I read Joe Paduda’s blog yesterday, confirming the thoughts of the Washington Post article I responded to below. Paduda’s stance is that between the three options of passing a version of the current bill, passing a completely new one, or passing no bill at all, the third is most likely to happen.

Eugene Robinson reports in the Washington Post on Friday that it may be a while before a health care bill is passed, especially with the recent election of Republican Senator Scott Brown. Senator John McCain has ruled out adapting the current bill, saying the Senate must start from scratch, and Nancy Pelosi has declared that for now she cannot find the 218 votes needed to pass the bill.

As contemplated in the Senate and House health care bills, the rules around pricing for individual health plans is very restrictive and will result in insurers exiting the market and/or dramatic price increases. Starting in 2014, health plans will no longer be able to adjust prices for health status and gender and will have limited ability to charge different prices depending on a person’s age. We don’t need the big Accenture or Towers Perrin report to predict what will happen. New York state introduced similar rules in 1993: no age, gender, or health status price adjustments. All health insurers exited the market, and with small exceptions, the only products left are required to be offered by health plans if they participate in the group market. A typical individual PPO plan in New York City costs $1200 per month. A family plan costs over $4000 per month. Thirty miles away in Connecticut, an individual plan could be available for as little as $100 to $150 per month.

What happened? People seeking health insurance want a competitively priced product that fairly reflects the cost of insuring against a future medical illness or injury. When you ask a ten year old healthy boy to pay into a pool that reflects the cost of much older (and more expensive) people, that might also be smokers with illnesses, the boy will conclude that the price is too high, and he may forego insurance. When a young healthy person opts out of the pool, prices go up for everyone and it begins a cycle of “adverse selection” where only the people that are in fact ill will purchase the insurance.

Congress has proposed a $750 penalty for people not purchasing health insurance. The likely effect is for people to self insure for routine services, and pay the annual penalty. If in fact they have a major illness, they can then go buy health “insurance” which will no longer exclude pre-exiting conditions.

Interestingly, these pricing rules do work in the employer, or group marketplace. This is due to the employer subsidy which is typically 50-80% of the cost of an individual health policy. The employee cost is then usually viewed as fair by the employee, regardless of age or health status.

The proposed health care bills in both the Senate and House have several provisions that will potentially destroy the individual health insurance market. The 3 particular items that are of significant concern are: 1) the weak mandated penalty for people who choose not to buy health insurance, 2) the limited ability to change price based on age and 3) the lack of ability to adjust price based on health status. If individuals shopping for health insurance believe a plan is priced significantly higher than what the insurance should cost, they ultimately will not purchase the insurance, and, in effect, self-insure. So, for instance, if a 20 year old male believes that the price for his insurance reflects that of a sick, 50 year old male that smokes, the 20 year old will forgo the insurance. Instead, he will self-insure and pay the $750 penalty for not carrying insurance. As younger, healthier people start to exit the insurance pool, prices on policies will rise and cause even more people to exit the pool until everyone’s price, in fact, reflects older, sicker policy holders.

Congress has, in fact, created a catastrophic plan. It costs $750 dollars a year and all preexisting conditions will be waved.

We have run this experiment before. 20 years ago, New York State had an enormous individual marketplace and in 1993, “reform” of the individual marketplace, in an effort to bring “fairness” to pricing, completely tanked the individual market. New York State prohibited pricing based on age, gender, health status, and smoking, and only allowed for pricing based on geography. Almost every insurer exited the marketplace and the price for individual policies increased astronomically. An individual policy in New York City for a 10 year old boy is over $1,000 a month. In Connecticut, a similar policy would cost less than $100 a month. We’ve tried to standardize pricing across various ages and health statuses before. We should avoid rolling out a failed experiment to the entire country.

We have seen situations where age-banding works. Take group or employer health plans. These plans are age-rated, but those covered under an employer plan are typically happier with their premiums than those covered under an individual policy. Why is this? Since these plans are subsidized 50-80% by the company, the policy holder ends up paying only 20-50% of the actual premium.

