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Lazenby: ACA, Premiums And Costs

According to a statement by the U.S. Department of Health and Human Services (HHS) last month, American consumers saved $3.9 billion on health insurance premiums in 2012 as a result of policies enacted under the Affordable Care Act (ACA). Under the ACA, 77.8 million consumers saved $3.4 billion up front on their…

According to a statement by the U.S. Department of Health and Human Services (HHS) last month, American consumers saved $3.9 billion on health insurance premiums in 2012 as a result of policies enacted under the Affordable Care Act (ACA).

Under the ACA, 77.8 million consumers saved $3.4 billion up front on their premiums as insurance companies operated more efficiently due to the ACA’s Medical Loss Ratio (MLR) – also called the 80/20 rule – and will save $500 million more in rebates under the provision. Accordingly, 8.5 million insurance customers nationwide are due to receive an average rebate of around $100 per family.

The 80/20 rule requires insurers to spend at least 80 cents of every premium dollar on patient care and quality improvement.  If they spend a higher amount on other expenses such as profits and overhead, they will owe rebates back to consumers or must reduce future premiums. Many insurers have lowered their premium prices or improved their level of coverage to meet the standard, according to the HHS report.

“The health-care law is providing consumers value for their premium dollars and ensuring the money they pay every month to insurance companies goes toward patient care,” said HHS Secretary, Kathleen Sebelius.

Additionally, the health insurance market is becoming more competitive as more insurers enter the market through the new insurance exchanges created by the ACA. States (like South Carolina) whose insurance markets were formerly dominated by one or two major carriers who controlled premium prices will now see multiple insurers competing for business, and competition should breed lower pricing.

(It should be noted here that insurance exchanges are for individuals who do not receive health insurance through their employers. They are also for people who do not qualify financially for Medicaid).

The administration released a memo in late May explaining its analysis of the increased choice and reduced premiums for consumers purchasing individual insurance through the new exchanges, which are set to open for enrollment on October 1, 2013 for coverage beginning in January 2014.

California has been used as an example of what will happen to insurance premiums by both critics of the ACA, who are claiming that rates will increase because of the healthcare law, and by the administration, which is claiming better rates as a result of increased competition within exchanges. They’re both right.

Blue Shield of California has said it will increase premiums for individual customers by about 13 percent on average next year over current premiums. Approximately 8 percent of that increase will the cover rising cost of medical care, which would have happened regardless of the new law. The other 5 percent pays for better benefits, guaranteed coverage for pre-existing conditions, and taxes and fees imposed on insurers by the ACA. The 8 percent increase – the part that is due to rising medical costs – has nothing to do with the ACA. Your insurance rates have been steadily increasing for years, prior to this law taking effect. It has everything to do with the way health care is delivered in this country, and that delivery system is broken.

But California officials announced last month that 13 insurers were awarded contracts to sell policies on the state’s health care exchanges next year. The companies submitted bids, and all came in much lower than anticipated. Additionally, about 2.6 million people in California are predicted to be eligible for federal subsidies through the exchanges based on their incomes, which will lower the premium costs they have to pay. Thus, Californians who stay with their individual Blue Shield plans will have higher premiums, and those who purchase new individual plans from one of the 13 insurers on the exchanges will have lower than anticipated premiums, as will low-income Californians due to federal subsidies.

Also, the federal government will use the cost of health insurance plans on the new exchanges, which have come in below earlier estimates in all nine states that have released their initial rate information according to a new analysis from Avalere Health, to determine the level of tax credits available to help people cover the cost of their premiums. This means that when premiums are lower across the board, a lower federal subsidy is needed for low-income insurance purchasers, which costs taxpayers less money.

But while premium rates are lower than anticipated by the Congressional Budget Office, they’re still higher than what young, healthy people are paying now for comparable coverage. That’s good news if you suffer from a pre-existing condition and couldn’t get insurance or had to pay more than you could afford for coverage before the ACA was passed, but it’s bad news for young, otherwise healthy people looking to buy insurance.

Which brings us back to the rising cost of medical care in the United States.

In the wake of last month’s HHS report about reduced premiums attributed to the Medical Loss Ratio, the health insurance industry has asserted that the administration is unfairly focusing on insurance premiums instead of on the prices charged by doctors and hospitals for medical procedures – prices that drive up their costs, which in turn drive up insurance premiums.

Indeed, an article published last month in The New York Times detailed the vast pricing differences between what routine medical procedures cost in the United States and in other developed countries, as well as between different states in the U.S. and even different hospitals in the same town. Additionally, procedures once performed in doctor’s offices are now routinely done in outpatient specialty centers, increasing the cost to insurance companies – who pay a separate “facility fee” in the case of such procedures – the cost to medical consumers, and the profit to some doctors and hospitals.

According to the New York Times piece:

A major factor behind the high costs is that the United States, unique among industrialized nations, does not generally regulate or intervene in medical pricing, aside from setting payment rates for Medicare and Medicaid, the government programs for older people and the poor. Many other countries deliver health care on a private fee-for-service basis, as does much of the American health care system, but they set rates as if health care were a public utility or negotiate fees with providers and insurers nationwide, for example.

Ours is a nonsensical and broken system. The price of a medical procedure for those who have health insurance is negotiated by individual physicians’ practices and hospital systems with multiple insurance plans. Also, a patient doesn’t generally know the full cost of a procedure until after he’s had it or agreed to have it. It’s not truly a free market when the consumer doesn’t know his choices up front. Often, medical consumers don’t actually have a choice – no one has an elective heart bypass operation. Thus, medical services are not typical services in a market sense.

What a patient pays for a medical procedure will vary greatly based on where it is performed, and most people don’t compare prices between hospitals and ambulatory surgery centers beforehand – they go where their doctors tell them to go. The cost of the same procedure will also vary among patients based on whether they have health insurance and on the type of insurance plan they have. The price of my MRI and your MRI will almost certainly not be the same, even if it is performed in the same facility, is ordered by the same doctor and interpreted by the same radiologist.

