Soaring premiums send thousands in Maine over a health care cliff

Insurance costs have grown by as much as 110 percent for those who earn too much to receive Affordable Care Act subsidies.

Escalating premiums and deductibles have driven about 10,000 Mainers over a health care “cliff,” where they can barely afford coverage thanks to a vulnerability in the Affordable Care Act exploited by the actions of the Trump administration.

Depending on the plan chosen, premiums have increased by about 70 percent or more since 2014 for people who earn too much to qualify for subsidies for the federal health care program. By contrast, ACA enrollees with subsidies have been mostly shielded from rate increases. The lack of a cap on premium increases, or other cost controls, for ACA enrollees who earn more than 400 percent of the federal poverty limit leaves them unprotected, making the “affordable” part of the program for some impossible.

Those cost hikes have accelerated since President Trump took office, and ratepayers are expected to be pummeled with giant rate increases again in 2019. Rates haven’t yet been filed with the Maine Bureau of Insurance, but will be by May.

“The cliff is real,” said Erik Wengle, a research analyst with the Urban Institute, a Washington-based think tank. “These plans have gotten quite expensive, and as they’ve gotten more expensive, we’re seeing people getting priced out.”

People earning more than 400 percent of the federal poverty limit – about $81,000 for a family of three, $65,000 for a two-person family or $48,000 for a single person – are not eligible for subsidies in the ACA marketplace.

“These are people firmly in the middle class,” Wengle said.

COSTS VARY COUNTY BY COUNTY
This subset – consistently about 10 to15 percent of the 75,000 Mainers who have ACA marketplace insurance – have seen their premiums soar. A 40-year-old single nonsmoker in Cumberland County who earns $50,000 per year has seen premiums for a silver plan increase from $284 per month in 2014 – the first year the ACA marketplace was in effect – to $489 in 2018, a 72 percent increase. If that same person lived in Aroostook County, he or she would have seen premiums increase from $376 per month to $790 per month, a 110 percent hike, according to an Urban Institute analysis.

Meanwhile, those who qualify for the subsidies are mostly protected from premium increases, because the subsidies go up roughly the same amount that premiums increase. For example, some silver plans in 2018 cost about $300 to $350 for those just under 400 percent of the poverty level, while bronze plans can be purchased for about $75 to $150, depending on where in Maine you live.
For those who don’t qualify for subsidies, they shoulder the entire burden of the increases.

Eric Cioppa, Maine Bureau of Insurance superintendent, said the state intends to start a reinsurance program for 2019 that will help keep insurance premiums in check, but affording insurance will still be difficult, especially for those who make more than 400 percent of poverty level.

“It’s literally becoming unaffordable if you’re over 400 percent,” Cioppa said.

The ACA categorizes its plans as bronze, silver or gold, with bronze having the lowest premiums but high deductibles; gold offering generous benefits, higher premiums and lower deductibles; and silver plans falling in the middle.

COUPLE ADVISED TO EARN LESS
For the Rices of Durham and the Williamses in Stonington, both empty-nester families that earn more than 400 percent of the poverty limit, going over the affordability cliff means sky-high deductibles and premiums.

“I have to bite my tongue when people complain about a $20 premium increase. I feel like saying, ‘Are you kidding me? Let me show you what I pay,’ ” said Jane Rice, a financial adviser who owns a Christmas tree farm with her husband, David, 60.

Rice, 57, said her husband has previously had prostate cancer and currently is being treated for esophageal cancer, and they expect to hit the out-of-pocket maximum, which this year is about $25,000, including premiums and deductibles.

Their total premiums are $1,500 per month with an $11,000 deductible.

Both are self-employed small-business owners who don’t have access to employer-based insurance – one of the key categories of people the ACA was designed to help. And for business owners who make less than 400 percent of the poverty level, it has kept insurance relatively affordable. But those who earn more have increasingly had to pay more.

Rice said she’s been told a few times that they “need to make less money.” The cliff effect creates a reverse incentive, because health care costs increase dramatically once enrollees earn slightly more than 400 percent of the poverty level.

