Tag Archive: individual mandate

Romney says he accepts being linked to Obamacare – Yahoo! News

Speaking at a Univision forum Wednesday night, the Republican presidential nominee said that now and then Obama calls him the grandfather of Obamacare.

Romney said, “I don’t think he meant that as a compliment, but I’ll take it.” He went on to defend the Massachusetts law but says it is wrong for the federal government to take that approach.

via Romney says he accepts being linked to Obamacare – Yahoo! News.

Governor Romney was also the Godfather of former California Republican Governor Arnold Schwarzenegger’s omnibus health care reform plan in 2007-08 that was largely based on Romney’s Massachusetts reforms featuring a state health benefit exchange and an “individual mandate” that everyone have public or private health coverage.  I know because I covered “ArnoldCare” nee RomneyCare from its beginnings to inglorious collapse in the state Senate as Sacramento health care correspondent for the Bureau of National Affairs.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Time will tell whether PPACA can save individual, small group health insurance market segments

Last week’s Supreme Court decision on the constitutionality of the Patient Protection and Affordable Care Act (PPACA) and specifically the so-called individual mandate turned on the penalty for not having minimum essential coverage under Section 1501 of the PPACA.  While the court ruled the government cannot compel all Americans have health coverage, the government may require payment of a penalty for not having it as a permissible exercise of Congress’s power to levy taxes.  The penalty gives the mandate real teeth.  Without it, the mandate would be a paper tiger.

The individual mandate in turn is designed to work with upfront tax credits to subsidize the cost of coverage for those who earn above 133 percent of the federal poverty level and are thus ineligible for Medicaid.  The penalty for not having coverage is the disincentive or stick and the tax subsidy to defray plan premiums or fees is the incentive — the carrot.  Insurers and health plans also have a mandate to sell coverage to whoever is willing to buy it starting in January 2014 regardless of their medical condition.

Together, the carrot and stick built into the individual mandate along with the requirement insurers and health plans accept all applicants (per sections 2701 and 2704 of the Act) is intended to save the individual and small group health insurance market segments from the black hole of adverse selection and ultimately market failure.  The acceleration in adverse selection in recent years occurred in the individual market due to increasingly selective medical underwriting standards in states where payers are permitted to screen out people likely to incur high medical treatment costs. Adverse selection also threatens the viability of the small group market due to poor spread of risk among employers of 50 or fewer employees— and particularly numerous micro businesses with five or fewer workers.

In order to preserve these market segments and to also reduce rising premiums in the large group market due to the shifting of medical treatment costs incurred by those without coverage to the insured population, the PPACA has created an alternative and far more compulsory health insurance market than existed prior to its enactment in early 2010Daniel Weintraub, a veteran Sacramento print journalist with deep knowledge of the health care market, described the new market landscape that will fully emerge in 2014 as one in which insurers and managed care plans will effectively become a “quasi-public utility.”

The question going forward is whether this government-drawn and enforced market can achieve sufficient savings and spread of risk to ward off market failure in the individual and small group market segments.  In addition, given that health insurance functions as a pass through mechanism, whether the chronic disease prevention provisions of Title IV of the PPACA will meaningfully slow the relentless rise in medical costs driving up premiums.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California advances legislation requiring community-based rating in 2014 — sans individual mandate — over objections of health plans

California legislative health committees have approved legislation authored by their chairs that would require health plans and insurers to transition from medical underwriting to community-based rating in 2014.  The authors of the bills, AB 1461 and SB 961, said they would conform California law to a similar provision of the federal Patient Protection and Affordable Care Act (PPACA) that becomes effective that year.

The California Association of Health Plans (CAHP) opposes the bills unless they are amended to also mirror the PPACA’s requirement that all individuals be enrolled in a health plan or have health insurance.  If the PPACA’s so-called “individual mandate” is set aside as unconstitutional by the U.S. Supreme Court this year, CAHP fears without a similar requirement in California law, health plans will fall into the adverse selection death spiral and become actuarially unsustainable.

But putting teeth into any California requirement that all residents have some form of medical coverage could prove problematic since those teeth like the PPACA version would likely take the form of a penalty or excise tax.  As a new tax, it would require approval by two thirds of the California Legislature, which would be a near political impossibility as long as Republicans hold at least one third of the seats in either house.