This medical delivery system must change before we are to realize true health care reform in the United States. The ACA is a good starting point in that it addresses the prices some of the most vulnerable Americans pay for health insurance and whether they can get insurance at all, but it is not perfect and it is not enough. The United States’ bizarre method of delivering health care, which is not a free market nor a universally price-controlled one, is driving up costs and is crippling to both our personal pocketbooks and our national budget. We may not agree on the method by which the American health care crisis should be addressed, but we should be able to agree that change must come to this area of our economy, which is ballooning out of control.

amy lazenby

Amy Lazenby is the associate opinion editor at FITSNews. She is a wife, mother of three and small business owner with her husband who splits her time between South Carolina and Georgia. Follow her on Twitter @Mrs_Laz or email her at amy@fitsnews.com.

***

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75 comments

Rick Hiller July 1, 2013 at 12:10 pm

Very well written. It sums up the real issue with U.S. healthcare in a manner which makes it understandable. Thank you.

Reply
GrandTango July 1, 2013 at 12:53 pm

Hitler would be VERY proud….

Reply
Rick Hiller July 1, 2013 at 12:10 pm

Very well written. It sums up the real issue with U.S. healthcare in a manner which makes it understandable. Thank you.

Reply
GrandTango July 1, 2013 at 12:52 pm

Has Pravda reprinted this???

People HATE ObamaCare. It is HIGHLY unpopular…….
If the GOP has hope of National re-establishment, it will be under the War Chant of repealing ObamaCare..and the people will REWARD them substantially for the opposition and defeat of it…

PS: Obama took over the Student Loan Program, and is now doubling interest rates, to re-direct money from struggling post-grads to pay for ObamaCare…What a filthy, corrupt . dude…

Reply
? Obamacare! July 1, 2013 at 12:57 pm

The only thing Obama and Mitt did right.

Reply
GrandTango July 1, 2013 at 12:58 pm

Obama wants oil drilling and coal to be illegal, and these Dumb@$$#$ want more Dope to more pollute the society…

Any wonder Liberal is synonymous w/ FAILURE???

Reply
Please July 1, 2013 at 2:37 pm

Still with the death panels thing? That crap is years old and no intelligent person believes in it – so it makes sense that it’s you bringing it up. Man, the real death panels are the insurance companies who wouldn’t help sick people, not Obama.

Reply
GrandTango July 1, 2013 at 2:49 pm

Now don’t you feel like an IGNORANT Dumb@$$ (read below)….

Sarah Murnaghan, a Pennsylvania girl has been told ‘NO’ in june, to a life-saving lung transplant by an Obama government appointee.

Because: Obamacare includes the phrase “as the secretary shall determine.”
Meaning the secretary of Health and Human Services Kathleen Sebelius has determined the child doesn’t get a lung transplant under Obama-Care regulations.

Nice try: Idiot!!!!!

Thank God a compassionate, non-Obama-NAZI judge over-ruled Obama and the goulish and hateful Sebelius…

Reply
Curious July 1, 2013 at 2:52 pm

You mean the girl who is doing well after her second lung transplant? http://www.huffingtonpost.com/2013/06/29/sarah-murnaghan-health_n_3521524.html
Go home, T, you’re drunk.

Reply
GrandTango July 1, 2013 at 2:57 pm

After she circumvented Obama’s Death Panel, that you claimed did not exist…
Thank God, there are judges who are not Obama-NAZIs..like you and Sebilius…

Curious July 1, 2013 at 3:00 pm

Right. Had nothing to do with Obamacare. Had to do with organ donor rules. Medical ethics, T, it’s complicated. Also, I hope your insurance company never denies a treatment to you or someone in your family, but chances are, it will.

GrandTango July 1, 2013 at 3:21 pm

With Obama-Care: they not only will deny you..they FORCE ALL Americans to pay, so they can pick and choose who gets treatment…in their inferior system…

That’s from an admistration ALREADY caught administering Tax Laws based onn their politcal enemies…

you ain’t scared of that, you’re one ignorant son of a B!*#h……

Please July 1, 2013 at 2:57 pm

This is about the organ donor system and whether a child can receive adult organs. It’s not about the ACA. And if you think for a second that insurance companies don’t deny treatments like this every day, you’re more of an idiot than you appear to be.

Reply
GrandTango July 1, 2013 at 3:02 pm

Sebilius DENIED the child, after a waiver was requested. That’s a death panel….You are lying to yourself. That’s what a lot of Germans did, in order to allow Hitler the latitude he needed.

PS: I loove how you eventually admit Sebilius did it…and try to say it’s OK because of your claim that the Ins. cos. do it…

Ins. cos. do not have the power and greed of the White House behind thjem, like Sebilus…

CL July 1, 2013 at 1:05 pm

So California is as an example of the greatness of Obamacare, when it is already spiking rates for all age levels (not just young workers)? I shudder to see the failures if this is one of the successes.

http://www.forbes.com/sites/theapothecary/2013/05/30/rate-shock-in-california-obamacare-to-increase-individual-insurance-premiums-by-64-146/

Reply
Curious July 1, 2013 at 2:01 pm

“California has been used as an example of what will happen to insurance
premiums by both critics of the ACA, who are claiming that rates will
increase because of the healthcare law, and by the administration, which
is claiming better rates as a result of increased competition within
exchanges. They’re both right.”

No, CA is an example of how the ACA works AND how it fails.

Reply
Frank Pytel July 1, 2013 at 2:40 pm

Pray tell? My rates are doubling. How am I getting a better rate when it’s going up?

Reply
Curious July 1, 2013 at 2:49 pm

Do you live in CA? Don’t think so, so its insurance exchange rates don’t apply to you. Are you getting insurance through an exchange? Nope, because they’re not open yet. Are you getting it through an employer? If so, that’s a different system. That was all explained in the article…

Reply
Frank Pytel July 1, 2013 at 3:26 pm

Correct. It was all explained in the article that the cost of my insurance is going up to subsidize the lazy fucks that don’t want to work. You are absolutely correct. Therefore this is not better, unless you don’t want to work, can’t hold down a job, or simply don’t give a shit about what you steel from others. For those people, it’s another fucking commie gold mine.

Curious July 2, 2013 at 7:08 am

I hope you never lose your job, Frank. Then you might need a social safety net.

