Sunday, March 24, 2013

Will CMS Reconsider 2014 Payment Cuts to Medicare Advantage?

In a bipartisan effort, lawmakers are pushing the Centers for Medicare and Medicaid Services (CMS) to reverse proposed 2014 payment cuts for Medicare Advantage (MA) and Medicare Part D Prescription Drug Plans.  The proposed cuts would have a crippling effect on 2014 MA plan offerings and the more than 14 million Medicare beneficiaries on MA plans.

MA plans constitute the part of Medicare through which private health plans provide comprehensive medical and drug coverage to seniors and other Medicare beneficiaries.  CMS recently proposed a 2.3 percent reduction in MA payments for 2014 at a time when medical costs are projected to increase by three percent.  This is the lowest growth rate in the history of the MA program, and it is far below the 2.8 percent increase in payment rates for 2013.

Karen Ignagni, America's Health Insurance Plans (AHIP) President and CEO, recently stated, "The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare."

The new proposed payment cuts are in addition to the MA cuts and new health insurance tax included in the Patient Protection and Affordable Care Act (PPACA).  AHIP hired actuaries at Oliver Wyman to assess the cumulative impact of all these changes; and Oliver Wyman estimated in its February 2013 report that the combined effect will be a 6.9 to 7.8 percent cut to MA plans in 2014, causing benefit reductions and premium increases of $50 to $90 per member per month.

Nearly 100 Members of the U.S. House of Representatives have urged CMS to reconsider the payment cuts.  In a letter to CMS earlier this month, lawmakers wrote that the payment cuts "will leave many vulnerable seniors with fewer benefits, higher out-of-pocket costs, and in some cases the loss of their current MA coverage."

Just the other day, I received the following communication from Congressman C.W. Bill Young, U.S. Representative for Florida's 13th district:

March 22, 2013

Because of your earlier support for private Medicare Advantage (MA) plans, I thought you might be interested to learn of recent events in this regard.
As a Representative of one of the largest number of Medicare beneficiaries in the Congress, you can be sure that I am greatly opposed to any reduction in service for our nation's seniors, particularly those with multiple chronic conditions as MA plans have a proven track record when it comes to coordinating care for chronically ill individuals. 

That is why I agreed to sign a letter along with more than 90 of my House colleagues that was sent March 15th to Centers for Medicare and Medicaid Services (CMS) Acting Administrator Marilyn Tavenner expressing serious concerns with the calculations that brought forth a February proposal by CMS to reduce MA payments by 2.3 percent for next year.  Combined with the huge reductions in MA payments that are planned over the next several years to help pay for the controversial 2010 Patient Protection and Affordable Care Act, this additional cut could very well lead to significant disruption for the 14 million beneficiaries enrolled in MA plans.  Specifically, it is estimated the cumulative impact of these changes will reduce MA payments by more than 8 percent in 2014.
This is a clear example of our efforts to prevent any further reduction in MA plans from taking place.  Of course, the solvency of the Medicare program is an issue that will remain under careful scrutiny by the Congress and you can be sure that I will continue to closely monitor the situation and will follow up with you on any new developments that occur.
As always, I greatly appreciate knowing of your support for my efforts on this important matter of mutual concern.  With best wishes and warmest personal regards, I am

Bill Young
Member of Congress

Andrew again.  This time, I'm 100% in agreement with Congressman Young!  Of course, that's not always been the case during the 15 years I've resided in Pinellas County.

Until next time,

Andrew Herman
AH Insurance Services, Inc.


Friday, March 15, 2013

Suspension of PCIP (Pre-Existing Condition Insurance Plan)

The Department of Health and Human Services (HHS) has suspended the Pre-Existing Condition Insurance Plan (PCIP) authorized by the Patient Protection and Affordable Care Act (PPACA).  This comes as a surprise, as the PCIP stop-gap program for uninsurable individuals was designed to accept new enrollments through the end of this year, prior to full implementation of PPACA guaranteed issue rules on 1/1/2014.

Why did HHS suspend PCIP enrollment?
The federal government states, on its official health care website, "PCIP is a temporary program for those locked out of the current insurance marketplace.  The program has a limited amount of funding from Congress.  Based on program experience and trends since the start of the program, PCIP enrollees have serious and expensive illnesses with significant and immediate health care needs.  This suspension will help ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP."

The federal website notes that individuals who recently lost PCIP coverage due to moving may be eligible to re-enroll in PCIP in their new residence state.  To learn more, click here to visit

From the viewpoint of many, including Rep. Morgan Griffith (R-Va.) the early shutdown of the PCIP program does not bode well for the fate of PPACA as a whole.  At a U.S. House of Representatives Energy and Commerce health subcommittee meeting today, Griffith remarked, "are we making promises we can't fulfill when we say we're going to cover everybody?"

Douglas Holtz-Eakin, a former Congressional Budget Office director, observed that PPACA defines "affordable" when a consumer spends less than 10% of income on health care.  Unfortunately, the U.S. as a whole now spends nearly 20 percent of national income on health care.  Based on that disconnect, the former CBO stated, "By definition, not all of us can have affordable health care... the law will never add up for everybody in the United States.  It cannot."

Regardless of how the numbers add up, it seems disappointing that PCIP enrollments were suspended more than nine months earlier than expected.  Clearly, this is detrimental to the 50-64 age group most likely to enroll into PCIP due to a pre-existing medical condition.  This demographic group often is described as vulnerable by proponents of PPACA, who advocate for the 3:1 rating rule that keeps premiums lower for older people but shifts those costs to younger people.

In my last blog post, I noted that actuarial studies suggest the average 64-year old exceeds a 5:1 cost ratio, as compared to the average 21-year old.  So while PPACA proponents are busy advocating for the 3:1 rating rule to protect the 50-64 demographic group, HHS strikes an even bigger blow to that same group by suspending PCIP enrollments - leaving newly uninsurable individuals with less options for the next nine months.  So much for early retirement!

Until next time,

Andrew Herman
AH Insurance Services, Inc.

Saturday, March 2, 2013

Letting Insurance Benefit Everyone Regardless of Their Youth (LIBERTY Act)

Rep. Dr. Phil Gingrey (R-Ga) Introduced H.R. 544 on February 6, 2013

Last month, Rep. Dr. Phil Gingrey (R-Ga) introduced H.R.544 in order to challenge the age rating rules written into the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare.  Dr. Gingrey’s bill would allow the states, not the federal government, to determine their age-rating bands to prevent spiking insurance costs for young, healthy people that could propel them to leave the health insurance market in droves.

As called for by PPACA, insurance companies must limit the difference in health premiums due to age to a 3-to-1 ratio.  From an actual cost perspective, it can demonstrated through actuarial studies that the average 64-year old exceeds a 5-to-1 cost ratio, as compared to the average 21-year old.  To make up the difference, the costs will be subsidized by young people in the form of higher premiums, with some increases expected to be in the 30-40% range.

The LIBERTY Act allows states to determine the age discount in their insurance market.  Should a state fail to act, the legislation establishes a rating which better reflects the correlation between age and health care costs.  Click here to read Dr. Gingrey's 1/29/2013 Letter to Congress.

The bill’s chances in the Democratic-controlled Senate are uncertain. In today’s times, with younger people burdened at an unprecedented level by student loans, unemployment and under-employment, I can only wish that wisdom will prevail and H.R. 544 will be passed.

Until next time,

Andrew Herman
AH Insurance Services, Inc.