CAHP also dislikes provisions in the bills that would bar health plans from considering smoking when setting an applicant’s rates, arguing it would lead to non-smokers subsidizing smokers.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

More indications of support for California version of insurance mandate if federal version tossed by high court

The Los Angeles Times‘ Chad Terhune via the Sacramento Bee quotes a key California legislator expressing support for a California version of the Patient Protection and Affordable Care Act’s (PPACA) coverage mandate if the federal law’s mandate is ruled unconstitutional by the U.S. Supreme Court.  California Insurance Commissioner Dave Jones also seems to favor an insurance mandate if the Golden State ultimately moves to put its own in place but doesn’t directly say so in Terhune’s story.

A week earlier, California Human Services Secretary Diana Dooley expressed support for the mandate, which state payer organizations contend is essential to prevent adverse selection in the state’s individual market, the largest in the nation as a percentage of working age adults and their dependents.



Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California could adopt own health reform plan with individual mandate if PPACA ruled unconstitutional

If the U.S. Supreme Court decides this summer that the Patient Protection and Affordable Care Act’s (PPACA) mandate that all Americans have health coverage or purchase it by 2014 is unconstitutional, California could nevertheless move forward with its own health reform plan including such a mandate.  That’s according to the state’s Health and Human Services Secretary Diana Dooley, per this excerpt from this story appearing in today’s Sacramento Bee:

If the court does rule the federal law unconstitutional, state Health and Human Services Secretary Diana Dooley said California should at least consider enacting its own universal health care legislation, including requiring every Californian to buy insurance.

“I think that we should be committed to making this system more rational than it is today, and improving the health of the people of California,” Dooley said in an interview. “If we ask the insurance plans to take everybody and insure everybody with no screens or pre-existing conditions, then we have to have everybody buying some level of health insurance to meet their responsibility to the system.”

That reciprocity was a core principle of the Health Care Security and Cost Reduction ActIn early 2008, California lawmakers considered but rejected the legislation championed by then-Governor Arnold Schwarzenegger and top legislative leaders.  Like the PPACA, the act was modeled after Massachusetts legislation enacted in 2006 that also served as a prototype for the PPACA and included as a central feature the so-called “individual mandate” requiring adults to have some form of public or private health insurance or managed health care plan.  In turn, insurers and health plans would abandon medical underwriting and accept all applicants regardless of medical history, thereby making coverage accessible to more people.  Other key policy goals of the mandate are to alleviate “cost shifting” in which those who have coverage end up paying for health care costs of those without coverage through higher premiums and to reduce the threat of adverse selection that can rapidly render payers insolvent.

It remains to be seen whether California would move forward with its own reform plan if the PPACA fails to survive judicial scrutiny by the nation’s highest court.  Increasing the probability is the view among the Golden State’s health care industry leaders that health care reform has achieved critical mass and will move forward regardless of what happens at the federal level.

Also generating momentum for reform is the state’s already partially spent federally funded investment in setting up the California Health Benefit Exchange under the PPACA to create a marketplace to help individuals and small employers aggregate their purchasing power.  Then there are the state’s demographics.  California is the nation’s most populous state and has more people in the individual health insurance market than other states — about eight percent of those 65 and younger versus about five percent in the nation as a whole.  It also has a relatively large percentage of medically uninsured residents, whose numbers have increased as many people lost employer-paid coverage in the economic downturn.

The recession was just getting underway when the Health Care Security and Cost Reduction Act was before the California Legislature, prompting then-state Legislative Analyst Elizabeth Hill to question if the state could afford its tax credits, subsidies and other costs.  Four years later, the state’s finances remain under siege amid ongoing deep budget deficits. Selling the individual mandate could also prove politically challenging as it did in 2008, when California health care payers were divided over it and business and consumer interests nearly uniformly opposed.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Health benefit exchanges, community rating could reinforce, boost self employment trend

Like the Clinton administration’s comprehensive health care reform proposal of the 1990s, a key goal of the Obama administration’s Patient Protection and Affordable Care Act (PPACA) is having all Americans medically insured though public or private health plans.  Since coverage gaps largely occur with private coverage, private market reform is central to the reforms of both administrations.

