By Jane Norman, CQ HealthBeat Associate Editor

September 12, 2012 -- Because more young adults, the very poor, and people older than 65 are being covered, the percentage of Americans who lack health insurance dropped to 15.7 percent in 2011, compared to 16.3 percent in 2010, U.S. Census Bureau officials recently announced.

The number of people without insurance declined to 48.6 million in 2011 compared to 50 million in 2010, according to the agency's annual Current Population Survey.

It marked the first time since 2007 that the census has found a decline in the uninsured rate. That year, 15.3 percent of Americans were without insurance. Since then, in the midst of the economic downturn and job losses, the share of the population without coverage has climbed.

More gains in insurance coverage are expected after the health care overhaul law is fully implemented in 2014.

The uninsured rate improved considerably in 2011 among Americans age 19 to 25, who, under the health care law (PL 111-148, PL 111-152), now may be covered on their parents' insurance policies. The census found that 27.7 percent of the young adults in that age bracket lacked insurance in 2011, compared to 29.8 percent in 2010.

David Johnson, chief of the social, economic and housing statistics division at the census, estimated that about 40 percent of the decline in the uninsured could be tracked to the health care law.

But Johnson wouldn't tie the entire change directly to the law, saying that some of the newly insured may have found coverage through other means. He said the share of young adults with health insurance grew by 4 percentage points from 2009 through 2011, when young adult coverage was in effect for the full year.

Those between the ages of 35 and 44 also had increased insurance coverage. But Johnson said there's not enough information available yet to show why they are gaining coverage and whether the increased coverage is coming through public programs or private insurance.

In a reflection of the ongoing economic problems and the aging population, the percentage of people covered by government health insurance—either Medicare or Medicaid—increased from 31.2 percent in 2010 to 32.2 percent in 2011. The number of people receiving insurance through government programs increased to 99.5 million in 2011, compared to 95.5 million in 2010.

Broken down, the percentage of the population using Medicaid coverage for their health care—which means they had a very low income level—grew from 15.8 percent in 2010 to 16.5 percent in 2011. The number of people receiving Medicaid grew from 48.5 million in 2010 to 50.8 million in 2011, despite efforts by many states to trim their Medicaid rolls in the face of budget crises.

As for Medicare, the percentage of the U.S. population enrolled in the program for the elderly and disabled rose to 15.2 percent in 2011 from 14.6 percent in 2010. Numbers grew to 46.9 million in 2011 compared to 44.9 million in 2010.

The percentages of non-Hispanic whites, blacks and Asians without health insurance declined, though the rate among Hispanics remained about the same.

Supporters of the health care law said it's clear that it is helping Americans obtain coverage already. "The fraction of people with health insurance coverage rose in 2011, and many age, race, ethnic and income groups had fewer uninsured," said Rebecca M. Blank, acting secretary of Commerce, in a written statement. "The president has taken a number of steps since 2009 that was critical to these higher levels of health insurance coverage, including increasing the Children's Health Insurance Program (CHIP) and passage of the Affordable Care Act."

Census officials also said that 63.9 percent of people were covered by private health insurance in 2011, which was not statistically different from 2010. "This was the first time in the last 10 years that the rate of private health insurance coverage has not decreased," officials said, perhaps signaling a pause in a long-running erosion in private coverage that is largely employer-based.

The Current Population Survey also includes information on U.S. income and poverty.

• Census Report (pdf)

By Jane Norman, CQ HealthBeat Associate Editor

September 11, 2012 -- An annual survey of health benefits released last week found a surprisingly modest 4 percent increase in premiums for employer-sponsored family coverage compared to last year, continuing a trend of moderation in health care costs.

Why the number dipped so low is not clear to researchers, nor is whether the trend will last. And given that the increase outpaced the growth in wages and in general inflation, consumers likely won't be thrilled with the news. Premiums have shot up an astonishing 97 percent since 2002 and families now are paying $4,316 on average toward the average $15,745 cost of their employer provided coverage.

Yet for those in health policy who remember the budget-busting, double-digit yearly premium increases of just a decade ago it was a relief—and intriguing—to see a 4 percent increase. The slowing down in cost growth could lend credence to such fledgling efforts by government and employers to keep costs under control as disease management, wellness programs and coordinated care.

