• Obama releases $950 billion health reform proposal
• Bipartisan commission to tackle Social Security, Medicare
• Medicare Advantage plans with drug coverage had average premium hikes of 14% for 2010

• Workers may gain in shift from employer-sponsored health insurance to individual coverage in an insurance exchange
• Experts agree a tax on health plans likely to cut benefits

Obama releases $950 billion health reform proposal

President Obama on Feb. 22 released details of a $950 billion health reform proposal that attempts to eliminate differences between reform bills already approved by the House and Senate, while adding some new proposals, including some proposed by Republican members of congress. In addition to the health insurance market reforms that are attracting the most attention, the reform proposal includes many Medicare and Medicaid related reforms.

The release came just days before a Feb. 25 nationally televised summit meeting on health care reform hosted by the President and including a bipartisan group of congressional leaders.

The proposal would gradually close the “donut hole” in Medicare Part D prescription drug coverage. It would create a new comprehensive Medicare and Medicaid sanctions database to provide a central location for information on health care providers, suppliers, and related entities that have been sanctioned. The proposal would hold Medicare administrative contractors responsible for payments made to individuals or entities excluded from participation in federal health programs. Payments to Medicare Advantage plans would be modified by creating a set of benchmark payments at different percentages of the current average fee-for-service payment in a given area. The proposal also increases the hospital insurance tax for individuals earning more than $200,000 and couples earning more than $250,000 annually.

States will be allowed to expand Medicaid eligibility to more families starting in April 2010. Medicaid eligibility would extend to even more adults starting in 2014. The president’s proposal also eliminates special Medicaid deals provided to specific states under the Senate bill, replacing it with uniform 100 percent federal support for all states with newly eligible individuals from 2014 to 2017, with decreasing amounts of federal support in subsequent years.

The proposal also would increase the threshold for the excise tax on the most expensive health plans from $23,000 for a family plan to $27,500 and starting it in 2018 for all plans. Further, the proposal would improve insurance protections for consumers and creating a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other unfair practices of insurance plans.

Detailed summaries of the proposal are available here: http://www.whitehouse.gov/health-care-meeting/proposal.

CCH Chicago Bureau, Feb. 22, 2010.

Bipartisan commission to tackle Social Security, Medicare

In the wake of the failure by Congress to agree to a binding commission to restore fiscal stability by recommending changes to Social Security, Medicare, and Medicaid. President Barack Obama has established by executive order the National Commission on Fiscal Responsibility and Reform.

Mr. Obama has appointed former Republican Wyoming Senator Alan Simpson and Erskine Bowles, former White House chief of staff under President Bill Clinton, to head the 18-member commission. Other members will be chosen as follows:

• six members appointed by Mr. Obama, not more than four of whom are from one political party, presumably Democrats;
• three Senators selected by Majority Leader Harry Reid (Nev.);
• three Representatives selected by Speaker of the House Nancy Pelosi (Cal);
• three members selected by Senate Minority Leader Mitch McConnell (Ken.); and
• three members selected by House Minority Leader John Boehner (Ohio).

In January, Congress failed to agree to establish the Bipartisan Task Force For Responsible Fiscal Action Act Of 2010. The proposal, introduced as an amendment to H.J.RES.45 (P.L. 111-139, which increased the statutory limit on the public debt), was introduced by Senate Budget Committee Chairman Kent Conrad (N.D.) and Sen. Judd Gregg (N.H.).

That task force would have been able to make recommendations to Congress that would have to be voted on without amendment. The President’s Commission has no binding effect on Congress.

The President’s Commission specifically is charged with making “recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers. In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the federal government.”

Mr. Simpson noted that the only methods to rein in entitlement programs was either to increase payroll taxes, decrease benefits, or start means testing the programs.

The President’s Commission is charged with making recommendations no later than Dec. 1, 2010. Final recommendations must be approved by 14 of the 18 Commission members.

For more information, visit http://www.whitehouse.gov/the-press-office/
executive-order-national-commission-fiscal-responsibility-and-reform.

Medicare Advantage plans with drug coverage had average premium hikes of 14% for 2010

Premiums for Medicare Advantage managed care plans with prescription drug coverage (MA-PD) rose an average of 14% in 2010 to an average monthly premium of $39.61, according to health care business strategy consultant, Avalere Health. The average premium increase for those plans was only 5.2% in 2009. Records indicate that 8.5 million Medicare beneficiaries are enrolled in one of the 2,430 MA-PD plans available in 2010. Of those plans, 1,705 also were available in 2009, according to Avalere, which used new data from the Centers for Medicare and Medicaid Services.

