Another Unscheduled Change/Delay to PPACA: Smoker's Premiums

[samclem]

According to this CBS report, the government computer systems can't properly compute/accept the required premiums from smokers as computed under the PPACA rules. It has something to do with the conflict between
a) Smokers can be charged up to 50% more.
b) Older insureds can't be charged more than 3x the rate of younger insureds.

Another thing that will reportedly require "at least a year" to fix. Until then--old smokers get artificially lower rates. There's a trend here . . .

 

[Tadpole]

old smokers get artificially lower rates.

Did Medicare add a smoker's fee?

Actually, I have a stupider question. What is a smoker? Is it someone who smoked today. Someone who smoked 1,2,... years ago. Someone who smoked more than 1M camels. What about someone who quit today and promises it is permanent this time? Also, once someone is on smoker's rates do they remain on those rates even if they quit permanently?

 

[samclem]

Did Medicare add a smoker's fee?

Interesting, but is not related to this.
- Is Medicare private insurance? Insurance under the ACA is private insurance.
- The ACA allows insurers to charge higher premiums for smokers. That's the law that was passed by Congress and signed by the President. Private insurance through the "exchanges" (what this is about) is supposed to go on sale starting October, 2013.

 

[MichaelB]

This news is confusing. The math is not a problem. That is, the 3X spread between the lowest and highest rates is still 3x if a 50% penalty is added to each. As an example, if the base rate is 100 and the top rate is 300, adding a 50% penalty to each makes the new rates 150 and 450, still a 3x spread.

There is still little news on this. One article I saw indicated that the real problem is, the surcharge is not 50% but instead "up to 50%" and insurers want to implement it with lower penalties on the younger people. So, it would be +10% penalty on a 26 year old and +50% on a 60 year old. That might make sense, as the health risk to smokers is greater for someone who has smoked for 30 years vs someone not yet 30 years of age.

So, charge the same stiff penalty to all, or charge more for long time smokers?

 

[Janet H]

So, charge the same stiff penalty to all, or charge more for long time smokers?

Who can afford to smoke? Sheesh... a pack is ten bucks at my local minimart...

$10 x 365 days = $3650.00 per year.

 

[Mulligan]

Who can afford to smoke? Sheesh... a pack is ten bucks at my local minimart...

$10 x 365 days = $3650.00 per year.

Although I am not a smoker, you can buy them for way under half that price in MO. State taxes them at 17 cents pack. I believe we voted down a tax increase this past year on them. Something is wrong with us as everyone always likes to kick a smoker and squeeze more taxes out of him.

 

[MRG]

Did Medicare add a smoker's fee?

Actually, I have a stupider question. What is a smoker? Is it someone who smoked today. Someone who smoked 1,2,... years ago. Someone who smoked more than 1M camels. What about someone who quit today and promises it is permanent this time? Also, once someone is on smoker's rates do they remain on those rates even if they quit permanently?

I think insurance companies get to decide that for you. I've been aware that any "misinformation" will be settled when the insurance company gets the bill. Have a death claim, they look at , if you smoke or have, the DRs. can and will inform insurance. Trust me as an ex smoker, you can smell them coming. Obviously there are other signs of "smoking", I don't know how it's defined.

IMHO the insurance company will make sure any mistakes will be resolved in their favor.

 

[Htown Harry]

As an example, if the base rate is 100 and the top rate is 300, adding a 50% penalty to each makes the new rates 150 and 450, still a 3x spread....

So, charge the same stiff penalty to all, or charge more for long time smokers?

In your example, the older smoker has penalty of $150, the younger smoker has a penalty of $50.

It seems to me there is already an implicit penalty on long time smokers built into the percentage-times-a-percentage rate calculation method.

 

[Htown Harry]

Here's something interesting.

Searching for more info I found an April thread on an actuary's discussion board. The "news" of a memo in the AP report cited in the OP's post is something that has been in play for several months.