But why is it happening? "Is this mostly the effect of the recession or is there something in health care going on that helps to hold down costs?" asked Drew Altman, president and CEO of the Kaiser Family Foundation, which since 1999 has conducted the annual employer survey with the Health Research & Educational Trust (HRET).

The recession and a corresponding drop in people's use of health care in order to save money has to be seen as a "big factor," said Altman. But other causes could be changes in the way medical services are delivered to make them more efficient and the increase use of managed care, or a combination of those things, he said.

"The sluggish economy may have played a significant factor," said Maulik Joshi, president of HRET and senior vice president for research at the American Hospital Association.

The second big question is whether costs will creep up again and "there's a hint" in the data that premiums could be higher next year though how much higher is unclear, Altman said in a briefing with reporters. He said there is a leveling off in the number of people enrolled in high-deductible plans combined with health savings accounts or health reimbursement arrangements, and those plans contribute to holding down costs. About 19 percent of workers are enrolled in such plans.

There's also a difference compared to last year in cost growth. In its 2011 survey, Kaiser found a 9 percent increase in health care costs compared to 2010. Altman said that number could have been an aberration—or at the time employers could have assumed that the economy would cover more quickly than it has, which would have prompted people to use more health care services and cost to increase. When the recovery stalled in 2011, so did utilization.

Another interesting finding in this edition of the survey was that the percentage of people enrolled in a plan considered as grandfathered under the health care law (PL 111-148, PL 111-152) fell in 2012 compared to 2011. The survey found 48 percent of workers in a grandfathered plan this year compared to 56 percent in 2011. This is significant because grandfathered plans are exempt from many provisions of the health care law such as no-cost preventive care. Grandfathered plans are those in which no significant changes have been made.

The Kaiser/HRET survey also found that about 2.9 million adult children have gotten health insurance coverage through their parents' plans due to the provision in the overhaul law that permits adult children to be covered up to the age of 26.

Rate Hike Politics

With the presidential campaign in full swing, the study immediately became political fodder, with Republicans asserting that it showed the Obama administration has failed to keep health care costs under control. Sen. Michael B. Enzi of Wyoming, top Republican on the Senate Finance Committee, pointed out the 4 percent increase was twice the rate of inflation.

The Department of Health and Human Services, heading off criticism, released its own report asserting that the mechanism of rate review included in the health care law has saved consumers $1 billion by reining in unreasonable premium increases "The Health Care Law is Saving Americans Money," an HHS blog post was headlined.

Researchers said that there's not much to tie the new law with the findings of the survey because much of the law has not yet gone into effect, and the provisions that have begun don't have much impact on most employer-sponsored coverage.

Yet another element to the health costs puzzle emerged with preliminary findings from another recent study, this one by the consulting firm Mercer. It presented a less rosy scenario for cost growth. Mercer said that its survey so far predicted that the overall average per-employee cost of health care will rise by 6.5 percent in 2013, slightly higher than the 5.7 percent increase it expects in 2012. But employers also indicated in the survey they intend to shift more costs to workers, driving up per-employee costs to an 8 percent increase, said Mercer. The results were based on a survey of 2,000 employers through Sept. 4.

The Kaiser/HRET survey was conducted from January through May among 3,326 employers, not including the federal government. Firms with three or more workers were surveyed.

Among other findings in the Kaiser study:

• Workers who are single had a small premium increase of 3 percent in 2012 compared to 2011. They are now paying $951 each toward their coverage on average. Total premiums for worker-only policies rose to $5,615 annually. In 1999, it was $2,196 annually.
• Workers at companies with a lot of low-wage workers—at least 35 percent of the workers earn $24,000 or less a year—face a real squeeze. The survey found they are paying $1,000 more a year for their family coverage than workers at bigger companies and are more likely to face high deductibles. This happens even though the firms with the lower-wage workers are paying less overall in total premiums, the study found. "Firms with a lot of lower wage workers charge a lot for family coverage," said Gary Claxton, the lead author of the study and a Kaiser vice president.
• About 60 percent of companies surveyed said they offer health benefits to their employees, although the size of the company matters. Just half of businesses with three to nine workers offer coverage compared to almost every employer with 1,000 or more workers.

