Massachusetts Association of Health Underwriters

THE SPECIAL COMMISSION TO MAKE INVESTIGATION AND STUDY RELATIVE TO THE IMPACT OF REDUCING THE NUMBER OF HEALTH BENEFIT PLANS THAT A HEALTH PAYER MAY MAINTAIN AND OFFER TO INDIVIDUALS AND EMPLOYERS

The Massachusetts Association of Health Underwriters (MassAHU) is a state association and chapter of the National Association of Health Underwriters (NAHU).  MassAHU’s membership is comprised of independent, licensed insurance professionals who specialize primarily in health insurance and employee benefits for thousands of businesses and hundreds of thousands of families and individuals across the Commonwealth.  Our association and members have been and continue to be active participants in healthcare reform both on the state and federal levels.     It is our understanding that this Special Commission has been tasked with examining the following:

• Determining the administrative costs associated with paying claims and submitting claims for multiple health benefit plans on health payers and providers;
• Determining the costs associated with reducing the number of health benefit plans on consumer and employer choices;
• Determining the impact of limiting the number of health benefit plans on competition between and among insurance payers, including but not limited to, tiered products, limited network products and products with a range of cost sharing options; and
• Determining the potential for disruption to the market resulting from closing a health care payer’s existing health benefit plans.

The law does not require that the commission recommend that the number of health benefit plans be reduced, but to report their findings on the potential impact a reduction of health plans might have.

 As the association that represents thousands of employers and consumers in the Commonwealth of Massachusetts – with the primary responsibility for understanding their unique needs, goals, objectives and challenges – we have significant concerns with the thought process behind this provision of Chapter 288.  Why?  Because we believe in the principles of free markets, choice and competition drive down cost and improve quality – limiting the number of health plan options doesn’t support those principles.

According to world-renowned economist Milton Friedman, basic economic theory suggests  that free markets, choice and competition spur innovation, improve quality and drives down costs.  If you look outside of healthcare – in almost every other area of our lives, this premise  holds true – so why is healthcare different? 

MassAHU believes the lack of transparency in provider to health plan contracting (unit cost) and responsibility for living a healthy lifestyle and making informed healthcare choices (units of service) is ultimately what contributes to the rising costs of health insurance.  Health insurance is expensive because healthcare is expensive.  To suggest limiting free markets, choice and competition will drive down the cost of health insurance ignores this basic economic theory.

 MassAHU’s position on rising healthcare costs  can be framed around three fundamental principles: 

1. Transparency of cost and quality

Notwithstanding important provisions of contract law, information about provider price and performance is essential and a significant driver of rising healthcare costs.  Without transparency, it is next to impossible to ask consumers to make informed healthcare choices when they do not have the access to information to help them make those choices.    MassAHU recommends making ALL provider contracts with health plans transparent – and while quality measures are also important to those decisions, we do not believe the absence of that information should prohibit the disclosure of those prices.  Similar to the thought process of MA Healthcare Reform – provide universal access to health insurance first, then address cost – we believe provider costs need to be transparent to the consumer and then allow the provider community to support their prices with quality information. 

2.      Reduce the variation in the rates charged by providers

While payment reform may result in better integration of care by rewarding quality over quantity, its full benefit will not be realized unless we address the market clout of certain providers.  Differences in prices between and among providers should be based on the quality, acuity and complexity of the patients served, not brand or market clout.  Expansions by academic medical centers into suburban communities have increased prices by steering patients away from community hospitals despite research that community hospitals offer comparable, if not superior, care in a more cost-effective setting.  The January 29, 2010 report from the Attorney General pinpoints this issue as a major driver of rising healthcare costs and MassAHU believes it is a significant driver of rising costs.

3.      Restrict and/or eliminate  new costs on small businesses

 Shifting state costs onto health plans and employers through new fees, assessments, or surcharges to fund state programs or mandating new benefits will make it more difficult for employers to find affordable coverage options and will do nothing to address the underlying factors driving health care costs.  Providing businesses with a range of coverage options and price points is essential to meeting the unique needs of employers and consumers dealing with the rising cost of healthcare.  Reducing the number of health plan product options restricts free markets and limits competition and choice.  The state should re-examine its standards for minimum creditable coverage (MCC) to provide more flexibility in benefit plan design and ensure that the standards concerning deductibles and out-of-pocket maximums are indexed with the rising cost of health care.  Finally, the state should work to ensure that implementation of Federal Health Care Reform does not impose new costs on employers who are complying with state standards.

The above principles are the basis for a meaningful discussion on reducing healthcare cost increases.  To suggest that limiting free markets, competition and choice will reduce costs in a meaningful way is akin to focusing on the symptoms rather than the underlying disease. 

MassAHU does not support the supposition that there are too many products in the market and that they are too complex.  Basic economic theory and the demand from our clients for choice and competition are the tenets of our thought process.  We need to provide small businesses a range of coverage options and price points in order to match their needs with comprehensive, affordable health plan product coverage.  Higher quality and lower cost health benefit plans are what our clients want  - not restricted choice and limited competition.

