Tag Archives: John Nelson

Healthcare Reform and the Courts, Part 3

This is the third article in a 3-part series on Healthcare Reform and the Courts. Preceding articles in this series can be found here: Part 1 and Part 2.

Why And When The Supreme Court Will Likely Take The Case
Before we get into how the Supreme Court is likely to reconcile these contradictions between the lower courts, let’s talk about the question of whether or not the court will even take the case on and the basis of their decision to do so.

The fact is that the Supreme Court has to be asked to rule on a case first. And if they are, 4 out of the 9 justices have to agree to take it.

When the court takes on a case, it’s usually because the justices believe that the case particulars can create the foundation of a ruling over an issue that the justices have viewed historically as being inconsistent with constitutional law or that is confusing and something that they believe they should address or clarify.

So the justices pick and choose cases that they can best use to harvest rulings that help the country in this regard. Often, when they take on a case, it has little to do with the actual issue of the case. More, it has much to do with a bigger picture question or issue pertaining to constitutional law.

So what is the big, compelling question/issue that the Supreme Court might want to resolve using the Patient Protection and Affordable Care Act as the vehicle? I think it’s the Commerce Clause.

This clause has been around for almost a hundred years and it has slowly grown to cover a lot of commercial activity throughout the country. The line between the autonomy of the states and the role of the federal government that was so carefully engineered by our founding fathers seems to have become more blurred over the last century and especially during the last decade.

Where do you draw the line? How far reaching should the Commerce Clause be? To the extreme, if the Commerce Clause continues to grow in influence and affect more and more businesses and everyday life, then what’s the point in even having states? These are very compelling questions for the justices to address, in my opinion. And I can’t imagine a greater platform and vehicle for a grand discussion and directive on this than the Patient Protection and Affordable Care Act.

A prospective ruling on this could be the ruling of the decade – not because of the mandate but because of how it affects states and their relationships with the federal government. So that’s why I believe the Supreme Court will take it. But when will they get it? No one’s sure.

The federal government will want to delay the time the case gets to the court as long as possible. The more it’s delayed, the more aspects of the Patient Protection and Affordable Care Act are likely to be rolled out and become part of societal infrastructure — if a state has already received money and built an exchange with it, what do you do if the court throws out the Patient Protection and Affordable Care Act? My bet is the exchange (or pieces of it) stays in place.

And this is why the states want to see the case go to the court right away. From what I’ve read, there’s a 50/50 chance that the court will issue a ruling before the next year’s election.

How Will The Supreme Court Rule On The Patient Protection And Affordable Care Act?
I for one think there’s a 60/40 chance in favor of the court ruling against the mandate. I have no clue whether they will consider the mandate severable or not, but many observers think the possibility of the court overturning the entire Patient Protection and Affordable Care Act is unlikely.

What If The Supreme Court Overturns Just The mandate And Leaves The Rest Of The Patient Protection And Affordable Care Act Intact?
If they rule against the mandate, leaving the guarantee issue and the no-preexisting clauses intact, we’ll have an individual insurance market rife with adverse selection and severe price increases just like the health insurance environments we already have in New York and New Jersey.

So what would lawmakers do with this kind of ruling and the prospects of the entire country turning into a New York-like market? There is no clear cut answer here. Democrats and many Republicans consider medical underwriting an anathema. They don’t like it at all. So there would be a natural reluctance to repeal the guarantee issue portion of the law.

The other thing is that many Democrats believe that the mandate is not really necessary. Last year, I heard an advisor to the White House state that eliminating the mandate will make no difference at all and that people will continue to buy coverage because it “is the right thing to do”. So I really doubt that if the Patient Protection and Affordable Care Act remains intact sans the mandate, that we will see Congress abolish the guarantee issue portion of the law.

However, I do believe that we will see regulations that will be geared towards protecting the integrity of the individual market such as special open enrollment periods. Right now, as the law is written, anyone after January 1st, 2014 will be able to sign up for individual coverage, be covered for their pre-existing conditions and not be rated up according to their health history. There is a mandate to buy coverage but the penalty for failing to do so is very weak. This is a recipe for adverse selection and disaster.

