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Uninsured Rates Fell Under Obamacare, But Who’s Reaping The Benefit?

By Chad Terhune, Los Angeles Times (TNS)

LOS ANGELES — Hospitals and health insurers have reaped a financial windfall from the 2014 rollout of the federal health law, even beyond what was expected.

Now, employers and consumers are seeking a share of the Obamacare dividend.

For years, insurance companies and hospitals told Americans that one reason their insurance bills were so high was because they were paying the hidden cost of medical care for the uninsured.

The Affordable Care Act sought to remedy much of that by unleashing the biggest expansion of insurance coverage in half a century. Ten million Americans became newly insured, and federal officials estimate that $5.7 billion in uncompensated care was wiped out this year as hospitals received more paying patients.

Now it’s time to share the bounty from Obamacare, said Bill Kramer, director of national health policy at the Pacific Business Group on Health, which represents big employers like Wells Fargo and Chevron.

“Consumers and businesses have been absorbing this cost shift for decades,” he said. “Employers need to step up and put pressure on hospitals and health plans. Show us the money.”

In a similar vein, consumer groups are questioning why these savings aren’t showing up in health insurers’ latest rates. By some estimates, the cost shifting in recent years typically has raised the average family premium by $1,000 or more annually.

But there have been benefits for employers and consumers — even though they may not be readily apparent, industry officials say. They point to historically low increases in overall medical spending and affordable premiums in government-run exchanges.

“The dividend is being shared,” said Charles Kahn, chief executive of the Federation of American Hospitals, an industry trade group in Washington. “There are a lot of factors indicating the costs to many are coming down or moderating. But all the problems that brought about cost shifting aren’t being washed away.”

Providers say government reimbursements for patients on Medicare and in particular Medicaid don’t always cover their costs. The health law also imposes funding cuts to hospitals.

Health insurers insist they always bargain for the best deal from medical providers, and they say other factors are pushing up costs at the same time. They fault pharmaceutical companies for charging exorbitant amounts for some specialty drugs and worry that a wave of hospital consolidation will drive up prices even further.

“While this cost shifting is decreasing, theoretically that should drive down health care costs,” said Dr. J. Mario Molina, chief executive of Molina Healthcare Inc., a health insurer based in Long Beach. “People are going to scratch their head and say, ‘What happened?'”

Molina’s short answer: “It’s the drugs. A huge pipeline of new pharmaceuticals is going to push us back into double-digit health care inflation.”

That hasn’t happened yet, and hospital chains and insurers have posted strong results, to the delight of Wall Street.

Profits at HCA Holdings Inc., the largest publicly traded hospital chain, jumped 18 percent to $1.7 billion for the first nine months of 2014 compared with the same period a year earlier. The Nashville company’s shares have soared 53 percent this year.

Likewise, health insurance stocks have rallied as the federal government guaranteed millions of new customers and spent billions of taxpayer dollars subsidizing their premiums. Insurers are handling much of the Medicaid expansion under state contracts.

Insurance giant Anthem Inc. signed up nearly 800,000 people on Obamacare exchanges across the country. Its shares rose 33 percent year to date — three times the increase in the broader Standard & Poor’s 500 stock index.

The biggest changes have occurred in the 27 states that have expanded Medicaid, the government health insurance program for the poor. HCA reported a 55 percent decline in uninsured patients and 30 percent growth in Medicaid business in five states where it operates and where the program was expanded.

Megan Neuburger, a Fitch Ratings analyst who tracks the for-profit hospital industry, said the turnabout has been dramatic.

“I think the Affordable Care Act has been more positive for the hospital industry than analysts had expected or even the industry expected it to be,” she said.

Uncompensated care totaled about $50 billion for hospitals last year, studies show. The Obama administration said the federal government has typically covered about 60 percent of those medical bills.

But the health law anticipated the decrease in bad debt and reduces future government payments to hospitals. The American Hospital Association estimates that hospitals have already experienced $122 billion in funding cuts since 2010.

U.S. workers aren’t likely to feel much sympathy. Medical costs are taking a bigger bite out of their paychecks while wages are largely stagnant.

Family premiums for an employer health plan rose 73 percent in the last decade, and workers’ share of the bill jumped 93 percent, according to a new report from the Commonwealth Fund.

On average this year, employers and workers combined spent $16,834 annually for a family health plan.

Dena Mendelsohn, a health policy analyst at Consumers Union in San Francisco, challenged 6 percent rate increases by Anthem and Blue Shield of California this year in a report to state regulators. She cited, among other issues, their failure to account for the drop in uncompensated care.

“We were puzzled because they didn’t factor it in,” she said. “The amount of cost shifting should go down.”