 

MassAHU's concerns with SB 2437

MassAHU would like to acknowledge and support the following in Senate President Murray's Bill, SB 2437, An Act to Promote Cost Containment, Transparency and Efficiency in the Provision of Quality Health Insurance for Individuals and Small Businesses.  MassAHU supports addressing stabilizing and controlling cost in health care insurance: the Move to an Annual Open Enrollment, to Eliminate Age Factor Brackets, to Reduce Inappropriate Use of Individual Coverage and to Establish a High Risk Reinsurance Pool.   However, we have significant concerns over several sections of Senate Bill 2437, specifically Sections 23, 24, 26, 27, 37, 38, 41, 42, 44 and 54 and concerns in Section 13 in the Amendments relating to the allowance of Association Health Plans for small businesses in Massachusetts.

 

Any legislative initiatives in Massachusetts on plan design should be considered in light of how they will deliver value, enhance competition and provide choice in the market place.  MassAHU recommends that licensed producers be used in the distribution of products in the state, both individual and group, including all Connector products.  Health plans use agents in 90% of their product distribution as the most cost effective means because the role of the agent as a licensed (and regulated) professional provides value at a minimal cost.  For the most part, health insurance products and plan designs evolve around market research and consumer demand.  

a.   Requiring health plans to offer selective network plans is dictating a solution to the market legislatively rather than allowing innovation and market responsiveness to develop solutions to pricing concerns.   MassAHU therefore recommends that provisions such as found in Senate Bill B 2437, Sections # 23 and # 24 should not be included in legislation.

b.   Capping HMO deductibles limits choice by consumers and by employers who may be interested in offering consumer directed high deductible health plans. 

c.    Requiring everyone to obtain prescription coverage as part of the minimum credible coverage requirements limits choice by consumers who may prefer holistic medical approach and/or who wish to self insure their prescription needs.  MassAHU recommends passage of an endorsement to MGL of 956 CMR 5.03(2)(a) through (h)  to allow consumers to purchase MCC without prescription coverage.

d.   Restricting the number of plans and/or design of such plans to be offered in the market serves to limit choice and competition in the market, both of which ultimately impact the price of such insurance products.  MassAHU recommends removal of provisions found in Senate Bill 2437, Section #54.

 

2)   MassAHU’s position is that the Connector should not duplicate distribution of products in the employer-based market, should not have exclusive products or pricing arrangements in the market, and should not use taxpayer dollars to solicit currently insured persons.  The Connector needs oversight to ensure the scope and reach of its products and services are appropriate to the task of assisting the uninsured to find insurance.  Special attention should be paid to other Connector/Exchanges models which focus on directing people to insurance, based on financial need, medical need, etc.   Brokers have played a vital role in the communciation, implementation and on-going support of the landmark healthcare legislation of 2006.  As a trusted source, licensed agents are invaluable in the communication channel.

a.   Regarding Section 40 in SB2437, on the Commission Study on Connector Exclusivity, MassAHU recommends implementation of the Oversight Commission should be immediate with report of findings to full legislature on 10/31/10. 

b.   No wellness discounts that are not also available in ‘standard’ distribution market.  MassAHU recommends amending the SB 2437, Section 38 to allow health plans to include wellness discounts in their standard pricing regardless of the market through which products are distributed. In Section 38 (c), Wellness Programs are discounted by 5% through the Connector. 

c.    Individual health plans distributed by whatever means deemed appropriate by the health plan (whether through direct in-house sales, producer-driven sales, and/or Connector sales).  MassAHU recommends striking Section 26 from SB 2437.

3)   New Massachusetts initiatives which are already addressed in some manner in the federal health care reform legislation should not be included in any reform legislation.  We should avoid having to reconcile differences in the federal vs. state mandates.   Having two sets of standards adds to the cost of insurance in Massachusetts and confusion on the consumer level.  (Federal legislation is already working on provisions of determining Minimum Loss Ratios (MLR) for example.)  MassAHU recommends removal of provisions for MLR as described in Section 108 and 108A of Chapter 175 and replacing it with the MLR as determined by the NAIC definition of Medical Loss Ratio. The NAIC definition of the Medical Loss Ratio is due out by the end of this year 12/31/2010

 

4)   The proprietary and budgetary impact of using UMass Business Development Center or any public, state or locally funded resources is a duplication of existing services by qualified professional licensed brokers and a duplication of infrastructure and distribution channels already in place.   Section 44, in SB 2437 states: Notwithstanding any special or general laws to the contrary, the Massachusetts small business development center at the University of Massachusetts, as funded shall develop and implement a small business health insurance assistance program to provide free and confidential, technical assistance, counseling and educational tools for eligible small businesses as defined in chapter 176J of the General Laws, seeking to purchase small group health insurance. The program shall, to the greatest extent possible, coordinate with existing chambers of commerce and other small business associations to develop common materials, conferences and educational seminars for small businesses.  MassAHU is concerned that these consultants will not be licensed, professional brokers and the revenue source to fund this duplication of services be pulled from Education, Mental Health or other departments that are already drowning in  budgetary cuts.

 

5)   Massachusetts reform should work to preserve the level playing field and community rating that has been created through two rounds of health care reform in 1996 and in 2006.  Establishing Association Health Plans, or cooperative health plans, in the under 50 insurance market only fragment the ability to create universal access and pricing in the market.  Association Health Plans do not help to lower costs in the market, do not produce measurable administrative savings, and work to upset the market and pricing outside of the associations.  (Please refer to our prior position statement on AHPs as attached herein).  MassAHU recommends against provisions to establish Association Health plans in the under 50 market in Massachusetts.