“I reject that. I want to be successful and for our businesses to be successful,” Rice said.
She declined to list their family income, but she said the only way they’ve been able to afford insurance is by being frugal.

“We live within our means and we are hard-working people,” Rice said. “Sometimes it feels like we are paying the equivalent of insurance for six people, not two. It has just been ridiculous. It is just not right.”

Judy and John Williams of Stonington said they earn about $100,000 but they’ve also seen the cost of health insurance jump to nearly unaffordable levels. But as a couple nearing retirement age, they value insurance and know they need it, even though they’ve been generally healthy. As lobstermen, the couple don’t have access to employer-based insurance.

Ann Woloson of health advocacy group Consumers for Affordable Health Care says “we are creating a sicker, more expensive health insurance marketplace” when young people have little incentive to get coverage and people like John and Judy Williams, above, subsidize care for everyone else. 

John is 63 and Judy is 62, and they pay a combined premium of $1,997. Their deductible was $750 four years ago, but now it’s $5,400.

“We have to spend nearly $12,000 before the insurance kicks in,” John Williams said. “We’re very fortunate that we can pay the premiums, but it’s a lot of money.”

He said that they are looking forward to age 65 when Medicare kicks in and coverage is free, although many often purchase “gap insurance” to pay for things that insurance doesn’t cover. But he said he doesn’t mind knowing that people who earn less can get insurance for far less.

People earning up to about $27,000 in Maine can qualify for zero-premium bronze plans through the ACA, while typical premiums for people who earn about $40,000 to $45,000 are about $200 to $300 per month, depending on age and where you live. Insurers can charge up to three times more based on age, and can charge more based on address.

Williams said the disparity is unfortunate, but doesn’t change his opinion that insurance should be affordable. He said it doesn’t bother him that some at lower incomes have access to zero-premium insurance while he and Judy have expensive insurance.

“People that need insurance should be allowed to have it. Everyone should be able to afford insurance,” Williams said.

ACA FIXES HAVEN’T BEEN ENACTED
The Trump administration in 2017 ended cost-sharing reduction payments to insurance companies – payments that were designed to help lower-income people afford out-of-pocket costs such as co-pays and deductibles. Ending the cost-sharing reduction payments had no effect on lower-income people, but increased premiums for people earning more than 400 percent and skewed the market. To prevent further weakening of the ACA marketplace, state insurance commissioners, including in Maine, responded with complicated work-arounds that resulted in zero-premium bronze plans and lower-cost gold plans that were much better deals than in previous years.

The ACA, as former President Barack Obama’s signature domestic policy achievement, has been caught up in partisan politics almost since it was signed into law in March 2010. Trump campaigned against it, and has vowed to get rid of it.

Most Republicans in Congress agreed with Trump, while Democrats have stood behind it and worked with a few moderate Republicans, including Maine Sen. Susan Collins, to save the law.

In 2017, Congress attempted to repeal the ACA, but those efforts failed by one vote in the Senate, with Collins one of three senators to buck the party and vote to preserve Obamacare. But in a year-end party-line vote, Collins sided with Republicans on a tax cut package that included repealing the Affordable Care Act’s individual mandate. Collins supported the tax bill in exchange for Republican leadership promises to pass ACA stabilization measures, but those efforts collapsed last month.

Repealing the individual mandate – which requires people to purchase insurance or pay a penalty – makes it more likely that young, healthy people will not purchase insurance, driving up costs, according to health care experts.

Ann Woloson, executive director of Consumers for Affordable Health Care, an Augusta-based health advocacy group, said the cost of insurance for those making more than 400 percent of the poverty limit prices people out if they have any kind of significant debt – such as car payments, mortgages and other loans.

“It is unaffordable and unsustainable for people,” Woloson said. “We are creating a sicker, more expensive health insurance marketplace.”

One of the fixes touted by Collins – a federal plan to direct $30 billion over three years for reinsurance – would have helped keep premiums in check for people above the subsidy threshold. But it was paired with another reform – restoring the cost-sharing reduction payments – that received a mixed review in a Congressional Budget Office report released last week.

