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					Harry replaced Louise with Max,
      Nancy and Olympia:

A Primer on the Recent Health
   Care Reform Initiatives

    Actuarial Society of Greater New York
             December 14, 2009

    Steven Babyak, FSA, MAAA, FLMI
      John Dante, FSA, MAAA, FCA
           Outline
The Case for Reform/ Concerns
2009 History
Definitions of Key Terms
House & Senate Bills
Potential Winners & Losers
A few Personal Stories
What Did We Miss?
 The Case for Reform
Quality – Per Amount Spent
Cost – Rising faster than inflation
Access – Who? What circumstances?
Currently, the U.S. spends more per
capita on health care than any other
member nation of the United Nations.
U.S. is the Cost Leader




   OECD = Org. for Economic Co-operation and Development
Projected Federal
Spending (% of GDP)




Concerns: Rising cost of health care + aging of U.S. population
             Concerns
Will it be easier to purchase insurance?
Will insurance be more affordable?
I don’t have to worry about loss of coverage?
No more pre-existing condition exclusions?
What if I am happy with what I have?
Will there be cuts to Medicare?
       New Concerns
Capacity: Will there be enough providers to
handle the addition of the uninsured?
Will care be rationed?
Will the Government “take over” health care?
Will a Public Option leave the Government or
the Private Insurers with all the sick people?
Now that you are requiring everyone to buy
insurance, have you addressed the cost
escalation issue?
What will the new system be like?
          2009 History
March 5: White House Forum on Health Care
Reform (many organizations, community
leaders and Congressional members attend).
May 11: Health insurance stakeholders
promise to save $2 trillion over next 10 years
(which is a 1.5% reduction in expenses).
July 15: Senate HELP Committee bill passed.
Sept. 9: President Obama delivers health
care speech to Congress.
2009 History (continued)
Oct. 13: Senate Finance Committee bill
passed.
Nov. 7: House Bill passes, 220-215.
Nov. 21: Senate HELP and Finance
Committee bills are merged. Senate passes
measure (60-39) to proceed with debate over
bill.
Week of Nov. 30: Senate begins debate on
bill. Needs 60 votes to conclude debate.
Definition of Key Terms
            Single Payer
“Medicare Part E” – Medicare for Everyone

  Single Entity pays for health care services but is not
  involved with the delivery of services.
  Critics are against what they term a Government
  takeover of health care.
  Advantages – Most recipients are satisfied with
  Medicare. Having all of the nation’s health care
  information in one place would prove beneficial.
  Disadvantages – Lacks cost controls, lacks anti-fraud
  measures and provides inadequate reimbursement
  according to providers. Financially unsustainable.
Equal Time for Pro-Gov’t. side
          Public Option
Plan that is run by the Federal Government and that
will compete with Private Insurers.
Meant to keep Private Insurers honest.
Both sides fear that they will get all the unhealthy
lives.
Highly dependent on structure and reimbursement.
When using Medicare reimbursement rates and
administrative costs, The Lewin Group estimates that
premiums for the Public Option will be 30% to 40%
less than premiums for comparable private coverage.
Public Option (continued)

House Bill has Public Option with
reimbursements that are negotiated with
providers (non-Medicare).
Senate Bill has Public Option with Opt Out
Provision.
Trigger – provision that provides for a Public
Option only if and when the uninsured do not
fall below a threshold in a certain amount of
time.
Damage from Public Option?
           Exchange
A marketplace where individuals can
purchase insurance provided that they are
not enrolled in employer sponsored plans,
Medicare or Medicaid.
Senate Bill has a state run version.
House Bill has a national version but allows
states to form their own.
Exchanges are open to small businesses and
are expected to include large businesses
over time.
Health Care Cooperative (CO-OP)

  A non-profit member-run health
  insurance organization governed by a
  Board of Directors that is elected by its
  membership.
  Both the Senate and House Bills have
  provisions for the development and
  funding of CO-OPs.
           Cadillac Tax

A 40% excise tax in the Senate Bill that will apply
to employer sponsored health coverage in excess
of $8,500 individual and $23,000 family beginning
in 2013.
The CBO expects this to generate $7 and $35
billion in revenue in 2013 and 2019, respectively.
Threshold only increases each year by CPI + 1%.
Called “back loaded” and “a tax trap”
Cadillac Tax (continued)

The CBO stated that 19% of employment based
policies will be impacted in 2016 if no behavior
changes. It expects behavior changes (such as
more cost sharing) to lower this to between 9%
and 12%.
A survey by Mercer indicates that 63% of
employers would cut their benefits to avoid
paying the excise tax.
      Millionaire Tax

House Bill imposes a 5.4% additional
income tax on individuals making more
than $500,000 and families making
more than $1 million.
           “Botax”

5% Tax on Elective Cosmetic Surgery in
Senate Bill
        “Death Panels”?

Proposal: Advanced Care Planning
           Commission

Comes from a Medicare provision in House
Bill to reimburse a doctor once every 5 years
for a discussion with a patient on what kind of
care he/she would want at the end of his/her
life.
Example: I would like to die at home and not
in a nursing home.
 “Rationing Commission”?