 

MassAHU has addressed several concerns in regards to the SB 2437, Act to Promote Cost Containment, Transparency and Efficiency in the Provision of Quality Health Insurance for Individuals and Small Business.   It is our hope that as the House as it reviews SB 2437 and adopts its own version that MassAHU’s recommendations will be considered insuring that this legislation address not only cost containment, transparency and efficiency but also maintains choice and stability the market. 

Be careful what you wish for America…

As the economy continues to struggle with high unemployment and massive amounts of new debt – Congress enacted the Patient Protection and Affordable Care Act, also known as “ObamaCare.”  This new law will insure 32 million more Americans – 50% of them will be enrolled in Medicaid – tax payer subsidized health insurance – which will force many states to take an active role in managing healthcare, raise taxes and grapple with exponentially higher health insurance premiums.  How do I know this?  Because we are living with it now in Massachusetts – be careful what you wish for America…here is a preview of things to come.

 

Almost four years after implementing the Massachusetts healthcare reform law (MassCare), the private market is “wrestling” with state government to address rising health insurance costs.  What was lost in the national debate and threatening the sustainability of MassCare is the fact that health insurance is expensive because healthcare is expensive.

 

Massachusetts is home to 4 of the top 12 health plans in the country as ranked by U.S. News and World Report in 2009.  All 4 of those health plans are non-profits that spend more than 88% of premiums on medical care, the balance on administrative costs.  Three of them posted significant operating losses totaling just under $200 million collectively.  Pointing the finger at health insurers is politically convenient, but significantly misguided.

 

Before you read on – I must disclose that I am a co-owner of an employee benefits firm and serve the insurance needs of over 350 employers and 21,000 employees primarily located in the New England region.  As a result, my commentary may be perceived as self-serving because in part, I earn a living through the sale of health insurance.  However, what’s not so well known is that our firm is passionately committed to partnering with our clients to reduce health insurance costs through Consumer-Driven Health (CDHP) and Wellness plans – a proven solution built on a foundation of personal responsibility – and a program that pays us much less and requires much more work.

 

Intelligent, Genius or Neither?   

 

It has been said, the mark of intelligence is learning from your own mistakes and the mark of genius is learning from other people’s mistakes.  Did Congress apply “intelligence or genius” and learn from Massachusetts when they created ObamaCare?  Sadly, the answer is no – ObamaCare is MassCare with $500 billion in Medicare cuts and a significant number of new taxes – and that’s really disappointing. Rather than solve the real challenge of rising costs, MassCare was signed into law in 2006 to insure the uninsured.  Its foundation is an individual mandate requiring every resident age 18 or older to purchase health insurance and provide subsidies to those who can’t afford it.  Prior to the passage of MassCare, Massachusetts ranked 3^rd in the country for the lowest number of uninsured…now it is #1, insuring almost 98% of its residents compared to the national average of 83%.  Almost all agree – this was a noble cause…but at what cost?  What did it really accomplish?

 

What did MassCare accomplish?

 

In March 2010, Massachusetts Treasurer Tim Cahill said, “our healthcare reform law is a fiscal train wreck.”  Initially, MassCare was expected to cost $88 million a year – today the MA healthcare budget exceeds $4 billion and our fiscal budget for 2011 is $294 million under-funded because of this law – simply put, Massachusetts can’t afford it.

 

Before the advent of MassCare, the state implemented a slew of insurance reforms like guarantee issue underwriting for small groups, no pre-exiting condition limitations, unlimited lifetime maximums and “children” up to age 26 to be carried on their parent’s health insurance plan provided they were students or dependents.  Most people believe these are reasonable protections, but also acknowledge they drive up cost when coupled with dozens of state mandated benefits like infertility coverage.

 

According to the Massachusetts Department of Revenue, it is estimated that roughly 5% of some 3.2 million taxpayers or 450,000 to 650,000 residents were uninsured.  As of March 2010, MassCare insured 408,000 of them – nearly 2/3 of which are enrolled in state or federally-subsidized health insurance.  3% were deemed able to afford health insurance, but self-assessed a penalty for not having it. The remaining 2% were exempt from the requirement to have insurance either because they could not afford to buy it or because of their religious beliefs.

 

What LESSONS does MassCare offer?

 

Lesson #1 – the individual mandate increased cost.  Why?  It is common knowledge that most people will find a way to do what is in their best interests.  An individual mandate doesn’t work if it’s not accompanied by strict rules (i.e., individuals must buy insurance at certain times of the year and keep that insurance for at least a year) and a steep penalty for non-compliance (i.e., more expensive than buying a low cost health insurance plan).

 

These design flaws created a phenomenon called the “jumpers and dumpers.”  Without the proper safeguards in place, people quickly figured out that they could purchase a health insurance plan at any time they had healthcare needs (like buying auto insurance after you get in an accident), drop that coverage after they received care and pay a pro-rated penalty for the number of months they weren’t insured.  These people paid a fraction of the cost for their care and “gamed” the individual mandate – this has translated into higher premiums for everyone.

