Archive for the ‘Insurance’ Category

The Insurance Industry’s No-Lose Situation

Thursday, July 6th, 2017

Many voices are speaking out about the Republican effort to undo the Affordable Care Act, but one party diligently refrains from public comment: the insurance industry. While the industry is undoubtedly exerting its influence in the closed-door negotiations to restructure the wildly unpopular GOP bill, it is not airing those views more widely.

It doesn’t have to, because the healthcare debate between the two major parties is largely a disagreement on how best to serve the needs of Aetna, Anthem and the other big players.

The ACA, of course, was built on the premise that government should expand coverage largely by providing subsidies to help the uninsured purchase plans from private companies. When those companies became dissatisfied with the composition of their new client base and starting jacking up premiums in response, ACA supporters were put in the position of advocating for new insurer financial incentives.

Meanwhile, the Republicans are seeking to help the industry by rolling back Medicaid expansion and allowing it to return to the pre-Obamacare practice of selling bare-bones junk insurance, which would be the only kind that many people could afford after subsidies are decimated.

This is probably a no-lose situation for the insurers: either they get paid more to provide decent coverage or they are freed to sell highly profitable lousy plans.

All those legislators catering to insurers one way or the other are forgetting that healthcare reform was made necessary by the ruthless behavior of that same industry. If those companies had not been denying coverage whenever possible, it would not have been necessary for the ACA to set minimum standards. And if those firms had not been raising premiums relentlessly, it would not have been necessary for the ACA to take steps — which turned out to be inadequate — to try to restrain costs.

The industry’s unethical practices are not limited to the individual marketplace. The big insurers have also exploited the decision by policymakers to give them a foothold in the big federally funded programs: Medicaid and Medicare.

As Senate Republicans were cooking up their repeal and replace bill, the U.S. Attorney’s Office in Los Angeles joined two cases against one of the industry’s giants, UnitedHealth Group. The whistleblower suits accuse the company of systematically overcharging the federal government for services provided under the Medicare Advantage Program.

The complaints in the cases allege that UnitedHealth routinely scoured millions of medical records, searching for data it could use to make patients seem sicker than they actually were and thus justify bigger payments for the company, which was also accused of failing to correct invalid diagnoses made by providers. Either way, the complaints argue, UnitedHealth was bilking Medicare Advantage, which was created on the assumption that bringing the private sector into a government program would cut costs.

Such assumptions continue to afflict federal health policy as a whole. Too many members of Congress continue to worship the market in the face of all the evidence that the private insurance industry cannot be the foundation of a humane healthcare system.

The Crappy Coverage Solution

Thursday, June 22nd, 2017

If Congressional Republicans succeed in enacting either the Senate or the House bill to repeal the Affordable Care Act, they will have carried out one of the most brazen bait and switch moves in the history of U.S. public policy.

They and Donald Trump campaigned on the idea that Obamacare exchange premiums were rising uncontrollably, yet neither of the bills does anything to address that problem. They did not vow to repeal and replace Medicaid — Trump, in fact, promised not to touch it or Medicare or Social Security — yet that is what the bills would in effect do, both for the ACA’s Medicaid expansion and traditional Medicaid.

It’s been widely noted that the Republicans seem preoccupied with repealing the taxes the ACA imposed on high earners to help pay for the cost of expanding coverage. Yet less attention is being paid to the other giveaway in the bills: the repeal of the ACA’s employer mandate. This provision should be called the Wal-Mart Windfall Act, because it would allow large low-road employers to avoid ACA rules that oblige firms with 50 or more full-time employees to provide health coverage or else pay a penalty.

The mandate is far from draconian, yet it was at least a partial remedy for the situation in which millions of workers at big-box retailers, fast-food outlets and similar workplaces were not provided affordable coverage and were encouraged to enroll in programs such as Medicaid. Now the Republicans seek to remove any obligation on the part of employers to provide coverage while also undermining the social safety net alternative.