In the article published last Thursday in the Fairfield Minuteman,”Dodd Says Health Care Plan Will Benefit the State,” Senator Dodd highlights three points from the recently passed bill:  (1) the state’s ability to move people from SAGA to Medicaid more quickly, (2) a year of higher payments for Connecticut hospitals and (3) a possible $100M grant for a new U. of CT hospital. Really? In an $871 billion bill that’s the benefit?! Dodd ignores the key provisions. For instance, the bill adds $398 billion in new taxes on insurers (read: policyholders), medicare device and pharmaceutical companies (patients), and upper income taxpayers; the bill guts 25% of Connecticut seniors’ Medicare Advantage plans; and the bill taxes corporations that provide retiree drug coverage. The list of new taxes goes on and on, so far in fact they even tax tanning salons!

The original premise of health care reform was to reduce the spiraling costs of health care and reduce the number of uninsured. Unfortunately the senate bill does nothing to address cost increases, but instead accelerates the insolvency of Medicare and Medicaid, while creating a massive regulatory and tax behemoth that no senator fully understands nor can explain to his constituency.

If Senator Dodd loses his upcoming reelection it will not be because he was the Senate Banking Chairman during the catastrophic Wall Street and banking failure. Or for his sweetheart mortgages obtained from Countrywide mortgage. Or for his stonewalling on his ten acre Ireland “cottage.” Dodd will lose because he cannot coherently explain the $871 billion health care bill that he called the “most important” of his senate career.

As of yesterday, December 21, the COBRA subsidy extension has been signed into action. The senate approved the military spending bill on December 19 that extends the subsidy for the unemployed and President Obama signed the bill on Monday.

The change will extend the nine month, 65 percent premium subsidy by six months, therefore applying to those involuntarily terminated up until February 28, 2010. The legislation also provides another six months of coverage at the subsidized premium rate for those whose nine month subsidy has already run out, for a total of 15 months of premium subsidy.

Those whose subsidy expired in the past and did not pay the full COBRA premium would not be able to receive retroactive coverage. Employers are required to notify current and future COBRA eligible employees of the new premium subsidy extension.

Health Plan One spoke to National Public Radio recently and focused on rules around preexisting conditions and insurability. I thought it would be appropriate to be very specific about how health insurance companies view preexisting conditions, what they do with them,  how we can help you get health insurance, and why the system works the way it does.

Health insurance companies are in the business of, in fact, issuing “insurance” policies. Insurance means that a company will assess a person’s risk and then set a price of insurance, commensurate with that risk. To the extent that insurance companies do a poor job at assessing risk, they will not be in business very long, as claims will quickly outrun premiums. In fact, the average insurance company posts 3% of premiums in after tax profits and therefore does not leave a large margin for error.

Insurance companies typically do not want to insure chronic diseases such as diabetes. They also do not want to insure undiagnosed conditions or imminent surgeries. So, for example, if someone has hurt their knee and needs a $5,000 operation, an insurance company will not offer a $200 policy so that person can pay for his or her $5,000 operation. What they will do is say they will not insure that knee but will insure the rest of that person’s health needs, or they will say get if that person gets his or her knee fixed, then 6 months later he or she will be eligible for health insurance. Health insurance companies do not want open ended risks that they cannot assess.

So, how should someone seeking health insurance with a medical condition proceed to purchase health insurance? First question is do you qualify today for individual insurance? At Health Plan One, we can quickly review your health status and tell you what company would potentially offer you health insurance. Or we may tell you that you should review alternatives. Depending on your state and situation, alternatives may include a COBRA plan, a sole proprietor plan, or a HIPAA plan. Certain states like MI, NY, NJ, MA, and others have guaranteed issue plans: they may be a bit more expense but anyone can qualify for these plans. In other states, like CT and NH there are high risk pools, or plans that although expensive but anyone can qualify for.

