HEALTH INSURANCE IN AMERICA CLS Course SS1 Spring 2014 BERNARD HANDEL, JD, CPA, CEBS, DHL
BERNARD HANDEL JD, CEBS, DHL Past Chairman and life trustee of Vassar Brothers Hospital Medical Center, member of Hospital Community Needs Committee; Member, Health-Quest Audit and Ethics Committee; past officer and trustee, Mid-Hudson Health; past president of Federally-established established Hudson Valley Health Systems Agency; nominated by two NY governors to serve on New York State Hospital Review and Planning Council, ratified by NY Senate, served 13 years;. Past Board member, American Health Planning Association. A retired CPA and attorney, served over 40 years as President and d CEO of Handel Group, healthcare and pension consultants with offices throughout East, merged with international consulting firm Milliman USA; from 1952 to 1957, Exec. Vice-pres. and partner in firm which innovated health insurance for persons over age 65 (before Medicare) and created AARP.
BERNARD HANDEL JD, CEBS, DHL (continued) Author of four books on healthcare and pension administration and cost containment, and over a hundred articles; lecturer on related subjects including social security, compensation plans and tax featuresf of deferred plans in several countries, teacher at Iona, Elizabeth Seton, Dutchess Community, and other colleges; board member of International Foundation of Employee Benefit Plans for 25 years and chair of numerous educational and professional committees; member, governing council, CEBS Society; editorial boa4rd member for numerous publications. Awarded ERVK Medal, Marist College President s s Award, St. Francis Hospital Franciscan Award, Dutchess County Historical Society Award, Community Foundation Award, Vassar Hospital Philanthropy Award, Pace University Law School Lifetime Achievement Award, Dutchess County Executive s s Arts Patron Award, Fundraising Association Philanthropy Award, State University Of New York doctorate, among others. Biography listed in Who s s Who in America since 1960. Lives in Poughkeepsie with wife Shirley, both members of CLS.
I NTRODUCTION Otto von Bismarck, 1815-1898 1898 Unexpected father of governmental health insurance and retirement plans Created the rule of 65 -- NRA Germany instituted national health insurance in 1870, other European nations later US a a slowly evolving trend
THE USA POLICY CONTROVERSY Is health care a human right or a commodity to be bought and sold in the market? Only a part of labor negotiations between management and labor, or an on or off incentive to improve employment incentives when manpower shortages? Does governmental intervention in health care conflict with rugged individualism of Americans? Are governmental plans a form of extreme socialism? Do Federal health care proposals violate states rights?
IS HEALTH INSURANCE REALLY INSURANCE OR A PREPAYMENT PLAN? Compare to fire and other forms of insurance The interest on investment factor High claim administration cost The reserve factor Frequency and timing of claims Which insurer will be liable for the big claim?
THE BREADTH OF HEALTH INSURANCE ON A UNIVERSAL BASIS Pay for medical expenses incurred or provide a financial source of payment Purchased insurance from insurers Individuals, all types including specific Limited disease plans -- cancer, heart, arthritis, travel, etc.) Society or association limited plans Social insurance (workmen s s compensation, Medicare, Veterans benefits) Welfare programs (Medicaid, Children s s Health Insurance, Specific disease programs) Employer provided plans Medical, dental, vision, prescription drug, wellness, long term care, disability
HISTORY HEALTH INSURANCE IN USA (1850 s 1920 s) 1850 -- Beginning of accident insurance in Massachusetts, copied in other states Limited benefit coverage 1880 -- 1890 Some early moderate sickness plans, society and union plans 1911 -- First employer sponsored plan to cover inability to work 1929 -- Dallas Teachers Association started first insured employer plan covering hospitalization and medical care at one hospital an an early HMO form 1920 s Hospitals adopted membership plans for clinics, maternity, tonsillectomy
HISTORY HEALTH INSURANCE IN USA (1930 1945) 1930 s -- Hospitals and industry established nonprofit Blue Cross Plans (community premium rating) Unions and labor won right to bargain with employers for benefits ts- important milestone (Court decision, approved by Supreme Court) 1933 1937 FDR and development of New Deal programs including Social Security but abandoning health care The Perkins lament Opposition to socialistic programs, and Campaigns by AMA, AHA, Chamber of Commerce, Industry 1941 1945 World War II Wage and Price controls, Shortage of defense workers, women went to war jobs War Labor Board -- Benefits authorized when wages at top permitted levels Employers sought employment help. Sponsored health and benefit programs Kaiser, others, Shipyards, first HMO Plans, full coverage for employees and families plan panels of providers
