Official Brief Comparison of House/Senate HC plans

[FIRE'd@51]

Here are are a couple of questions I have about this bill?

How does it really improve portability?

If those who are satisfied with their current policies can keep them, how will the new policies without underwriting be priced, especially since they will disproportionally attract those who can't pass underwriting? IMO, this bill perpetuates adverse selection by not expanding the risk pools dramatically.

If the Congress really cared about meaningful healthcare reform, they would open up the Federal employees' health plan to everyone (other than Medicare patients). That plan includes immense risk pools with premiums negotiated by the largest single employer in the country. It's not a public option, nor is it single payer. It's a bunch of private insurance companies bidding for business. Doesn't it make you suspicious that this hasn't been seriously proposed?

[ziggy29]

Quote:

Originally Posted by FIRE'd@51 If the Congress really cared about meaningful healthcare reform, they would open up the Federal employees' health plan to everyone (other than Medicare patients). That plan includes immense risk pools with premiums negotiated by the largest single employer in the country. It's not a public option, nor is it single payer. It's a bunch of private insurance companies bidding for business. Doesn't it make you suspicious that this hasn't been seriously proposed?

Even this would result in adverse selection unless it eliminated the concept of individual health insurance with individual underwriting. Because unless that happened, healthy people who needed health insurance could get a better rate with an individual policy and only those who are unhealthy, uninsurable and with significant pre-existing conditions would sign on to the federal group plan.

So another question becomes -- is it possible to have a "group" based policy with no underwriting which does not trigger adverse selection if individual health insurance is available?

[samclem]

Quote:

Originally Posted by ziggy29 So another question becomes -- is it possible to have a "group" based policy with no underwriting which does not trigger adverse selection if individual health insurance is available?

What would be the impact of a "within kind" tax scheme were individually-procured, underwritten, non-group health insurance was taxed to provide matching funds (at an annually-modified rate) for those purchasing the group policies? No new income taxes, but those getting the cheaper prices of individually underwritten insurance pay the tax to offset the higher costs (caused by adverse selection) in the (mandatory-issue, set-price) group plan.

We'd still need to fund health care for the truly poor.

[FIRE'd@51]

Quote:

Originally Posted by ziggy29 Even this would result in adverse selection unless it eliminated the concept of individual health insurance with individual underwriting. Because unless that happened, healthy people who needed health insurance could get a better rate with an individual policy and only those who are unhealthy, uninsurable and with significant pre-existing conditions would sign on to the federal group plan.

I'm not sure that this is correct. The Federal plan is pretty attractively priced for the coverage provided. As I understand it, all types of plans are offered - HMO's, PPO's, HSA's, etc. And, typically group plans are cheaper than individual plans offering the same coverage.

Now, if you are saying that 20 million sick people would join the plan, and that they would have a big effect on the risk pool, driving up the cost for all, you may well be right. Perhaps this is why it hasn't been offered. Congress knows what's good for itself and other Federal employees. This is why I asked if it made one suspicious that it hasn't been seriously proposed.

[ziggy29]

Quote:

Originally Posted by FIRE'd@51 Now, if you are saying that 20 million sick people would join the plan, and that they would have a big effect on the risk pool, driving up the cost for all, you may well be right. Perhaps this is why it hasn't been offered. Congress knows what's good for itself and other Federal employees. This is why I asked if it made one suspicious that it hasn't been seriously proposed.

That's sort of my point. Let's say someone has Megacorp health insurance and FIREs at 50, and they know they need to find another source of health insurance. Let's say they know that a 50-year-old individual can get group coverage under the federal plan with no underwriting for (say) $600 a month. (The actual numbers are fairly unimportant for the purposes of this example.)

As a prelude to retirement, they begin the process of looking into an individual health plan. But maybe they are a significantly overweight smoker with high blood pressure, high cholesterol and high blood glucose levels.

Such a person -- if they can find it -- might have to pay $1000 a month or more for individually underwritten health insurance, but only $600 on the federal employee plan (even if they paid up to 102% of the full cost like people do with COBRA, make it $612).