Again, the ability for health insurance companies to accept all comers regardless of health status requires that everyone participates in the pool. It also requires that health insurance companies are allowed to allocate costs commensurate with risk. For example, age is a big determinant of your health risk: a 5 year old child typically requires much less care than a 60 year old male. Insurance companies will charge that older male 4 to 5 times the premium of the younger male. This may seem unfair to the 60 year old, but it seems awfully fair to the child. Unfortunately, the insurance market needs to allocate prices according to risk profile or it won’t work. Take NY, for example where age rating is not allowed and regardless of age you pay the same price. A PPO policy costs $1,500 dollars per month. This happens because everyone pays the same rate regardless of age. The younger people will ultimately opt out of the insurance pool, viewing it as unfair and too expensive. If the 18 year old opts out because it’s too expensive, then it gets a little bit higher for everyone, and ultimately, the price will reflect a 64 year old male and almost everybody will opt out of the insurance pool.

So how do we deal best with an insurance market that demands we allocate risk appropriately? High risk pools are an excellent way. People buy insurance to guard against future risk not current risk, so you can take the really high risk people and put them in a high risk pool and protect healthy people in an insurance market that reflects the actual cost of insuring against a future event you will have a highly functioning insurance market. Taxes or some other mechanism must be issued to subsidized to the high risk pool, although if everyone has insurance, over time the need for that high risk pool will diminish.

The House of Representatives yesterday approved legislation that would extend the COBRA subsidy, embedded in the Defense Appropriation Act.

H.R. 3326 states that the 65% premium subsidy would be extended six extra months and apply to anyone facing involuntary employment termination through February 28, 2010. There is also language regarding retroactive premium payments: an additional six months of subsidized coverage would be provided for anyone whose nine month subsidy has run out.

It is expected that the House will take up another bill that would extend the subsidy to those who lose their jobs through June 30, 2010. We will keep you updated.

Most people are aware that President Obama’s stimulus package under the American Recovery and Reinvestment Act of 2009 included a temporary premium reduction, or subsidy, for anyone on COBRA. Individuals eligible for COBRA coverage due to involuntary employment termination occurring September 1, 2008 through December 31, 2009 may be eligible for the subsidy. With this date bracket coming to a close, many people are wondering what will happen to those losing a job in the near future.

The United States Department of Labor has just announced changes for the COBRA subsidy. In order for an individual to be eligible for the subsidy, two events must have occurred on or before December 31, 2009: 1) Involuntary job termination and 2) becoming eligible for COBRA.

An involuntarily terminated employee will not be eligible for the COBRA subsidy, if his or her coverage runs through December 31, 2009. Even if an employee loses his or her job before December 31, if his or her coverage lasts until the end of the month, he or she will not be eligible for COBRA coverage until January 1, 2010.

The Department of Labor has put out Question and Answers on their website which you can find at http://www.dol.gov.ebsa/COBRA.html.

For more information about the original components of the subsidy visit Health Plan One’s COBRA page.

What to do if your COBRA subsidy is ending:

As the subsidy lasts only nine months, it is now ending for many beneficiaries.  If you are a COBRA subsidy recipient, you may not receive notification that your subsidy is ending-you will simply see a huge difference in your next COBRA bill. Refusal to pay this will immediately end coverage. It is important that you do not have a lapse in coverage because health insurance carriers may use this as a reason to deny future coverage for preexisting conditions.

As recommended in the New York Times your best bet is to check for all your options. You can view pricing information from carriers in your area by entering your zip code in our zip code box which will take you to view available individual plans. As always, you can discuss your options with our licensed health insurance specialists, who can recommend what the best plan would be for you.

The Connecticut Consumer’s Guide to 2010 Medicare Advantage

Open enrollment season for Medicare Advantage plans began Thursday, November 15.  Over the next few weeks, health insurance companies will be communicating with seniors about their 2010 Medicare Advantage plan offerings.  Whether you’re just turning 65 or you already have a Medicare plan, understanding the different options and choosing the right plan can be a daunting task.