April 8th post:

Smoking Loads under ACA: "We screwed up, you deal with it" - Actuarial Outpost

Along with others, we found that when submitting the rate template, it resolves to an error when doing this - that the higher-age rates for smokers are greater than 3 times the 21-year-old rate for smokers. We asked CMS about this, and they released a [e-mail] bulletin today.

"Accordingly, we ask that, until further notice, all issuers using the Rating Tables Template and that will be offering non-grandfathered plans in the individual and small group markets implement the tobacco rating factor for their non-grandfathered policies so that older adult smokers are not rated in total more than 3 times of the total rate for a younger adult smoker. One way to accomplish this is if an issuer imposes a 1.2 to 1 tobacco rating factor on a 21-year -old smoker, the issuer should use the same 1.2 tobacco rating factor for the 65-year-old smoker. If an issuer implements the tobacco rating factor with the result that an older smoker is rated up more than 3 times of that of a younger smoker, the submission of the issuer will be rejected by the system. We intend to implement a system change that will allow for processing of tobacco rating factors that vary based on age, and we expect this to be completed after calendar year 2014."

edited to add:

Reading the actuary thread to the end, the "templates" are mentioned often. I found them here:
http://www.serff.com/plan_management_data_templates.htm

The stated purpose of the templates: "These Microsoft Excel workbooks are referred to as "templates" and are intended to create a nationwide standard of plan- and issuer-level data collection for the use of QHP certification, exchange operations, and oversight activities." The final revisions were in May.

My interpretation: The templates are a fundamental building block for starting up the exchanges. Pressed by deadlines to start insurers preparing their ACA rate tables for submission to state and federal exchanges, the CMS folks ran out of time to deal with a macro change that would allow a higher % tobacco surcharge percentage to be applied to older smokers.

 

[ERhoosier]

MichaelB's right that adding a fixed %surcharge for all smokers would be easy to administer & not violate the "3X base premium" rule. The issue is balancing extra HI premium cost to smokers vs extra overall cost of health care delivery to smokers . Setting HI premiums too much higher for smokers could lead more to NOT buy HI, while not charging smokers "enough" would increase premiums to non-smokers to stay within the "3X + low smoking surcharge" rate structure possibly increasing their nonparticipation rate.
What I don't understand is how the Gov't has taken almost 3 yrs to deal with this. The "ran out of time" excuse sounds like the kid claiming the dog ate his term paper night before it was due

 

[MichaelB]

Looks to me like the issue is with the insurers. They don't want to charge the smokers premium to the younger people, just the older ones. They want to have it both ways.

Harry's link shows this is not a new issue, just getting it's turn in the spotlight. The decision would need to be in 2012 to allow the worksheet coding and give time to the insurers to prepare their pricing strategy for June deadline submissions.

 

[samclem]

Looks to me like the issue is with the insurers.

The insurers are just trying to apply the government's own (somewhat arbitrary--IMO) rules for premiums, and the government's own computer systems won't allow them to do it properly. The government is right to take responsibility for the SNAFU.

"Because of a system limitation ... the system currently cannot process a premium for a 65-year-old smoker that is ... more than three times the premium of a 21-year-old smoker," the industry guidance said.
If an insurer tries to charge more, "the submission of the (insurer) will be rejected by the system," it added.

Now they should fix it so this program launches in its entirety on time. Or, there should be a change in the legislation to allow a delay.

 

[MichaelB]

They say beauty is in the eyes of the beholder.

I don’t recall another legislative initiative subject to such such scrutiny or transparency, and I think it’s a good thing, blemishes and all. Adapting, delaying and reconsidering parts improve the likelihood of a successful undertaking.

 

[ERD50]

...
I don’t recall another legislative initiative subject to such such scrutiny or transparency, ...

When was the last time we had such wide-reaching, complex legislation, that required a Supreme Court decision to determine if it was even valid or not, and that polling showed was unpopular?

That's not a political statement or value judgement, just a factual observation - I don't think it is surprising that it is being scrutinized heavily. It affects a LOT of people! Scrutin away (paraphrasing Mayor Daley there)!