The work-arounds created by states lowered premiums for many, so unwinding those work-arounds when restoring the insurance company payments would cause many earning less than 400 percent to experience premium increases. The mixed CBO report and a fight over Obamacare abortion restrictions supported by Republicans deep-sixed the deal.

Democrats have since launched a counterplan that would, among other things, cap costs for those making more than 400 percent of poverty level to 8.5 percent of their income. With Republicans in control of Congress, it’s not likely to go anywhere, at least this year.

Woloson said the ACA is still standing and helping about 20 million Americans, through Medicaid expansion and ACA coverage. Maine voters approved Medicaid expansion in November but Republican Gov. Paul LePage is fighting Democrats in the State House over implementation costs.

‘ESSENTIAL’ BENEFITS NOT COVERED
Complicating the health care picture is a state-run reinsurance program that was put on hold when the ACA started. A LePage-era reform, it is likely to be relaunched and take effect in 2019.

The state’s reinsurance plan – called the Maine Guaranteed Access Reinsurance Association – redistributes insurance money by charging a fee of $4 per person per month on individual, small and large group plans, and funneling the revenue only to individual plans. The plan would also tap into federal money to help pay for what is estimated to be a $90 million program in 2019, according to Milliman, an insurance consultancy firm. That will help keep premiums 10 percent lower than they otherwise would be, but since rates haven’t been filed yet, Cioppa, the Maine Bureau of Insurance superintendent, said it’s unknown what the rate hikes will be for 2019.

The Trump administration is also promoting the expansion of short-term and association plans that would further undermine the ACA markets, Woloson said. Those short-term and association plans would be exempt from “essential health benefits” that all ACA plans are required to cover, such as maternity care, mental health, prescription drugs and substance use treatment. While they would carry lower premiums, Woloson said, patients would often find that many services aren’t covered, which was often the case with individual plans purchased prior to passage of the ACA. Often these plans were called “junk insurance” and if allowed to flourish would further weaken the ACA and could cause premium spikes, Woloson said.

The Trump administration has indicated that the association and short-term plans are on the way, but they are still going through federal rule-making.

Kevin Lewis, chief executive officer of Community Health Options, a nonprofit that provides ACA insurance, said what will happen with short-term and association plans is a “big looming question” of “paramount importance.”

Cioppa said Maine law currently allows for “rigorous” regulation of short-term and association plans. As long as the federal government doesn’t try to usurp state authority to regulate those plans, Cioppa said that Maine will be able to prevent them from weakening the ACA marketplace.

In addition to the 10,000 who have ACA marketplace plans and earn more than 400 percent of the federal poverty limit, an additional 9,000 people have off-marketplace plans, and many of them also would not qualify for subsidies.

Meanwhile, John Williams, the Stonington lobsterman, said the system needs an overhaul.

“All I know is, there’s got to be a better way of doing this than what we’re doing now,” Williams said.

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Short-term health plans skirting ACA-required benefits and protections to be expanded

The Trump administration is proposing to significantly broaden Americans’ ability to rely on short-term health plans that do not comply with the Affordable Care Act’s benefits requirements and consumer protections.

Health and Human Services Secretary Alex Azar announced Tuesday morning that a rewrite of federal rules would extend the time consumers can hold such health plans from three months to 12 months.

The plans were intended until now to be a brief gap-filler for people between jobs or for college students taking a semester off. The administration is attempting to redefine them as part of its strategy to help consumers bypass the Affordable Care Act marketplaces, which President Trump and his aides characterize as expensive failures.

“It’s one step in the direction of providing Americans with health insurance options that are both more affordable and more individualized for families’ circumstances,” Azar said in a conference call with reporters to announce the proposed rule.

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, echoed that portrayal of the rewrite as health reform. “While in the past these plans have been a bridge, now they can be a lifeline,” she said.

The proposed rule is the second that officials have designed since October, when Trump issued an executive order intended to widen the availability of health plans that skirt important Affordable Care Act insurance provisions.