Since most working age Americans have employer-paid coverage, the Clinton administration’s reforms would have required all employers to cover their employees so that none had to obtain their own coverage in the individual market or be medically uninsured.  Rather than the Clinton administration’s employer mandate, the Obama administration instead placed the mandate on individuals, requiring all Americans to have medical coverage by 2014.  Key to the individual mandate in the PPACA is the law’s state health benefit exchanges to provide an insurance marketplace for small employers and individuals.

If the U.S. Supreme Court upholds the constitutionality of the individual mandate later this year, it could mesh well what some observers believe is a trend toward more temporary and self-employment.  This trend has seen a significant boost in recent years as employers hire fewer people to do the same work or adopt processes that require fewer permanent staff.  This in turn has led to growing numbers of temporary and self-employed people.

Since these workers aren’t covered by employer-provided plans and must obtain health coverage on their own, they will benefit from the exchanges where participating insurers will be required to offer coverage with minimum coverages and premiums determined using modified community-based rating versus medical underwriting.  As 2014 draws closer, the exchanges could in turn encourage more to deliberately choose temporary and self-employment.  Many who might otherwise work for themselves balk at the prospect of having to find health coverage in the existing individual market where they can be declined for pre-existing medical conditions and don’t benefit from group purchasing power the exchanges would provide.  The exchanges and the PPACA’s mandates that all individuals have coverage and health plans and insurers accept all applicants regardless of medical history would significantly mitigate this disincentive for those considering self-employment.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Obama administration cites health insurance crisis in Supreme Court brief supporting PPACA coverage mandate

The Obama administration last week filed its brief supporting the Patient Protection and Affordable Care Act’s (PPACA) requirement that every American be covered by public or private health insurance effective Jan. 1, 2014.  Opponents of the requirement, referred to in the administration’s brief as the “minimum coverage provision,” contend it’s an unconstitutional exercise of Congressional authority over commerce and taxation.

The minimum coverage provision is the keystone of the PPACA and the product of a political tradeoff leading up to the 2010 enactment of the legislation to address what the brief terms “a crisis in the national health care market.”  The provision was aimed at quelling opposition from health insurers who opposed the PPACA’s requirement to shift from their existing medical underwriting risk selection model to a community-rating model that requires all applicants be accepted and charged standardized premiums regardless of their medical histories.  Unless everyone is required to be in the insurance market in some form or another, payers argued, they would be exposed to adverse selection because only those who needed coverage would purchase it, driving up claims costs.  That would lead to adverse selection since the insurance pool would have a disproportionate number of sick people needing costly medical treatment while healthier people who go without coverage don’t contribute premiums to cover those costs.

The administration argues in its brief that this results in cost shifting in which those who have coverage end up paying additional premium dollars to pay for the uncompensated care of the uninsured, many of whom cannot obtain affordable coverage due to pre-existing conditions.  “The Act breaks this cycle through a comprehensive framework of economic regulation and incentives that will improve the functioning of the national market for health care by regulating the terms on which insurance is offered, controlling costs, and rationalizing the timing and method of payment for health care services,” the brief states.

In sum, the administration asserts, the market needs community rating to sustainably provide coverage to all Americans.  But it cannot work without what effectively functions as a community insurance requirement.  Everyone gets in the pool regardless of medical history — and everyone pays to enter.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

What’s likely driving state challenges of PPACA coverage mandate

The constitutionality of the so-called “individual mandate” of the Patient Protection and Affordable Care Act (PPACA) — the law’s requirement that all Americans have a public or private third party payer covering most of their medical bills starting in 2014 — is under review in multiple U.S. Circuit Courts of Appeal.

Opponents of the mandate — including more than two dozen state attorneys general — contend the law is unconstitutional because it impermissibly forces someone to engage in commerce when they purchase coverage if not covered thorough their employment or a government program.

One of the more interesting arguments raised in the mandate’s defense this week in the 11th Circuit is based on EMTALA — the Emergency Medical Treatment and Active Labor Act of 1986.

Acting U.S. Solicitor General Neal Kumar Katyal noted the rationale behind the coverage mandate is to more equitably allocate the costs of medical care provided for those not privately covered or in a government health program by those who incur them.

