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Monday, September 27, 2010

The Inmates have taken over the Asylum: the 2nd step of health reform

When we last left health reform, one of its most significant early changes was dangling over the cliff. Guaranteed issue or the practice of no longer denying health insurance for children under the age of 19 was scheduled to start on Sept 23rd. Health insurance plans or the inmates in this analogy were expected to change their practices but there was a trouble brewin' on the horizon. The insurance companies pointed out that with this provision, children could drop their insurance whenever they didn't need it and then enroll whenever they needed it. This would be expensive and individual insurance could become even less affordable. The Obama administration was so concerned that they gave the state insurance divisions flexibility to negotiate and offer concessions like a limited period of time when children could enroll or open enrollment period.

How did the state insurance divisions and Obama respond in this crisis when it emerged in early August? Late and ineffectively. If they were super heros, school bus would have toppled over the cliff. If they were Austin Powers, they would have been eaten by sharks with frickin laser beams.

Children were supposed to stop being denied insurance on September 23rd. As that date approached, the two state insurance divisions in my area (Oregon and Washington) had yet to issue any guidance or rules to respond to the insurance companies' concerns. In response, the insurance companies steadily began to announce that they would stop offering insurance to children. First, national carrier Health Net, stopped offering individual insurance to anyone. Other national carriers like Cigna, Assurant, and Aetna pulled out of the child or dependent only market. This means that a parent must both pass the health screening and enroll in the individual insurance plan in order to purchase coverage for their child with these plans. In Oregon, the nail in the coffin was when when Regence, the local Blue Cross plan who sells almost half of the individual insurance plans in the state, announced they were leaving the child only market. When there is market uncertainty, the market seeks certainty. The main result of this health reform provision has been the disappearance of the option for children to purchase insurance without a parent.

There was great hope that reform would stop insurance companies from sinking to the lowest common denominator. It was thought that there would be vigorous and clear enforcement by the regulatory bodies that would convince all insurance companies to participate in guaranteed issue for children under fear of fines, exclusion from future opportunities, or even sharks with frickin laser beams. The biggest fear that insurance companies had is that they would be the only ones participating, receive a disproportionate share of unhealthy children, and be at a competitive disadvantage that they couldn't recover from. This fear was not allayed.

Instead, the Obama administration and Health and Human Services (HHS) did not provide sufficient support and guidance to the state insurance divisions. The state insurance divisions to not have the resources nor bandwidth and were overwhelmed by the issues with this implementation. Insurance companies filled this leadership vaccuum by announcing their own interpretations and intentions for how they would implement guaranteed issue.

The Washington and Oregon insurance divisions finally issued draft guidelines on open enrollment periods and other provisions that would apply on Sept 23rd which was the day that they were supposed to be implemented. Insurance brokers have reported that some insurance carriers like Lifewise, don't intend to comply until Sept 2011 when they have to refile their plans. However, that's actually fairly irrelevant since the insurance division haven't been able to provide guidance and ensure compliance for the insurance companies that have expressed an interest in following the rules.

I had higher expectations for reform then this.


Anonymous said...

You had higher expectations of govt efficiency? Hoo-boy, what ARE you on? As long as state and fed govt have insurers as the whipping boys, they will stand pat on that hand UNTIL they force the insurers' hands, which is what you described here.

But there was no excuse for surprise -- back in June the Boston Globe reported that lawmakers must fix exactly the same kind of problem -- people gaming the system and jumping in and out of the ins. market as needed. This problem is a known quantity, there's even a name for it, "adverse selection." You want to know what's down the road for HCR? Just look at Massachusetts.

Deadhedge said...

Fair enough about having high expectations for government efficiency. However, I did not expect them to f#ck it up this badly.

This is different than Massachusetts because the insurance carriers are fighting back and playing hard. They are fighting adverse selection by not participating in it by closing to children. The Obama administration still hasn't figured out how to respond.

Massachusetts is figuring it out a little better. They tackled the insurance side (except for gaming the sytem) and are now fighting the provider cost side. They'll get there. The rest of the country, except for Hawaii, is still behind.

Anonymous said...

You are right, Deadhedge, it IS different from Mass. -- where the insurers (and premium-payers) are bleeding red ink waiting for lawmakers to fix the loopholes. So, my insurer should also hemorrhage red ink waiting for OR /WA to fix it? They'll just wait till 2014.

This has got Insurance Commissioners all over the country beside themselves --but apparently they aren't listening to themselves. To wit: "Kentucky Insurance Commissioner Sharon Clark said the insurers’ decisions could force children needing coverage to turn to Kentucky Access, the state’s high-risk insurance pool. That “could prove disastrous” to the program, Clark said in a statement. “The current budget of Kentucky Access could not sustain the entry of several hundred children per month.”

She's making the same point the insurers are -- it would be disastrous for them (and members), too.

Deadhedge said...

That is true and I am back to being incredulous about how the Obama administration didn't anticipate some likely outcome or having higher expectations for government.

There was an article today about how Massachusetts is setting up Accountable Care Organizations which can address cost and the red ink. Ultimately everyone needs this to work if we have agreed as a society that we need to cover sick kids whether it be the high risk pools or insurers. The red ink has to be shared or it will show up some where. That's why Massachusetts is farther along than most of the rest of the states.

That's why I also don't think that everyone will wait until 2014 to solve it and why I'll still be indignant about my disappointment.

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