To the extent that the Republicans have a solution to the healthcare problem it is this: bring back junk insurance. It is often forgotten that the ACA was designed not just to address the problem of the uninsured but also the underinsured.

Starting in the 1990s, large insurers such as Aetna began selling bare-bones individual policies to low-income individuals who did not get employer coverage and could not qualify for Medicaid. These policies had relatively low premiums but sky-high deductibles and numerous exclusions. In cases of a serious accident or illness, they were all but worthless. The ACA put an end to this predatory market by establishing a set of essential benefits that all plans would have to include.

Republicans don’t like to admit that they are promoting a return to crappy coverage, so they dress up their arguments with misleading phrases such as “patient-centered reforms.” Many of them also realized that the idea of lowering standards directly was not very popular, so they have returned to their favorite panacea of giving states more flexibility. This allows them to pretend they are not scrapping essential benefits while knowing that many governors and state legislatures would be all too willing to do so if given the opportunity.

The cynicism of Congressional Republicans is matched by that of the big insurance companies, for whom the ACA was tailored and are now doing nothing to defend the law. Instead, they still seem to be sulking about the two anti-competitive mergers (Aetna-Humana and Anthem-Cigna) that were opposed by Obama Administration and shot down in the courts. Having seen their oligopolistic dreams go up in smoke, they now seem to want to give up the ACA market in favor of selling bare-bones policies.

It is unclear whether the dystopian vision of the ACA opponents will come to pass, but in the meantime the wellbeing of millions of Americans is being unnecessarily endangered.

The Junk Insurance Lobby

Thursday, April 6th, 2017

The ACA repeal-and-replace effort, given up for dead two weeks ago, may or may not be getting resurrected. Whether that happens seems to depend on satisfying the desire of Tea Party Republicans to grant Americans the right to purchase the crappiest health coverage possible.

Whereas Paul Ryan and President Trump initially wanted to retain the ACA’s popular provisions on essential benefits and pre-existing conditions, they now seem open to trading them away to win over the Freedom Caucus.

The position of the hardliners is often dismissed as some kind of bizarre misanthropy, but it is actually the logical conclusion of the mainstream Republican notion that deregulation is the solution to all problems. That notion has been embraced by Trump, who repeatedly bashes agencies such as the EPA and claims that weakening business oversight is the key to job growth.

The members of the Freedom Caucus seem to believe that removing all restrictions on insurance companies will result in lower premium costs. That may be true but only because the insurance that people would be purchasing would cover as little as possible.

While the Freedom Caucus presents this as a bold new approach, it is really nothing more than a return to the situation before the enactment of the ACA. Republicans of all stripes would have us forget how awful and oppressive health insurance used to be.

Thirty years ago, the House Select Committee on Aging was warning that, in addition to the millions of Americans who were uninsured, millions more were underinsured. As traditional insurance was increasingly replaced by health maintenance organizations — whose business model was to deny as much coverage as possible — subscribers had to fight constantly to get prior approval for many procedures and to get reimbursed for medical fees already paid.

Even worse than the HMOs were the individual plans labeled as “limited benefit” or “mini-medical.” Targeted to lower-income people who were self-employed or had jobs that provided no coverage, these policies could cost as little as $40 a month but they had strict limits on both routine expenses and hospitalization costs. These plans existed for a long time on the fringes of the health insurance world, but eventually large companies such as Aetna, Cigna and UnitedHealth Group entered the market with their own bare-bones offerings.

Those subscribing to such plans were gambling they would remain healthy. If instead someone had a serious accident or illness, the plans were useless and often pushed people into personal bankruptcy.

Junk policies are the healthcare analogue to payday loans and other forms of predatory lending. They appear to serve a need and initially appear to be inexpensive, but they can have disastrous consequences.