Let's also say that another 50-year-old colleague of theirs retires at the same time and they are in great health -- ideal BMI, non-smoking, all blood panels look normal and there's no history of pre-existing conditions. They might get in for, say, $400 a month.

Suffice it to say that the former would sign up for the group plan and the latter for the individual coverage. That in turn would result in many more high-risk people in the federal group without the "critical mass" of healthier, lower-risk folks who could make the overall group costs manageable. This would drive up the cost of the federal plans (and drive up taxpayer costs if we had to eat the higher costs for federal employee coverage).

So in reality, even if there is a "universal mandate" for coverage I don't know how you can have a no-strings-attached, no-underwriting group plan exist side-by-side with individual plans, as the group plans would be the "dumping ground" for all the high risks. I don't know how we could implement this feasibly unless the concept of individually underwritten health insurance was abolished and *everyone* had to have group coverage.

[FIRE'd@51]

Quote:

Originally Posted by ziggy29 So in reality, even if there is a "universal mandate" for coverage I don't know how you can have a no-strings-attached, no-underwriting group plan exist side-by-side with individual plans, as the group plans would be the "dumping ground" for all the high risks. I don't know how we could implement this feasibly unless the concept of individually underwritten health insurance was abolished and *everyone* had to have group coverage.

I agree. For it to work without adverse selection, you really need one risk pool (or maybe large regional pools), with all insurance, whether it be group or individual drawing from the same risk pool. IMO, this is a failure with the current proposed reform. When the President said you could keep what you have if you like it, he introduced adverse selection into the equation.

[samclem]

We've discussed the sly bits of budgetary subterfuge that help the Senate bill look more budget neutral, and there's been some question about the real cost after everything is in place. I looks like about $100 billion in additional federal red ink every year. Here's the source of that helpful factoid, a column in the Arizona Republic. The assumptions look fair to me.

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With different provisions taking effect at different times, the only way to judge its fiscal impact is as fully implemented. In 2019, CBO estimates that the health care subsidies in the bill will cost nearly $200 billion a year. Supposedly that's offset, but the offsets are hoaxes. There's $35 billion in taxes on high-value insurance policies that probably won't exist. There's $46 billion in cuts to non-physician Medicare providers Congress won't follow through on. And there's $35 billion in cuts to physicians Congress knows it will restore. So the bill, as a practical matter, will easily add more than $100 billion a year to the federal deficit.

Now that $100B is just increased federal expenditures, it doesn't count increased state outlays (more people on Mecicaid) or the higher costs to individuals and corporations (due to that old supply/demand thing--virtually the same number of doctors and many more people chasing their services). I don't know what those extra costs might be.

[FinanceDude]

Quote:

Originally Posted by samclem We've discussed the sly bits of budgetary subterfuge that help the Senate bill look more budget neutral, and there's been some question about the real cost after everything is in place. I looks like about $100 billion in additional federal red ink every year. Here's the source of that helpful factoid, a column in the Arizona Republic. The assumptions look fair to me. Now that $100B is just increased federal expenditures, it doesn't count increased state outlays (more people on Mecicaid) or the higher costs to individuals and corporations (due to that old supply/demand thing--virtually the same number of doctors and many more people chasing their services). I don't know what those extra costs might be.

I think the costs will BALLOON severely in the future. I can't think of ONE govt program that didn't end up costing a lot more than they thought.

I can't find any of my friends to take a bet I am offering, I want to bet them $100 that the budget deficit will increase under the HC bill, and noone will take me up on it........

[lets-retire]

Fired@51 -- What you are missing, and will make your point moot, is the only factors to be used in determining policy prices are age (with limits), region, and family size. With that written into the law, my family of four with serious health issues will pay the same for an individual policy, as your very healthy family of four with a government policy, assuming every one in the families are the same age and we live in the same region. We will see the cost of big group policies go up if these bills pass.