There might be a way to fix this, though, via regulations. A rule could be promulgated that states that all citizens have a one-time opportunity to sign up for individual coverage and it is during the month of January, 2014. Sign up then and you’ll get your coverage as envisioned by the Patient Protection and Affordable Care Act. If you miss this date and change your mind later, then carriers would have the right to rate you up and impose a waiting period. I see the scenario of creating a rule like this more likely than Congress making a politically unpopular law that reinstates medical underwriting.

What If The Supreme Court Overturns The Patient Protection And Affordable Care Act Entirely?
If the Supreme Court throws the whole thing out, then a lot of things will revert back to the days before the Patient Protection and Affordable Care Act was implemented but ghosts of it will remain.

  1. The MLR requirement will go away — but some of the states will miss it and might pass legislation to reinstate it on their own with perhaps even tighter restrictions. Will commissions on individual climb back up to the levels they were before the Patient Protection and Affordable Care Act was signed into law? Probably, but I wouldn’t be surprised to see carriers take a little while to increase them.
  2. The federal funding and rules for exchanges go away — but states are already developing them. Do they stop midstream and throw out what has already been built? Or do they stay the course and continue building them (keep in mind that Utah and Massachusetts already have exchanges up and running). It’s hard for me to believe that exchange development for all states will be stopped wholesale if the Patient Protection and Affordable Care Act goes away entirely. My bet is that some states will continue to build their exchanges albeit with an emphasis on the individual market and less on small group.
  3. Will healthcare delivery costs go up or down if the Patient Protection and Affordable Care Act goes away? Delivery costs are always trending up but if the law is overturned, the rate of increase is likely to slow due to providers not needing to cost shift as much as they are now due to higher populations of Medicaid patients and cuts to Medicare.
  4. Agents and the industry can breathe a sigh of relief — maybe. For about a month or two.

    The Patient Protection and Affordable Care Act relieved a lot of pressure on the states to do something about escalating healthcare costs and the growing populations of uninsureds. If the Patient Protection and Affordable Care Act goes away, states will feel more compelled to act on their own. America’s healthcare system has been broken for some time. That’s why Congress acted and created the Patient Protection and Affordable Care Act. Unfortunately, the law is bending the healthcare cost curve up and is making things worse. But if the Patient Protection and Affordable Care Act goes away, we’re still left with a broken system that is rapidly becoming a black hole in our economy. Healthcare eats up 16% of our GDP. In 40 years, at the current rate of growth, it will account for 40% of our GDP. How are we going to pay for it?

    The Patient Protection and Affordable Care Act’s demise would lead to a short term sigh of relief for many but the problems that we’ve had before and after March, 2010 will continue to haunt lawmakers, business, agents and our industry until they are tackled in a meaningful way.

Many of you know me to be optimistic about the future of agents. And I am because the role of the agent will become more valuable over time, not just as a distributor of health insurance products — but as educators to the public and facilitators of meaningful change to the way our healthcare is delivered and financed.

Understanding the details of the Patient Protection and Affordable Care Act, its legal challenges and what this all really means to our industry and, most importantly, the American public is fundamental in empowering them to look in the right direction for answers to a complicated question that is facing all of us — who is going to treat us when we need medical care and how are we going to pay for it?

If you’d like more detailed information regarding courts and the Patient Protection and Affordable Care Act, including verbatim copies of the judges’ rulings to date on all cases, contact me, and I’ll respond accordingly.

Healthcare Reform and the Courts, Part 2

This is the second article in a 3-part series on Healthcare Reform and the Courts. Preceding and subsequent articles in this series can be found here: Part 1 and Part 3.

How The Florida Court Ruled
The Florida Court agreed with the states on both counts. Basically, the court said that the government cannot compel people to engage in an activity like buying health insurance. That authority is left to the states. And they agreed that this portion of the Patient Protection and Affordable Care Act was not severable and, therefore, the whole thing is unconstitutional.

