Nancy Turnbull, Associate Dean for Educational Programs at the Harvard School of Public Health says Association Health Plans would increase premiums for small employers and individuals:

Some bad ideas just won’t go away. We’re seeing an example right now as the legislature considers SB 446 and HB 3452, which would permit the reintroduction of Association Health Plans (AHPs) into the Massachusetts health insurance market. While the intention of the bills is good—to make health insurance more affordable for small businesses—they would actually have the opposite effect and increase premiums for most small employers. And, since the state’s 2006 health reform law merged the insurance markets for small employers and individuals, the creation of AHPs would also raise premium rates for people who purchase individual coverage. These premium increases for individuals and small employers would likely increase the number of people without health insurance in Massachusetts.

As envisioned by these bills, an AHP would be a health plan offered by a professional or trade association, chamber of commerce or other similar group. The association selling the health plan would need to have at least 100 members, have been in operation for over five years and have been established for a purpose other than providing health insurance. The association couldn’t deny membership or coverage to any individual due to a health condition, and it couldn’t charge higher rates to a member company than would otherwise be allowed under the existing small group law. Read more…

If you need any convincing about the urgent need for reform of provider payment, check out the latest report on hospital financial performance from the Massachusetts Division of Health Care Finance and Policy.

The report gives a very stark picture of the growing gulf between the “haves and have-nots” among hospitals in the Commonwealth.

I think the operating results are the most troubling and relevant, since they show financial performance without the effect of non-operating factors like investment gains or losses.

Among the findings in the report:

• 40% of Massachusetts hospitals had a loss from operations in Fiscal Year 2008.
• The top quarter of hospitals made a healthy 2.9% operating margin; the lowest quartile lost money, with an average negative margin of 1.1%.
• The gap between the financial performance of teaching and community hospitals is getting wider and wider: the median operating margin among teaching hospitals was 4.1%–by far the highest level in the seven-year-period shown in the report– while community hospitals barely broke even from operations, with an anemic 0.4% operating margin.

Not all community hospitals did poorly on operations. Read more…

Thought #1

The Globe today has a story about an “offer” from America’s Health Insurance Plans and the Blue Cross and Blue Shield Association, the two largest health insurer trade groups, to give up risk rating—the practice of varying premium rates by health status. Massachusetts did this back in 1990 for small employers and in 1996 for individuals. So, ho hum for our state. But the story did remind me that I’d been meaning to suggest that Massachusetts should think about abandoning the major discriminatory rating practice we do still allow, and that’s age rating. Our insurance laws permit health plans to charge older people as much as twice the premium rate as younger people for the same product. The classic argument in favor of age-rating has been that it’s necessary to have lower rates for younger people in order to convince them to purchase insurance. But this argument isn’t so convincing in Massachusetts any longer because of the state’s individual mandate, which requires most adults, including younger people, to purchase insurance. The ability of health plans to age-rate also creates a troubling inequity in the state’s affordability schedule at the highest income levels, where the schedule requires people to purchase insurance regardless of the cost. This requirement, combined with age rating, means that an older person with exactly the same income as a younger person might be required to pay as much as twice the amount—and therefore twice the percent of income—to comply with the mandate.

I can just hear the teeth gnashing about the suggestion of doing away with age-rating, Read more…

Governor Patrick held a meeting of top state officials on Monday to review and accelerate the administration’s focus on efforts to control health care costs. This meeting, which was prompted by the recent Globe Spotlight series on Partners and Blue Cross, is an excellent development. Among other things, the Globe series has served as a wake-up call about the failure of relying on market forces to shape and control the cost of the state’s health care system. Partners and Blue Cross are not the only culpable parties in the feeding frenzy that the market has produced in the last two decades. State inquiry and action must also address other providers that have developed and exploited dominant market positions, insurers that have had neither the resolve nor the power in many areas to address the causes of rising costs, employers, who have done little and often hindered approaches that might have made a difference, and government, which was missing in action for nearly 20 years after the state began its romance with the market in health care.

Our collective behavior in dealing with rising health care costs in Massachusetts shows many of the classic symptoms of addiction: denial (“health care costs aren’t really a problem…”costs aren’t really higher in Massachusetts”); rationalization (“our quality is higher so our higher costs are justified”…. “health care is the only growth industry in the state”); blaming others (“providers who aren’t doing well are just whining”….”we insurers can’t really do anything about rising spending”….”mandated benefits are the real problem”….”consumers are too fat, smoke, don’t get enough exercise, and don’t have enough ‘skin in the game”); Read more…

When the Obama administration and the Congress take up health reform in 2009, one of the most contentious issues is likely to be whether to include an individual mandate (IM) in any proposal to expand coverage. When Chapter 58 passed, I was not a fan of the IM. But I’ve since had something of a conversion. While I don’t yet fully embrace the IM, I do think it’s played a much more important role than I expected in the coverage expansions in Massachusetts. And the experience here with designing and implementing the IM holds important policy and political lessons that should inform the debate on whether or not to include an IM in national reform.