Insurers say it takes time for these changes to filter through and the effect remains unclear. The rate hikes for more than 1 million individual policyholders take effect next month.

The prospect of financial relief for consumers may vary across the country depending on whether a state expands Medicaid as well as the balance of power between hospitals and health plans locally.

The sterling reputation of some hospitals makes it difficult for insurers to bargain effectively or follow through on the threat to drop them from an insurance network, said Paul Ginsburg, a professor at the University of Southern California’s Schaeffer Center for Health Policy and Economics.

Without outside pressure, he said, the first inclination of many hospitals may be to spend any extra money themselves.

“There are clearly some hospitals that have enormous leverage with insurers,” Ginsburg said. “Hospital administrators and their boards see opportunities to fund all these things they haven’t been able to do until now.”

AFP Photo/Karen Bleier

U.S. Healthcare Ranks Last Among 11 Developed Nations, Report Says

By Chad Terhune, Los Angeles Times

LOS ANGELES — Despite having the costliest care, the United States ranks last among 11 industrialized countries on health care quality and access, according to a new report.

The analysis by the Commonwealth Fund published Monday ranked the United Kingdom first overall, even though its per-capita health spending is less than half that of the U.S.

The other top-ranked countries were Switzerland and Sweden. France and Canada were just above the U.S. at the bottom of the rankings.

Researchers said the U.S. was hurt by a lack of access to primary care and inefficiencies in the health care system overall.

They said provisions in the Affordable Care Act may help boost the country’s standing.

“It is disappointing but not surprising that despite our significant investment in health care, the U.S. has continued to lag behind other countries,” said lead author Karen Davis.

“With enactment of the Affordable Care Act, however, we have entered a new era in American healthcare,” she added.

The U.S. spent $8,508 per person on health care in 2011 compared with $3,406 in the United Kingdom.

In addition to high costs, the U.S. fared poorly on several measures. It ranked last among the 11 industrialized countries on infant mortality.

Americans also experienced financial barriers. More than a third of U.S. adults reported skipping a recommended test or treatment because of cost, according to the report.

Forty-percent of U.S. adults who had visited the emergency room said they could have been treated by a regular doctor if one had been available.

The Commonwealth Fund is a private foundation that supports health policy research.

AFP Photo/Rick Gershon

Employer Health Costs To Rise Nearly 9 Percent This Year, Survey Finds

By Chad Terhune, Los Angeles Times

LOS ANGELES—Employer health care costs are expected to rise nearly 9 percent in 2014, a slight improvement over recent years, according to a new survey.

However, that modest decline doesn’t offer much relief to companies and their employees, who are seeing health insurance costs take a bigger bite out of their paychecks.

“Even though the decline is good news, most (health) plan sponsors still find 8 percent to 9 percent cost increases unsustainable,” said Harvey Sobel, a principal at Buck Consultants, a benefits consulting company that surveyed 126 insurers and health plan administrators nationwide.

Those companies surveyed provide health benefits to 119 million people.

The report released Thursday found that costs for preferred-provider organization, or PPO, plans are expected to rise 8.7 percent this year. That’s down from 9 percent last year.

HMO plans should increase 8.6 percent, down just slightly from the previous year, according to Buck Consultants.

Some insurers surveyed cited patients’ lower use of medical care as the primary reason for the decreases.

“This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment,” Sobel said.

Overall, U.S. health care spending has been growing at historically low levels from 2009 to 2012, federal data show.

Many health economists and industry officials have attributed the slowdown primarily to lingering effects of the Great Recession, when millions of Americans cut back on medical care.

But the Obama administration and other experts have pointed to fundamental changes in health care reimbursement and the delivery of care spurred by the Affordable Care Act.

Even with the slowdown, the rise in health premiums continues to outpace inflation and wage growth.

For 2013, the average total cost for a family health plan rose 4 percent to $16,351, according to a closely watched survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

The typical employee’s share of that premium was $4,565, up about 6 percent from 2012. But the employer’s share of the premium increased just 3 percent, a further sign that employers continue to shift more medical costs onto their workers.

Photo: ProgressOhio via Flickr

More U.S. Consumers Are Seeking Medical Care, Report Shows

By Chad Terhune, Los Angeles Times

A historic slowdown in U.S. health care spending in recent years may be drawing to a close.

An industry report published this week and health care experts point to a steady rise in medical care being sought by consumers seeing specialists, getting more prescriptions filled and visiting the hospital. Other factors such as millions of newly insured Americans seeking treatment for the first time and higher prices from health care consolidation could also help drive up costs.

Experts aren’t predicting an immediate return to double-digit increases in medical spending. But the emerging trend underscores how difficult it will be for policymakers, employers and health plans to control health care costs going forward.