Frank Pytel July 2, 2013 at 7:27 am

Frack that. I’ll get in my truck and jump through trash cans for scrap metal and paper first. I’ve done it before, I’ll do it again.

GrandTango July 1, 2013 at 3:05 pm

Frank: people loike you ensure we get NAZIs like Obama. You, FITS and McCain (all liberal-tarian moderates) deserve what you get because you are so unstable about your purposes and ignorant about acheiving goals…us conservatives don’t deserve it….

Reply
Frank Pytel July 1, 2013 at 4:23 pm

Well when you start voting for conservatives, I’ll stop voting for NAZI’s T. HAGD!! :)

GrandTango July 1, 2013 at 2:55 pm

Curious: Are you a Liar or just a Dumb@$$….???..ObamaCare, like Obama, is a TOTAL failure, if you’re an American…

California Insurance Rates to Shoot Up Under ObamaCare
As insurance companies release their proposed rates for 2014 — the year that most of ObamaCare actually goes into effect — it is becoming increasingly clear that the law is, in fact, causing individual insurance rates to skyrocket. Maryland’s largest insurer of individuals, for instance, has proposed a 25-percent rate hike for next year. And new insurer proposals from California, despite the state’s best efforts to portray them otherwise, show that individual rates in the Golden State are likely to experience even greater increases.

http://www.thenewamerican.com/usnews/health-care/item/15626-california-insurance-rates-to-shoot-up-under-obamacare

Reply
CL July 1, 2013 at 3:02 pm

What a great marketing slogan for Obamacare: “California, come see how the ACA works AND how it fails.”

Reply
Reading Comprehension July 1, 2013 at 3:05 pm

Isn’t this article about a broken healthcare system, not about how great Obamacare is? I think showing how Obamacare works and how it doesn’t work given the way our healthcare system is set up was the whole point…

Reply
Frank Pytel July 1, 2013 at 3:28 pm

BS. It’s an advertisement

CL July 1, 2013 at 3:29 pm

The article claims Obamacare “good starting point” in fixing our healthcare system but then claims government needs to go even further (nevermind that it was government intervention that broke it in the first place). So the issue of whether Obamacare is truly working or not is obviously relevant to whether further governmental intervention would be likely to make things better or worse.

Dr. Know July 2, 2013 at 6:59 am

Government intervention that broke it in the first place? Govt. sets the reimbursement costs for Medicaid and Medicare, which are actually lower than the reimbursement costs negotiated by major insurance companies – and insurance companies still make huge profits b/c they wouldn’t be in business if they negotiated lower reimbursements than they could afford (and sit on the profits – see BCBS of SC). That’s why there’s the 80/20 rule.

That’s also why many primary care doctor’s offices have stopped accepting Medicaid patients – they can’t afford to treat people for the lower reimbursement payments (I would know). We haven’t stopped accepting private insurance coverage, though, and the private insurers haven’t stopped making profits. Government didn’t break the system – insurance companies and hospitals who charge different rates for different procedures broke the system, rates that are much higher than what is charged in the rest of the developed word for the same procedures (see the article about colonoscopies linked to in the article above). Add in uninsured people who can’t qualify for Medicaid or don’t want to (or can’t) pay for health insurance who pay outrageous fees for simple or life-saving medical treatments and then default on bills, passing off the cost to rest of us, which means you get a totally fubar system – govt didn’t do that.
As a physician, I’d rather have standard rates for procedures, and I’d rather have insured patients. If that means more government intervention to set some price controls and subsidize some insurance plans on the exchanges, I’m fine with that.
Also, anyone who thinks that Obamacare runs “death panels” hasn’t had much experience with private insurance treatment denials.

CL July 2, 2013 at 8:24 am

This is just nonsense. Health insurance companies do not make “huge profits.” The health insurance industry is 86th in profit margin, behind such heavy hitting industries as confectioners and home furnishing stores. Even journolister Ezra Klein admits that talking point is bs. http://voices.washingtonpost.com/ezra-klein/2009/09/profit_and_the_insurance_indus.html (u can follow the link to the list itself). But by all means, blame the insurance companies. Why don’t they just do their civic duty and operate at a loss so that you can feel better about yourself and your liberal pieties? The nerve of some people, expecting to make a 3% profit. If you are in a medical practice, I wonder what your profit margin is? More than 3.3%?

Do you not understand that the fact that central planners set reimbursement rates lower than market is part of the problem? Providers have to make up the difference somewhere, and it helps increase the costs for everyone.

And hospitals charge insurance patients “less” only in fantasy land where the uninsured patients are paying their bills. The facilities are forced to treat everyone under EMTALA (more government intervention), get stuck with the costs, which get paid by those with insurance.

Government did all of that. You could take away every penny of profit the insurance companies made and it would not solve our healthcare problems, because the problem is structural.

Dr. Know July 2, 2013 at 12:27 pm

Riiight: http://www.postandcourier.com/article/20110501/PC1602/305019922

Blue Cross Blue Shield of South Carolina, which has generated hundreds
of millions of dollars in profits over the past five years, has boosted
the pay of board members and top executives while sticking policyholders
with ever-higher premiums, a Post and Courier review found.

The nine members of the company’s board of directors have
more than doubled their reported salaries in the past year, financial
filings show. In 2010, two executives earned more than $1 million in
salary and bonus pay, and another earned more than $2.2 million,
according to the filings.

As top earners’ salaries
have surged, an April financial analysis showed the insurer is sitting
on excess capital reserves, money that instead should have been returned
to policyholders through rebates or lowered premiums, consumer
watchdogs said.

The health insurer also has been
accused of having a vise on the state’s insurance market, stifling
competition and leaving its 1-million-plus South Carolina customers with
few health care alternatives.

To make matters worse,
soft state oversight of the insurance industry leaves South Carolinians
exposed to continual rate increases, a recent report on insurance
industry regulation nationwide showed.

The high cost
of premiums has put health coverage beyond the reach of an estimated 1
million South Carolinians, said Sue Berkowitz, who heads the Appleseed
Legal Justice Center, a Columbia advocacy group for disadvantaged
residents.

“People are struggling to afford health care even as industry profits continue to grow,” Berkowitz said.