By Rebecca Adams, CQ HealthBeat Associate Editor

September 11, 2012 -- Two insurance rules stemming from the 2010 health care law appear to have saved consumers $2.1 billion this year, according to a new report released by the Obama administration. However, an administration official said it is difficult to say definitively how much money state insurance regulators might have saved anyway had the overhaul never been enacted.

One of the health care law (PL 111-148, PL 111-152) regulations forces insurers to justify premium increases of 10 percent or more. That has led to reductions in insurers' original proposed rate hikes, which the administration says saved nearly 800,000 consumers a total of about $1 billion.

Another overhaul rule requires small-group and individual market insurers to spend at least 80 percent of premium dollars on benefits or provide rebates. That rule, known as the medical loss ratio regulation, last year saved nearly $1.1 billion that was spread among 13 million consumers, for an average rebate of about $151 per household.

Forty-four states now have programs to oversee insurers' requests for proposed increases, according to Health and Human Services officials. The Obama administration looks over the proposed increases in states that do not have review programs.

Gary Cohen, director of HHS' Center for Consumer Information and Insurance Oversight (CCIIO), told reporters during a recent call that state insurance commissioners made 69 percent of the rate review decisions and HHS determined the other 31 percent.

It's difficult to quantify the effectiveness of state regulators in holding down proposed increases before the law was enacted, Cohen said, because states did not have to report that information in a uniform way before the overhaul.

HHS officials have given $160 million in grants to 45 states, the District of Columbia, and territories to bolster their rate review programs or let consumers know about them. There is $90 million in grant money left for this year and 2013.

About 36 percent of the proposed rate increases that represented a 10 percent or higher boost went through without changes, said the report. But about 12 percent of proposed increases were withdrawn during review, an additional 26 percent were rejected and another 26 percent were changed, according to HHS.

Regulators reduced proposed rate increases by 2.8 percentage points on average.

With the issue of health care costs figuring prominently in the congressional and presidential campaigns, Democrats are touting the findings as evidence that the health care law is helping consumers.

House Democratic Whip Steny H. Hoyer, D-Md., praised the report.

"Democrats will continue working to make sure the Affordable Care Act is fully implemented," he said. "Already, Republicans in the House have voted over 30 times to defund or repeal the law. I continue to call on them to cease their attempts to end a law that has yielded so many benefits to American families and has brought real savings to individuals and to our economy as a whole."

But Republicans countered that a report showing that some insurance spikes may be less than insurers originally sought does not prove that the 2010 law is holding down costs in a significant way.

Some GOP lawmakers noted that a nationwide study by the nonpartisan Kaiser Family Foundation shows that on average, health care premiums for large employer-sponsored plans rose about 4 percent this year.

"This report is an election year gimmick that ignores the true total cost increases of the new health care law," said Michael B. Enzi, R-Wyo., the top Republican on the Senate Health, Education, Labor and Pensions Committee. "What this administration does not want people to know is that the new mandates contained in the health care law are significantly increasing the cost of insurance, which will make it harder for many Americans to purchase affordable coverage. Despite claims to the contrary, it is clear that the new health care law will increase insurance costs for all Americans."

By Rebecca Adams, CQ HealthBeat Associate Editor

September 14, 2012 -- As 26 states begin a new initiative to more efficiently care for people who are dually eligible for Medicare and Medicaid, hospitals will have to persuade health insurance plans, not the federal government, to pay them at the higher Medicare reimbursement rate.

Officials with the Centers for Medicare and Medicaid Services (CMS) support the use of Medicare rates for hospitals, but the agency will not directly set those rates. Instead, managed care plans that are chosen to participate in the demonstration projects will negotiate rates with individual hospitals and health systems. Medicare and Medicaid officials do not plan to weigh in directly on the tense negotiations over payments that will soon begin in earnest between hospitals and health plans in states like Massachusetts.

"We don't anticipate requiring minimum rates to providers," a CMS official said last week. "We plan to stay out of that."

In fact, the official said that in the duals demonstration projects, the agency will follow a rule that bans CMS from interfering in contract negotiations between health plans and providers in the Medicare Advantage managed care program.

"There's a federal statute that in Medicare Advantage prohibits us from getting directly involved in establishing rates between plans and providers," the official said. "That's the model that prevails for us."