Medicare is divided into three main categories – Original Medicare, which is managed by the federal government, and Medicare Advantage and Medicare supplement – or Medigap – plans, which are offered through private health insurance companies.

Original Medicare is composed of three sub-categories – Part A, which covers hospital expenses, Part B which covers doctors’ expenses, outpatient care and some other medical services not covered under Part A, and Part D, which covers prescription drugs.  Costs vary for each of these.  While Part A is usually provided with no monthly premium, Part B premiums are usually about $100 per month, except for higher-income individuals and Part D premiums range from $40-100 per month based on the drug plan you choose. There is a 20% coinsurance for Original Medicare and the current Part B deductible is $135. It is unclear whether or not this will increase for 2010.

In addition to enrolling in traditional Medicare, seniors may also choose to add benefits through Medicare Advantage or Medicare supplement plans.  Since Original Medicare has deductibles and coinsurance, seniors may purchase a supplement plan to pay a portion or all of those out-of-pocket costs. Alternatively, they may opt to enroll in a Medicare Advantage plan – choosing between HMO, POS and PPO plan types.  Typically Medicare Advantage plans offer more extensive benefits than Original Medicare, including annual physical exams and routine hearing and vision exams, at additional low monthly premiums, although they usually require physician and hospital copayments.  Medicare Advantage plans typically include a Part D drug plan.

Is Medicare Advantage the Best Option for You…?

Choosing Between an HMO or PPO/POS Plan

HMO, POS and PPO plans differ primarily by cost and network, so it pays to invest time in deciding what you want and what you can pay when making your final decision.  While HMOs may have the lowest monthly premiums, plan members may only be able to access care from their carriers’ network, except in the case of emergency care.  And, while some Medicare HMO plans may have no monthly plan premium and include a Part D drug plan, it may have significant hospital and surgery copays.  Often, the most popular Medicare Advantage HMO plans cost between $100-150 in monthly premiums and have no or low inpatient hospital copays.

For seniors who do not want to be restricted by a limited HMO network, such as those individuals who travel a lot, a Medicare PPO or POS plan might be a good alternative (PPO and POS plans are equivalent). While these plans often offer the same overall benefits as HMOs, higher monthly plan premiums and greater cost-sharing for out-of-network services allow greater flexibility in accessing health care. Seniors insured under a PPO/POS plan are not restricted by a network.

While there are private fee for service – or PFFS – plans available in 2009, they are not covered here as they tend to more expensive than other Medicare Advantage plans and are being phased out after 2010.

What’s Different from 2009

Seniors living in Connecticut will be able to choose from many Medicare Advantage plans, including 23 from the major carriers.  With Anthem’s reentry into the Connecticut market this year, competition will certainly be tough, particularly in Fairfield, Hartford and New Haven counties, where most major carriers have a significant number of plan choices.

Both Health Net and ConnectiCare will be offering four HMO plans and two PPO/POS plans to residents in all Connecticut counties.  Aetna is offering three HMO plans and two PPO/POSs for seniors living in Fairfield, Hartford, Litchfield and New Haven counties.  Anthem is offering four HMOs for Fairfield, Hartford and New Haven counties, while United Healthcare is offering one PPO to residents in all Connecticut counties and an HMO only in New Haven County.

In 2009, ConnectiCare had one of the most popular HMO plans in Connecticut, prompting many Health Net HMO members to switch carriers last year.  Smaller premium and low or no out-of-pocket increases for Health Net’s 2010 HMOs make these plans quite competitive this year. However, it is worth noting that both the ConnectiCare and Health Net HMO networks do not extend outside of Connecticut for its Medicare Advantage members.

For residents in Fairfield, Hartford and New Haven counties, Anthem and Aetna also have highly competitive plan options. Aetna’s plans are also available in Litchfield County and its Medicare Advantage members can access Aetna’s network nationwide.