 

Lesson #2 – the merger of the individual and small group markets increased cost.  MassCare merged the individual and small group markets to provide individuals with an opportunity to reduce their health insurance rates by as much as 20-25%.  Sounds like a good idea – but in reality it shifted the financial burden to small employers (<50 employees) by as much as 5-7% on top of 10-11% healthcare trend.

 

Lesson #3 – the creation of minimum creditable coverage increased cost.  Rather than protect consumers from a lack of full disclosure about what an insurance plan covers, the law went a step further and forced tens of thousands of Massachusetts residents to buy an insurance plan they didn’t want, couldn’t afford or both.

 

Lesson #4 – the law decreased access and increased wasteful spending.  Rather than improve access and reduce the reliance on hospital emergency rooms, MassCare created more patients with no additional doctors and increased emergency room usage by 17%.  According to the Boston Business Journal, Massachusetts has the highest number of physicians per capita of any state in the country – unfortunately, it is also boasts the longest wait times – an average of 46.7 days. 

 

What is the BIGGEST lesson learned?

 

According to a 2008 report by Oliver Wyman commissioned by the Massachusetts Division of Insurance, between 2002 and 2006 the total cost for medical services increased by 55% or an average of 11.5% per year; plan designs are 27% richer (i.e., lower deductibles and out-of-pocket costs) and costs are 15% higher than the nation.  Healthcare spending is expected to double by the year 2020, rising 8% faster than the Gross State Product, threatening jobs and economic sustainability – and health insurance rate increases for small groups (< 50 employees) have averaged between 10–32%.

 

At the risk of over-simplifying the biggest lesson, MassCare created an unsustainable “access” model, because it didn’t address cost at the same time.  Instead, “Massachusetts kicked the cost can down the street” – and now it is confronting the real problem –  rising healthcare costs.

 

What’s REALLY driving costs higher?

 

Recently, the Massachusetts Attorney General issued a report on healthcare cost trends and drivers.  The report concluded that the contracts between doctors/hospitals and health insurers is the primary driver of health insurance premium increases.

 

The report concluded that prices for healthcare services are:

 

1.   Not tied to the quality of care; the sickness of the people being served; level of Medicare/Medicaid patients; or the underlying cost structure to deliver those services

2.   Doctor/Hospital market leverage based on size, geography and brand is the biggest driver of price increases

3.   Increases in prices paid to doctors/hospitals are the primary driver of health insurance premium increases not excessive health plan administrative costs

 

Health insurance costs are rising because healthcare providers get what they negotiate – and we all pay the price because for the most part, these costs are not transparent to us.

 

Where do things stand now?

 

In response to public pressure over rising premiums and a competitive race for re-election, Governor Patrick is playing politics with the issue by attacking health insurers and accusing them of being profit-driven, serving the needs of company executives at the expense of their policyholders.  It is temporary comfort for voters, but in Massachusetts it is simply not true.

 

The Massachusetts Health Insurance Market and the Governor’s Directive

 

Massachusetts is dominated by not-for-profit health plans that spend roughly $.90 of every premium $$ paying for doctors, hospitals and prescription drugs.  Instead of focusing his energy on the real problem – rising provider costs – Governor Patrick directed the Commissioner of Insurance to reject any rate filings that exceeded 4.8% and set aside prudent actuarial principles.

 

What the Governor doesn’t appear to understand is that his actions are highly disruptive to the market and will only exacerbate the cost problem.  Capping premium rate increases for all small groups renewing in April is fiscally irresponsible because it ignores the real problem and asks insurers to accept premiums that are less than what it costs to provide the necessary care.  It’s like asking an automaker to sell a car for $15,000 that costs $20,000 to make – how long would that automaker survive?

 

On the surface, the Governor’s directive sounds like a good idea – but it only addresses the symptoms.  The artificially low premium rates health insurers are being forced to charge are not based on actual costs and the “unintended effect” of his directive will cause insurers to drain their claim reserves, significantly weaken their financial position and place many of them (if not all eventually) in receivership.  Does Massachusetts really want to bankrupt 4 of the top 12 health plans in this country?

 

The Insurance Exchange aka “The Connector”

 

After a $25 million one time appropriation and a $5 million annual payroll, the insurance exchange called “The Connector” was created to connect the uninsured with insurance.  In addition to the state or federally-subsidized Commonwealth Care products – the Connector created a suite of non-subsidized private health insurance products called Commonwealth Choice.  Those products insure 21,000 participants, many of whom previously bought health insurance from their employers.

 

Faced with budget shortfalls and a threat to its existence, the Connector recently purchased a private distributor of health insurance (Small Business Service Bureau) with taxpayer money, gained unfettered access to Department of Revenue tax records and then spent taxpayer money marketing insurance products to over 170,000 small businesses.  Somewhere along the way, the Connector drifted into “Scope Creep” – and away from the intent of the law.  Connector officials will tell you they are following the law – but a closer look suggests that is a liberal interpretation and not the intent of the law as it was constructed.

 

As a result of these actions, the market is left to ponder several important questions:

1.   Where does the law suggest that the Connector establish itself as a distributor of small group private health insurance products to employers and consumers who are already insured?

2.   Where does the law suggest the Connector can use taxpayer money to acquire a private entity to help market those products?

3.   Where does that law suggest the Connector leverage confidential taxpayer information to market those products giving itself an unfair competitive advantage?

4.   Why was the commission to review and analyze the Connector’s effectiveness and scope of authority never convened?

 

Is this a preview of things to come?