The court’s rationale here was interesting, I thought. The reality is that Congress passes a lot of laws that do not include a severability clause. And yet many of those laws remain in place after the court has ruled against certain provisions of them because severability is implied. The courts, not wanting to thwart the will of the people via their elected representatives know that throwing out every single law because of problems with certain sections would create a logjam in government and nothing would get done. So the courts prefer not to do this.

But judges don’t automatically assume severability. They go back to and research any documentation they can get their hands on to determine whether or not lawmakers intended to include severability in the legislation. And that’s just what the Florida judge did with the Patient Protection and Affordable Care Act.

So what did he find? He found that a prior draft of the Patient Protection and Affordable Care Act did include a severability clause which meant that for some reason, someone pulled it out when the final version was reported out of Congress — possible evidence that Congress did not mean for the Patient Protection and Affordable Care Act to include severability.

Additionally, the judge did more homework and then came across news clips of the President of the United States talking about the importance of the individual mandate and saying that without the mandate, everything else including the provisions that mandate carriers to provide guarantee issue coverage with no waiting period on preexisting conditions would collapse. We can’t force carriers to do this unless everyone is covered, he said.

Congress pulled the severability clause from a prior draft of the law and the President was publicly quoted as saying that without the mandate, other aspects of the law won’t work. So the judge concluded that legislators felt that you couldn’t have one without the other. And that’s why the Florida judge cited in his reasoning that the ruling that the individual mandate is an overreach and, therefore, the whole thing must go down with it.

With the judge ruling against the feds and striking down the Patient Protection and Affordable Care Act, the feds appealed to the District Court of Appeals.

The District Court of Appeals Ruling
Three judges were involved in the ruling of the district court — two Democrats and one Republican. Basically, one of the Democrats and a Republican agreed with the Florida judge on the mandate.

And they carried the argument one step further. If the Patient Protection and Affordable Care Act’s individual mandate is left to stand, then where do the feds stop? If a person’s coverage status affects the financial health of the overall healthcare delivery system, then why not compel him to workout, eat better, etc, etc, etc?

Not stopping the mandate opens the door for the federal government to impose all kinds of requirements on citizens that the government deems beneficial to overall society. Where does federal authority stop? Allowing the individual mandate to stand would be tantamount to opening a giant door for additional federal influence over states’ rights.

But the appeals court disagreed with the Florida judge over the severability clause. The court said that standard protocol within the House of Representatives assumes that most legislation is severable and that a specific clause isn’t always necessary.

The court was sensitive to the impact on the insurance industry if carriers are required to take all applicants with no waiting periods on preexisting conditions with a mandate. But the judges didn’t think this was all that important given that most of the people the mandate would apply to already have coverage. Those who don’t have coverage now, they said, are those who would be eligible for Medicaid and individual subsidies.

So if the bulk of the population the mandate would apply to is already insured, then the mandate is not really that important (they did not address the scenario where people may opt to drop their coverage if they know they can get it anytime when they really need it).

So now we have a bit of a disagreement between the Florida court and the appeals court — not to mention all the other Patient Protection and Affordable Care Act-related lawsuits that are being litigated in other courts throughout the county. Conflicting views and directives from a law as expansive as the Patient Protection and Affordable Care Act is not conducive to harmonious execution of the provisions of that law. Given the two different rulings, what is a given state to do? Do you follow through on the mandate or not? Do you begin building the exchanges or not? You have one court that says no and another that says kind of. It is for these reasons and many others that people believe the next stop is the Supreme Court.

Healthcare Reform and the Courts, Part 1

The decisions to date, the ones to come and their meaning to agents and our industry

This is the first article in a 3-part series on Healthcare Reform and the Courts. Subsequent articles in this series can be found here: Part 2 and Part 3.

A lot of agents have been wondering what the outcome will be with the legal challenges against the Patient Protection and Affordable Care Act.

I will attempt to articulate what I think might happen. My discussion will be limited to certain aspects of the bill — primarily with regard to the individual mandate and the question over severability. So I will be excluding a fair amount.

Remember, the Patient Protection and Affordable Care Act is over 2,700 pages long and affects virtually every aspect of healthcare delivery and its related financing (the insurance component) including Medicare, Medicaid and private insurers. It even deals with student loans.