The ACA was designed to protect people from those consequences, but the Obama Administration did not do enough to explain the change. In a climate of rightwing demagoguery, many people who had to give up their low-cost junk insurance were led to think they were losing something valuable. Moreover, Medicaid expansion, which provided free, decent coverage for low-wage workers who might otherwise have had to depend on junk policies, was blocked in many states for ideological reasons.

Now the Freedom Caucus would have us believe that bare-bones coverage is the way forward for the individual marketplace. That might be the case if we want a society in which those few people with no significant health needs get a bargain while everyone else has to risk financial ruin.

Catastrophic Plans

Thursday, March 9th, 2017

During his private-sector career Donald Trump floated many dubious business ventures, and now as president he is pushing his biggest bait-and-switch scheme yet. Having run for office on promises that he would improve healthcare and protect safety net programs such as Medicaid, he is now embracing and promoting a Republican replacement for the Affordable Care Act that would do exactly the opposite.

Throughout the campaign, Trump made it abundantly clear that he wanted to repeal the ACA, which he repeatedly described as a disaster, and with his typical hyperbole promised voters: “You’re going to have such great healthcare at a tiny fraction of the cost, and it is going to be so easy.” During the transition he said that the replacement plan would seek to provide “insurance for everybody.”

Trump exploited the real frustrations of many people with the ACA — frustrations that were largely the result of Republican intransigence that prevented the inclusion of a public option, blocked any legislative fixes and precluded Medicaid expansion in many states. He implicitly promised that a replacement plan would do more.

When Trump stated on February 27 that “nobody knew health care could be so complicated,” he was in effect signaling that the bait phase of his con was over and he was moving on to the switch. Now he has dropped the extravagant promises and has joined the House Republican rush to enact a repeal and replace plan supposedly made urgent by the imminent collapse of Obamacare.

The House legislation has not yet been officially scored by the Congressional Budget Office, but it is widely anticipated that it will result in a loss of coverage for millions of people and sharp increases in premiums for many of those who hold onto their plans.

Yet there is another issue that is receiving less attention: the quality of coverage for those who remain in the individual marketplace. For now, the Republican plan retains the ACA’s list of essential benefits (preventive care, etc.) that must be included in any individual or small group plan, but it is possible that could be bargained away to placate social conservatives who don’t like the provisions relating to reproductive health.

Trumpcare does not, however, include the ACA’s cost-sharing provisions that cap out-of-pocket expenses in plans obtained through the exchanges by persons with income below 250 percent of the federal poverty line. As a result, these people could very well be subjected to sharply higher deductibles and co-pays.

This points to the little-acknowledged aspect of the assault on the ACA: at the heart of the Republican “solution” to rising premiums is giving people the ability to purchase lower-cost but substandard coverage. In other words, they want to return to the pre-ACA situation in which insurers could sell bare-bones policies that provided little or no cost reimbursement except in cases of major illnesses or accidents — and might be skimpy in those situations as well.

It is significant that Republicans keep quoting Aetna CEO Mark Bertolini in perpetuating the bogus claim that the ACA is in a “death spiral.” Bertolini is hardly an objective observer. He used misleading negative comments about the ACA to try to deter the Obama Administration from its opposition to Aetna’s anti-competitive acquisition of its rival Humana, which was recently blocked by a federal judge who accused the company of dropping out of the ACA marketplace in several states to “improve its litigation position” in the merger dispute.

Aetna is also the company that was one of the biggest promoters of bare-bones policies in the pre-ACA period. It got into the business, also known as junk health insurance, two decades ago through the purchase of U.S. Healthcare, an HMO whose bare-knuckles practices Aetna adopted in full and thus found itself the target of a series of class-action lawsuits brought by patients as well as providers.

The substandard policies sold by Aetna made up a substantial portion of the plans that were banned by the ACA. The people who had to give up that “coverage” became symbols of the supposed oppression of Obamacare.

Although they try hard to hide the fact, Republicans — and now Trump — are setting the stage for a resurgence of the bare-bones policies under the banner of affordability. That will be catastrophic coverage in every sense of the word.