 

Our healthcare system is the best in the world – and few will argue it’s broken and in desperate need of reform – but is more government involvement the answer?

 

Solving the rising cost of healthcare is akin to working with a “rubix cube” because it has so many moving parts and possible combinations to get the “right answer.”  But one thing is clear – health insurance is expensive because healthcare is expensive.

 

MassCare was designed to insure the uninsured and achieve near universal health insurance.  By most accounts, Massachusetts can claim success on that measure.  However, the architecture of the law has some significant flaws in its foundation and lessons worthy of not repeating on a national level – the question remains – will Congress and the Administration learn and apply those lessons before it’s too late?

 

Be careful what you wish for America…just look at Massachusetts to see OUR future if we stay on the present course.   

 

Is it Scope Creep or True Intent?

In 2006, MA passed landmark healthcare reform legislation to address the “easy” issue with healthcare – insuring the uninsured. Prior to the passage of that law, MA ranked 3rd in the country for the lowest number of uninsured…now we are #1 because we insure almost 98% of our residents when the national average is 83%. All agree – this was a noble cause…but at what cost and importantly, what did we learn and how is it affecting us now? More specifically, merging the non-group and group markets sounded like a good idea – but in reality it has significantly driven up cost for small employers because of increased healthcare spending by the all the newly insured residents with pent up healthcare needs, which has translated into higher premium rate increases.

In response to public pressure on this issue, the government’s answer to this serious challenge is to gather information on the market dynamics (we support) AND “meddle” with the private insurance market to “fix it.”

What’s not working?
Our state government is allowing two things to happen that are highly disruptive to the market and will only exacerbate the cost problem:

(1) the Governor’s directive to cap premium rate increases at 4.8% for all small group employers renewing in April is fiscally irresponsible and

(2) the Connector’s expansion into the small group market through a strategic partnership with SBSB, a private market intermediary of health plans.

The Governor’s directive sets aside prudent actuarial risk management practices to temporarily comfort voter frustration with rising healthcare costs. On the surface, this sounds like a good idea – but it only addresses the symptoms and not the underlying issues. The “unintended effect” of this policy directive will be the probable demise of several MA-based non-profit health plans.

The Connector was established under Chapter 58 of the MA Healthcare Reform Law and it is governed under Chapter 176Q. Its purpose is to:

1. Connect individuals and small businesses with health insurance

2. Reduce the administrative burden of providing health insurance

3. Make it easier to find affordable health insurance

4. Allow more workers to buy insurance with pre-tax dollars

5. Provide portability of insurance to workers who change jobs

Somewhere along the way, the Connector drifted into “Scope Creep” – and away from the intent of the law – to insure the uninsured. Connector officials will tell you they are following the guidelines under Chapter 176Q – but a closer look suggests that is a very liberal interpretation of the law and in our view not the intent of the law as it was constructed.

After a failed attempt to build a viable small group product – the Contributory Plan – in which the Connector spent a considerable amount of taxpayer dollars developing and promoting, the Connector entered into a strategic partnership (acquired) with SBSB taking over its intermediary block of 37,000+ members. Where does the law suggest that the Connector establish itself as a distributor of small group private health insurance products to employers and consumers who are already insured?

As you know by now, the Connector is mailing EVERY small business (less than 50 employees) and aproximately 170,000 businesses in the Commonwealth a letter soliciting them for their business and announcing the launch of their new group health insurance plan – "Business Express." This is disturbing on several levels because it is duplicating expense and misleading the public. There is NO RATE ADVANTAGE to purchase health insurance from the Connector.

Where do we go from here?
The state government is trying to address the cost challenge – and we applaud them for their efforts – and we look forward to the upcoming dialogue at the AG sponsored public hearings. In the meantime, we are asking our members to:

Strengthen our voice by helping us build your professional MassAHU

JOIN your Political Action Committee -  MassAHU PAC and national Political Action Committee - HUPAC

Contact your district representatives and ask them if they understand the private insurance market ramifications of Governor Patrick’s directive on price controls?

Contact your district representatives and ask them if they think its good policy to allow the Connector “scope creep” beyond the intent of the law

Contact the Division of Insurance and ask them if they think its good policy to endorse the Connector’s misleading marketing information?

Contact your district representatives and ask them if they think its good policy to allow the Connector access to other state departments for marketing information (e.g., Department of Revenue) as it continues to solicit business?

MassAHU will continue to address your concerns and advocate for your positions on the issues. We will help the Connector Board understand the VALUE of our independent role in the health care buying equation – and share perspective on how our members provide guidance to employers, business and industry groups as well as consumers all across our state. 

BUT – MassAHU can’t do it alone! Member involvement is critical if MassAHU is to continue to be your VOICE and ADVOCATE on Beacon Hill. Every one of us can make a difference if we care to get involved. Contact your legislators and make a difference in determining whether legislation will pass or fail. Help us help you by getting involved!

Testimony Given on LTC Rates at Joint Committee on Financial Services Hearing

Good afternoon Mr. Chairman and members of the committee.  My name is Tobe Gerard. I am here today in 4 capacities: 1) As an owner of an insurance agency specializing exclusively in long term care insurance; 2) As a member of the Board of Directors of the Massachusetts Association of Health Underwriters 3) As a member of the National Association of Health Underwriters’ Long Term Care Advisory Committee; and 4) most importantly, as a consumer who is a long term care insurance policyholder. 