Also, my discussion will be limited primarily to one challenge to the law — the one that involved dozens of states suing the federal government in a Florida court. There are a number of other legal challenges against the federal government that might lead another observer to draw a different conclusion on how these challenges will ultimately pan out down the road. But given the clout and importance of the states, many observers including myself have been particularly interested in that one.

Before I address what I think might happen with the Supreme Court, I think it is important to understand the status of the States’ lawsuit and how they got here. So I will be first explaining why the states sued the federal government, how the court ruled and the subsequent action by a district appeals court.

The Reason The States Sued The Feds
The primary reason over two dozen states and other parties (the plaintiffs) sued the federal government is because of the individual mandate. They simply do not think that the federal government has the authority to mandate citizens to buy health insurance.

The states believe that the decision about whether or not to compel someone to buy insurance is theirs to make and not the federal government’s. By the way, this is why folks aren’t challenging the likes of Massachusetts which has a similar mandate in place. Massachusetts has the authority as a state to do this.

In more technical terms, the states believe that the federal government via the Patient Protection and Affordable Care Act is stretching what’s known as the “Commerce Clause” beyond what it was designed to do and is an overreach of power by the federal government.

It all harkens back to our history and the compromises that came together to form our nation. The federal government has powers but so do the states. The original 13 individual states wanted to retain a certain amount of autonomy when they formed the union. So there are powers unique to the federal government and there are powers unique to the states.

The Commerce Clause was created about a hundred years ago and has evolved over time. It was created to address the question of which governmental entity has the power of regulating business when business is transacted across state lines. For example, let’s say that California has the authority to regulate the California Widget Makers. Colorado has the authority to regulate the Colorado Widget Makers, too. But the way they regulate their Widget Makers is different than how California regulates its Widget Makers. The regulations are different and were promulgated out of the customs and needs of the unique populations.

Let’s now assume that Joe’s California based widget company has decided to expand its customer base beyond California and into Colorado. Which regulations apply to Joe? Colorado’s or California’s? The Commerce Clause exists, in part, because it answers this question and creates consistency for the likes of Joe because he only has to play by one set of rules and not two.

Back to the Patient Protection and Affordable Care Act. So the law mandates that people will have to buy individual coverage starting in 2014. The states are saying “no, whether or not they should be forced to buy coverage is our call, not yours.” The feds are saying it’s their call because a persons decision about whether to obtain or go without coverage transcends state lines and affects everyone throughout the country.

The states disagree. But how they’re saying no via their lawsuit in Florida is interesting because their argument is based on this: The Commerce Clause only applies to those people who are engaged in commerce. Those who choose not to buy a product are therefore not involved in commerce and the mandate, therefore, should not apply to them. They say the feds cannot force people out of inactivity into activity.

The feds counter by saying that because of regulations that compel hospitals to care for people regardless of whether they have coverage or not, that while someone may appear to be inactive, they’re really not because they’ll eventually need care, they will get it and the rest of us will end up footing the bill via cost shifting (keep in mind that about 20% of our commercial premiums are a direct result of doctors and hospitals charging carriers more to make up for the lack of payments they’re getting from the feds and the uncompensated care they’re giving to folks who don’t have any coverage).

In their lawsuit, the states also asked that if the court agreed with them about the individual mandate, that the whole law should be thrown out and ruled unconstitutional. The basis of their argument is that there is no severability clause anywhere in the 2,700 plus pages of the law.

A severability clause basically enables the bulk of the law to survive even if a portion of it is thrown out. These clauses are typical in business contracts (such as agent agreements). But there isn’t one in the Patient Protection and Affordable Care Act and the states said that it should be thrown out if the mandate goes down.

What Agents Must Know About The Mechanics Of America’s Healthcare Delivery System

I believe it is very important that agents fully understand the mechanics of America’s healthcare delivery system, why it is broken and what it might look like if it’s successfully overhauled.The fundamental problem with the American healthcare system is that we hardly spend any money on basic, general care which causes us to spend a whole bunch of money on specialty care. The fact is that five chronic diseases account for 70% of our country’s $2.6 trillion annual healthcare expenditures. Those diseases are coronary artery disease, congestive heart failure, diabetes, depression and asthma. The status quo of the way we deliver healthcare is conducive to inadequate management of chronic illness.