As I understand the bills, all policies currently in effect that do not meet the standards can remain in effect as long as they do not enroll new customers. That is fine but that means as people, die, retire, have their needs change, the number in the pool is diminished. It might take several years but those policies that do not meet the new standards will eventually cancel all policies due to the pool becoming too small. Since there is a limit on the amount of profit a company can keep, I think you will find few policies that will go above the minimum standards for the three levels of policies, as detailed in the bills. There is greater risk for the companies without any more real return. It would be like putting your money in a savings account or investing in stocks, both with a max possible return of 1.25%. You'd be a fool to invest in the stocks, where you could lose money, when you can get the same return safely in the savings account. If the companies can only keep say 10% of the medical loss for their profit, then they can only keep 10% no matter how the policy is structured. The current policies that have low co-pay and deductibles will bring in no more than 10% profit. The policies detailed in the bills will bring in no more than a 10% profit. The difference is the policy requirements in the bills transfer more of the cost of insurance to the policy holders, while many current low deductible/co-pay policies keep the risk with the insurers. So if the insurers keep current policies in effect they are increasing their risk without increasing the potential for profits.

[FIRE'd@51]

Quote:

Originally Posted by lets-retire If the companies can only keep say 10% of the medical loss for their profit, then they can only keep 10% no matter how the policy is structured. The current policies that have low co-pay and deductibles will bring in no more than 10% profit.

Not quite sure if I follow you. It seems to me that an insurance company will payout more medical losses (in $) for a low-deductible policy than a high one? So even if the 10% number is the same for both, it will lead to more $ in revenues (and hence earnings) for the low-deductible policy, since the 10% is applied to a larger $-volume of medical losses.

For example, if I find a riskless arbitrage opportunity in the market, I am better off to leverage my investment as much as I can since it will increase my $-return, even though the percentage return on the underlying notional amount is still the same.

[lets-retire]

Quote:

Originally Posted by FIRE'd@51 Not quite sure if I follow you. It seems to me that an insurance company will payout more medical losses (in $) for a low-deductible policy than a high one? So even if the 10% number is the same for both, it will lead to more $ in revenues (and hence earnings) for the low-deductible policy, since the 10% is applied to a larger $-volume of medical losses. For example, if I find a riskless arbitrage opportunity in the market, I am better off to leverage my investment as much as I can since it will increase my $-return, even though the percentage return on the underlying notional amount is still the same.

They might make more money, but then again they might not. That is the point 10% would be the max they could earn. I could also be less. If the maximum return is the same no matter how they structure their policies, there is little benefit for offering a better policy where they would take more risk for no better return, and possibly lower returns. You are correct in that there would be higher medical loss, but that 10% is the maximum they can earn. I think what would happen, if they did offer the current type policies, is they would be very expensive, triggering the cadillac plan tax.

Your point also brings up another issue. Insurance companies would have no incentive to keep medical expenses down, and in fact would receive an incentive to maximize their medical expenses.

[samclem]

Quote:

Originally Posted by ziggy29 To me the funding mechanisms are the worst problem because of its disproportionate impact on "effective" middle class tax brackets. The phaseout of the subsidy occurs entirely within the solidly middle class brackets and then goes away. So people needing to buy their own health insurance on a middle class income take the brunt of reform. As a result, every extra dollar a $60K household earns can effectively have its take-home equivalent pay reduced a lot more than someone earning $200K because the former is losing somewhere in the neighborhood of 15-18 cents on the dollar in the form of reduced subsidy to buy health insurance.

This analysis provides examples of this craziness (emphasis added):

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Those mandates and subsidies would impose effective marginal tax rates on low-wage workers that would average between 53 and 74 percent— and even reach as high as 82 percent—over broad ranges of earned income. By comparison, the wealthiest Americans would face tax rates no higher than 47.9 percent. Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill and 159 percent under the House bill. Under the Senate bill, adults starting at $14,560 who earn an additional $560 would see their total income fall by $200 due to higher taxes and reduced subsidies. Under the House bill, families of four starting at $43,670 who earn an additional $1,100 would see their total income fall by $870.

Does anyone think this legislation is rational and well designed? Here's an idea--let's use the normal process for producing legislation instead of the secret "let's cut a deal" method. Maybe some transparency, and allowing lots of people to read it while it is being built. Novel. At least the some of the biggest mistakes might get fixed before the vote.

