Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



October 18, 2010

Washington Health Policy Week in Review Archive 5e8de0fd-9b15-4ad1-961f-083e383b7258

Newsletter Article


House Dems' Investigation Finds Big Increase in Health Insurance Denials

By Jane Norman, CQ HealthBeat Associate Editor

October 12, 2010 -- An investigation by House Democrats released Tuesday found a 49 percent spike in the number of people with pre-existing conditions who were denied health insurance coverage by four big insurers in the individual market between 2007 and 2009.

That denial rate came even as applications for individual policies to the four companies increased by just 16 percent during that same period, the investigation by the Energy and Commerce Committee found. The four insurers—Aetna, Humana, UnitedHealth Group and WellPoint—turned down more than 651,000 applicants during those two years due to their medical histories, or one out of every seven applicants, the investigation determined.

The inquiry began prior to enactment of the new health care law earlier this year, and it was released as Democrats and the Obama administration in advance of the midterm elections try to capitalize on the new benefits in the law (PL 111-148, PL 111-152) in the face of lukewarm public acceptance. Provisions cracking down on insurance company practices are among the most popular pieces of the law, even among some Republicans.

A report from Democrats Henry A. Waxman of California and Bart Stupak of Michigan on the investigation says that the new law will "significantly reform" insurance company denials of insurance to sick people that likely "would continue unabated in the absence of federal health reform legislation." That's because the law includes a ban on such denials for adults beginning in 2014. For children, the ban started for new policies issued after Sept. 23.

Waxman, the chairman of the committee, and Stupak, chairman of the oversight and investigations subcommittee, said they wrote to the four insurers on March 2 seeking information about coverage and claim denials and asked for internal communications, including e-mails to or from senior corporate managers. The companies, which covered about 2.8 million enrollees in the individual market in 2009, provided the committee with 68,000 pages of documents.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans (AHIP), which represents the industry. said in an emailed statement that health plans are committed to providing the most affordable coverage possible to people who rely on the individual market. Applicants undergo an underwriting process in which pre-existing conditions are disclosed, because if they defer buying insurance until after they need medical care, the cost of premiums will be driven up, he said.

Zirkelbach said insurers have recognized the problems that sick people have obtaining policies and that's why during the debate over the law they proposed changes to end exclusions based on pre-existing conditions, health status and gender. It's also key that the law includes an individual mandate so healthy people also buy insurance.

"There is broad agreement among policymakers and health care stakeholders that for market reforms to work, everyone needs to have health care coverage," he added.

Mohit M. Ghose, a spokesman for Aetna, said that the investigation showed what insurers have known for years—that the individual market needs change to improve access for all consumers.

"We must recognize, however, that improving access without also addressing the underlying issue of rising medical costs will lead to higher premiums for many consumers," said Ghose. "Consumers want more affordable insurance options, and we will continue to work for payment and regulatory reforms that will help address the cost drivers of premium increases."

The insurers' denials of coverage were to people in the individual market, which serves those who don't have group plans through employers or qualify for government programs such as Medicaid or Medicare. While the individual market is much smaller than the group market, there were 15.7 million people in 2008 who bought individual policies, the report noted.

The Democratic investigation also found that companies would turn down some insurance applicants without a review if the applicants disclosed certain medical conditions. According to an internal 2006 memo cited by the report, at one unnamed insurer those conditions included anyone who was a candidate for surgery, any woman who was currently pregnant or treated for infertility during the past five years and any applicant with a body mass index (BMI) of 39 or higher. Men or women with a BMI of 30 or higher are deemed obese.

Denials of insurance by the four companies climbed from 172,400 in 2007 to 221,400 in 2008 to 257,100 in 2009, the report said. "The actual number of coverage denials is likely to be significantly higher than reported," the report said, because it doesn't include sick people discouraged by insurance brokers from applying at all. Also, one company provided information to the committee from only one subsidiary.

Zeroing in on maternity care, the report found that pregnant women, expectant fathers and people trying to adopt children are "generally unable to obtain health insurance in the individual market," an issue that has been explored in the past in congressional hearings.