We need transparency because we need to know how to deal with this. Shouldn't we expect full transparency for something that affects so many of us in such significant ways?

Adapting, delaying and reconsidering parts improve the likelihood of a successful undertaking.

Fine, it's unlikely to get everything right the first time around on such a complex bill (which is part of the problem, IMO, but that's water under the bridge). But that is the job of Congress - to make the laws, no?

For retirees, those considering ER, or others trying to plan for the future - it's tough when the laws are complex and the rules are being changed on the fly by moving implementation dates.

-ERD50

 

[MichaelB]

In the US things (laws, rulings, and court decisions) can be challenged and often go to the Supreme Court, not because they need the Supreme Court to rule, but because our judicial process allows it.

We should expect transparency on all our legislation, we just haven't seen it to this degree elsewhere (to my recollection). I think that is positive.

Back to the PPACA, this is really an amazing process. A rule is proposed, then submitted to the public for discussion and feedback. All constituents are free to respond, all comments are considered and addressed with a public, published response. Some comments and suggestions lead to reconsider the rules or their implementation. A slow and messy process, with built in delay, but not a bad way to go about implementing this legislation.

 

[ERhoosier]

For retirees, those considering ER, or others trying to plan for the future - it's tough when the laws are complex and the rules are being changed on the fly by moving implementation dates.
-ERD50

Agree 100%. Regardless of how one felt about ACA during legislative process, it was passed, upheld by SCOTUS, and is the law. It would be best for all to implement ACA AS PASSED, then decide on administrative & legislative tweaks to fix it. Trying to fix a moving target is an exercise in futility, and some legal scholars are now suggesting this Admin's handling of ACA (e.g. ignoring hard deadlines written in the law) could be establishing a bad precedent. What good is any law Congress passes if the Executive branch simply changes or ignores the law's features as it wishes?
IMHO- ACA can still be implemented largely as passed, deadlines & all. Just quit the political BS and/or hire competent admin types to write the workable (NOT perfect, but functional) reg's to get us started. If all the computers can't interface yet, use paper forms for 2013 OE. After all- paper forms worked reasonably well for most of SS program- and for conducting WWII

 

[samclem]

It would be best for all to implement ACA AS PASSED, then decide on administrative & legislative tweaks to fix it. Trying to fix a moving target is an exercise in futility, and some legal scholars are now suggesting this Admin's handling of ACA (e.g. ignoring hard deadlines written in the law) could be establishing a bad precedent. What good is any law Congress passes if the Executive branch simply changes or ignores the law's features as it wishes?

Amen. The executive branch does not have the authority to choose which laws, or parts of laws, to enforce (plenty of case law to the effect--see this piece for more). Unsurprisingly, Presidents of all political affiliations have tried in the past to disregard big and small aspects of legislation, and their own lawyers (the Office of General Counsel) have been found this to be improper. If that doesn't happen this time, then there is always the court system, but the problem in this case is that there may be no entity with "standing" to bring the case to court.

It's a terrible precedent. As we grapple with other issues (immigration reform, spending priorities, etc), we need to know that the compromises reached in Congress can't be overridden by the President (whoever he/she is).

Implement this thing just as it was designed and we'll be more quickly able to adjust it based on real-world experience. That'll be the best way to get it right for retirees--and everyone else.

 

[ERD50]

...

Back to the PPACA, this is really an amazing process. A rule is proposed, then submitted to the public for discussion and feedback. All constituents are free to respond, all comments are considered and addressed with a public, published response. Some comments and suggestions lead to reconsider the rules or their implementation. A slow and messy process, with built in delay, but not a bad way to go about implementing this legislation.

But isn't that supposed to happen as part of the law-making process?

I realize the Executive branch is responsible for executing legislation, but I thought that meant executing what was written. Moving something slated for one year into the next year seems to be not executing what was written.

Again, not trying to take this political, I'm just trying to understand how people and businesses are expected to plan, if the implementation of a three year old law is in flux from what was written.