The order is part of the administration’s strategy to circumvent parts of the sprawling 2010 health-care law — President Barack Obama’s primary domestic legacy — through executive actions. The moves are an alternate route given the Republican-led Congress’s failure last year to dismantle much of the law — although Trump is still urging lawmakers to try again, despite GOP Senate leaders’ reluctance.

In this case, the idea is to make it easier for individuals and small businesses to buy alternative types of coverage with lower prices, fewer benefits and weaker government protections.

If the rule is finalized, consumers would be able to buy — for just under a year at a time — short-term plans that do not have to include the Affordable Care Act’s 10 required health benefits and that can deny coverage or charge more to some customers who are in poor health.

The health officials played down criticism Tuesday by some consumer advocates that the short-term plans will drain healthy people from the Affordable Care Act marketplaces. Verma predicted that “only a very small number” of customers will defect from the federal insurance exchange or similar ones run by states.

Government actuaries predict that the number is likely to be 100,000 to 200,000, said Verma, who added that “the shift will have virtually no impact” on insurance premiums in Affordable Care Act marketplaces. The main people who will buy short-term plans, officials predicted, are some of the 28 million Americans who are uninsured — “the forgotten men and women of the Affordable Care Act,” Azar termed them Tuesday while meeting with reporters for the first time since he was sworn in three weeks ago.

At the moment, federal law does not allow these limited-duration plans to be renewed. But Verma said the administration is asking for suggestions on how the government might start permitting renewal.

Because their coverage can be skimpier than that offered by Affordable Care Act health plans, which are intended for people who cannot get affordable health benefits through a job, short-term plans do not count toward the law’s requirement that most Americans carry health coverage. Verma said that people who buy the limited plans could face federal penalties this year for violating the mandate. But that danger will disappear next year, when enforcement of the mandate will end, under an important element of the massive tax law Congress adopted late last year.

Insurers selling short-term plans would need to include on applications and plan documents clear statements that the coverage does not meet Affordable Care Act requirements.

Azar and Verma did not say when they expect such plans to be available for sale. After a public comment period ends in 60 days, officials will put the rule in final form — perhaps by this spring, Azar said.

Just after New Year’s, the Labor Department took the first step under the president’s order, proposing a regulation to widen access to a form of coverage known as association health plans that have long been praised by conservatives. The rule, still in draft form during its comment period, would reclassify such plans so that they no longer have to include the essential health benefits — including maternity care, prescription drugs and mental health services — that the Affordable Care Act requires of insurance sold to individuals and small businesses. It also would, for the first time, allow individuals to buy them.

America’s Health Insurance Plans, an industry trade group, said in a statement Tuesday that “we remain concerned that expanded use of short-term policies could further fragment the individual market, which would lead to higher premiums for many consumers, particularly those with preexisting conditions.”

On Capitol Hill, House Energy and Commerce Committee Chairman Greg Walden (R-Ore.) and the head of the panel’s health subcommittee, Rep. Michael C. Burgess (R-Tex.), praised the HHS proposal as “another important step taken by the administration to expand consumer choice, competition and access to health care.”

But the committee’s ranking Democrat, Rep. Frank Pallone Jr. (N.J.), and his counterparts on the Ways and Means Committee, Rep. Richard E. Neal (Mass.), and Education Committee, Rep. Robert C. “Bobby” Scott (Va.), derided the draft rule, contending that “widespread marketing of these bare bones, junk plans will further destabilize health insurance markets, and will lead to higher premiums for everyone.”

Tom Shores, an insurance agent for 25 years in Boise, Idaho, said he favors affordable alternatives to Affordable Care Act coverage but has noticed that alternatives tend to be more expensive as they become more popular. In Idaho, he said, some insurers have found ways to sell short-term plans for 10 months instead of the federal limit of three months.

“But because so many people are doing that, the cost of the short-term plans are up,” Shores said. “They are not that much of an advantage over the plans in the exchange.”