Maternity care is often excluded from policies, maternity benefits are limited and health insurance company executives developed business plans to reduce their maternity coverage, the report said. At one unnamed company, in a presentation to senior staff, executives identified maternity coverage as resulting "in higher prices, lower margins and loss of market share," the report said.

Another unnamed company kept a list of 425 medical diagnoses used to deny coverage including angina, diabetes and heart disease, the report said.

Those with health problems who did get insurance found deductibles increased for their conditions or riders attached to policies excluding coverage for these illnesses. One company did this with about 15 percent of its customers in the individual market, most often for Caesarean sections, back disorders, psychiatric disorders and outpatient treatment for high cholesterol, the report said. The report said that the four insurers turned down, in all, 212,800 claims for medical treatment in 2007 through 2009.

Business plans were formulated to use pre-existing conditions to limit claim payment, the report said. In addition, executives were considering expanding that practice by, for example, denying payments for prescription drugs used for pre-existing conditions, the report said.

Publication Details

Newsletter Article


Premiums Will Be Higher If Insurers Get Their Way on Exchanges, Consumers Union Says

By John Reichard, CQ HealthBeat Editor

October 12, 2010 -- If the Department of Health and Human Services goes along with the wishes of the insurance industry in setting rules for the creation of state-based exchanges, consumers won't get the best deals, a Consumers Union official said Tuesday.

Exchanges would lack the power to exclude plans that don't offer good deals, and insurers would be able to offer plans outside of exchanges that would siphon off good risks, said DeAnn Friedholm, director of health reform at Consumers Union. That would leave a disproportionate number of higher-cost enrollees—sick people—in plans offered inside the exchanges, driving up the premiums they charge, she said.
Friedholm was commenting on a 35-page letter filed with HHS by America's Health Insurance Plans (AHIP), the nation's largest health insurance association, on how exchanges should be structured. HHS requested public comment on the issue Aug. 3 and the comment period closed Oct. 4. HHS is expected to publish a proposed rule in coming months on requirements for exchanges under the health care overhaul.

"Probably our greatest heartburn would be over the premise that any plan that meets minimum standards would have to be in the exchange," Friedholm said. Consumers Union is the publisher of the influential consumer purchasing guide, Consumer Reports.

Friedholm emphasized, however, that "we have some points of close agreement" with insurers on how exchanges should operate.

Consumers Union says that exchanges should be permitted to be "active purchasers" rather than entities that simply serve as a kind of bulletin board that passively posts rates rather than trying to squeeze insurers for a better deal. But Friedholm said that's a longer term goal in the case of some exchanges because the markets involved may not have enough competitors to allow plans to be excluded.

AHIP argues against excluding any plan in compliance with solvency and other standards. Such an approach is needed "to maximize consumer choice," it says.

Friedholm also expressed concern about AHIP's comment that in the future "consumers seeking coverage should have options available both through the exchange and through new and existing products."

"They could offer skimpier boutique plans on the outside that would attract the low-risk people," she said.

Consumers Union agrees with AHIP on the need to encourage states to test certain exchange functions well before their required start date under the law, which is Jan. 1, 2014. And like AHIP, Consumers Union says enrollment periods for plans offered in the exchanges need to be limited in duration. Otherwise, people would be more likely to wait until they get sick to buy coverage, Consumers Union and AHIP say. Both organizations agree that the penalty under the law for not buying coverage is "weak," making it more important to have limited enrollment periods to limit bad risks.

Another point of agreement is on the need for an aggressive "outreach" program to make sure people know about the exchanges.

Publication Details

Newsletter Article


Medicare Advantage Program to See Modest Changes Next Year, Study Says

By John Reichard, CQ HealthBeat Editor

October 15, 2010 -- Seniors will see modest changes next year in Medicare's private health plans, according to a study released Friday—a conclusion seemingly at odds with Republican warnings earlier in the week that enrollees in the plans face big new costs and vanishing choices because of the health care overhaul law.

But after making adjustments for political spin and different time frames in their analyses, the findings of the study by the Kaiser Family Foundation and the GOP assertions, which were based on a study by Medicare Actuary Richard Foster, aren't necessarily at odds.