Aetna’s Deception and the ACA Crisis

Thursday, January 26th, 2017

One of the decisive moments in the 2016 election campaign came last summer, when major insurance companies cut back their involvement in the Affordable Care Act exchanges after claiming they were losing money in the market. This was seized on by Trump and other Republicans to further denigrate the ACA and argue the need for repeal and replace.

Evidence has now emerged suggesting that the insurers’ claims were more of the lies that tainted the whole campaign and that those lies were motivated by an attempt to influence the federal government’s policy on mergers.

What was often overlooked during discussions of the health insurance industry last year was that the biggest concern of the major firms was the fate of their attempt to capture greater market share through giant acquisitions. Aetna was seeking to acquire Humana, and Anthem wanted to join forces with Cigna. The two proposed deals, worth about $85 billion, would reduce the number of major players to three (the other being UnitedHealth).

The Obama Administration and multiple states challenged the mergers, which ended up in court. Recently a federal district court judge sided with the Justice Department in the Aetna-Humana case; another judge is expected to rule soon on the Anthem-Cigna deal.

In his 158-page ruling on the Aetna matter, U.S. District Judge John D. Bates cited evidence indicating that the company’s decision to leave ACA exchanges in 17 counties in three states (Florida, Georgia and Missouri) was designed to “improve its litigation position.” In other words, its main reason for dropping out was not the profitability of  those markets but rather the attempt to make it more likely that the Humana acquisition would be approved.

The opinion reveals (on p.125) that when Aetna met with officials at the Justice Department and the Department of Health and Human Services prior to the filing of the government’s complaint it “connected this lawsuit with its future participation in the exchanges” and threatened (p.126) to withdraw from those exchanges if the merger were not approved.

Also included in the opinion is an excerpt (p.127) from an e-mail in which Aetna CEO Mark Bertolini stated that “the administration has a very short memory, absolutely no loyalty and a very thin skin.” Asked in a deposition what he meant by that, Bertolini expressed resentment that the administration was opposing the merger despite Aetna’s role in supporting the ACA during the battle over its enactment.

The judge went on to cite (p.129) internal company e-mails in which, in the words of the opinion, “Aetna executives tried to conceal from discovery in this litigation the reasoning behind their recommendation to withdraw from the 17 complaint counties.” That effort was unsuccessful.

Overall, the court found that the exchange counties from which Aetna was withdrawing were a mix of profitable and unprofitable ones, thus undermining the claim that the move was purely a business decision.

While Aetna’s deception failed to sway the government or the lawsuit, it had a significant political impact amid a heated campaign. Now that the campaign is over and the ACA opponents prevailed, Aetna and the other insurance giants are staying silent as Republicans move to gut the law.

It’s unclear whether the firms expect the exchanges to survive in some form or they are rooting for a return to the old days of minimal regulation. In either event, it’s clear that companies like Aetna and Anthem are putting their desire for oligopolistic control above all else.

Resisting Insurance Industry Blackmail

Thursday, October 27th, 2016

healthcare-profitsOther than the Wikileaks email offensive against the Clintons, the closest thing Republicans have had to an October surprise in their favor has been the news about rising premiums for those getting health coverage through the Obamacare exchanges.

The media treatment of these increases has displayed a bias that Trump is not likely to throw a tantrum about: the coverage is all too often skewed in a way that boosts the arguments of the repeal and (maybe) replace crowd. Too many reporters and pundits seem to take it for granted that the insurance companies have good reasons for boosting rates and that their decision to do so is a reflection of flaws in the system.

As a supporter of the single payer model, I do not hesitate to admit that the Rube Goldberg mechanism created by the Affordable Care Act to deal with the uninsured is far from ideal. In fact, one of its main flaws — the central role given to private insurance — is what’s behind the current problem.

Let’s not forget that the ACA was in a sense an attempt to rehabilitate insurance companies such as Aetna and Humana that were among the worst corporate villains of the 1990s and early 2000s, given their ruthless efforts to deny coverage.