“You can walk out of this courtroom and be hit by a bus,” Katyal told the court.  Without medical coverage, he argued, the treating hospital and the taxpayers will have to pay the costs of the emergency care, he added.

Under EMTALA, the hospital is required to assess and medically stabilize that bus accident patient regardless of medical coverage or his/her ability to pay.

Katyal is correct the hospital could end up eating some of the cost of providing the hypothetical bus accident victim’s care.  Hospitals also write off a significant portion of unreimbursed medical care as uncollectible debt or charity care.  That’s in large part why emergency room bills for those paying on their own are so stratospheric.

However, Katyal’s argument that taxpayers also foot the bill is questionable.

In December 2006, the New America Foundation (NAF) estimated that about 10 percent of California health care premiums are comprised of unreimbursed medical costs incurred by those without medical coverage.  The foundation’s study of this so-called “hidden tax” or “cost shift” is significant given that California is not only the nation’s most populous state, but also has more medically uninsured people than nearly all other states.

Bottom line: The burden of uncompensated medical care is borne privately, not by taxpayers.

That point aside, I suspect the real concern driving the challenge of the individual mandate derives from playing it out several years into the future.

Requiring everyone to have coverage may provide a temporary respite for the smallest and most troubled source of medical coverage: the individual market.  It’s already circling the drain of adverse selection. Bringing more individuals into the risk pool expands its ability to spread risk and generate premium dollars to offset rapidly rising medical treatment costs.

However, those rising costs are passed along as higher premiums.  That could well lead to some — most likely people under age 40 or 45 — to conclude they’d be better off paying the penalty for not having coverage and dropping out of the pool.

Then the individual market would be quickly be back on the brink of adverse-selection driven collapse where it stands today.  That in turn could lead the states and/or the federal government to step into the breach with a government run risk pool or by expanding Medicare/Medicaid for those unable to obtain affordable coverage on the individual market.

Either outcome likely has the states worried.  Recession-hammered states are strapped fulfilling their current obligations as well as meeting their share of state Medicaid programs. They probably don’t relish the prospect of maintenance of effort requirements for a new federal/state insurance program that would take the place of a defunct private individual insurance market.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

“Everything happens at the margin”

The aphorism “everything happens at the margin” directly applies to the health insurance crisis.  In the health insurance market, that margin is the low end of the market: individuals who buy coverage on their own and the small group segment — those employing less than 50.  This is the most troubled region of the health insurance market where the risk spreading mechanism that is the core principle of insurance is the weakest.

That’s why the Patient Protection and Affordable Care Act (PPACA) includes a mandate that all individuals have some form of health coverage.  This controversial requirement is the focus of Congressional misgivings over the PPACA and some federal court rulings finding the mandate unconstitutionally compels people to engage in commerce.

Modeled after reforms enacted in Massachusetts several years ago, the mandate essentially creates a government enforced pool of insureds so there are more “lives” as they called in the insurance business across which to spread risk of claims.  Too few people and the pool tends to fall into a death spiral called adverse selection, leaving only the highest — the most adverse — risks remaining.  Too many dollars end up going out to pay claims and too few are replaced in the form of premiums.

The PPACA also addresses the troubled individual and under 50 employee group market by establishing state health benefit exchanges.  The exchanges will begin operating in 2014 and are designed to aggregate purchasing power among insurance buyers in these market segments.  Compared to the large employer group market, individuals and small businesses have little or no purchasing clout that can help them bargain with insurers and health plans for lower premiums.

But even midsize and large employers are seeing their premiums rise nearly ten percent in 2011.  Due to their weak purchasing power, the increases are far steeper in the small group and individual markets, rising so rapidly in the latter they now nearly equal the amount of a mortgage payment for people in their fifties and early sixties.

If premiums driven by rising medical costs keep increasing at their current rate, it calls into question the utility of the health benefit exchanges.  By the time the exchanges set up shop in 2014, premiums could be so high that few employers of less than 50 people will be able to affordably provide health coverage.  That would leave primarily individuals buying coverage through the exchanges.  That raises the question of whether premiums will be affordable for these individuals, even with income-based subsidies.  If not, that could lead many of them to conclude it’s a better deal to go bare and pay the penalty for not having coverage.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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