Back in 2006, I knew the policy arguments for the inclusion of the IM in our reform law. In particular, the Urban Institute had shown in its Roadmap to Coverage project for the Blue Cross Blue Shield of Massachusetts Foundation that a voluntary insurance system would not get us close to universal coverage, even with a much stronger employer pay or play requirement than was ultimately included in Chapter 58. Without an IM, many people would not take up employer coverage that was available to them and others would not purchase individual coverage even if it were affordable, particularly younger people. Read more…

Note to readers: I am a member of the board of the Connector.

One of the goals of Chapter 58 is to make health insurance more affordable for people who buy it directly from insurers. The market for people who buy their own coverage (referred to as the “individual market” or the “nongroup market”) has a troubled history of expensive premiums, limited benefits, and lack of coverage for people with preexisting health conditions. In the 1990s, Massachusetts, like many states, enacted reforms to the individual market to improve availability and affordability of coverage. These reforms included requiring carriers to sell coverage to all applicants regardless of health, adopting standardized benefit packages, and placing limits on permissible rating factors and rate variation.

Chapter 58 continued this history of reform by merging the individual and small employer markets (so that premium rates in the individual market would be based on a larger and more diverse pool of people) and encouraging the development of range of new products.

So far, the only data I’ve seen about how these reforms have affected the individual market is one PowerPoint slide that compares the cost and comprehensiveness of coverage for a 37-year-old before and after reform. The slide shows that this 37-year-old can now get much better coverage for half the cost (a deductible of $2000 vs. $5,000, drug coverage, preventive and emergency care before the deductible, and a monthly premium of $175 vs. $335 before reform). Impressive progress indeed.

But after seeing this PowerPoint slide yet again at a conference out-of-state, and presented yet again by a national health policy person who had no connection to Massachusetts, I decided it was time to add at a few more data points to the discussion about the individual market reforms in Chapter 58. Read more…

On July 1, Commonwealth Care members started paying the higher premiums and co-payments approved in April by the Connector board (of which I am a member).

At the time these increases were approved, there were assurances that this was just the first stage of increased “shared responsibility.” We were told that while consumers, and particularly those with low and moderate incomes, were the first to be asked to do more, employers, health insurers and providers would soon follow in order to help address the financing challenges of health reform.

Well, it’s three months later….and we’re still waiting for any new responsibilities to be imposed on employers, providers and health plans. I hope we’ll see some action soon since time is running out in this legislative session. But lest I criticize others for inaction when I am guilty myself, I admit that I never produced the update on health plan financial results for year-end 2007 that I mentioned on this blog back in February. I thought I’d link the two issues of health plan financial results and shared responsibility, just in case anyone is having trouble thinking of ways that health plans could be asked to do more for health reform. So, I’ve put together some health plan financial numbers for 2007, ranked in order of how many Commonwealth Care members could be covered for the same amount of money. Read more…

The process of implementing Chapter 58 has been full of surprises. For me, one of the biggest is that April 15 has come and gone with so little public outcry about the individual mandate (IM). The IM is the most radical feature of the state’s health reform law. (Before any of you readers gang up on me, remember that “radical” means fundamental, extreme or drastic—it carries no value judgment about good or bad). No state has ever imposed such a broad requirement on its residents to purchase health insurance, nor levied state tax penalties on people who don’t comply. We’ll understand more about how this provision of the law is working when the state Department of Revenue (DoR) releases information from the 2007 state tax filings, which should be soon. I, for one, am really curious to see what the data show.

We will all need to interpret the DoR data with caution. Read more…

Earlier this month, I got a break from health reform in Massachusetts and spent a week in Germany doing research on that country’s health care system. Although we in the US most often compare our health system to those in Canada and the United Kingdom (maybe we think that speaking English is an important attribute of health system performance?), Germany’s health care system is actually much more similar to ours, and deserves more attention in the U.S.

Some similarities: In Germany, the health care system is not run by the government (although it is strictly regulated); employers provide much of the financing, through an assessment based on employee earnings that is split with the employee; coverage is provided through private health insurers, which compete for members (higher income people can opt-out and buy coverage from private, for-profit insurers but few people do); most of the delivery system is privately controlled–physicians work in private practice and most hospitals are structured as not-for-profit entities.

There are important differences, of course. Read more…

The board of the Connector, on which I serve, is facing some difficult decisions about enrollee premiums and cost-sharing for the Commonwealth Care (CommCare) program. State finances are tight, CommCare enrollment is larger than expected, and health care costs and premiums continue to rise much faster than overall inflation or wages. All of these factors are combining to put financial pressure on the CommCare program.

Let’s be clear about the problem: The financial challenges facing CommCare result from covering more people than projected at this point in the program’s development. Spending per person is on target. Of course, this doesn’t lessen the need to deal with the finances of the program. But it does suggest that the problem results from something good: getting more people insured.

As one approach to moderating rising program costs, the Connector board is considering asking Commonwealth Care members to pay more, in the form of larger copayments for those above the poverty level and bigger premium contributions for program enrollees who have incomes above 150% FPL. We don’t yet know how much these proposed changes would save for the state or how much they would cost enrollees, and the Connector board, and the public, need that information before any vote on any proposed changes.

Some increase in cost-sharing for Commonwealth Care enrollees might be necessary. But as we seek to deal with the financial challenges of the program, we need to make sure that we distribute the burden fairly. Here are a few thoughts on this equation: Read more…