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Idaho Insurer Moves Ahead With Health Plans That Flout Federal Rules

It's barely been two weeks since Idaho regulators said they would allow the sale of health insurance that doesn't meet all of the Affordable Care Act's requirements — a controversial step some experts said would likely draw legal scrutiny and, potentially, federal fines for any insurer that jumped in.
And on Wednesday, Blue Cross of Idaho unveiled a menu of new health plans that break with federal health law rules in several ways, including setting premiums based on applicants' health.

"We're trying to offer a choice that allows the middle class to get back into insurance coverage," said Dave Jeppesen, the insurer's executive vice president for consumer health care.

The insurer filed five plans to the state for approval and hopes to start selling them as soon as next month.

The Blue Cross decision ups the ante for Alex Azar, the Trump administration's new Health and Human Services secretary. Will he use his authority under federal law to compel Idaho to follow the ACA and reject the Blues plans? Or will he allow state regulators to move forward, perhaps prompting other states to take more sweeping actions?

At a congressional hearing Wednesday, even as Blue Cross rolled out its plans, Azar faced such questions. "There are rules," Azar said. "There is a rule of law that we need to enforce."

However, he didn't specifically indicate whether the federal government would step in.

Robert Laszewski, a consultant and former insurance industry executive, says it should. "If Idaho is able to do this, it will mean other ... states will do the same thing," he said. "If a state can ignore federal law on this, it can ignore federal law on everything."

Idaho's move stirs up more issues about the stability of individual insurance markets.

Policy analysts say that allowing lower-cost plans that don't meet the ACA's standards to become more widespread will pull younger and healthier people out of Obamacare, raising prices for those who remain. Supporters say that is already happening, so the lower-cost plans provide more choices for people who earn too much to qualify for subsidies to help them purchase ACA coverage.

Idaho's move to allow such plans, announced in January, drew harsh and swift criticism.

"Crazypants illegal," tweeted Nicholas Bagley, a law professor at the University of Michigan and former attorney with the civil division of the U.S. Department of Justice, who said that states can't pick and choose which parts of federal law to follow. Sabrina Corlette, a research professor at Georgetown University's Center on Health Insurance Reforms, pointed out that health insurers could be liable for sharp fines if they are found to be in violation of the ACA.

But both Idaho regulators and Blue Cross officials say they aren't worried.

Jeppesen said the ACA gives states regulatory authority "to make sure the market works and is stable," and the insurer is simply "following what the state has given us guidance" to do.

Other insurers in Idaho are taking a much more cautious approach, telling The Wall Street Journal they aren't stepping up immediately to offer their own plans.

Laszewski said they are likely waiting to see what legal challenges develop. "If I were running an insurance company, there's no way I would stick my neck out until the high court has ruled in favor of this — and they're not going to," he said.

Jeppesen said his company has consulted with legal experts and is moving ahead with confidence.

The aim is to bring people back into the market, particularly the young, the healthy and those who don't get a tax credit subsidy and can't afford an ACA plan.

For some people — especially younger or healthier applicants — the new plans, which the insurer has named Freedom Blue, cost less per month than policies that meet all ACA rules.

They accomplish that by limiting coverage. If they are allowed to be sold, consumers will need to weigh the lower premiums against some of the coverage restrictions and variable premiums and deductibles, policy experts say.

The plans, for example, will include a "waiting period" of up to 12 months for any pre-existing conditions if the applicant has been without coverage for more than 63 days, Jeppesen said.

Additionally, they cap total medical care coverage at $1 million annually. And premiums are based, in part, on a person's health: The healthiest consumers get rates 50 percent below standard levels, while those deemed unhealthy would be charged 50 percent more.

All those conditions violate ACA rules, which forbid insurers from rejecting coverage of preexisting conditions or setting dollar caps on benefits or higher premiums for people with health problems.

But the rates may prove attractive to some.

Premiums for a healthy 45-year-old, for example, could be as low as $195 a month, according to a comparison issued by the insurer, while a 45-year-old with health problems could be charged $526. In that case, the 45-year old would find a lower price tag — $343 a month — for an ACA-compliant bronze plan.