HISTORY HEALTH INSURANCE IN USA (1946 1957) 1946 to 1950 -- Health care provided by high percentage of employers and government Blue Cross and many commercial and nonprofit carriers But coverage limited, excluded catastrophic illness costs President Truman introduced a national single payer health care program with broad benefits, opposed by AMA, AHA, Chamber, defeated in Congress Truman campaigns to again fight for program but Korean War diverts 1951- During Korean War, wage and price controls restored; When wages attain maximum permitted levels, 7 ½ cents per hour benefit contribution by employers allowed (Pajama Game) Result: explosion in health and pension plans 1947 NLRA -- Taft-Hartley trust & multi-employer programs - local and national In 1956 -- 1957, first pilot plans to cover persons over age 65 (commenced in Poughkeepsie for NY State Retired Teachers
HISTORY HEALTH INSURANCE IN USA (1960 s) By 1960, 142 million Americans covered for some form of health insurance, about 70-75% 75% of eligible population (but retirees and pensioners over 65 excluded by age and high premium costs) Pilot Senior Citizen Plan Expanded to National program for retired teachers from Washington DC, AARP created) with basic benefits and limited coverage ($ 11 a day in hospital, 31 days, $100 for Sundry in-patient charges and O-P P tests at hospitals, $250 Surgical schedule, Doctors visits after third visit, etc)- no expanded benefits or major medical coverage a a pilot program to prove seniors were insurable at moderate premiums but higher than for younger and working people great success
HISTORY HEALTH INSURANCE IN USA (1960 s Medicare) Pres. Johnson advocates and succeeds in creating Medicare, a single payer system to provide hospital and medical coverage for all Americans age 65 and older, and Medicaid to provide coverage to poor and unemployed of all ages; Medicare included ALS and Renal diseased patients of any age Medicare administered by fiscal intermediaries selected by competitive bidding, resulting in low administrative cost and few governmental employees Medigap insurance introduced by private insurers covered deductibles and copayment provisions of Medicare Medicare expanded subsequently to include disabled of all ages Still left large percentage of Americans without health insurance
HISTORY HEALTH INSURANCE IN USA (1960 s Medicare) Yet period from 1965 to 2000 is golden period of highest percentage of Americans covered by health insurance, primarily employer based and financed heavily by employers To an extent effect of labor unions and threats of labor organization on employer sponsorship of plans The middle management quandary in negotiations: Equal or higher benefits for management and executive employees IRS requirements on percentage of employee participation The concept of bargaining for a total raise in compensation to be allocated between wages and benefits. The savings to management in avoiding payroll taxes and workmen s s compensation and pension credits for portion of compensation allocated to benefits
EFFORTS TO PROMOTE UNIVERSAL HEALTH COVERAGE (1970 s s and 1980 s) 1970 s -- Sen. Ted Kennedy introduced legislation for single payer universal plan, not supported by Congress Pres. Nixon surprisingly offered a national privately insured plan and included it In reelection campaign and State of Union address, strongs Congressional opposition Nixon, diverted by Watergate, impeachment threat, abandons health plan, but obtains Congressional approval of first health care costc containment law and establishes Health Systems Agencies (HSAs( HSAs) throughout US with consumer-provider joint role in allocation of hospital facilities and health regulation with states. 1974 -- 1980 Presidents Ford and Carter support financing of cost containment and anti-fraud efforts. ERISA enacted 1974- effect and preemption. 1980-1988 President Reagan eliminates HSA funding and weakens cost containment regulation
EFFORTS TO PROMOTE UNIVERSAL HEALTH COVERAGE (1990 s) 1993 -- 1994 President Clinton task force headed by Hillary Clinton proposes universal health plan for all Americans through private insurers, opposed by industry, doctors, providers, rejected by Congress, many labor unions, all insurers; Many liberal groups opposed as not an exclusively governmental single payer system and too expensive administratively. ( concepts ts local area health Districts with joint membership by consumers, health providers, local government, etc.) Congress enacted Health Insurance Portability And Privacy Act (HIPPAE) to establish COBRA continuation of insurance after job termination and protect patient privacy of medical records. 1997 -- Congress authorized Medicare Advantage Plans through commercial insurers as alternative for over 65 age persons with Federal subsidies, cost 12% more than Medicare, very popular, road benefits including prescriptions. Under attack now for high cost to US
EFFORTS TO PROMOTE UNIVERSAL HEALTH COVERAGE (2000 s) 2003 -- Pres. George W. Bush obtained Congressional approval of a Medicare Prescription Drug Program operated by commercial insurers, plan effective in 2006. Establishes areas of partial of fully covered formularies with large l co- pays and deductibles and large portion of charges above deductibles not covered Includes a penalty provision for failure to enroll timely Establishes for first time concept that premiums can be means tested so that higher income persons pay higher premiums to subsidize program ( also adopted subsequently for Medicare) Could the means tested concept of a larger premium for higher incomei participants without a corresponding increase in benefits be a precursor to future Social Security termination of present dollar limit on wages on which social security taxes are paid? Such a change would help reduce the future shortfall in the Social Security Trust.