[MasterBlaster]

How can anyone comment on exactly what the legislation/taxation is until it emerges form the conference ?

All this speculation and assuming the worst possible outcome will drive you crazy.


- death and taxes

[ziggy29]

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Originally Posted by MasterBlaster How can anyone comment on exactly what the legislation/taxation is until it emerges form the conference ? All this speculation and assuming the worst possible outcome will drive you crazy.

Because these proposals are out there, and it seems to me that the best time to comment on, and draw attention to, the worst aspects of potential legislation is *before* it becomes law, yes?

[MasterBlaster]

Well if you really want to be involved, this is the wrong forum.

- As I posted you are just going to work yourself into a tizzy and make yourself crazy if you are going to get excited about every possible proposal.

There are so many voices in this game. Some of those voices just might get you really worked up when in reality their view of the world never comes to be.

[ziggy29]

Quote:

Originally Posted by MasterBlaster Well if you really want to be involved, this is the wrong forum. - As I posted you are just going to work yourself into a tizzy and make yourself crazy if you are going to get excited about every possible proposal.

So if we don't think something about it is a good idea, we either need to either "get involved" (per your definition) or shut up about it?

That is the implication you seem to be making, and I reject it utterly. And I'm not sure how merely mentioning it equates to "working myself into a tizzy."

And by the way, there IS something to be said for making sure more people understand the ramifications of some of the proposals. After all, some of them might make it to the president's desk, and he's not going to veto it because of a few questionable provisions.

And in closing, if it isn't worth discussing here because it's not "getting involved," why would you even read this forum?

[MasterBlaster]

Ziggy:

calm down. I wasn't trying to insult you or silence you. I just thought that your posts were premature.

If you want to comment on the heath proposals - post away.

[lets-retire]

Quote:

Originally Posted by MasterBlaster How can anyone comment on exactly what the legislation/taxation is until it emerges form the conference ? All this speculation and assuming the worst possible outcome will drive you crazy.

The portions I've commented on are essentially the same in each of the bills. There hasn't been much discussion about those areas either, so odds are they are not going to be taken out of the bills and will most likely come through in about the same condition.

[FUEGO]

I figure the basics of the premium/tax credit structure will probably be somewhere in between the house and the senate version. I doubt that section will be ripped up and written anew.

[samclem]

This development may be of interest to any board members who are in a union: In the latest twist, the White House and the select group of legislators negotiating the merged version of the health care legislation have reportedly reached a compromise regarding the proposed tax on "Cadillac" health plans. As before, the value of these plans exceeding certain limits will be taxed at 40% starting in 2013. The compromise is that if the insurance is part of a collective bargaining agreement (i.e. part of a union-brokered contract), a Taft-Hartley multiemployer plan, or part of a state-employer plan, then the tax will not go into effect until 2018. I assume the unions will use the time to renegotiate these contracts and have the compensation moved into other areas rather than health care.

Additonal info is here.

For anyone else who has a generous health care plan through your employer (i.e. you negotiated it independently one-on-one, or you selected it as part of a benefit package, or you are a non-union employee and the employer has always offered these plans to you)--no special deals. Sorry, you are not part of a favored, protected group and so you are a "bill payer."

Of course, as time goes by, there will be virtually no government revenues due directly to this tax. Employers and employers will shift compensation to avoid it. The government revenues will come from other taxes that people pay as they try to avoid this tax. From Bob Herbert's NYT column of a few weeks ago:

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If even the plan’s proponents do not expect policyholders to pay the tax, how will it raise $150 billion in a decade? Great question. . . According to the Joint Committee on Taxation, less than 18 percent of the revenue will come from the tax itself. The rest of the $150 billion, more than 82 percent of it, will come from the income taxes paid by workers who have been given pay raises by employers who will have voluntarily handed over the money they saved by offering their employees less valuable health insurance plans.

With the revised carve-outs for union plans, the government now expects to bring in "only" $90 billion , not $150 billion, over the arbitrary 10 year window. So someone else (. . . "that man behind the tree!") will be making up the difference.

The hits just keep on coming!