I speak to you today in support of Senate Bill 462 with regard to the enactment of our state version of the NAIC LTC Model Act and Regulation, as well as in support of House Bill 979 with regard to the protection of consumers in the purchasing of long term care insurance.

 

Senate Bill 462 would allow us to join with other states that have enacted standards for long term care insurance, and would enhance the role of the Division of Insurance in evaluating rate adequacy and reporting requirements by insurance carriers.  Though all 50 states have long term care insurance laws, my understanding is that Massachusetts is one out of only four states that does not have a state version of the NAIC LTC Model Act and Regulation. 

 

Senate Bill 462 sets minimum standards that insurance products need to meet to qualify as a long term care insurance policy.  In addition, passage of Senate Bill 462 and House Bill 979 will allow more attention to be focused on protecting consumers from rate instability. 

 

It will allow for more regulatory attention to be paid to filings for premium rate increases, and it will allow for stricter enforcement of rate stability.  All of this is necessary to protect the consumer.

 

Due to overly aggressive rate increases on the part of some long term care insurance companies, a number of Massachusetts residents are being priced out of a product they purchased with a great degree of foresight not even 10 years ago.  Consumers who weighed and measured their options and then made appropriate purchasing decisions should not be penalized. Rates on existing long term care insurance policies in Massachusetts have risen as much as 72.8%.  Considering skyrocketing health care costs, it is understandable that insurance companies would seek increased rates.  Under current economic realities, a 20% increase in long term care insurance premiums could be considered reasonable, but 72.8% seems opportunistic.

 

I urge you to pass Senate Bill 462 and House Bill 979 so that the consumers of Massachusetts can have confidence that the long term care insurance policies they are buying today will respond to their future needs appropriately.

As we are all living longer, long term care insurance has become a crucial insurance coverage to be included in the estate and financial plans of many Massachusetts consumers.

Tobe Lynn Gerard, CSA, CLTC, MBA
Tobe Gerard Insurance, L.L.C.

I speak to you today in support of Senate Bill 462 with regard to the enactment of our state version of the NAIC LTC Model Act and Regulation, as well as in support of House Bill 979 with regard to the protection of consumers in the purchasing of long term care insurance.

 

Senate Bill 462 would allow us to join with other states that have enacted standards for long term care insurance, and would enhance the role of the Division of Insurance in evaluating rate adequacy and reporting requirements by insurance carriers.  Though all 50 states have long term care insurance laws, my understanding is that Massachusetts is one out of only four states that does not have a state version of the NAIC LTC Model Act and Regulation. 

 

Senate Bill 462 sets minimum standards that insurance products need to meet to qualify as a long term care insurance policy.  In addition, passage of Senate Bill 462 and House Bill 979 will allow more attention to be focused on protecting consumers from rate instability. 

 

It will allow for more regulatory attention to be paid to filings for premium rate increases, and it will allow for stricter enforcement of rate stability.  All of this is necessary to protect the consumer.

 

Due to overly aggressive rate increases on the part of some long term care insurance companies, a number of Massachusetts residents are being priced out of a product they purchased with a great degree of foresight not even 10 years ago.  Consumers who weighed and measured their options and then made appropriate purchasing decisions should not be penalized. Rates on existing long term care insurance policies in Massachusetts have risen as much as 72.8%.  Considering skyrocketing health care costs, it is understandable that insurance companies would seek increased rates.  Under current economic realities, a 20% increase in long term care insurance premiums could be considered reasonable, but 72.8% seems opportunistic.

 

I urge you to pass Senate Bill 462 and House Bill 979 so that the consumers of Massachusetts can have confidence that the long term care insurance policies they are buying today will respond to their future needs appropriately.

As we are all living longer, long term care insurance has become a crucial insurance coverage to be included in the estate and financial plans of many Massachusetts consumers.

Tobe Lynn Gerard, CSA, CLTC, MBA
Tobe Gerard Insurance, L.L.C.

Overview of the Affordable Health Plan

The Affordable Health Plan (HB-4452) would require health care providers and health insurers to limit their costs to help small businesses and individuals.  The bill would limit the rates doctors and hospitals charge for this one product to no more than 10% above what the federal Medicare program pays and would limit insurer profits on all products sold to small employers to no more than 2%. Taken together, the Affordable Health Plan could reduce premiums for many small businesses by as much as 22%. The state legislature is preparing to take action on Representative Harriett L. Stanley and Senator Richard T. Moore's bill soon. 

MassAHU along with SBANE, MBA, NBT, AIM, Worcester Chamber of Commerce, SBSB and MAHP all support the Affordable Health Plan which provides some relief to small businesses and individuals. 

MassAHU Promotes Bipartisan Health Care Reform Efforts

Massachusetts (MA) implemented sweeping healthcare reform in 2006 and the law was passed with bipartisan support.  What is the good news?  Massachusetts ranks #1 in the country with 97% of its residents insured.  What’s the bad news?  Massachusetts healthcare budget is exploding, we have longer wait times to see a doctor and healthcare costs are still rising at a double digit pace and placing a significant strain on employer’s budgets all across the state.  What did the election of Scott Brown to the US Senate tell us?  It told us that the people of Massachusetts understand the federal healthcare reform bill (which is largely modeled after MA) will cover more people, but it will NOT lower costs.  The election of Scott Brown sent a message to Washington DC – we want balance in government and a bipartisan approach to healthcare that will adopt our best practices and learn from our mistakes.  We want to “start over” and create a bill that will lower costs and improve the quality of the healthcare we receive.

