Tag Archives: high deductible

How a GOP Congress Could Fix Obamacare

Republicans are primed to take over Congress. A new FiveThirtyEight.com projection gives the GOP a 60% chance of winning the Senate this fall. And, according to RealClearPolitics, there’s virtually no chance Democrats will take the House.

If the GOP succeeds, public displeasure with Obamacare may be why. A recent poll from Bankrate.com found that more than two-thirds of voters say that Obamacare will play a role in how they vote in the coming election. Nearly half said it would influence them “in a major way.”

Of course, the next Congress has little hope of repealing Obamacare outright. The president would just issue a veto. Overriding it — though technically possible — would be difficult with an intransigent Democrat minority.

A GOP majority should instead focus on incremental reforms with bipartisan support — like tax cuts, regulatory reforms and repeal of some of Obamacare’s most unpopular mandates. That’s the most effective way for lawmakers to move our health care system toward one that puts markets and patients at its center.

Step one? Repeal Obamacare’s medical-device tax. This 2.3% excise charge on all device sales is expected to collect $29 billion over the next decade, according to government data.

Device firms are compensating by cutting jobs. Stryker, for instance, has cut 5% of its workforce — about 1,000 people. Zimmer Holdings has chopped 450 jobs. In total, Obamacare’s device tax could kill 43,000 jobs, according to Diana Furchtgott-Roth, an economist at the Hudson Institute.

Getting rid of the tax is a no-brainer. In March 2013, 79 senators — including 34 Democrats — approved a non-binding resolution calling for its repeal. It’s time to make that vote binding.

Second, a GOP-controlled Congress should strengthen health savings accounts. These financial vehicles allow patients to stow away money tax-free for medical expenses. HSAs are typically coupled with high-deductible health insurance. Patients bear the cost of routine care, and coverage kicks in when needed, like in the event of a medical emergency.

HSAs give patients a financial incentive to avoid unnecessary medical expenses. Converting someone to HSA-based insurance drops her annual health expenses by an average of 17%.

This year, 17.4 million people are enrolled in HSA-eligible plans — a nearly 14% increase over 2013. Among large employers, 36% now offer HSA/high-deductible plans, up from 14% five years ago.

Annual HSA contributions are currently capped at $3,350 for an individual and $6,550 for a family. Congress should raise them to $6,250 and $12,500, respectively. And patients with HSA coverage through the exchanges should be eligible for a one-time, $1,000 refundable tax credit to be deposited directly into their account.

Third, the new Congress should reform medical malpractice. Frivolous lawsuits and the threat of baseless litigation are increasing health costs and degrading quality of care.

Excessive malpractice suits drive “defensive” medicine, in which doctors order unnecessary procedures and tests simply to shield against accusations of negligence. This practice costs the country an estimated $210 billion every year, according to PricewaterhouseCoopers. Injecting common sense into the medical tort system would bring down that bill.

Earlier this year, the House Energy and Commerce Committee passed a bill that restricted lawsuits against doctors by, among other things, limiting non-economic damage judgments to $250,000. It was effectively ignored once it moved out of committee. Republicans should dust it off and pass it.

Finally, the GOP should repeal Obamacare’s employer mandate, which slaps midsize and large companies with a fine if they don’t provide sufficiently “robust” health coverage to full-time employees.

The mandate is destroying jobs. Employers are holding off on hiring and ratcheting back workers’ hours to avoid additional insurance costs. A Gallup poll found that 85% of businesses are not looking to hire. Nearly half cited rising healthcare costs.

There’s ample political support for repealing the employer mandate. The administration has already unilaterally — and maybe illegally — delayed its implementation. Several prominent backers have openly called for repeal.

All of these reform ideas are imminently actionable. They could find broad bipartisan backing and avoid a veto. Most importantly, they would move U.S. healthcare closer to a consumer-driven system, with patients empowered to control their own spending and market forces pushing costs down.

How Private Health Exchanges Can Win

As the various public healthcare exchanges have gained more publicity, employers are increasingly aware of the availability of their private sector counterpart.  A legion of brokers, third party administrators and experienced legacy benefit administrators are striving to reconfigure and brand themselves as a private healthcare exchange (PHX), providing service to employer groups rather than individuals.

However, the genuine article is nearly nonexistent. Out of the nearly 100 companies that are identified as a PHX, only a few possess the technology, industry knowledge, backing and other necessary qualities to succeed over the long term.

How is the investor, carrier or broker able to evaluate a PHX for partnership and ensure he picks not only a survivor but a winner?

There are three essential capabilities any contender must possess.

  • Intuitive shopping experience (i.e. Amazon)
  • Multiple medical carrier and plan options
  • Direct integration of consumer-directed account(s) in both the shopping and enrollment processes

Intuitive shopping

The PHX experience must model other consumer Internet shopping experiences in all aspects for universal adoption. If a PHX is unable to do this, brokers, HR administrators and other service providers will engender unsustainable, escalating costs while providing little service. A PHX must move to the self-service model of e-commerce.

It is unlikely that the insurance industry, so mired in its own protocols, can design such a system on its own. For the PHX industry to thrive, outside experts from e-commerce must be welcomed inside the business to effectively couple their expertise with that of individuals with deep knowledge of the employee benefits sector.

Multiple options

It would seem intuitive for an employer to offer employees a range of national and regional insurance carriers. Yet the health insurance industry has always gravitated to restricted choice. It is a golden scenario for a carrier to have enrollees choosing exclusively from its options in an electronic marketplace. This leaves brokers in a precarious position. Although they currently control the health insurance marketplace, brokers are vulnerable to the almost certain risk that the current carrier will raise rates; brokers may lose clients or have to abandon the platform and seek another carrier.