“2013 was a rebound year for health care,” said Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, an industry research firm that released Tuesday’s report. “We saw health care usage overall up for the first time in three years. We think that is reflective of a strong economy, more patients with insurance and also some pent-up demand for services that may have been delayed or deferred since the economic downturn.”

David Gruber, director of health care research at Alvarez & Marsal, said he’s expecting a similar trend of higher demand coupled with consolidation among hospitals and large physician groups pushing up prices. He said the demand for services is being driven by an influx of Obamacare enrollees, aging baby boomers and people with chronic conditions who can no longer delay care.

“At some point you can’t defer anymore,” Gruber said. Health spending “isn’t going up by double digits, but it could spike to 6 percent or 7 percent.”

There are other forces at play that could serve as an effective counterweight and bear watching. The growing use of narrow provider networks by employers and health insurance companies and a shift away from conventional fee-for-service reimbursement for medical providers can be potent cost-containment tools, Gruber said.

On Monday, the Congressional Budget Office cited the prevalence of narrow networks as one reason premiums for Obamacare coverage in government-run exchanges will be lower in the next few years than previously expected.

David Axene, a fellow at the Society of Actuaries, estimates that rates for individual consumers under the health law may rise, on average, 6 percent to 8.5 percent next year. He cautions that rates will vary across the country, and some health insurers such as industry giant WellPoint Inc. have already warned about double-digit rate hikes in some markets.

“Many exchange health plans got better discounts than anticipated from providers, but there is really a strong pushback now from hospitals and physicians who are concerned about having enough money to cover their costs,” said Axene, an actuary in Murrieta, Calif. “I hope we can stay south of double digits, but there’s no guarantee we will.”

From 2009 to 2012, U.S. health care spending grew annually at less than 4 percent, according to federal data. That’s been the lowest rate of growth in half a century, and has sparked considerable debate about the underlying reasons.

Many health economists and industry officials have attributed the slowdown primarily to lingering effects of the Great Recession, when millions of Americans cut back on medical care. But the Obama administration and other experts have pointed to fundamental changes in health care reimbursement and the delivery of care spurred by the Affordable Care Act.

The IMS Health report found that total U.S. spending on pharmaceutical drugs grew 3.2 percent last year to $329.2 billion. That came after a 1 percent drop in 2012 — the first decline since IMS began tracking the data in 1957.

Patent protections expiring on major drugs and cheaper generic substitutes flooding the market helped drive that previous decrease. Aitken said patent expirations had less impact last year and there was greater use of health care in general.

IMS Health also found that the number of physician office visits, hospitalizations and prescriptions filled all rose last year.

At the doctor’s office, visits to primary care physicians fell less than 1 percent, but trips to specialists jumped 5 percent. The number of hospital visits also grew last year, primarily among commercially insured patients who received outpatient treatment.

Any upswing in medical costs could further squeeze workers. Their health insurance premiums keep taking a bigger bite of their paychecks, as employers shift more health care costs to employees.

There was some good news for consumers. The IMS report found that 57 percent of all retail prescriptions filled last year cost consumers $5 or less. But patients often bear a growing share of the cost for high-priced specialty medications for cancer, rheumatoid arthritis and other chronic conditions.

Will O’Neill via Flickr

Insurers Ponder 2015 Prices As Obamacare Enrollment Deadline Looms

By Chad Terhune, Los Angeles Times

LOS ANGELES — After months of head counts for Obamacare, it is the medical bills that will start to matter now.

Even before enrollment closes Monday, California has far exceeded its initial goals for signing up people under the Affordable Care Act. Although the sheer volume of 1.1 million policyholders is impressive for a brand new government program, the number of sicker patients is what’s likely to draw the most attention.

How sick they are and the size of their medical bills will be front and center in the weeks to come as insurers begin drawing up next year’s insurance rates, which will become public this summer.

The outcome — hefty rate hikes or more modest increases — in the pivotal state of California could help shape political races nationwide and the future of enrollment for President Barack Obama’s signature law.

WellPoint Inc., parent of California’s leading health insurer in the exchange, Anthem Blue Cross, has already predicted “double-digit-plus” rate increases on Obamacare policies across much of the country.

Other experts discount the notion of soaring premiums because the Obama administration has programs in place to help health plans offset losses from higher-cost customers.

Meanwhile, most everyone involved is waiting to see how many additional people rush in by Monday, the last day to begin enrolling in Obamacare.

But health insurers aren’t wasting any time sizing up what patients are costing them now and what that will mean for 2015 rates.

Hunkered down in conference rooms, insurance actuaries are parsing prescriptions, doctor visits and hospital stays for clues about how expensive these new patients may be. By May, insurance companies must file next year’s rates with California’s state-run exchange so negotiations can begin.