While Freedom Blues plans cover many of the "essential health benefits" required under the ACA, such as hospitalization, emergency care and mental health treatment, they do not include pediatric dental or vision coverage. One of the five plans doesn't include maternity coverage.

When compared with one of the Blues' ACA-compliant plans — called the Bronze 5500 — the new standard Freedom Blue plan's annual deductibles are a mixed bag.

That's because it has two separate deductibles — one for medical care and one for drugs. If a consumer took only generic drugs, the new plan would be less expensive, according to details provided by the plan. But with a $4,000 deductible for brand-name drugs, the Freedom Blue plan requires more upfront money before full coverage kicks in than the ACA-compliant plan it was compared with.

Jeppesen said the insurer hopes to attract many of the "110,000 uninsured state residents who cannot afford [ACA] coverage."

That's the total number of uninsured people who earn more than 100 percent of the federal poverty level in the state, he said.

Sarah Lueck, senior policy analyst for the Center on Budget and Policy Priorities, cautioned that some of those residents might actually be eligible for subsidies under the ACA, which are available to people earning up to four times as much.

"Many ... could be getting subsidies for more comprehensive coverage through the [ACA-compliant state exchange] and would be better off," Lueck said.

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GOP Plan To Trim Insurance Benefits Might Not Tame Premiums

As House Republicans try to find common cause on a bill to repeal and replace the Affordable Care Act, they may be ready to let states make the ultimate decision about whether to keep a key provision in the federal health law that conservatives believe is raising insurance costs.

Conservatives from the House Freedom Caucus and members of a more moderate group of House Republicans, the Tuesday Group, are working on changes to the GOP health overhaul bill that was pulled unceremoniously by party leaders last month when they couldn't get enough votes to pass it.

At the heart of those negotiations is the law's requirement that most insurance plans offer 10 specific categories of "essential health benefits." They include hospital care, doctor and outpatient visits and prescription drug coverage, along with things like maternity care, mental health and preventive care services.

The Freedom Caucus had been pushing to strip required benefits, arguing that the coverage guarantees were driving up premium prices.

"We ultimately will be judged by only one factor: if insurance premiums come down," the Freedom Caucus chairman, Rep. Mark Meadows, R-N.C., told The Heritage Foundation's Daily Signal last month.

But moderates, bolstered by complaints from patient groups and constituents, fought back. And a brief synopsis of a proposal outlined by Rep. Tom MacArthur, R-N.J., suggests that the compromise could be letting states decide whether they want a federal waiver to delete essential health benefits.
"The insurance mandates are a primary driver of [premium] spikes," Meadows and Sen. Ted Cruz, R-Texas, wrote in March.

But health analysts and economists say that eliminating those benefits probably won't bring premiums down — at least not in the way conservatives are hoping.

"I don't know what they're thinking they're going to pull out of this pie," says Rebekah Bayram, a principal consulting actuary at the benefits consulting firm Milliman. She is the lead author of a recent study on the cost of various health benefits.

Opponents of the required benefits point to coverage for maternity care and mental health and substance abuse treatment as things that drive up premiums for people who will never use such services.

But eliminating those benefits wouldn't have much of an impact, Bayram says. Hospital care, doctor visits and prescription drugs "are the three big ones," she says. "Unless they were talking about ditching those, the other ones only have a marginal impact."

John Bertko, an actuary who worked in the Obama administration and served on the board of Massachusetts' health exchange, agrees: "You would either have very crappy benefits without drugs or physicians or hospitalization, or you would have roughly the same costs."

Maternity care and mental health and substance abuse, he says, "are probably less than 5 percent" of premium costs.

Of course, requiring specific coverage does push up premiums to some extent. James Bailey, an assistant professor of health economics at Creighton University in Omaha, has studied the issue at the state level. He estimates that the average state health insurance mandate "raises premiums by about one-half of 1 percent."

Those who want to get rid of the required benefits point to the fact that premiums in the individual market jumped dramatically from 2013 to 2014, the first year the benefits were required.

