Health Care Financing and Business Planning Outline

Health Care Financing and Business Planning Outline: Fall 2009
I.                   Intro/Context for Reform
A.    Reform Legislation: Goals
1.      Assure access, affordability and stability of health insurance
2.      Fix Infrastructure of System:
a.       Workforce
b.      Information
i.                    Technology
ii.                  Effectiveness research
c.       Fraud
3.      Private Insurance: 
d.      Require insurers to offer health insurance to anyone seeking it;
e.       Limit the price variations health plans can charge among sick vs. healthy for the same benefit packages;
f.       Eliminate current insurance practices that seek to discourage enrollment of older and less healthy individual or those with above-average risk factors by:
i.                    Prohibiting exclusions or waiting periods based on pre-existing conditions,
ii.                  Prohibiting rescissions of coverage for reasons other than non-payment of premiums or fraud,
iii.                Requiring insurers to provide a minimum level of benefit adequacy.
4.      Insurance Exchange/Gateway: (pg 638 & 643)
a.       Mechanism for paying, regulating plans that offer insurance to individuals and employers.
b.      Creates mechanism for pooling of risks of uninsured, small employers
c.       Private insurers will sell plans through the exchange
d.      Key Issues:
i.                    Public Plan Option in addition to private plans?
ii.                  Who can buy through the exchange?
iii.                National or state entity?
iv.                Benefit design for plans: Minimum coverage;  three or four kinds of plans (basic, enhanced, etc)
v.                  Risk adjustment
vi.                Regulation: guarantee issue, rating variation limits, bands of variation in premia
vii.              Negotiation of rates with exchange czar?
 
5.      Mandates: Pay or Play
a.       Employers: 
i.                    Exempt small employers
ii.                  Penalty (tax) if insurance not offered
b.      Individuals
i.                    Sliding scale premium subsidy. i.e., families earning up to 350-400% of FPL pay up to 11% of income; families with 133% of FPL pay 3% of income
ii.                  Penalties for noncompliance ($750/year)
6.      Expansion of Existing Government Plans: (Pincers Move)
a.       Expand Medicaid to all individuals up to 133% or 150% of FPL; other liberalization of eligibility
b.      Expand somewhat Medicare eligibility, i.e., “buy in” for ages 55-64; eliminate 2 year waiting period for disabled eligibility.
c.       Expand SCHIP/Purchase through exchange.
7.      Financing Reform: Options
a.       Reduce provider payments to private Medicare (Medicare advantage plans) to levels of traditional Medicare
b.      Surcharge (tax on families with > $350,000 income
c.       Tax insurance plans (i.e., by level of benefit? )
d.      Income tax increase
e.       Sin/obesity/sugar taxes
8.      Fixing the Infrastructure:
a.       Fund medical education to train more primary care providers
b.      Fun effectiveness research
c.       Fund community health centers
d.      Assist and help fund state public health efforts
e.       Malpractice reform
f.       Enhanced penalties for fraud & abuse
 
II.                What is Health Insurance?
A.    Insurance is a method of managing risk. With other insurances, you don’t insure things that are high probability/certain to break down…i.e., you shoes wear out. But for health, it’s different. But we’re risk averse…the less averse we are, the more likely we are to pay to insure out health, thereby shifting the risk of getting sick to the insurance company. Insurance is a way of spreading the risk of getting sick to others. Insurance companies try to reduce risk, theoretically that would be by insuring people in low risk categories. They want healthier people. Underwriting is a process of assessing the medical risk of the insured (if allowed by law); it leads to a tendency to try to get healthier people.
B.     Moral Hazard: the theory that people who have insurance will use more medical care because they know it will be paid for. I.e., consumption based on coverage.   A tendency for consumers not to adapt behaviors in a cost conscious way.
C.    Lubeznik v. HealthChicago – pt has ovarian CA with little chance of survival. MD recommends rx that her insurance company sees as “experimental” and doesn’t pre-certify her. The Contractual “hook” here is “experimental”. If the company doesn’t KNOW that a procedure will work, they don’t want to pay for it. They want to insure against a quantifiable probability/risk. But…no where in the K was it expressly excluded. It was an exclusion subject to a benchmark…subject to appropriate medical technology. If the company had a definition linked to a process, then the exclusion might have stood. i.e., “policy will not cover procedure not recognized by…” But here, she won. Good testimony by her doc that he’d used this successfully in the past. Not big numbers though, so another argument to make against paying. 
D.    Cost/Access: Some Data
1.      Insurance affordability: average family pays $13,000/year; minimum wage = $15,000/year;
2.      46 million uninsured – 83 mil uninsured at least 1 month/year; racial, ethnic and class disparities
3.      Employer sponsored insurance: Source of ins. for most insured citizens, less than 40% of small employers (with less than 10 employees) offer insurance; none for PT employees; “job lock”
E.     Mechanisms for controlling cost:
1.      Direct regulation: hospital price regulation (ended in ‘80s); control supply (CON laws, licensure regulations, etc); Managed Care Competition – MCOs will induce lower prices (1990s); “managed Competition” Clinton idea; Minnesota
F.     Types of Health Plans
1.      Indemnity Plans: pre paid (“first $) service benefit plans (old style BC/BS plans)
2.      Preferred Provider Organizations (PPOs)
3.      Health Maintenance Organizations (HMOs): Independent Practice Association (IPA) model; staff model HMO
4.      HMO/POS – HMO with Point of Service Option
5.      HDHP (w/HAS) – High deductible plan (PPO) with health savings account.
G.    State Insurance Regulation: (pg 689)
1.      States are primary regulators of insurance. Some special regs for small group, individual markets. BUT…ERISA exempt self-insured employers form state regs.
2.      Solvency regulation: reserve requirements
3.      Taxes or premiums: Blues no longer TE
4.      Regulation of underwriting practices: Prohibition on genetic info for eligibility; individual market – guaranteed renewal, preexisting conditions
5.      Rate regulation: community rating; rating bands; reinsurance pools
6.      Genetic regulations
7.      State insurance regulations preempted by ERISA, which governs health care plans if the plan is self-insured.
H.    State MCO regulation:
1.