Blue
Cross Blue Shield spokeswoman Elizabeth Hammond said the insurance
giant’s policies are priced “to reflect its superior networks,” and she
dismissed concerns about market domination. Although it hiked group
insurance premiums last year, Hammond pointed out that the company did
not increase prices of its individual policies, which account for 6
percent of its membership.

Ethan Rome, executive
director of Health Care for America Now, a national health consumer
advocacy group in Washington, D.C., said the dominant carrier is not
playing fair.

“Huge reserves, big pay, no
competition, very little scrutiny — you’ve got a big problem,” he said.
“You’re not going to have fair rates.”

Excess reserves

During
the past five years, Blue Cross Blue Shield’s net income generated from
premiums has increased considerably, while the number of members has
increased only modestly, according to data provided by the state
Department of Insurance.

While the insurer said it is
difficult to draw conclusions about premium pricing using composite
figures, the data indicate the average per-member premium has increased
by about 17 percent since 2006.

As consumers struggle with rate hikes, Blue Cross Blue Shield’s profits have soared.

In
2010 alone, the company’s profits rose 46 percent over the previous
year, to about $96 million, according to records filed with the National
Association of Insurance Commissioners. Its total capital increased
from $1.5 billion in 2009 to nearly $1.7 billion in 2010, the records
show.

Insurance companies must maintain a certain
level of capital to cope with large-scale disaster. But Blue Cross Blue
Shield’s capital far exceeds regulatory requirements, with nine times
the amount required under state law, according to an April Citigroup
Global Markets financial analysis.

That level of
excess will make it difficult for Blue Cross Blue Shield “to justify why
premium rates need to rise as much as expected cost trends” and will
“lead to significant tension” with consumer activists, according to the
Citigroup analysis.

Industry observers such as Rome
and Judy Dugan, a research director at California-based Consumer
Watchdog, already have taken note. Policyholders are entitled to share
the company’s profits, they said.

Most health
insurers operate either as for-profit, publicly traded companies or as
tax-exempt nonprofits. That makes those companies publicly accountable
to either shareholders or taxpayers.

As a mutual
insurance company, Blue Cross Blue Shield of South Carolina’s
policyholders act as shareholders, industry experts said. That means
those policyholders are entitled to rebates or rate cuts when the
company posts big profits, they said.

But neither rebates nor reduced premiums seem to be in the cards for Blue Cross Blue Shield’s customers.

“The
fact that we make a small profit means we can afford to build into our
prices only the impact of increases in medical care,” spokeswoman
Hammond said in emailed responses to questions from the newspaper. Blue
Cross Blue Shield responded to Post and Courier questions by email from
Hammond.

She rejected criticism that the company is sitting on excessive capital.

“These reserves … provide our customers with the security they need,” she said in the statement.

‘Huge’ pay

Each
of the nine members of Blue Cross Blue Shield of South Carolina’s board
of directors doubled their reported pay or better since last year,
according to compensation reports filed with the S.C. Department of
Insurance. Some members increased their pay by as much as 163 percent in
one year, the records show.

All members of the board
— made up of prominent lawyers, bankers and development and business
leaders — earned between about $100,000 and $160,000 in 2010 for their
board duties, documents show.

Despite acknowledging
the accuracy of financial statements showing the increased pay, Blue
Cross Blue Shield officials said compensation did not double.

M.
Edward Sellers, the company’s former CEO who now serves as chairman of
the board, said pay was reported differently in previous years.

“I don’t know exactly what happened,” Sellers said.

The
board meets multiple times a year and holds ultimate responsibility for
managing the company’s business affairs, Blue Cross Blue Shield’s
Hammond said in a statement. The board examines national comparative
studies on pay and sets compensation with input from a consultant, she
said.

Sellers said the board pay is “commensurate to a company of our scale.”

Recent
public uproar over executive and board compensation in Massachusetts
led Blue Cross Blue Shield in that state to suspend board pay. But in
Massachusetts, all board members earned far less than their South
Carolina counterparts.

Rome, of Health Care for America Now, said the South Carolina pay is unjustified.

“It’s a group of people who are highly compensated to go to an occasional meeting,” he said.

The
Palmetto State insurance giant’s top executives also were
well-compensated in 2010, with most of the top nine earners getting
increased pay over 2009.

Sellers, who retired from his position as CEO in August, earned a reported $2.26 million in pay and benefits.

David Pankau, the company’s former chief operating officer who replaced Sellers as CEO, earned about $790,000.

Two
other executives outpaced Pankau in 2010. Senior Vice President Stephen
Wiggins earned more than $1 million in pay and benefits, while Chief
Financial Officer Robert Leichtle earned more than $1.3 million.

Most
states have Blue Cross Blue Shield plans. The South Carolina
executives’ compensation is higher than many of their counterparts in
other states, according to Atlantic Information Services, a group that
reports on the insurance industry. But executives in some states,
including New Jersey and Florida, earned more.

That provides little solace for consumer advocates like Berkowitz at the Appleseed Legal Justice Center.

“I
don’t begrudge them for making big salaries,” Berkowitz said. “But
there’s big — and then there’s huge. And here we have people who have
no access to health care because they can’t afford it.”

Market domination

Blue
Cross Blue Shield of South Carolina and UnitedHealthcare, whose market
share is a distant second to Blue Cross’, together controlled 83 percent
of the state’s commercial health insurance market in 2008, according to
a recent American Medical Association study of the health insurance
industry nationwide.

That figure, up from 65 percent
two years prior, puts South Carolina among five states nationally where
the two largest health insurers had the biggest gains in market share,
the report said.

“The market power of health insurers
places physicians and patients at a significant disadvantage,” American
Medical Association President Cecil Wilson said in a statement. “When
insurers dominate a market, people pay higher health insurance premiums
than they should, and physicians are pressured to accept unfair contract
terms and corporate policies, which undermines the physician role as a
patient advocate.”

Blue Cross Blue Shield spokeswoman Hammond dismissed the criticism.

“South
Carolina has a strongly competitive health insurance marketplace in all
segments and S.C. Blue Cross sees no sign that this will change,” she
said in a statement.

The insurer has seen market
success “because it provides superior products at a superior price with
superior service,” she said in the statement. “If this were not the
case, the company’s clients would move to its competitors.”