The Medicare part of the Social Security Act (PL 74-271) includes an amendment on "non-interference" that bans Health and Human Services (HHS) officials from requiring any Medicare Advantage plan to contract with a particular hospital "or require a particular price structure for payment under such a contract." The ban is needed, the law says, "in order to promote competition."

The issue will play out in the 26 states that have proposed plans to shift dually eligible patients to managed care or managed fee-for-service plans in a major CMS demonstration project. CMS officials are working to finalize proposals that will allow states such as California, Ohio and Wisconsin to go forward with their plans next year.

The demonstration projects are getting a lot of attention because some providers and policy analysts say the initiative is moving too fast and will affect too many people. As many as 2 million of the 9 million dually eligible people may be shifted to managed care or managed fee-for-service under the project.

CMS officials say the initiative will significantly improve the coordination of care for patients and that the status quo of fragmented care is unacceptable. They hope to simplify the care for dual eligibles, who currently have to navigate different policies under the Medicare, Medicaid and prescription drug benefit programs. (See related story, CQ HealthBeat, July 20, 2012). The dual eligibles are among the frailest and sickest people in those programs and therefore the most expensive to care for.

Monitoring Massachusetts

Many health industry executives and policy analysts are watching how the process unfolds in Massachusetts, the first state whose proposal was approved.

In Massachusetts, health plans will soon learn whether they have been formally accepted into the program and what the plans' rates will be. Then contract discussions between health plans and individual health systems will get serious. The program is expected to launch on April 1.

"Our strong support for the concept that underlies this initiative is equaled by our great concern that inadequate reimbursement may undermine its potential success," said Massachusetts Hospital Association Executive Vice President and General Counsel Timothy F. Gens. "This is chief among our concerns."

Hospitals would like to see an explicit guarantee from the state or federal government that they will get rates that are at least as generous as Medicare rates.

"We're concerned that there'll be no requirement or directive from either the federal or state government and we won't find out until each provider organization finds out what it's going to be paid" from managed care plans," Gens said. "There's nothing explicit ... The process is beginning, so we still are advocating that there be a specific requirement for Medicare rates."

CMS and state officials both say the program's goal is not to save money by cutting providers' rates. The projects do assume savings, but federal and state officials say that should come from fewer administrative and marketing costs for health plans as well as lower utilization of unnecessary medical services.

State officials in Massachusetts and California have suggested that they expect hospitals to be offered rates as high as those in Medicare.

Some health systems already know they will be getting Medicare rates because they have contracts with insurers that provide a blanket guarantee of similar rates for every line of business.

And even though federal officials will not be in the room for every contract negotiation, they do have one card to play to make sure that providers are reasonably compensated. CMS officials will conduct a readiness review for every state that looks at a range of issues, including whether the provider network that a health plan has built is adequate for patients with complicated medical needs. If large numbers of hospitals individually refuse to sign a contract with a health plan unless they are paid Medicare rates, then the managed care plan may not be considered by CMS to be ready to participate in the project. If CMS officials believe that a number of insurers do not have adequate networks, then the entire demonstration project in that state could stall.

• Massachusetts Memorandum of Understanding (pdf)

By Jane Norman, CQ HealthBeat Associate Editor

September 14, 2012 -- Even in Republican-led states that were part of the suit against the health care law, discussion and debate about how and whether to establish a health insurance exchange continues to consume insurance commissioners, lawmakers, governors, consumers, and the insurance industry.

But whether state-based exchanges can be set up in time to roll into operation in 2014 is still in doubt.

One example is in Kansas, where Insurance Commissioner Sandy Praeger has solicited recommendations on which essential health benefits should be in the exchange, but GOP Gov. Sam Brownback is refusing to take any action pending the results of the November elections, according to news reports. Republican presidential nominee Mitt Romney has vowed to work to repeal most of the health care law (PL 111-148, PL 111-152) if he is elected.

"All of this really hinges on the election Nov. 6," Praeger, a prominent former president of the National Association of Insurance Commissioners, said at a recent public forum, according to the Topeka Capital-Journal.

A new Urban Institute report on exchange activities in 10 states whose leaders have varying political affiliations says all are making an effort to hear from stakeholders and all would ideally prefer a state-based exchange, but "many state policy environments remain politically contentious." States that have not passed certain milestones by now won't have state exchanges in time, says the report by Linda J. Blumberg and Shanna Rifkin.