The Massachusetts Association of Health Underwriters represents over 1,000 health insurance agents and brokers who provide insurance for millions of Massachusetts residents. 

Business Perspectives on Health Care Reform

Health care reform is a complicated challenge and one without a simple solution.
 
Where do we start?  Let's look at the best practices and lessons learned from the Massachuestt's "experiment."  Three years ago, the state implemented health care reform with the goal of universal access and lower cost.

What were the results?

Access
Massachuesetts ranks No. 1 in the country with 97 percent of it residents insured.  But Massachusetts' health care budget is also exploding and we have longer wait times to see a doctor.  The state has the highest number of physicians per capita in the country and the longest wait times - an average of 46.7 days.

Best Practice No.1: Individual mandate with the elimination of pre-existing condition limitations and guarantee issue underwriting.
Best Practice No. 2: Subsidies for those citizens who are in financial need.

Lesson No. 1: A government-run, public option isn't necessary.  Partnering with private health insurers makes more sense. The notion that government will create competition is flawed.  The government would threaten the long-term viability of private health insurance.  Why? You can't be a referee and a player at the same time and call the outcome objective when you play by different rules.
Lesson No. 2: It is socially responsible for an employer to offer health insurance. An employer mandate isn't necessary because most employers offer health insurance to attract and retain their employees - in most cases, those that don't offer it can't afford to do so without eliminating jobs.

Lost Savers
1.  Tort Reform - According to Investor's  Business Daly, medical liability adds $60 billion of cost to the system - and the CBO suggests that the defensive practice of medicine adds more that $700 billion of unnecessary care and does nothing to improve American's health. Why not consider tort reform so providors can practice medicine instead of protecting their liability?

2. Evaluate State Mandates - When you buy a health insurance plan, that plan includes a list of services that must be covered, called mandates.  In Massachusetts, we have 43 state-mandated benefits, including infertility coverage.  By some estimates, this benefit adds 7 percent to the cost of insurance.  Infertility treatment is valuable  - but mandating the benefit for everyone adds unncecessary cost.  Why not consider developing a standard set of medically necessary benefits for all states to follow and make other benefits available for purchase on an employer/individual basis?

3. Evaluate Minimum Creditable Coverage (MCC) - Massachusetts established a minimum level of benefits for a health plan to be compliant with the law.  This provision of the law is well-intentioned but again increases the cost of insurance. In Massachuestts, 187,000 people lacking prescription drug coverage now have to buy that coverage even if they don't want it or can't afford it.  Why not consider stronger consumer protection laws that mandate full disclosure?

4. Allow Interstate Competition and Tax Favorability for Individuals - competition drives down cost - government-run, public healht insurance will not create competition.  By some estimates, the country has 1,300 health insurance companies; why not let them compete across state lines?  Employers can buy health insurance on a tax-preferred basis.  Why not allow individuals to buy health insurance on a tax preferred basis?

5. Evaluate Provider Reimbursement - The federal government (Medicare) doesn't pay its fair share of health care because it doesn't reimburse providers adequately.  By most accounts, the federal government reimburses providers $0.75 for $1.00 of health care - while private health insurers reimburse providers $1.25 to make up the difference, and we all pay higher insurance rates as a result.  Providers contract with insurers on a discounted fee-for-service basis.  In most cases, those contract increase the level of reimbursement from year to year to account for inflation.  However, the inflation factor used in those coutracts accelerates two to three times faster than does the general rate of inflation (better known to all of us as health care trend).  Why not consider fixing the annual reate of increase to match overall inflation?

In the end, the direction of national health care reform is still a mystery, though one thing is clear:  This debate is far from over.  I hope all of us take the time to participate in the conversation.

Mark S. Gaunya
Principal, Borislow Insurance
President, MassAHU

MassAHU comments on Payment Reform Commission Report

The Massachusetts Association of Health Underwriters (MassAHU), a membership organization of professional health insurance brokers, consultants and other professionals, shares the concern for affordability of health care in the commonwealth of Massachusetts.  Through the Payment Reform Commission appointed by Governor Patrick, recommendations have been submitted for the restructuring of the health care payment system.  According to this commission, the goal is to make recommendations to reform the current payment system in order to “provide incentives for efficient and effective patient-centered care, and to reduce variations in quality and cost of care”. 

 

While we appreciate the incredible effort that went into this commission’s research, MassAHU is extremely concerned that a small appointed board will determine what payment reform will be without the necessary, vigorous research needed to support this direction.   In keeping a historical perspective on provider payment models of the past, multiple approaches in the market have led to the current prevailing methods.  Some payment methods have disappeared (i.e. the capitation approach) while others have flourished.  This is not to say that the predominent fee for service method works; we share in the perspective that payment reform is needed.  But we do not share in the position that a global solution should be mandated by the state based on a small appointed board.  Instead, we support the enabling of payers and providers to come up with payment reform to meet these goals with appropriate incentives.