In most parts of the state, however, viable competitors do not exist, the report showed.

The
American Medical Association studied eight of South Carolina’s metro
areas. Blue Cross Blue Shield held at least 60 percent of the market
share in all areas, but stretched to about 80 percent and beyond in
three — Anderson, Spartanburg and Sumter.

The
insurer holds about 70 percent of the market share in the Charleston
area, the report said, including employees of The Post and Courier.

Through her spokesman, Gov. Nikki Haley declined comment on the market domination.

Department of Insurance Director David Black does not see anything to worry about.

“It’s something to be aware of,” he said.

Black
said he has spoken with people in the industry about Blue Cross Blue
Shield’s heavy concentration. “They don’t think it really leads to
problems in the marketplace,” he said.

Asked for his personal opinion as the state’s chief regulator, Black said, “I haven’t formed an opinion. It’s a good question.”

CL July 2, 2013 at 1:10 pm

Pasting that entire article in proves what exactly? It contradicts nothing I posted, and does not even give any useful information about BCBS’s profit MARGIN to see where it falls within the industry. As the link I provided shows, the industry average is 3.3%. If BCBS is on the upper edge of the band of profit margin for their industry, good for them. Maybe they can make it rain like one of the true heavy hitters in the confection industry.

You did not answer on whether you are part of a practice and whether its profits exceed 3.3.%.

CL July 3, 2013 at 5:20 pm

As to the culpability of government, I forgot to mention that our entire model of employer provided, tax free health insurance is a creation of wage controls implemented by the federal government during WWII. Employers could not raise wages, so they upped fringe benefits that were not subject to the controls.

This is a terrible system that prevents a true market from ever forming, as the customer has no price sensitivity when they were just submitting a claim to the insurance company. Something similar has resultedfrom the well-intentioned federal student loan programs, which have caused, or at least enabled, a price spiral in higher education by making a lot of cheap money available to prospective students.

Insurance companies and regulators have tried to introduce some price sensitivity (co-pays, high deductible plans,etc.) into the system, but the structural flaw persists thanks to government intervention. So government absolutely caused this problem.

CL July 1, 2013 at 3:16 pm

And the supposed good news from Obamacare was based upon faulty comparisons. The press release touting the supposed better than expected rates was making an apples to oranges comparison of individual plans under the exchanges with group plans offered by small businesses. (“The rates submitted to Covered California for the 2014 individual market ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions”). When you compare apples to apples, i.e. individual plans in the private market to individual plans under the exchanges, the news is all bad. As Avik Roy notes, a 40 year old can expect to see his rates increase by an average of 116% using the proper comparison.

Reply
Frank Pytel July 1, 2013 at 3:28 pm

Um. No. The article clearly states accurately that those persons who get employer supplied healthcare, those people that are able to purchase in bulk and thereby get a lower rate, were EXCLUDED from the study.

Reply
CL July 1, 2013 at 4:15 pm

Frank,

I quoted the language about the claimed savings directly from the Covered California press release, and the exchange compared the rates against the “average premium for small employer plans.” You can read it for yourself here:

http://www.coveredca.com/news/press-releases/pr-05-23-13-plans-anounced.html

Frank Pytel July 1, 2013 at 4:23 pm

I referenced this article, the one the discussion is about.

“(It should be noted here that insurance exchanges are for individuals who do not receive health insurance through their employers. They are also for people who do not qualify financially for Medicaid).” Therefore, employers that already provide excellent coverage at reasonable rates.

You can read it for yourself above. :)

The gist of it is that you and I somewhat agree. It’s a bogus study to show the libitards their getting more for nothing.

Dr. Know July 2, 2013 at 7:02 am

Yes, it’s much easier to bring your own talking points to the table rather than discuss what was actually in the article, namely the rates for insurance on the the exchanges, NOT employer-provided insurance plan rates. It’s a complicated system that can’t be reduced so simply.

CL July 2, 2013 at 8:10 am

So Dr. Know, you are taking the position that there is nothing in this article praising Obamacare? I just brought that in from left field?

And she cited the supposed “lower than expected rates,” but as I demonstrated that was only in comparison with a completely different type of plan. You apparently agree group plans are not comparable, so why don’t you focus your criticism on Covered California for making the comparison in the first place rather than those who point out the dishonesty.

CL July 1, 2013 at 1:05 pm

So California is as an example of the greatness of Obamacare, when it is already spiking rates for all age levels (not just young workers)? I shudder to see the failures if this is one of the successes.

http://www.forbes.com/sites/theapothecary/2013/05/30/rate-shock-in-california-obamacare-to-increase-individual-insurance-premiums-by-64-146/

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Curious July 1, 2013 at 2:01 pm

“California has been used as an example of what will happen to insurance
premiums by both critics of the ACA, who are claiming that rates will
increase because of the healthcare law, and by the administration, which
is claiming better rates as a result of increased competition within
exchanges. They’re both right.”

No, CA is an example of how the ACA works AND how it fails.

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Frank Pytel July 1, 2013 at 2:40 pm

Pray tell? My rates are doubling. How am I getting a better rate when it’s going up?

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Curious July 1, 2013 at 2:49 pm

Do you live in CA? Don’t think so, so its insurance exchange rates don’t apply to you. Are you getting insurance through an exchange? Nope, because they’re not open yet. Are you getting it through an employer? If so, that’s a different system. That was all explained in the article…

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Frank Pytel July 1, 2013 at 3:26 pm

Correct. It was all explained in the article that the cost of my insurance is going up to subsidize the lazy fucks that don’t want to work. You are absolutely correct. Therefore this is not better, unless you don’t want to work, can’t hold down a job, or simply don’t give a shit about what you steel from others. For those people, it’s another fucking commie gold mine.

Curious July 2, 2013 at 7:08 am

I hope you never lose your job, Frank. Then you might need a social safety net.

Frank Pytel July 2, 2013 at 7:27 am

Frack that. I’ll get in my truck and jump through trash cans for scrap metal and paper first. I’ve done it before, I’ll do it again.

CL July 1, 2013 at 3:02 pm

What a great marketing slogan for Obamacare: “California, come see how the ACA works AND how it fails.”