The analysis looked at Alabama, Colorado, Maryland, Michigan, Minnesota, New Mexico, New York, Oregon, Rhode Island, and Virginia. Five have exchanges in place and five don't. In three states, legislation was passed creating the exchange and in two the governors issued executive orders.

Among those states that the institute looked at, Virginia—one of the leaders in challenging the health care law in court—provided an "interesting example" of what's happened with an exchange, the report said. A bill enacted in April 2011 expressed the intent to build a state-based exchange, but it didn't specifically establish the exchange and state legislators didn't vote on it this year. It's possible the governor could issue an executive order to establish an exchange but that hasn't happened yet, said the report.

"While states are making progress, many essential design decisions have yet to be made in most of the states studied," said the report. That includes definitions of essential health benefits, consumer outreach campaigns and how to collect and manage data, the report said, Maryland and Oregon have made the most progress in this area.

In the 10 states studied, policy makers, staff members, consumer advocates, and others are highly engaged in exchange policy discussions, the report said.

"There was also a strong sense across the political spectrum that a state-run exchange was preferable to a federally run one," the report added, even among those states opposed to the law.

"However, many state policy environments remain politically contentious, and progress in exchange development has been slow for some of them as a result," the report said.

States that have not yet contracted with an IT vendor to develop exchange and Medicaid systems, or set up an exchange entity and hired staff, or created a process for making central design decisions "are unlikely" to be able to set up a state exchange by late 2013, when enrollment for 2014 is to begin, the report said.

Those that aren't ready in time can work in partnership with the federal government in setting up an exchange, the authors noted. The report was underwritten by the Robert Wood Johnson Foundation.

In other exchange developments this week:

• The Salt Lake Tribune reported that hackers broke into the Web portal for the Utah health insurance exchange system, and it wasn't operating for 10 days. No personal information was compromised but words on the site were garbled and headlines were blurred like an attack of graffiti, the newspaper said. Utah had an exchange in operation prior to the passage of the health care law.
• Mississippi Insurance Commissioner Mike Chaney, a Republican, said at a meeting that a state exchange where "we can set the rules" will be more effective for Mississippi than a federally run exchange, the Greenwood, Miss., Commonwealth reported. Chaney also said that an insurance exchange is "not a new idea" and "not a Democrat or Republican idea," the newspaper said. Mississippi leaders have been strongly resisted the health care law.
• Wyofile, a Wyoming nonprofit online publication, said state lawmakers are calling it a "near certainty" that Wyoming will fail to meet deadlines and will have to have a federally run exchange.
• The state of West Virginia will pay health care "rock star" Jonathan Gruber $121,500 to look at health insurance in the state as West Virginia studies how to set up an exchange and whether to expand its Medicaid program, the Charleston Daily Mail reported. Gruber, a professor of economics at Massachusetts Institute of Technology, was a key adviser to the Obama administration in developing of the health overhaul.

By Jane Norman, CQ HealthBeat Associate Editor

September 13, 2012 -- A health care overhaul that brings business and politicians to the same table for debate, negotiation, and ultimately successful legislation sounds like a deal forged in never-never land.

But Massachusetts business leaders said at a forum at Georgetown University this week that it really did happen that way in their state, and that their 2006 law has been good for the business climate as well as the newly insured.

"We were willing to compromise when we had to, without giving up on our core values," said Richard C. Lord, CEO of the Associated Industries of Massachusetts.

And while acknowledging the opposition by some national business groups to the federal health care law, the Massachusetts leaders said they strongly believe it's in the best interests of business to be fully involved and engaged as implementation continues throughout the country.

Lord, as well as the heads of the Greater Boston Chamber of Commerce, Massachusetts Business Roundtable and Massachusetts Taxpayers Foundation, have written a report on their experiences in helping to develop the state's health care law, which was a model for the federal overhaul (PL 111-148, PL 111-152).

When they are invited to speak to employers and business groups in other states about their involvement helping to pass the Massachusetts law, "we are often met with a strong dose of skepticism," they wrote in the report. But they came to the realization that having large numbers of uninsured people is costly and damaging to a state's economy, they said.

"While every state faces different challenge, we are convinced that many aspects of our experience with health reform and what we've learned from it can be applied elsewhere," they added. The report was funded by the Robert Wood Johnson Foundation, Blue Cross Blue Shield of Massachusetts Foundation, and Community Catalyst.