 

Health care reform has thus far dealt with accessibility of insurance to all citizens, affordability of insurance through increased subsidies, and minimum insurance coverage standards.  MassAHU feels that before we proceed in sweeping reform of health care payment system, we need to focus on the underlying issues that were identified by the reform commission’s study, as well as other statistical studies, and the initial goals of health care reform in general:

 

→ Lack of sufficient primary care access in the state, which contributes to other issues including low compliance on preventive screenings and management of chronic illness in adult population, as well as overuse of emergency room for non-emergency and/or preventable symptoms

→ Lack of transparency in both cost and quality data for consumers

→ Lack of meaningful medical malpractice reform

→ Lack of incentives for consumer engagement in healthy lifestyles/wellness

While the commission’s recommendations may indeed work for some providers and payers, MassAHU is concerned for the impact on employers and consumers we work with in designing  quality, affordable health insurance programs.  Without addressing the above named issues first, we will not be able to improve the quality of care or the runaway cost of care.  Through the history of our payment system, we have moved so far away from accountability – that is accountability for your own health as a consumer, and accountability for the cost/results as a provider – that it is time to make this a priority and build on payment reform in cooperative partnerships.   Without addressing the cost of care, we cannot impact the cost of insurance, and without relief in the cost of insurance, we will end up with fewer employers and consumers having insurance.  The ‘bottom line’ in payment reform must be to reduce the cost of insurance to consumers, but we cannot pass such sweeping reform as is included in this commission’s recommendation without further vetting out the potential pitfalls of such reform.

Potential Adverse Consequences to Proposed Changes in FSC regulations

MassAHU is concerned about potential adverse consequences of the proposed changes to the Fair Share Contribution regulations to take effect on October 1, 2009 (114.5 CMR 16:00: Determination of Employer Fair Share Contribution).  We understand the changes are designed to help employers who have applied for relief from the FSC responsibility as part of the annual (and now quarterly) filing with the DUA.  We sympathize with businesses who are struggling to pay their liabilities in this difficult economy.  However, changing the regulations benefits exactly the businesses who, in the spirit of health care reform, are not living up to their ‘fair share’ while upsetting the group insurance market for the majority of businesses who are offering group health plans to their employees. 

 

Background

Businesses in Massachusetts are required to contribute at least 50% of a single health plan cost in order to secure a group health insurance policy according to current health plan underwriting requirements.  In fact, studies show that businesses who do provide health insurance to their employees are actually contributing about 70% of the cost.  In other words, they are doing more than their ‘fair share.’

 

The health care reform legislation regarding FSC is intentionally more lenient than standard group insurance requirements because it sets the minimum employer contribution at 33% of the lowest cost health plan offered by the employer.  When some of the MA health plans indicated they were going to drop their minimum contribution requirements to match the HCR requirement, they were ASKED by the Governor’s office NOT to do this.  The reason is simple:  our administration recognized what would happen as a result – businesses would seek the lowest level of commitment to avoid the FSC and reduce their financial support towards insurance protection for their employees.

 

At Issue

With the increasing cost of health care and health insurance in the state, we are concerned that this change will invite some employers to discontinue their group plan and replace it with a 33% PRA for their employees, fully knowing that the lower paid employees will in most cases not elect it due to affordability.  With no group health plan, this will also ‘free up’ some lower paid employees to obtain subsidized coverage through Commonwealth Care, increasing the burden on the state. 

 

The employers will still be able to meet their FSC requirements by a) offering the 33% PRA, and b) by ‘taking care’ of their management employees to help them purchase individual coverage, increasing their pay to offset the increase in personal insurance costs, and meeting the 25% FSC participation requirement.  In effect, the unintended affect of this policy change will result in fewer people being covered in commercial plans, more people covered under the state, and less employer funding into either insurance or the state FSC.

 

The further we move away from group insurance in our state, the higher the cost to those who remain insured in the commercial market.  With a 33% contribution to individual health insurance, where the standard 75% group health plan participation is no longer a concern, uptake in such a plan will be lower.  People will do the math.  If they have health issues, they will buy the insurance.  If they don’t, they will opt out, even if it means a state income tax liability (because it is lower than the cost of insurance).  This raises the claims cost to the insurance pool, because once again, we will be losing the healthier individuals from the insurance risk pool.

 

Increasing commercial insurance costs directly impacts the employers who are in the commercial market, primarily those very employers who are offering group health plans to all their employees at substantially higher contributions and participation.

 

Summary

Dropping the standards of FSC to allow employers to use the PRA will have an adverse effect on the group health insurance market in Massachusetts.  It will decrease the number of insureds in the state, increase the state’s costs to fund the uninsured through Commonwealth Care, decrease the state’s FSC funds, and increase the commercial insurance market rates.  This is not to say it will all happen overnight, but it will happen as an unintended but damaging consequence to Health Care Reform.

 

In summary, FSC rules already exempt businesses with less than 11 FTE from the requirement.  FSC rules already give employers with 11-50 FTE the leniency to comply with either the 25% participation or 33% contribution.  The $295 assessment is by all standards a very low contribution compared to what Massachusetts businesses who provide group health insurance are contributing to insurance.  Adopting regulations to further exempt employers from the FSC rules in this manner is counterproductive to the objectives of HCR.