There’s not a lot of money in educating a family on what brings on an asthmatic attack and what to do in case a child suffers from one. But there’s a whole lot of money spent when an asthmatic is admitted to the hospital. The lack of proper care and management of diabetes can lead to very expensive care including amputations, dialysis at $10,000 a day and maybe even a new kidney at $250k. Outreach programs to help diabetics methodically check their blood chemistry, see their doctors regularly and gain access to nutritionists are generally poorly funded, if they exist at all. So it’s no wonder that diabetes alone accounts for 35% of Medicare expenditures.

Shortages in access to primary care due to lack of financial incentives (why be a general practitioner when you can make three times the money being a specialist?) cost our system hundreds of billions of dollars a year. Unless our country does more to encourage chronic disease management, the healthcare cost curve will continue upward and ultimately drive our country off the edge of an economic cliff.

Having said this, our system appears to be in the early stages of changing for the better.

For example, Congress included within the Patient Protection and Affordability Care Act (PPACA) language to encourage development of Accountable Care Organizations (ACOs) to help save Medicare money.

According to Wikipedia, many healthcare leaders define the three core principles for ACOs as follows: 1) Provider-led organizations with a strong base of primary care that are collectively accountable for quality and total per capita costs across the full continuum of care for a population of patients; 2) Payments linked to quality improvements that also reduce overall costs; and, 3) Reliable and progressively more sophisticated performance measurement, to support improvement and provide confidence that savings are achieved through improvements in care. Living examples kind of look like Integrated Delivery Systems such as Kaiser and HealthCare Partners Medical Group. In other words, in this model, hospitals and specialists within an ACO would be rewarded for positive health outcomes even if they never see the patient.

While Congress had making Medicare more effective and efficient in mind when they incorporated ACOs into PPACA, my bet is that large employers will be watching the development of this model with a great deal of interest. One of the advantages that large groups have over small groups is the fact that they can realize a return on investment (in the form of lower premiums and higher employee productivity) by incorporating chronic disease management and wellness programs into their employee management regimen. And that’s a good step towards lowering the cost of healthcare in our country.

But what about small employers?

Small employers don’t have the advantage that large employers have because of how small group rates are pooled in our markets. An employer with 10 employees who tries to help his employees live healthier lives will not realize a meaningful decrease in his health insurance premiums for his efforts because his company’s rates are pooled with thousands of others. But carriers being sensitive to the escalating cost of the delivery system and the threat this poses to the industry via reduced commercial enrollment are likely to take steps to modify their networks to look more like integrated delivery systems, ACO’s and , yes, even fully capitated HMO’s (remember those?).

Further, since the PPACA and its related changes to Medicare and Medicaid became the law of the land, the nature of conversations between providers and insurers appears to have changed for the better. So there is likely to be more productive innovation when it comes to developing future, new health care delivery models. Everyone realizes that unsustainable increases in cost are simply that: unsustainable.

Will these initiatives work? I think they will. All of this equates to more optimism that the healthcare delivery system has the potential to change and that the cost curve can begin to change course and begin to trend downward. But how long it takes to turn our system around and empower it to deliver and finance the level of care we expect for ourselves and fellow Americans for the long haul greatly depends on you, the agent.

The public needs to understand what we talked about above. The more they know about how the healthcare delivery system works, the more they will embrace and expect positive changes to it. Educating the public can bring you short term dividends, as well. The agent who typically explains away a rate increase by simply stating that this is “trend” is vulnerable to an agent who is on top of his game and can really explain what is behind the increase.

In the client’s eyes, the agent who knows his stuff and can explain in simple terms the mechanics of our healthcare system will come across as being more credible than the other guy. Increasing your understanding of how our healthcare system works will empower you to become more successful at building and retaining your base of clients. If you would like real case examples of the benefits of managing chronic diseases, let me know by completing the contact form below, and I’ll forward you the article. I promise you that it will find it eye-opening and inspirational.