The Massachusetts law is far from perfect, and a major challenge remained afterward in addressing rising health care costs, the leaders said, though they added that state lawmakers are working on new payment systems and other solutions for curbing costs.

Lord and others spoke at a forum last week at Georgetown's McDonough School of Business. The idea was not to debate whether or not the federal health care law is a positive, but rather to use one case study in which a change in the health care system has been implemented and look at how business played a role, said David Thomas, dean of the business school.

In Massachusetts, according to the report, the most recent statistics show that 98 percent of residents have health insurance coverage, including virtually all children—99.8 percent. In 2010, 77 percent of Massachusetts employers with three or more employees offered health care coverage, compared to 69 percent nationwide.

In Massachusetts, as nationally, the "key building block" in the law was the requirement that every individual should have health insurance, said Michael J. Widmer, president of the Massachusetts Taxpayer Foundation. But acceptance of that concept may have been a little easier in Massachusetts because there was already a high degree of employer-provided coverage there and thus an existing tie between work and health insurance, he said.

Yet there was a problem with many young people turning down offered coverage because they didn't want to pay for it or couldn't afford it. And businesses that did provide health insurance coverage were frustrated with those that didn't, because health care costs for their workers wound up being paid by everyone, the leaders said.

As the national law envisions for every state, the Massachusetts system features a health insurance exchange, called the Connector, that's been the body administering state-provided subsidies for low-income people to purchase coverage. Businesses have roles on the governing board of the Connector.

Each Massachusetts business that either doesn't offer health insurance or offers plans deemed unaffordable is assessed $295 per employee. The assessment is considered to cover the cost to the system of uncompensated care.

"The results have been dramatic," said Widmer, pointing to the 98 percent coverage figure. In addition, the five-year additional cost to the state budget has been just 1.4 percent, he said.

Health insurance legislation actually first was approved in 1988 in Massachusetts—and then later repealed, in large part that was because of a lack of involvement by the business community, forum participants said. Jack Connors Jr., the former chairman of Partners HealthCare and the ad firm Hill Holliday, said that by the mid-2000s, businesses felt that health care costs were spiraling upward and there was little control over their growth.

Lord said that then-Gov. Mitt Romney and legislative leaders sought the involvement of the business community as the new health care measure was shaped, and consulted with business group leaders about what they thought their members could accept. Romney, now the Republican nominee for president, signed the Massachusetts law. He now says he would repeal most elements of the federal law and replace it with his own plan.

In Massachusetts, Lord said, the open door for business was key. "I saw that as a very important part of the negotiations leading up to the bill," he said.

He said that soon after the federal law was enacted, he was invited to meet with a business group similar to his own, and members expressed "total surprise" at his support for the overhaul. But he said he tells groups that the Massachusetts concept was based on the familiar employer-based system rather than some "radical" approach.

"I don't see it as we rebuilt our health care system as much as we plugged the gaps," he said, including the use of subsidies to extend access to care for the uninsured.

Forum participants said fears that business would suffer proved unfounded. Linda J. Blumberg, a senior fellow at the Urban Institute, said her research has found "absolutely no evidence that the Massachusetts reforms had any negative impact on employment at all." In addition, Blumberg said her research found no sign of reduced employment among small employers and employers in retail or hospitality, those who might have to offer health insurance for the first time under the overhaul.

The state law made the business climate better in Massachusetts, the leaders said. "With universal access, and building off the employer system, I think many business leaders would say we have a competitive advantage in having this degree of coverage," Widmer said.

Businesses face pressures to be accountable, and they felt they were paying too much for a broken system, Connors said. "People appreciate the fact that there's greater accountability today," he said.

The report acknowledges that the process of creating the law was "long and difficult." But business leaders, even when frustrated, stayed at the negotiating table to work out solutions. For example, the $295 figure for uncompensated care was arrived at when business originally had proposed a fine of $30 and some lawmakers wanted it to be as high as $600 or $700, forum participants said.

Since the 2006 law was enacted, Connors said his biggest surprise is that it's been "so vilified" by opponents. And Widmer said it's the fact it was implemented at all that's still surprising to him. Despite the differences, among all parties "there was a larger commitment to succeed," he said.