of least resistance" to massive new taxes to pay for the president's health care reform plan, Democratic leaders are embracing the notion of taxing health insurers that sell what are being called "gold-plated" health insurance plans.

That's sort of like imposing an extra tax on grocery stores when consumers choose to buy high-end foods and wines rather than the moderately priced products. In the sane world it's the buyer who has to pay a luxury tax, but not with this group in Washington: Vendors are taxed extra for selling what customers want.

At the same time President Obama has declared that health reform will include "consumer protections." Restrictions like:

• "No Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays"
• "No Cost-Sharing for Preventive Care" and
• "No Annual or Lifetime Caps on Coverage"

Or what most people familiar with health insurance might call ... "gold-plated" coverage.

Most health insurance, even very good coverage, has an annual and/or lifetime cap on the benefits. Eliminating that cap definitely puts the policy in the gold-plated category.

Who knows what "exorbitant out-of-pocket expenses" are, but with this administration and Congress you can bet that figure is well below what most employers currently provide. And lots of health plans currently limit cost-sharing on preventive care, but the lower the cost-sharing, the "golder" the plan.

So while the president is, on the one hand, saying there will be nothing but gold-plated plans, Democrats are also saying they want to tax insurers that sell such plans as a way to raise money and discourage the selling of those plans.

Makes you wonder if the left hand knows what the far- left hand is doing.

But that's not all. Most large employers self insure. That is, they just pay the claims themselves. If they use an insurer, it's only to handle the paperwork or to provide some stop-loss coverage in case of a very expensive claim.

In that case, the gold-plated tax would, presumably, be imposed on the employer, since the employer is the one providing the gold-plated coverage. So Democrats want to impose a pay-or-play employer mandate for not providing good health coverage and a gold-plated tax if they do.

Actually, it makes you certain the left hand doesn't know what the far-left hand is doing.

Can Washington Control Health Care Costs?
"It's about the fact that the biggest driving force behind our federal deficit is the skyrocketing cost of Medicare and Medicaid." -- President Obama

The health care reform effort would make a lot more sense if, well, it made more sense. And one of the most confusing aspects is the president's contention that health care reform is necessary because the skyrocketing cost of Medicare and Medicaid is killing us.

The cost is killing us, but the federal government has complete control of those programs -- and has had that control for 45 years. If the feds know how to effectively slow health care cost, then start with Medicare and Medicaid. Congress doesn't have to wait on sweeping legislation to improve those programs.

The pools of people are certainly big enough -- some 90-plus million Americans. Congress and state legislatures (for Medicaid) can tell any participating private health insurer what it can and can't do. Price controls on hospitals and doctors were imposed decades ago to slow the growth in spending -- and that hasn't worked. Lawmakers have complete control. And yet Congress has never been able to control Medicare and Medicaid costs.

Congress and the president claim they want to cut back on Medicare and Medicaid reimbursements for doctors and hospitals, even as they raise reimbursements for doctors taking Medicare. (Sort that out!) They claim they want to find new ways to reimburse for more efficient and quality care, not just more care. Then do it; Congress can do that without the current legislation. And doing so might be a reassuring step for the American public.

A recent Zogby poll found that 88 percent of the public thought Congress should eliminate the fraud and waste out of Medicare. The public's on to something that most of the politicians may not know, or care.

Medicare and Medicaid are riddled with fraud. Depending on what you define as fraud -- vs., say, taking dubious liberties with the Medicare billing codes that may push the envelope but may not be actual fraud -- the public may be throwing away $20 billion, $40 billion or more every year on Medicare fraud. It's so bad that the Russian mob finds scamming Medicare more lucrative than gambling or peddling drugs. Hardly a day goes by without a news story identifying an arrest or conviction of multiple people raked in millions of dollars in Medicare and Medicaid fraud.

And yet for months the president has said he wants a "Medicare-like public option." How about, as a goodwill gesture, a few years of success in the health insurance programs it does control before giving the feds the whole health care system? Show us you can run Medicare and Medicaid efficiently and without the massive waste in taxpayer dollars in fraud and abuse and maybe, just maybe, we'll let you take on comprehensive health care reform.

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