EFFORTS TO PROMOTE UNIVERSAL HEALTH COVERAGE (2000 s) 2009 -- 2014 Pres. Obama established with bare partisan Congressional approval the Affordable Care Act (ACA) to mandate health coverage for all Americans through private insurers, mandated larger employer sponsorship of plans, no exclusion for pre- existing medical conditions, minimum standards in all health insurance policies, coverage for dependent children and students to age 26, insurance exchanges; expanded Medicaid for lower income people, subsidies to low income persons to pay premiums, new methods of reimbursement to hospitals and al other medical providers. NOTE -- ANOTHER SPEAKER IN THIS COURSE WILL SPEAK ON THIS LAW AND ITS IMPACT ON ALL AMERICANS AND SENIOR CITIZENS IN A SUBSEQUENT SESSION. The ACA has no immediate effect on the plans of seniors, except for the hoped reductions in Medicare costs resulting from changes in reimbursement and possible reorganization of health providers. The act did improve prescription drug benefits and costs to seniors under that plan.
OTHER GOVERNMENTAL PLANS Children s s Health Insurance Plan (SCHIP) means test, joint program with states (like Medicaid) Plans for retired Military personnel administered by Tricare Champus plan for dependents of military personnel- single payer plans administered by commercial fiscal intermediaries (like Medicare). Veterans Administration - operated by US directly, now means tested Indian Health Services on reservations Statewide risk pools in 34 states to cover uninsured --very expensive, cover only 200,000 people
MEDICARE FINANCING 90% of Medicare enrollees are covered by Medigap plans, mitigating the deterrent impact of deductibles and co pay provisions, which h now primarily serve only to reduce government s s Medicare costs but do not discourage utilization of health facilities. Medicare costs to government will grow from present 3% of GDP to over 6%, unless ACA cost reductions are implemented and effective which may slow rise. However, pending Congressional efforts to annually modify or cancel reductions in physician reimbursement will not help the Medicare cost crisis. The increased costs resulting from large number of future retirees, longer life expectancy and higher prices for new advanced technology and drugs may result in major changes s in the Medicare program. Possible changes include delay in benefit commencement age, means testing for eligibility, reduced benefits s and higher participant premiums. It is hoped that ACA may lower the impact of these factors.
OVERALL INSURANCE PROTECTION The number of Americans covered by health insurance has steadily decreased since 2000. In 2010, about 84% covered, but about 40% complained that their insurance was not adequate. Enrollment percentage of the 84% (approximate): Under employer plans (declining) 58% Individual policy purchases 10% Public Health and military Insurance 32% Public programs like Medicare, Medicaid, SCHIP accounted for about half of all health care costs. In past, employers paid as much a 85% of costs for employee insurance and 75% for dependents. Much less today. Employer cost is tax free f to employee, employee contributions are usually tax free also. Some Congress leaders complain that tax free nature and broad coverage make Americans terrible health care consumers and indifferent to medical pricing and charges. They feel providers are encouraged to charge higher prices because Americans don t t realize or care about costs since they pay little.