The problem is further complicated by several factors. Carriers require digitalization to facilitate rating, enrollment, eligibility and billing. Retroactive risk adjustment is often required to account for employee population variables. Finally, and perhaps most importantly, individual state “exchange shops” mandated for small groups under the Affordable Care Act all have multiple medical carrier options, raising the bar for private healthcare exchanges.

High-deductible health plans coupled with health savings accounts are now approaching 50% of plan populations after languishing for years with only 5% to 10% adoption rates. Although the reasons for this increase are not necessarily clear, the statistic is well-documented, as illustrated in the May 2014 joint study by John Young and Todd Berkley. It is clear employees making unfiltered decisions are voting with their feet. Consumer-directed accounts (read health savings accounts) can no longer be treated as just a minor option for early adopters.

Integration of accounts

While the consumer may choose a high-deductible plan, it is quite possible that when the first claim happens there will not be funds to pay it. It is imperative that the consumer bank account is enrolled concurrently with enrollment into the medical plan. This does not take place in most situations today. The importance of assessing other mechanisms of providing the consumer liquidity cannot be overstated as a means to ensure accounts are adequate to pay claims under deductible or co-pay responsibilities.


While there are stiff challenges, an incredible opportunity exists to offer a PHX that is an integrated, superior product that belies the complexity underlying the system it serves.

How To Avoid Public Backlash Against Price Transparency

“Audiences in the Washington area have been erupting in whoops, whistles and applause when actress Helen Hunt, playing the single mother of a chronically ill child, denounces HMOs with a string of unprintable epithets,” the Washington Post recounts in a story in 1998. “Hunt's character quickly apologizes for the outburst, but actor Harold Ramis, playing a physician, assures her that the apology is unwarranted. 'Actually, I think that's their technical name,' he says.”

While most people may not remember this movie, “As Good As It Gets,” they certainly are familiar with HMOs — and how unpopular they were with the public in the Clinton era, as embodied by this scene. Today, most purchasers and payers who once championed HMOs as the next great answer to health costs and quality are much more cautious about them: Less than 38 percent of employers offer an HMO benefit to their employees, almost always as one among many plan options.

Yet the basic principles behind HMOs remain appealing to employers. They can realign payment systems to incentivize prevention. If a procedure appears unnecessary, they don't pay for it — or they can require clinical evidence that it is indeed necessary. They can pivot services around the needs of the patient and coordinate care.

Employer reliance on HMOs has receded, but the problems HMOs were designed to address have only grown exponentially larger in recent years. Health costs exploded since “As Good As It Gets” debuted, and the persistent problems of fragmented services, inadequate prevention and unnecessary care waste at least a third of all money spent on healthcare, according to the Institute of Medicine (IOM). But consumers hated HMO restrictions on choice and resented interference with the doctor-patient decisio-nmaking, and that doomed HMOs, however good their intentions may have been.

So purchasers moved in a new direction, aiming to uphold the original principles behind HMOs without interfering with patients' choices. Instead of tightly managing the services provided to employees, purchasers would take a hands-off approach and give consumers more information so they could make their own decisions about the right care at the right price. Instead of managed care, we'd have manage-your-own-care. The manage-your-own-care philosophy ultimately led to the accelerated growth of high deductible health plans, now the fastest-growing form of health insurance, in which employees and dependents enjoy a high level of choice of doctor and procedure but pay for much of it out of their own pocket. This gives consumers the incentive to “shop” for the best provider, search out the right prices, and make sure that the procedure and the costs are warranted.

In line with this development is a trend among purchasers to call for price transparency, including a demand for plans and individual providers to publicly report on how much employees must pay for services they seek. I support price transparency, with an important caveat: Price reporting must be interwoven with quality reporting, in all venues, every time. By contrast, price reporting decoupled from quality reporting could inspire the same backlash HMOs did. Here's how:

  • Your costs will grow. Anyone who has worked in healthcare knows that the current pricing and chargemaster scheme are nonsensical and are in no way correlated to the quality of care. What that means is you can't predict the quality by the price. But consumers don't understand that, and studies show that given the pricing options, they will select the highest priced provider — assuming that's automatically the highest quality provider. When you only show pricing, without coupling the dollar figures with an easily comprehended indicator of quality, consumers will head toward the highest priced option, especially after they have already satisfied the deductible and it's the purchaser's dime (i.e. during an inpatient stay). If a purchaser or plan tries to restrict choice of hospital, it will be perceived as a cynical effort to cut costs at the expense of patient quality — since the employee does not see for themselves that price is unrelated to quality.
  • Your company CEO will appear as the villainous businessman sweating on 60 Minutes. Employees will accuse their companies of choosing “cheaper” providers rather than the “best” providers, without any information on whether the less-expensive options are actually lower in quality. Comparing pricing information with quality information allows employers to make informed choices, and in turn, inform employees, too.
  • Your health plan will be treated as evildoer. If your employees continue to shop services by price alone, they will not appreciate any efforts by health plans to restrict choices of hospitals or otherwise make demands on hospitals. Health plans that try to do this on behalf of purchasers or as part of the exchanges will be subject to Helen Hunt-style vitriol for sacrificing quality as soon as the employee exhausts the deductible.

In the new movement away from managed care and toward manage-your-own-care, purchasers and payers are at a crossroads. They must take steps to educate their employees on how to select the best provider, including the weirdness of a market in which price tells you nothing about quality or vice-versa. Only by assuring full transparency of both quality and pricing — always coupled together — will the public learn the strange truth about getting the best care for themselves and their families. Purchasers and payers deserve credit for pushing for higher quality care, so they should insist on giving employees what they need to work toward that same goal. Don't be cast as the villain again.