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Reading Comprehension July 1, 2013 at 3:05 pm

Isn’t this article about a broken healthcare system, not about how great Obamacare is? I think showing how Obamacare works and how it doesn’t work given the way our healthcare system is set up was the whole point…

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Frank Pytel July 1, 2013 at 3:28 pm

BS. It’s an advertisement

CL July 1, 2013 at 3:29 pm

The article claims Obamacare “good starting point” in fixing our healthcare system but then claims government needs to go even further (nevermind that it was government intervention that broke it in the first place). So the issue of whether Obamacare is truly working or not is obviously relevant to whether further governmental intervention would be likely to make things better or worse.

Dr. Know July 2, 2013 at 6:59 am

Government intervention that broke it in the first place? Govt. sets the reimbursement costs for Medicaid and Medicare, which are actually lower than the reimbursement costs negotiated by major insurance companies – and insurance companies still make huge profits b/c they wouldn’t be in business if they negotiated lower reimbursements than they could afford (and sit on the profits – see BCBS of SC). That’s why there’s the 80/20 rule.

That’s also why many primary care doctor’s offices have stopped accepting Medicaid patients – they can’t afford to treat people for the lower reimbursement payments (I would know). We haven’t stopped accepting private insurance coverage, though, and the private insurers haven’t stopped making profits. Government didn’t break the system – insurance companies and hospitals who charge different rates for different procedures broke the system, rates that are much higher than what is charged in the rest of the developed word for the same procedures (see the article about colonoscopies linked to in the article above). Add in uninsured people who can’t qualify for Medicaid or don’t want to (or can’t) pay for health insurance who pay outrageous fees for simple or life-saving medical treatments and then default on bills, passing off the cost to rest of us, which means you get a totally fubar system – govt didn’t do that.
As a physician, I’d rather have standard rates for procedures, and I’d rather have insured patients. If that means more government intervention to set some price controls and subsidize some insurance plans on the exchanges, I’m fine with that.
Also, anyone who thinks that Obamacare runs “death panels” hasn’t had much experience with private insurance treatment denials.

CL July 2, 2013 at 8:24 am

This is just nonsense. Health insurance companies do not make “huge profits.” The health insurance industry is 86th in profit margin, behind such heavy hitting industries as confectioners and home furnishing stores. Even journolister Ezra Klein admits that talking point is bs. http://voices.washingtonpost.com/ezra-klein/2009/09/profit_and_the_insurance_indus.html (u can follow the link to the list itself). But by all means, blame the insurance companies. Why don’t they just do their civic duty and operate at a loss so that you can feel better about yourself and your liberal pieties? The nerve of some people, expecting to make a 3% profit. If you are in a medical practice, I wonder what your profit margin is? More than 3.3%?

Do you not understand that the fact that central planners set reimbursement rates lower than market is part of the problem? Providers have to make up the difference somewhere, and it helps increase the costs for everyone.

And hospitals charge insurance patients “less” only in fantasy land where the uninsured patients are paying their bills. The facilities are forced to treat everyone under EMTALA (more government intervention), get stuck with the costs, which get paid by those with insurance.

Government did all of that. You could take away every penny of profit the insurance companies made and it would not solve our healthcare problems, because the problem is structural.

Dr. Know July 2, 2013 at 12:27 pm

Riiight: http://www.postandcourier.com/article/20110501/PC1602/305019922

Blue Cross Blue Shield of South Carolina, which has generated hundreds
of millions of dollars in profits over the past five years, has boosted
the pay of board members and top executives while sticking policyholders
with ever-higher premiums, a Post and Courier review found.

The nine members of the company’s board of directors have
more than doubled their reported salaries in the past year, financial
filings show. In 2010, two executives earned more than $1 million in
salary and bonus pay, and another earned more than $2.2 million,
according to the filings.

As top earners’ salaries
have surged, an April financial analysis showed the insurer is sitting
on excess capital reserves, money that instead should have been returned
to policyholders through rebates or lowered premiums, consumer
watchdogs said.

The health insurer also has been
accused of having a vise on the state’s insurance market, stifling
competition and leaving its 1-million-plus South Carolina customers with
few health care alternatives.

To make matters worse,
soft state oversight of the insurance industry leaves South Carolinians
exposed to continual rate increases, a recent report on insurance
industry regulation nationwide showed.

The high cost
of premiums has put health coverage beyond the reach of an estimated 1
million South Carolinians, said Sue Berkowitz, who heads the Appleseed
Legal Justice Center, a Columbia advocacy group for disadvantaged
residents.

“People are struggling to afford health care even as industry profits continue to grow,” Berkowitz said.

Blue
Cross Blue Shield spokeswoman Elizabeth Hammond said the insurance
giant’s policies are priced “to reflect its superior networks,” and she
dismissed concerns about market domination. Although it hiked group
insurance premiums last year, Hammond pointed out that the company did
not increase prices of its individual policies, which account for 6
percent of its membership.

Ethan Rome, executive
director of Health Care for America Now, a national health consumer
advocacy group in Washington, D.C., said the dominant carrier is not
playing fair.

“Huge reserves, big pay, no
competition, very little scrutiny — you’ve got a big problem,” he said.
“You’re not going to have fair rates.”

Excess reserves

During
the past five years, Blue Cross Blue Shield’s net income generated from
premiums has increased considerably, while the number of members has
increased only modestly, according to data provided by the state
Department of Insurance.

While the insurer said it is
difficult to draw conclusions about premium pricing using composite
figures, the data indicate the average per-member premium has increased
by about 17 percent since 2006.

As consumers struggle with rate hikes, Blue Cross Blue Shield’s profits have soared.

In
2010 alone, the company’s profits rose 46 percent over the previous
year, to about $96 million, according to records filed with the National
Association of Insurance Commissioners. Its total capital increased
from $1.5 billion in 2009 to nearly $1.7 billion in 2010, the records
show.

Insurance companies must maintain a certain
level of capital to cope with large-scale disaster. But Blue Cross Blue
Shield’s capital far exceeds regulatory requirements, with nine times
the amount required under state law, according to an April Citigroup
Global Markets financial analysis.