As might be expected, average premium increases varied among the different types of MA-PD plans, with individuals enrolled in private fee-for-service plans experiencing the highest increases (31% to $57.85 per month) and those enrolled in PPOs the lowest increases (an average of 4.4%). HMO enrollees experienced an average premium increase of 11.3% to $34.70 per month. Local PPOs had the highest average monthly premiums ($67.56), while regional PPOs had the lowest ($31.07). Beneficiaries who did not change plans in 2010 experienced an average premium increase of 22%.

Medicare payments for MA-PD plans in 2010 were lowered by 3% to 5%, and further decreases may be ahead.

“Premiums are going up—not just in the individual markets—but also for Medicare Advantage products,” said Lindsey Spindle, a vice president at Avalere Health. “They fit into a broader trend of increased financial pressure on the insured through rising copayments and increased premiums.”

For more information, visit http://www.avalerehealth.net.

Workers may gain in shift from employer-sponsored health insurance to individual coverage in an insurance exchange

Workers generally would gain from shifting from employer-sponsored health insurance to the individual market through a national health insurance exchange, a major element of most health care reform proposals, according to a study published in January by the National Bureau of Economic Research (NBER). The study is entitled Let Them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange (NBER Working Paper 15687), prepared by researchers Leemore Dafny and Mauricio Varela from the Northwestern University Kellogg School of Management's Department of Management and Strategy, and Katherine Ho from the Columbia University Department of Economics.

More than 60 percent of Americans younger than age 65 buy health insurance through their employers, but often the choices available are limited. Four-fifths of employers that sponsor a health insurance benefit plan offer only one option. The limited choice might prevent individuals and families from selecting the plan that best meets their needs and from "trading off added benefits against associated premium increases," the researchers noted.

Health care reform bills passed in either chamber of Congress provide for the establishment of health insurance exchanges through which individuals and small employers would have a range of insurance packages and options. As long as these insurance exchange options were available on the same terms as currently through employers, tax-free and with employer subsidies, workers would do better with the expanded choices available through the individual insurance market exchange.

The median employee would be willing to forgo 27 percent of his or her employer's health insurance premium subsidy to be able to use the balance of the employer subsidy to buy a plan of his or her choice, the researchers determined. They also concluded that, even keeping employers' premium subsidies budget-neutral, the median "welfare" gain from the expanded choice available through an exchange would amount to about 20 percent of the premium.

The gains for workers because of a shift from employer-based to individual health insurance in an exchange would more than offset any resulting premium increases, the researchers concluded. "For the vast majority of employee groups and alternative model specifications, the gains from choice are likely to outweigh potential premium increases associated with a transition from large group to individual pricing," they wrote. Workers would choose plans that are priced similarly to the employer-sponsored plans in which they are enrolled, but in different plan types with different carriers.

"In addition to surplus gains from choice, reducing the reliance on employer-sponsored insurance would mitigate the labor market frictions [the job-lock] arising from the lack of insurance portability between jobs and in or out of the labor force," the researchers concluded. "While there is little political support for explicitly dismantling the employer-based system, reform proposals actively considered during 2009-2010 would all reduce the relative reliance on employer-sponsored insurance."

The NBER is a Cambridge, Massachusetts-based private, nonprofit, nonpartisan research organization. A copy of the study (NBER Working Paper 15687) is available at http://www.nber.org/papers/w15687.

Experts agree a tax on health plans likely to cut benefits

Since the vast majority of Americans who have health coverage get it through their jobs, one obvious question raised by the health reform legislation pending in Congress is: How might it affect the U.S. employment-based health benefits system? The nonpartisan Employee Benefit Research Institute (EBRI) recently asked that question of more than a dozen experts from a wide range of specialties at a day-long conference, and--not surprisingly, given the sharp disagreements that exist over health reform--got a wide range of answers.

But on one point there was general consensus: Imposing a tax on health benefits (such as the proposed tax on so-called "Cadillac" health plans) is likely to cause major cuts in health benefits and might result in structural changes in the employment-based benefits system.

Employers "will go ahead and cut benefits if that's what it takes to avoid an additional tax," Beth Umland, head of health and benefits research for the Mercer consulting firm, told the EBRI conference, citing a recent Mercer survey. Her comments were widely echoed, including by representatives from organized labor, management, and other groups.

And a common disappointment voiced at the forum was that the initial effort in Congress to reform the delivery and cost of health care in America gradually became focused on just financing and coverage of health insurance. "Overall, the problem of high cost isn't being fixed by healthcare reform," said Bruce Pyenson, principal and consulting actuary with Milliman, Inc., a New York-based consulting firm.

These and other comments were made at EBRI's biannual policy forum held in Washington, D.C., on Dec. 10, 2009, on the topic, "Employers, Workers, and the Future of Employment-Based Health Benefits." The forum brought together a wide range of economic, benefits, management, and labor experts to share their perspectives at a time when major health reform legislation was being debated in Congress, and their presentations are summarized in the February 2010 EBRI Issue Brief, online at www.ebri.org.