Private health plans in Medicare are called Medicare Advantage, or "MA," plans. They've become an increasingly popular alternative to traditional Medicare in recent years because they offer extra benefits.

About 12 million people are now enrolled in "MA" plans, but providers are overpaid relative to doctors and hospitals in traditional Medicare. The health law ends those overpayments over a period of time.

Almost everyone in Medicare will have at least one MA plan as an alternative to traditional Medicare, said the Kaiser study. Medicare enrollees on average will be able to pick from among two dozen MA plans in their county, the study found. Seniors in a relatively small number of counties will have few or no choices, while those in many other counties will have a larger number of plans to select from.

People enrolled in MA plans with prescription drug coverage will see premiums rise by about $2 per month next year if they stay in their current plan, the Kaiser study said. The typical MA plan has prescription drug coverage.

For the first time, all MA plans will limit their enrollees' out-of-pocket costs because of new regulations issued by the Centers for Medicare and Medicaid Services (CMS), the study also noted.

Republican senators issued a statement earlier this week citing projections by Foster that out-of-pocket costs for MA enrollees will grow by $346 in 2011 and continue to rise, increasing by $923 by 2017. The projected increases stem from the health overhaul law's cuts in payments to MA plans, Foster said.

Foster said his estimates take into account the fact that certain types of out-of-pocket costs are lowered under the overhaul; the impact of the MA cuts more than erases those improvements for beneficiaries, he said.

Foster's analysis "confirms that the new health care law jeopardizes seniors access to private Medicare options," Sen. Jon Kyl, R-Ariz., said.

"It's beyond dispute that seniors enrolled in the Medicare Advantage program will not only see their choices disappear over the next decade, but they'll also have to pay much more out of their own pockets," said Sen. Orrin Hatch, R-Utah.

The Kaiser study found that the number of plans being offered will drop 13 percent next year, but hardly disappear. It attributed the decline to a 2008 law trimming a certain type of MA plan, and to CMS regulations designed to lessen confusion from having too many plans to pick from by dropping those with low enrollments.

But the Kaiser study deals with 2011, not with future years. And the impact of cuts in the health overhaul law is expected to deepen in coming years. Analysts say there will be fewer plans, but how many fewer is unclear.

Publication Details

Newsletter Article


Don't Cave on Medical Payout Rule, Rockefeller Exhorts NAIC

By John Reichard, CQ HealthBeat Editor

October 14, 2010 -- Sen. John D. Rockefeller IV issued a statement Thursday urging the National Association of Insurance Commissioners (NAIC) to "stand strong" against industry efforts he said would deny rebates to consumers in some states under the health care overhaul law.

"Now is not the time to stand down," the West Virginia Democrat said. "I urge you to reject the health care industry's eleventh-hour lobbying campaign."

At issue is a regulation the Department of Health and Human Services (HHS) will issue in coming weeks that requires insurers to pay rebates if they spend less than 80 percent of premium dollars on medical care for policies sold to individuals and small employers. For larger groups, rebates are required if medical payouts fall below 85 percent.

NAIC will soon make recommendations on this so-called medical loss ratio (MLR) rule to HHS, which the department is by and large expected to follow.

Rockefeller said NAIC needs to withstand a last-minute lobbying blitz and stick to the position reached by one of its committees that medical payouts need to be calculated at the state rather than the national level to check compliance with the payout minimums.

Aetna, Cigna, Humana, UnitedHealth and Wellpoint "are now mounting a furious eleventh-hour lobbying effort" to allow companies to add up the medical payouts in all the states they do business in to come up with a single national figure, Rockefeller said.

In a letter to the NAIC, Rockefeller said that "allowing insurers to aggregate their medical loss ratio at a national level deprives the consumers of individual states" of important consumer protections. In states where medical payouts do not meet the minimums, consumers "would have no right to rebates, as long as the health insurance company's overall national average remained above the law's new requirements," Rockefeller complained.

Separately, NAIC sent a letter to HHS Secretary Kathleen Sebelius on Oct. 13 that did not address that particular issue but that did emphasize the need to be flexible in administering the MLR rule.