For seniors interested in a PPO/POS plan, Health Net introduced a new plan, which features a low monthly premium and comparable copays to other PPO/POS plans offered in the state. ConnectiCare remains a strong choice, with its competitively priced POS plans. With moderately low physician and hospital copays, the Aetna’s PPO plan and ConnectiCare’s POS plan also may be good options.

Eligibility for Financial Assistance

State Assistance Programs

If you cannot afford Medicare premiums, you may qualify for state assistance. Depending on what state you reside in, you could have one or more options. In Connecticut, seniors who qualify have the option of enrolling in ConnPACE, a program designed to help seniors in paying for prescription medications.

ConnPACE is a state funded prescription drug assistance program for Connecticut’s senior citizens and people with disabilities. ConnPACE covers most prescriptions, insulin, and insulin syringes. Out of pocket expenses for ConnPACE are a $30 annual application fee and a $16.25 copay for each prescription medication.

You are eligible for ConnPACE if you have been a Connecticut resident for at least 6 months, you are 65 years or older or a disabled person over the age of 18, you are not receiving Medicaid benefits, you do not have an insurance plan paying for all or some of each prescription on a continuous basis and you have an adjusted gross income of less than $25,100 for a single person and $33,800 for married people.

Or You May Consider a Medicare Supplement Plan?

Medicare supplement options may certainly be described as an alphabet soup of coverage, ranging from Plan A to Plan J.  Like Medicare Advantage, Medicare supplement plans are sold by private insurers but these plans are primarily designed to help individuals fill payment gaps.

While these plans typically have higher monthly premiums, Medicare supplement plans pay your share of the costs of Medicare-covered services thus eliminating or reducing out-of-pocket payments, including co-insurance, deductibles and Part A and B premiums.  These are separate from Medicare Advantage, employer- or union-sponsored group coverage, Veterans Administration benefits or TRICARE for military personnel and their families, so come with no value-added benefits.  Enrollees would have to purchase a stand-alone Part D drug plan, as none are offered as part of these plans.

While many smaller insurers offer Medicare supplement plans in Connecticut, two plan options from major insurance carriers are worth considering based on their monthly premiums – UnitedHealthcare/AARP Plan J ($184/month) and United of Omaha Plan F ($190/month).  Enrollees would have to purchase a stand-alone Part D drug plan, as they are not offered as part of supplement plans.

In 2010, there will be a few changes to Medicare supplement. Two new plans, M and N, are going to be added. It is believed that these plans will have lower premiums and involve more cost-sharing. They should be introduced by June 2010.

How Should I Decide?

With so many options available to seniors in Connecticut, it may be difficult to identify the one plan that is best for you.  Earlier, we discussed price, which in the case of Medicare supplement plans, should guide your decision since benefits are identical.  While some states do allow for different pricing based on age and gender, Connecticut does not.

For Medicare Advantage Plans, the quality and breadth of the physician and hospital networks, as well as value-added benefits, should also be taken into consideration.  Are you sure your physician is in your plan’s network?  Does your physician admit to hospitals that also are in the carrier’s network?  For example, if your physician only admits to Norwalk Hospital in Fairfield County, it may be worth noting that only one health plan has Norwalk Hospital in its Medicare Advantage network.  The size and quality of an insurer’s network is not critical for individuals purchasing Medicare supplement plans because there are no networks tied to these plans.

In addition to ensuring that your prescription medication is covered under a Part D or Medicare Advantage plan, you need to know what tier your health insurer has placed your drugs in, as different pricing tiers will impact your out-of-pocket costs.

Important Dates

• November 15 – Open enrollment season begins
• December 31 – Open enrollment season ends
• January 1 – Changes made during open enrollment period take effect
• January 2 to March 31 – If you are not satisfied with your Medicare Advantage Plan, you may still switch plans up until this date. You can only make one change after December 31 and you may not add or drop Medicare Part D.

Professionals Here to Help

For more information or to answer questions regarding specific plans, in addition to any concerns regarding Part D drug coverage, please visit www.medicaresolutions.com or www.healthplanone.com or call 1-877-270-0612.