Does the Congressional Budget Office need to re-do its calculations?

-ERD50

 

[ERhoosier]

.....then there is always the court system, but the problem in this case is that there may be no entity with "standing" to bring the case to court....

WTF If the law says I'm supposed to get HI from my large employer & the Executive branch refuses to recognize that legal requirement, seems to me I should have "standing" in the courts as an injured party. If a future Exec branch refused to recognize same-sex marriage in a fashion contrary to US law, don't you think a married same-sex couple would have "standing" for a court challenge?

 

[MichaelB]

The outrage!

Rest assured, dear friends, our political process is not in jeopardy, there has been no egregious abuse of power, checks and balances are still working, same sex marriage, immigration reform, and spending priorities are all safely in the hands of Congress, where they are certain to be dealt with in a manner befitting this most venerable group. If there are any lingering concerns regarding lawful compliance of health care reform implementation, the process for challenging those remain open and available.

Most importantly, no one will be denied health care because of this, and all components of the PPACA are still scheduled for implementation.

 

[samclem]

Most importantly, no one will be denied health care because of this, and all components of the PPACA are still scheduled for implementation.

PPACA is about health insurance, which isn't quite the same thing as health care. Nonetheless, compared to the way the ACA was written, there will be fewer people with health insurance coverage because of this delay--employees of companies with more than 50 employees who will elect to not buy coverage and instead pay the small fine/tax. And for those employees who buy individual policies on the exchanges, the hit to taxpayers will be higher (more premium subsidies) than would have been the case if this law had been enforced.

I guess the good news: As a result of the delayed implementation of the employer mandate, businesses will delay their ongoing reductions of full-time jobs (below the magic 50 number), and will delay the reduction of hours below the magic 30/week number.

Below from BLS stats. Note the June numbers: Open to interpretation, but as the ACA implementation approaches, employers have probably been doing the thing that the law incentivizes: dump FT workers and hire PT ones.



One reason suggested for the delay in implementing the employer mandate is this impact on employment, and some have even suggested that this present delay is a deliberate attempt to push the pain until after the 2014 elections.



For semi-retirees looking for a part-time gig, the delay of the employer mandate is a bit of a setback--these government policy-induced part time jobs would be just the ticket for a person who already had Medicare or other insurance.



Another item in the news that relates to this employer health coverage: Immigration reform. Under the plan approved by the Senate, many individuals who have immigrated illegally to the US would be allowed to live and work here legally while they continued on their pathway to full citizenship. They would not be eligible for the ACA subsidies, but also employers would not be mandated to purchase health insurance for them. As a practical matter, that would make it more attractive to hire such a person than a similarly-qualified US citizen.


Breaking the link between employment and health insurance is the major enhancement that the ACA failed to accomplish. But it may do it via the indirect approach.

 

[ERhoosier]

...Rest assured, dear friends, our political process is not in jeopardy, there has been no egregious abuse of power, checks and balances are still working, same sex marriage, immigration reform, and spending priorities are all safely in the hands of Congress, where they are certain to be dealt with in a manner befitting this most venerable group. If there are any lingering concerns regarding lawful compliance of health care reform implementation, the process for challenging those remain open and available.

Most importantly, no one will be denied health care because of this, and all components of the PPACA are still scheduled for implementation.

"......all safely in the hands of Congress".
As Ben Franklin said- "No man's life, liberty, or fortune is safe while our Legislature is in session"

FWIW- Even EJ Emmanuel, a framer & ardent supporter of ACA, conceded in a recent NY Times editorial that the employer mandate delay would affect "only" 1-1.5 million Americans.
Obama's Insurance Delay Won't Affect Many - NYTimes.com

 

[MichaelB]

ERhoosier, the link you posted is the topic of a different thread.

samclem, any employee without employer provided healthcare can get coverage at the exchange. This delay does not affect anyone's access to healthcare, which was my point.

 

[Bestwifeever]

Thanks for another lively discussion!

Porky Pig Cartoon Ending "That's All Folks!" - YouTube