NAIC said that HHS must be flexible about deadlines. The letter cautioned that "improper or overly strident application of the MLR and rebate program could threaten the solvency of insurers or significantly reduce competition in some insurance markets."

The standards take effect on Jan. 1, 2011, with rebates required to be issued in 2012 to the extent an insurer's 2011 payouts fall short of the standards. So if an insurer in the small-group market takes in $100 million in premiums and pays out $78 million for medical care, it would have to pay rebates totaling $2 million.

But the NAIC letter said that such consumer protections aren't helpful if the MLR rule threatens the solvency of a company. "State regulators understand that the threshold consumer protection is ensuring a health insurance company is solvent," the letter said. Companies in a number of markets will need more time to fully meet the MLR, NAIC said.

States such as Maine, Iowa and South Carolina have asked for longer phase-in periods. America's Health Insurance Plans sent a letter of its own to NAIC on Oct. 13 hammering hard at the need for a phase-in schedule and saying that NAIC should make specific recommendations to HHS on such a schedule.

NAIC is also recommending to HHS that "expatriate and international polices" sold to people living abroad who sometimes return to the United States for brief periods should be exempted from the MLR standard. That is because of heavy administrative expenses involved in servicing such policies, NAIC says.

Publication Details

Newsletter Article


Allowing 'Ultra Lite' Exchanges Will Blow Big Chance to Improve Care, Kaiser Exec Warns

By John Reichard, CQ HealthBeat Editor

October 13, 2010 -- If the Department of Health and Human Services decides to let states set up minimal health insurance exchanges under the health care overhaul, a big opportunity to improve the nation's quality of care will be squandered, the chief executive of the nation's largest nonprofit health plan warned Wednesday.

"There are people who want to make the exchanges 'ultra lite;' they want to make the exchanges data narrow; they want to make the exchanges data free," the executive, George Halvorson of 8.6 million-member Kaiser Permanente, told a forum sponsored by the National Committee for Quality Assurance (NCQA).

"I would ask everyone in this room, if you're influencing anybody who is influencing the development [of] designs for the exchanges, please push it in the direction toward having smart exchanges, not dumb exchanges," he said.

Halvorson said quality performance data developed by NCQA, called "HEDIS measures," has evolved to the point where health care purchasers have used it to drive big improvements in the quality of care. Employers have used the measures to obtain baseline data on the quality of care in hundreds of health plans and to push for improved performance on those measures.

For example, HEDIS, which stands for Healthcare Effectiveness Data and Information Set, measures the extent to which health plan enrollees who suffer heart attacks are treated with beta blocker drugs, a proven lifesaving practice that prevents repeat heart attacks.

But through the creation of exchanges, individual consumers, not just employers, also will be able to use such data to pick higher-quality health systems, he says. "If exchanges are done well, it will give consumers a magnificent set of data that can be used to make meaningful choices," he said.

"The likelihood of dying of cancer doubles over five years if you make the wrong choice of care site," Halvorson said. He said that the chance of dying from coronary bypass surgeries goes up by almost a factor of ten "if you have the surgery done at one site than if you do it at another."

Halvorson said after his remarks that he was referring to the exchange operating in Utah when he talked about "ultra lite" exchanges. Utah "says they are going to put some basic information" about premiums and benefits in the exchange, Halvorson said. "I can see why for administrative reasons they may want to do that. But I think it's a lost opportunity. And I think what they should do is wait a little while until somebody else builds a template" for quality data reporting Utah could follow, Halvorson said.

Robert Spendlove, an adviser to Utah Gov. Gary R. Herbert, said in an interview that financially strapped states like Utah just aren't in a position to operate the big insurance exchanges he fears HHS will insist on under the law.

In response to Halvorson's comments, Spendlove said "I completely agree that cost and quality data is essential for an informed consumer." Utah is developing an "all-payer" database that includes information on quality of care from various types of plans in the state, he said, but that effort "is a work in progress" and the data isn't yet part of the state's exchange.