OVERALL INSURANCE PROTECTION Movement for CONSUMER DRIVEN PLANS in which employees pay taxes on employer contributions and will elect plans with high deductibles and co-pay provisions to reduce their costs. people get vouchers or cash and can choose plans they want. Hospitals and d all health providers oppose concept. About 50% of employers with less than 100 employees provide benefits. Colleges provide plans for students. Some trade associations sponsor plans for members. Employers and unions operate multi-employer plans, cover about 11 million. Federal government provides broad national plans for its employees es and Congress and Judicial members under Federal Employees Health Insurance Plans offering many options by private insurer programs.. States, local government, school districts, public authorities usually provide broad benefit plans with moderate employee contributions (but this changing).
REGULATION OF HEALTH INSURANCE Primarily by State Insurance Departments (Federal McCarran-Ferguson Act) Regulation efficiency varies in quality drastically in US New York Department rated highly (and toughest) - some carriers avoid NY NY has stringent rules to protect consumers State legislatures impose mandates on required coverage and insurer procedures, increasing premiums States monitor claim complaints, premium rates, insurer solvency Issues of preemption of Federal over State law ERISA - preempts State Law, applies to all employer sponsored plans.
TYPES OF HEALTH INSURANCE PLANS Traditional fee for service specific benefits Blue Cross, Blue Shield Plans -- 38 separate companies, some nonprofit, others commercial Premiums -- Community rated, experience rated, Administrative Services Only Insured or self-insured Open panel of providers or restricted panel (PPOs( PPOs) Established reimbursement rates with providers (contractual) Coverage nationally, internationally or restricted to specific geographic areas)
Health Maintenance Organizations (HMOs) Gatekeeper role, emphasis on preventive care, usually closed panel of hospitals and doctors, managed care concept, no bills to patients, may own their own hospitals, employ many physicians directly, require insureds to be treated at their facilities and by their physicians. Prime Examples: Kaiser Permanente, Loma Linda, others. Kaiser in 9 states and DC, 167,000 employees, 15,000 physicians 9 million members. Notable failure in Dutchess,, Ulster Counties -- HealthShield (Kaiser offshoot)
Other Types of Plans Major Medical to cover major extraordinary illness or accident providedp by most plans, may be reinsured Managed Care Concept Used by all types of insured plans Closed panels Preventive care Contracted reimbursement rates Incentives to insured to utilize less medical care High Deductible Plans with large catastrophic benefits=lower premiums Specific Coverage cancer, heart, etc.( ACA outlaws as basic coverages)
Other Types of Plans Flexible Spending Accounts (FSAs( FSAs) Limited Benefit Plans with low premiums (outlawed by OBAMAcare) Long Term and Home Care Nursing Home Coverage- high premiums Dental and Vision Prescription drug, including mail order and generic emphasis Disability insurance- income replacement-short term and long term Employer sponsored wellness programs smoking smoking cessation, obesity, diabetes management, Exercise, gym use, etc.
Healthcare Trends Fewer employers provide plans for workers Large number of workers and families are uninsured Over 40 million people in US are uninsured, about 16% of population (before Obama Care) Government and education personnel reductions result in loss of benefits Every 1% increase in unemployment results in one million uninsured people, increases Medicaid costs to States and US, higher rate of sickness and death, increases national health care costs, with greater need for emergency expensive surgery and treatment due to lack of normal preventive and diagnostic care, and high level of unpaid hospital emergency room charges.
Healthcare Trends There is some good news, however. As of late March, over six million enrolled in ACA and many others signed up initially for Medicaid ( despite much publicized enrollment glitches at exchanges). The uninsured rate dropped to lowest level since 2008. Unfortunately, many lower income people did not enroll because they did not realize the US would pay most or all of their premiums. Most employers of less than 25 workers did not take advantage of substantial tax credits if they initially sponsored a plan. The rise in health care costs nationally has slowed drastically, assisted by reductions in Medicare payments and greater fraud controls.
Healthcare Trends FUTURE SPEAKERS IN THIS COURSE WILL REVIEW IN DETAIL THE HEALTH SYSTEMS AND INSURANCE PLANS OF OTHER COUNTRIES AND AN ANALYSIS OF AMERICAN HOSPITALS, MEDICAL/SURGICAL/DIAGNOSTIC SERVICES, NURSING, AND ALL ASPECTS OF USA HEALTH CARE SYSTEM.
The End Questions?