"The ACA requires more benefits that every consumer is required to purchase regardless of whether they want them, need them or can afford them," Ohio Insurance Commissioner Mary Taylor said in 2013, when the state's rates were announced.

But most of that jump was not due to the broader benefits, Bayram says, but to the fact that for the first time sicker patients were allowed to buy coverage.

"The premiums would go down a lot if only very healthy people were covered and people who were higher risk were pulled out of the risk pool," she says. (Some conservatives want to change that requirement, too, and let insurers charge sick people higher premiums.)

Meanwhile, most of the research that has been done on required benefits has looked at plans offered to workers by their employers, not policies available to individuals who buy their own coverage because they don't get it through work or the government. That individual market is the focus of the current debate.

Analysts warn that individual-market dynamics differ greatly from those of the employer insurance market.

Bailey says he "saw this debate coming and wanted to write a paper" about the ACA's essential health benefits. But "I very quickly realized there are all these complicated details that are going to make it very hard to figure out," he says, particularly the way the required benefits work in tandem with other requirements in the law.

For example, says Bertko, prescription drugs can represent 20 percent of costs in the individual market. That's far more than in the employer market.

Another big complication is that the required benefits do double duty, Bayram says. They not only ensure that consumers have a comprehensive package of benefits, but enable other parts of the health law to work by ensuring that everyone's benefits are comparable.

For example, the law adjusts payments to insurers to help compensate plans that enroll sicker-than-average patients. But in order to do that risk adjustment, she says, "all of the plans have to agree on some kind of package. So if you think of essential health benefits as an agreed-upon benchmark, I don't know how they can get rid of that and still have risk adjustment."

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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Health care costs need serious debate

Bozeman state Rep. Tom Woods is proposing to put the rates hospitals charge under the control of the Public Service Commission. It would set all hospital rates at what Medicare pays for those services. And everyone – the insured, the uninsured, Medicaid and Medicare patients – would be charged the same, not the inexplicable hodgepodge of pricing we have today.

Under Woods’ legislation, if a hospital wants to charge anything over the Medicare rate, it would have to make a case before the PSC, which could grant or deny the rate increase.

The measure will likely meet a tsunami of resistance from the hospitals and those who insist health care rates be set by a free market. And it may ultimately be defeated by that resistance. But at the least the bill should start a badly needed conversation about soaring health care costs.

Free marketeers have long insisted consumers have a choice when it comes to health care. That may be true when you want to get a bunion removed or have Lasik eye surgery. You can call around and get the best price.

But if you are unfortunate enough to break your leg at the ski hill, are you going to shop around for the cheapest doctor? No, you take the quickest route to the hospital emergency room and hope for the best. Even if you were stoic enough to do some calling around, no one would – or even could – tell you what it’s going to cost to fix that leg without seeing it. But you better believe it’s going to cost you aplenty.

Woods’ bill is not without precedent. One state, Maryland, has regulated hospital rates for almost 40 years, and that state has the lowest hospital rates in the nation along with the second lowest health insurance costs.

Perhaps Woods’ proposed legislation won’t provide the solution to control health care costs here in Montana. It’s an idea, however, certainly worthy of debate.

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Huge variation in medical prices as hospital 'monopolies' charge more, report says

Health Care Cost Institute finds hospital transaction prices play a huge role in influencing healthcare spending for the privately insured. 

The prices hospitals negotiate with private insurers vary considerably across geographies, according to a new study by the Health Care Pricing Project, driving huge variations in health care spending for the privately insured.

The study, by researchers from Yale University, Carnegie Mellon University, University of Pennsylvania and The London School of Economics called "The Price Ain't Right? Hospital Prices and Health Spending on the Privately Insured," analyzed 92 billion health insurance claims from 2007 through 2011 from 88 million people covered by Aetna, Humana, and UnitedHealth, three of the country's largest insurance companies. The data, which was provided by the Health Care Cost Institute, shows spending and utilization for almost 30 percent of people in the nation with employer-sponsored or private insurance.