Publication Details

Newsletter Article


States' Lawsuit Against Health Care Law to Move Forward

By Jane Norman, CQ HealthBeat Associate Editor

October 14, 2010 -- A U.S. District Court judge in Florida on Thursday allowed two parts of a multistate lawsuit against the health care law to move forward, including an argument that the measure's individual mandate is unconstitutional. But the ruling was far from a final decision on the law.

The written decision by Judge Roger Vinson was not a surprise, since he had indicated during a September hearing he probably would permit at least a portion of the suit involving 20 states to continue. However, it was still a setback for the Obama administration, which will have to continue to fight the states in the federal courts. The battle is expected to reach the Supreme Court.

Vinson allowed a claim to move forward that the individual health insurance mandate and the penalty for not buying coverage violate the Commerce Clause of the Constitution. He also allowed a challenge to the law's Medicaid expansion. States contend they will be overwhelmed by costs for the state-federal program if they eventually have to pay for millions of new enrollees.

The suit in the Northern District of Florida was brought by Republican attorneys general from 16 states and governors from four states, the National Federation of Independent Business and two individual taxpayers. It was filed minutes after President Obama signed the law on March 23.

Vinson set Dec. 16 for a summary judgment hearing on the suit, where both sides will make arguments on the merits of their cases.

DOJ Disappointed
The defendants are the U.S. Department of Health and Human Services, Department of Treasury, Department of Labor and their secretaries. Lawyers for the Department of Justice contend the government has the power to regulate interstate commerce, and that includes the purchase of health insurance.

A spokeswoman for the Department of Justice (DOJ) said that while the government was "disappointed" the court did not dismiss the entire case, the decision to reject other claims that were made by the states was welcomed. Other claims dealt with issues such as state sovereignty.

"The judge saved for another day the decision on the merits of two claims, and we remain confident that the law ultimately will be upheld," said DOJ's Tracy Schmaler. "This case is in the early stages of litigation and the department will continue to vigorously defend this law in ongoing litigation."

Vinson said that his ruling on the lawsuit was not a decision on the overall merits of the law (PL 111-148, PL 111-152), though he did examine at length the arguments on both sides in his 65-page decision.

"In ruling on the defendants' motion to dismiss, I must only decide if this court has jurisdiction to consider some of the plaintiffs' claims, and whether each of the counts of the amended complaint states a plausible claim for relief," Vinson wrote.

But he also said that the individual mandate applies across the board and people have no choice. Either they comply or they will be penalized, Vinson said. "It is not based on an activity that they make the choice to undertake," he said. "Rather, it is based solely on citizenship and on being alive."

He quoted a Congressional Budget Office statement from 16 years ago that a mandate to buy insurance would be an unprecedented federal action that has never before been required as a condition of lawful residence in the United States.

Saying it is novel does not mean it is unconstitutional, Vinson said, because there's a first time for everything. But at this point the plaintiffs have "most definitely" stated a plausible claim for action, he said.

He added: "In this order, I have not attempted to determine whether the line between constitutional and extraconstitutional government has been crossed. That will be decided on the basis of the parties' expected motions for summary judgment, when I will have the benefit of additional argument and all evidence in the record that may bear on the outstanding issues.

"I am only saying that (with respect to two of the particular causes of action discussed above) the plaintiffs have at least stated a plausible claim that the line has been crossed."

Praise From Plaintiffs
Florida Attorney General Bill McCollum praised the ruling as a victory. "It is the first step to having the individual mandate declared unconstitutional and upholding state sovereignty in our federal system and means this case will go forward to the summary judgment hearing that the court has set for December 16th," he said.

"Congress has no constitutional authority to force the individual mandate and its penalty on Americans who cannot afford or do not wish to have health insurance," said McCollum. "Regardless of whether the Obama administration argues it is a tax or regulation, it is an unjust burden on the American public."

But Ron Pollack, executive director of Families USA, an advocacy group that backs the law, said he expects it will ultimately be upheld and that the ruling has no bearing on the validity of the law. Implementation will continue without interruption, he said.

"This case is really a politically motivated ploy aimed at diverting attention from the many benefits of the new law," added Pollack.

Publication Details