That level of
excess will make it difficult for Blue Cross Blue Shield “to justify why
premium rates need to rise as much as expected cost trends” and will
“lead to significant tension” with consumer activists, according to the
Citigroup analysis.

Industry observers such as Rome
and Judy Dugan, a research director at California-based Consumer
Watchdog, already have taken note. Policyholders are entitled to share
the company’s profits, they said.

Most health
insurers operate either as for-profit, publicly traded companies or as
tax-exempt nonprofits. That makes those companies publicly accountable
to either shareholders or taxpayers.

As a mutual
insurance company, Blue Cross Blue Shield of South Carolina’s
policyholders act as shareholders, industry experts said. That means
those policyholders are entitled to rebates or rate cuts when the
company posts big profits, they said.

But neither rebates nor reduced premiums seem to be in the cards for Blue Cross Blue Shield’s customers.

“The
fact that we make a small profit means we can afford to build into our
prices only the impact of increases in medical care,” spokeswoman
Hammond said in emailed responses to questions from the newspaper. Blue
Cross Blue Shield responded to Post and Courier questions by email from
Hammond.

She rejected criticism that the company is sitting on excessive capital.

“These reserves … provide our customers with the security they need,” she said in the statement.

‘Huge’ pay

Each
of the nine members of Blue Cross Blue Shield of South Carolina’s board
of directors doubled their reported pay or better since last year,
according to compensation reports filed with the S.C. Department of
Insurance. Some members increased their pay by as much as 163 percent in
one year, the records show.

All members of the board
— made up of prominent lawyers, bankers and development and business
leaders — earned between about $100,000 and $160,000 in 2010 for their
board duties, documents show.

Despite acknowledging
the accuracy of financial statements showing the increased pay, Blue
Cross Blue Shield officials said compensation did not double.

M.
Edward Sellers, the company’s former CEO who now serves as chairman of
the board, said pay was reported differently in previous years.

“I don’t know exactly what happened,” Sellers said.

The
board meets multiple times a year and holds ultimate responsibility for
managing the company’s business affairs, Blue Cross Blue Shield’s
Hammond said in a statement. The board examines national comparative
studies on pay and sets compensation with input from a consultant, she
said.

Sellers said the board pay is “commensurate to a company of our scale.”

Recent
public uproar over executive and board compensation in Massachusetts
led Blue Cross Blue Shield in that state to suspend board pay. But in
Massachusetts, all board members earned far less than their South
Carolina counterparts.

Rome, of Health Care for America Now, said the South Carolina pay is unjustified.

“It’s a group of people who are highly compensated to go to an occasional meeting,” he said.

The
Palmetto State insurance giant’s top executives also were
well-compensated in 2010, with most of the top nine earners getting
increased pay over 2009.

Sellers, who retired from his position as CEO in August, earned a reported $2.26 million in pay and benefits.

David Pankau, the company’s former chief operating officer who replaced Sellers as CEO, earned about $790,000.

Two
other executives outpaced Pankau in 2010. Senior Vice President Stephen
Wiggins earned more than $1 million in pay and benefits, while Chief
Financial Officer Robert Leichtle earned more than $1.3 million.

Most
states have Blue Cross Blue Shield plans. The South Carolina
executives’ compensation is higher than many of their counterparts in
other states, according to Atlantic Information Services, a group that
reports on the insurance industry. But executives in some states,
including New Jersey and Florida, earned more.

That provides little solace for consumer advocates like Berkowitz at the Appleseed Legal Justice Center.

“I
don’t begrudge them for making big salaries,” Berkowitz said. “But
there’s big — and then there’s huge. And here we have people who have
no access to health care because they can’t afford it.”

Market domination

Blue
Cross Blue Shield of South Carolina and UnitedHealthcare, whose market
share is a distant second to Blue Cross’, together controlled 83 percent
of the state’s commercial health insurance market in 2008, according to
a recent American Medical Association study of the health insurance
industry nationwide.

That figure, up from 65 percent
two years prior, puts South Carolina among five states nationally where
the two largest health insurers had the biggest gains in market share,
the report said.

“The market power of health insurers
places physicians and patients at a significant disadvantage,” American
Medical Association President Cecil Wilson said in a statement. “When
insurers dominate a market, people pay higher health insurance premiums
than they should, and physicians are pressured to accept unfair contract
terms and corporate policies, which undermines the physician role as a
patient advocate.”

Blue Cross Blue Shield spokeswoman Hammond dismissed the criticism.

“South
Carolina has a strongly competitive health insurance marketplace in all
segments and S.C. Blue Cross sees no sign that this will change,” she
said in a statement.

The insurer has seen market
success “because it provides superior products at a superior price with
superior service,” she said in the statement. “If this were not the
case, the company’s clients would move to its competitors.”

In most parts of the state, however, viable competitors do not exist, the report showed.

The
American Medical Association studied eight of South Carolina’s metro
areas. Blue Cross Blue Shield held at least 60 percent of the market
share in all areas, but stretched to about 80 percent and beyond in
three — Anderson, Spartanburg and Sumter.

The
insurer holds about 70 percent of the market share in the Charleston
area, the report said, including employees of The Post and Courier.

Through her spokesman, Gov. Nikki Haley declined comment on the market domination.

Department of Insurance Director David Black does not see anything to worry about.

“It’s something to be aware of,” he said.

Black
said he has spoken with people in the industry about Blue Cross Blue
Shield’s heavy concentration. “They don’t think it really leads to
problems in the marketplace,” he said.

Asked for his personal opinion as the state’s chief regulator, Black said, “I haven’t formed an opinion. It’s a good question.”

CL July 2, 2013 at 1:10 pm

Pasting that entire article in proves what exactly? It contradicts nothing I posted, and does not even give any useful information about BCBS’s profit MARGIN to see where it falls within the industry. As the link I provided shows, the industry average is 3.3%. If BCBS is on the upper edge of the band of profit margin for their industry, good for them. Maybe they can make it rain like one of the true heavy hitters in the confection industry.

You did not answer on whether you are part of a practice and whether its profits exceed 3.3.%.