The study found striking variations existed both within geographic areas and nationwide for services. For example, they looked at Philadelphia for hospital-based MRI's of lower limb joints, a common procedure. In 2011, prices there varied significantly, with data showing the most expensive hospital was 6 times more expensive than the cheapest.  Across the country, they also varied significantly.

According to the study, prices were 12 times higher in the most expensive area, Bronx, New York, than in the least expensive area, Baltimore. In Miami, the most expensive hospital's prices were nine times more expensive than the least expensive hospital.

Not surprisingly, hospital transaction prices play a huge role in influencing healthcare spending for the privately insured. Across all hospital referral regions, spending per beneficiary varied by thousands of dollars. In 2011, $1,707.39 was spent per privately-insured beneficiary in the area that showed the lowest spending, Honolulu, Hawaii. On the other hand, in Napa, California spending per beneficiary topped out at $5,515.90 each.

A number of factors influence high or low prices in a given market, but the study shows a big one is competition. It says hospitals that must contend with fewer competing facilities have significantly higher prices. More specifically, hospitals in "monopoly markets" show prices that surge more than 15 percent higher than hospitals doing business in markets where there are four or more competitors. Hospitals facing just one competitor had prices 6 percent higher, and hospitals with two rivals were almost 5 percent higher.

"These price differences between hospitals can be thousands of dollars," said Martin Gaynor, the E.J. Barone Professor of Economics and Health Policy at CMU's H. John Heinz III College. "For example, the price of an average inpatient stay at a monopoly hospital is almost $1,900 higher than where there are four or more competitors. We know that these higher prices end up getting translated into higher premiums that employers pass on to workers."

Other factors in hospital pricing included whether the facility is for-profit, the quality, scope and level of technologies the hospital boasts, and the size of the hospital's Medicare client population.  A lower share, along with these other factors, were all associated with higher prices, according to the study.

Ultimately, the data should drive changes in how public health policy is shaped moving forward, the authors said. Just the nature of the data constitutes a huge departure, according to study co-author/Assistant Professor of Health Policy and Economics at Yale Zack Cooper. He said even though most people in the United States get their health insurance from private insurers, much of what is known about healthcare spending and what usually serves as the basis for public policy is based on analysis of Medicare data. "The rub is that Medicare only covers 16 percent of the population. The majority of individuals -- 60 percent of the U.S. population -- receive healthcare coverage from private insurers." said Cooper, "This new dataset really allows us to understand what influences health spending for the majority of Americans. This information is critical to creating better public policy." Moving forward, he said, policymakers should be more careful about making broad recommendations for health spending for privately insured Americans based on Medicare data.


The study's authors said the boom in healthcare mergers and acquisitions can have a negative effect on prices, since their data points to the presence of healthy competition as a major force behind driving hospital prices down. "There have been over 1,200 mergers in the hospital industry since 1994, and 457 since 2010. There's a real need for continued vigorous antitrust enforcement and other policy options to encourage competition and combat market power," said Gaynor, who along with Cooper and their fellow co-authors insist antitrust enforcement will be pivotal to confronting hospital and providers' prices.

Moving forward, the collaborative group behind the Health Care Pricing Project will explore additional related topics, including healthcare spending growth over time, providers' price growth over time, as well as telling relationships market structure and hospital prices, and between changes in Medicare reimbursements and hospitals' negotiated transaction prices.

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Cost of insurance under Obama health care law likely to drop (Indiana)

Indiana consumers getting insurance through President Barack Obama's health care law can expect to pay less this coming year.

Figures released by the federal government this week show that the cost of a benchmark plan is expected to drop by 12.6 percent in 2016.

The drop in Indiana comes as states across much of the U.S. are expected to see cost increases under the federal program - in some cases, by double digits.

Benchmark plans at HealthCare.gov shows a monthly premium range of $383 to $524 before tax credits, which averaged about $319 in Indiana 2015.

It pays to look at more than premium prices. In general, the lower the monthly premium, the more a consumer would pay out of pocket each time they receive care.

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