The Obama Administration has gone too far in treating the companies as partners rather than adversaries in the implementation of the ACA. Although the insurers ultimately went along with restrictions on their practices — in exchange for being given a captive customer base — they have not changed their stripes entirely.

They are clearly impatient with the ACA’s growing pains and have lost none of their yearning for profit maximization. Whereas in the past the insurers would refuse to pay for specific treatments and would decline to renew the policies of certain subscribers, now they drop out of certain exchanges or they jack up their premiums.

At the same time, the biggest insurers are seeking to exercise greater dominance over the entire system by acquiring their competitors. Those commenting on the rate increases usually fail to mention that Aetna announced plans to acquire Humana, and Anthem proposed to buy Cigna. The two proposed deals, worth a total of about $85 billion, would reduce the number of major for-profit health insurance companies to just three.

Fortunately, the Justice Department announced its opposition to the mergers back in July. Yet there is no reason to believe that the companies have given up. In fact, both the retrenchment in their exchange activity and the premium hikes should be seen as bargaining chips in the battle over the mergers. Anthem, for example, made this pretty clear during an investor call July when it linked an expansion in its involvement in the exchange market to approval of the Cigna deal.

Faced with a choice between giving three companies (UnitedHealthcare being the third) tremendous market power and seeing the big insurers leave the Obamacare exchanges entirely, the company would be better off with the latter — especially if the foolhardy decision to eliminate a public option is finally rectified.

Insurers Show Their True Colors

Thursday, August 4th, 2016

healthcare-profitsOne of the key building blocks of the Affordable Care Act was the notion that insurance companies would compete with one another to offer good deals to the uninsured once that population was required to purchase coverage. That captive market is not working out as well as hoped.

Just the other day, Aetna became the last of the five major national carriers to project a loss on ACA business for 2016 while announcing the cancellation of a planned expansion of its participation in the ACA state exchanges and a reevaluation of its current involvement. This came in the wake of recent news that UnitedHealth and Humana would also be cutting back on their exchange offerings.

These carriers attributed their moves to higher than expected medical costs among exchange participants. For all the talk about a reformed health insurance industry, the companies still operate according to a perverse dynamic. They make money when more people don’t seek healthcare services. The insurers can’t get away with many of the tricks they used in the past to deny coverage, but they can still walk away from certain market segments such as ACA plans when profits are not as high as they would like.

The steps by Aetna and the others will intensify what is already a dwindling amount of competition in some of the state exchanges. Several are in a situation in which only one insurer is expected to offer marketplace plans. The result is a kind of single payer situation, though not in the good sense.

All of this is happening while the major insurers have been trying to diminish competition in another way — by trying to merge with one another. Aetna has been seeking to acquire Humana, and Anthem wants to join forces with Cigna. The two proposed deals, totaling about $85 billion, would reduce the number of major players to three.

Last month, the Justice Department and multiple states filed challenges to the two proposed mergers. It is unclear to what extent Aetna’s announcement about a pullback in the exchanges is meant to put pressure on the Obama Administration to back off from its opposition to the Humana deal.

What is clear is that Aetna has a long history of using hard-ball tactics dating back to its purchase of the notorious HMO U.S. Healthcare two decades ago. Aetna tried to apply some of the worst features of managed care — including bare-bones policies — to its health insurance business and ended up with a wave of litigation and regulatory violations. An attempt by plaintiff lawyers to bring a massive tobacco-industry-type case against the industry failed, but Aetna did have to pay $470 million to settle a class-action suit brought by physicians over inadequate payments.

Aetna’s track record was one of the main pieces of evidence showing the folly of the decision by the Obama Administration and Congressional Democrats to shun single payer (or even the public option) and embrace the big insurers. That Faustian choice is coming back to haunt the Dems, who are now trying to resurrect the public option. It may be too late.