CL July 3, 2013 at 5:20 pm

As to the culpability of government, I forgot to mention that our entire model of employer provided, tax free health insurance is a creation of wage controls implemented by the federal government during WWII. Employers could not raise wages, so they upped fringe benefits that were not subject to the controls.

This is a terrible system that prevents a true market from ever forming, as the customer has no price sensitivity when they were just submitting a claim to the insurance company. Something similar has resultedfrom the well-intentioned federal student loan programs, which have caused, or at least enabled, a price spiral in higher education by making a lot of cheap money available to prospective students.

Insurance companies and regulators have tried to introduce some price sensitivity (co-pays, high deductible plans,etc.) into the system, but the structural flaw persists thanks to government intervention. So government absolutely caused this problem.

CL July 1, 2013 at 3:16 pm

And the supposed good news from Obamacare was based upon faulty comparisons. The press release touting the supposed better than expected rates was making an apples to oranges comparison of individual plans under the exchanges with group plans offered by small businesses. (“The rates submitted to Covered California for the 2014 individual market ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions”). When you compare apples to apples, i.e. individual plans in the private market to individual plans under the exchanges, the news is all bad. As Avik Roy notes, a 40 year old can expect to see his rates increase by an average of 116% using the proper comparison.

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Frank Pytel July 1, 2013 at 3:28 pm

Um. No. The article clearly states accurately that those persons who get employer supplied healthcare, those people that are able to purchase in bulk and thereby get a lower rate, were EXCLUDED from the study.

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CL July 1, 2013 at 4:15 pm

Frank,

I quoted the language about the claimed savings directly from the Covered California press release, and the exchange compared the rates against the “average premium for small employer plans.” You can read it for yourself here:

http://www.coveredca.com/news/press-releases/pr-05-23-13-plans-anounced.html

Frank Pytel July 1, 2013 at 4:23 pm

I referenced this article, the one the discussion is about.

“(It should be noted here that insurance exchanges are for individuals who do not receive health insurance through their employers. They are also for people who do not qualify financially for Medicaid).” Therefore, employers that already provide excellent coverage at reasonable rates.

You can read it for yourself above. :)

The gist of it is that you and I somewhat agree. It’s a bogus study to show the libitards their getting more for nothing.

Dr. Know July 2, 2013 at 7:02 am

Yes, it’s much easier to bring your own talking points to the table rather than discuss what was actually in the article, namely the rates for insurance on the the exchanges, NOT employer-provided insurance plan rates. It’s a complicated system that can’t be reduced so simply.

CL July 2, 2013 at 8:10 am

So Dr. Know, you are taking the position that there is nothing in this article praising Obamacare? I just brought that in from left field?

And she cited the supposed “much lower than anticipated” rates in California’s exchanges, but as I demonstrated that was only in comparison with a completely different type of plan. You apparently agree group plans are not comparable, so why don’t you focus your criticism on Covered California for making the comparison in the first place rather than those who point out the dishonesty?

GrandTango July 1, 2013 at 1:40 pm

Public Approval of Supreme Court Falls to All-Time Low
Violating the Constiution for Obama-care and Gay marriage….has its consequences…

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tomstickler July 1, 2013 at 4:38 pm

The fact that healthy young people in California were able to obtain health insurance cheaply before ACA is merely an artifact of the faulty health insurance business prior to ACA.

Insurers were happy to offer cheap policies, confident that they would have to pay out few claims on such a healthy demographic.

True insurance puts everyone in the same risk pool and charges premiums based on the projected claims of the entire pool. That means that you will pay more into the system than you get out while you are young and healthy, and will probably get more out than you pay in when you are old and feeble.

The advantages are that everyone participates, and no one can be denied coverage due to preexisting conditions. Since there are more participants in the risk pool, average premiums should be less over a lifetime than they would have been without ACA.

As with any insurance program, some will never get out of it what they put into it, but then few complain about all the home fire, flood and wind insurance premiums they paid without ever making a claim, right?

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GrandTango July 1, 2013 at 4:52 pm

In the FREE mkt. we can always REFUSE Coverage. Your NAZI has stopped that..

Aside from that: Leftwing promises and theroies regarding socialism, even if they are not all that attractive in the first place…under-perform.

ObamaCare will cost more than ever claimed, and the service will be a disaster, where quality is concerned…

Liberals are liars and failures. We’re already seeing that…no matter what you try to peddle.

People have seen you over and over. We know who, and what, you are….So who are trying to fool???

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tomstickler July 1, 2013 at 4:38 pm

The fact that healthy young people in California were able to obtain health insurance cheaply before ACA is merely an artifact of the faulty health insurance business prior to ACA.

Insurers were happy to offer cheap policies, confident that they would have to pay out few claims on such a healthy demographic.

True insurance puts everyone in the same risk pool and charges premiums based on the projected claims of the entire pool. That means that you will pay more into the system than you get out while you are young and healthy, and will probably get more out than you pay in when you are old and feeble.

The advantages are that everyone participates, and no one can be denied coverage due to preexisting conditions. Since there are more participants in the risk pool, average premiums should be less over a lifetime than they would have been without ACA.

As with any insurance program, some will never get out of it what they put into it, but then few complain about all the home fire, flood and wind insurance premiums they paid without ever making a claim, right?

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Born in the USA July 2, 2013 at 7:31 am

We cannot afford to add the family to the health care program at my employer because of the cost. We went with a high-deductible HSA for the wife and kids, but that is going up 200% in our state (still in the South but not in South Carolina). So, because of this governmental influence that was going to “help” Americans, we are, in fact, in worse shape due to this legislation.

As we celebrate our nation’s independence this week, let’s focus on independence. We should all resolve to be less dependent on government rather than the current trajectory of our nation which is more dependent on government.

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Born in the USA July 2, 2013 at 7:31 am

We cannot afford to add the family to the health care program at my employer because of the cost. We went with a high-deductible HSA for the wife and kids, but that is going up 200% in our state (still in the South but not in South Carolina). So, because of this governmental influence that was going to “help” Americans, we are, in fact, in worse shape due to this legislation.

As we celebrate our nation’s independence this week, let’s focus on independence. We should all resolve to be less dependent on government rather than the current trajectory of our nation which is more dependent on government.

Reply

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