Proposal: The Medicare Commission
  Senate Bill establishes an independent
  Medicare Commission to submit proposals to
  trim excess Medicare cost growth by targeted
  amounts.
  Congress must act on these proposals and if
  they don’t, they are automatically enacted.
  It applies to Doctors and Home Health Care
  Providers, but not Hospitals.
You Lie!


House and Senate both agree that taxpayers
should not subsidize insurance for illegal aliens.
The question is if they can purchase it at all
through the Exchanges with their own money.
The Senate Bill prohibits this.
The House Bill is silent on this.
            House Bill
Passed on November 7, 2009 (220-215 vote).
Coverage: 96% of U.S. residents < age 65.
Cost: Up to $1.2 trillion over 10 year period.
Budget Deficit: Reduced by $138 billion over
10 year period according to CBO.
Penalties: Individuals earning >$9,350/year
(families >$18,700) pay 2.5% of income as
penalty if they do not have insurance.
House Bill (continued)
“Millionaire Tax”: A surtax of 5.4% on
individual income higher than $500,000 and
family income higher than $1,000,000.
Abortion: Abortion coverage is prohibited in
the public plan.
Public Option: States may NOT opt out.
Medicaid Eligibility: Individuals with income
up to 150% of federal poverty level.
Cuts and Savings to Medicare and Medicaid.
    House Bill: Changes to
      Private Insurance
Insurers cannot deny coverage for any reason
(including health status).
Cannot rate by health status, occupation or gender.
Premiums can vary by age (2 to 1 limit), # of family
members & geographic area.
No annual or lifetime limits allowed.
Cannot rescind coverage, except for fraud.
Cap on out-of-pocket spending per year.
No cost sharing for preventive care.
Minimum “loss ratio” of 85%.
           Senate Bill
Coverage: 94% of U.S. residents < age 65.
Cost: $848 billion over 10 year period.
Budget Deficit: Reduced by $130 billion over
10 year period according to CBO.
Penalties: If no insurance, individual penalty
up to $750 per person.
“Cadillac Tax”: 40% tax on the portion of
“high-value” health insurance plans worth
more than $8,500 for an individual or $23,000
for a family.
Senate Bill (continued)
Abortion: Health exchanges must offer plans
both with and without abortion coverage.
Public Option: States may opt out.
Medicaid Eligibility: Individuals with income
up to 133% of federal poverty level.
Medicare Taxes: For individuals earning
>$200,000/yr (families >$250,000), Medicare
payroll tax increases from 1.45% to 1.95%.
   Senate Bill: Changes to
     Private Insurance
Insurers cannot deny coverage for any
reason (including health status).
Cannot rate by health status or gender.
Premiums can vary by age (3 to 1 limit),
number of family members, geographic area,
and tobacco use (1.5 to 1 limit).
No annual or lifetime limits allowed.
Cannot rescind coverage, except for fraud.
Cap on out-of-pocket spending per year.
No cost sharing for preventive care.
    Potential Winners
Health Insurers: 46 million new customers
with $200 billion in new premium per year.
Drug Companies: Assumes that these new
customers will have drug coverage.
Primary Care Physicians: Due to increased
enrollment, they will receive many new
patients. Lower administrative costs.
      Potential Losers
The U.S. Economy: Will likely raise deficits at
a time of high unemployment.
Senior citizens: $120 billion in cuts to
Medicare Advantage; Medicare physician
payments cut by 25% in 2011.
Taxpayers: Studies by consulting firms
indicate that premiums will be higher as a
result of the legislation.
Brokers and Agents: Minimum Loss Ratios
may lead to lower commissions.
A few Personal Stories
Bill: Young unemployed worker
Laurie: Brain injury, lost her job
Claire: Carrier terminated her coverage
retroactively
One company’s struggle with
profitability
What does this leave us?
Recent Updates from Senate
         Debate
  Medicare buy-in for 55 to 64 year olds?
  Public Option sidelined?
  OPM would negotiate with insurance
  companies and have oversight for non-profit
  national plans on Exchanges?
  Some type of trigger for Public Option?
  Some federal subsidies might cover abortion?
  Minimum Loss Ratio of 90%?
    What did we miss?
We should control costs first!
       (Top 10 list)

 1. Evidence Based Medicine
 2. Coordination of Care
 3. Electronic Health Records
 4. Wellness/ Accountability
 5. Tort Reform
What did we miss? (cont’d)
We should control costs first!
       (Top 10 list)

 6. Eliminate Medicare Fraud
 7. Eliminate Preventable Infections
 8. Promote Primary Care Physicians
 9. Change Payment System
 10.Consistent Tax Treatment
Questions
   &
Answers
Contact Information
Steven Babyak, FSA, MAAA, FLMI
(347) 497-6267
StevenBabyak@Hotmail.com


John Dante, FSA, MAAA, FCA
(570) 417- 9039
JohnDante@DanteActuarial.com

				
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