“If rates in California increase by 20 percent,” said Robert Laszewski, a healthcare consultant in Virginia, “enrollment will go down and any healthy people will bail.”

Those concerns are one reason the Covered California exchange, insurers and health-law supporters are trying so hard to persuade young and healthy people to enroll before Monday’s deadline. The goal is to improve the chances of getting a balanced mix of policyholders and keep monthly premiums down.

No matter the final outcome, Covered California officials are confident they have done enough to avert upheaval in the market.

“I think we’re in a position to be optimistic that if rates go up at all, it will be in the single digits,” said Peter Lee, executive director of Covered California.

Harriet Davidson, 60, was one of the first people in line for Obamacare after being shut out of the market for years.

The self-employed consultant in Contra Costa County was rejected twice for individual health insurance because of her diabetes and a thyroid condition. The healthcare law removed that obstacle by guaranteeing access to coverage regardless of preexisting conditions.

That meant Davidson could buy a Silver plan from Blue Shield of California that costs her $92 a month — thanks to a federal subsidy.

“I probably neglected my health the last few years because of the expense,” Davidson said. “Now I’m going to have every test known to man.”

She plans to undergo lab tests for her diabetes, a mammogram, a bone density scan and a colonoscopy — everything she put off while she went without comprehensive insurance.

Davidson’s medical bills are the kind of expenses that could end up being scrutinized in a conference room on the 18th floor of Blue Shield’s headquarters in San Francisco. The company’s chief actuary, Amy Yao, and a small team of co-workers meet every other day to pore over the latest data and trends. “It’s kind of the sausage-making factory,” she said.

Yao said claims information is usually a better guide to future costs than a customer’s age, sex and other demographic data. But there’s a risk to putting too much weight on such a short time period, and there’s no guarantee Blue Shield will hang on to these same customers when they get a chance to renew their policies early next year.

“It’s really dangerous to draw conclusions from a small sample because you could be off materially,” Yao said. “Pricing is really challenging this year.”

Jacinta Camacho Kaplan, 63, is another person who immediately put her new health plan to use. The retired writer in Santa Monica has visited the hospital twice since she enrolled and needs follow-up care for a brain tumor that was treated in 2007. Kaplan pays about $600 a month for a high-end Platinum plan from Anthem Blue Cross.

“I’m a big user because I have these problems,” she said. “It’s a godsend to have this insurance.”

Covered California enrollment has made steady progress among young people, but officials acknowledged it was still falling short of their ultimate goals.

The turnout among young Californians ages 18 to 34 reached 27 percent of total enrollment through March 1, the latest data available. About one-third of the people eligible for subsidies are in that age group.

Many health policy experts say the prevalence of older, sicker customers in the exchange shouldn’t surprise health insurers.

They also note two major unknowns that could alter the equation: It was always anticipated that younger people would procrastinate until the Monday deadline, and the risk pool for rate-setting purposes also includes tens of thousands of people who are buying new policies outside the state exchange. Details about the size and makeup of that market aren’t known yet.

“I think all of the health plans expected the first 500,000 people would be older and sicker,” said Marian Mulkey, director of the health reform and public programs initiative at the California HealthCare Foundation. “I don’t expect a dramatic shift in the rates.”

Covered California’s overall enrollment as of Thursday had already surpassed the most optimistic estimates by 33 percent. By another measure, the state has reached nearly half the two million Californians who are eligible for premium subsidies.

To receive that government assistance, consumers must purchase their policy through the exchange. Otherwise, they can choose to bypass the state marketplace and buy the same health plans directly from insurers.

California’s exchange has benefited from widespread political support for the Affordable Care Act, a largely functioning web site and a broad network of clinics, nonprofit groups and labor unions aggressively promoting enrollment. It started slow in October, with only 30,000 people picking out a health plan in the entire month. Last week, more than 80,000 people enrolled over a four-day period.

In recent weeks, the state revamped its advertising and put the spotlight on younger enrollees. Orange County construction worker Luis Lupercio, 38, and his two sons star in a Spanish-language TV commercial aimed at attracting Latinos.

He said he couldn’t afford health insurance previously for his family of four, particularly as work dried up after the recession. But cost was no longer an issue with a federal subsidy. He said he got a Health Net policy through the exchange for just $1 a month.

“I rarely get sick,” Lupercio said. “Getting coverage for my kids was more important.”

Most health insurers remain bullish about their prospects under the healthcare law and have been pleased with California’s better-than-expected performance overall.

“But a lot of healthy people sat out year one, so you need another big influx” when enrollment opens again in November, said Charles Bacchi, executive vice president at the California Association of Health Plans, an industry trade group.

Santa Monica resident Julia Reed Nichols, 27, lost healthcare coverage about a year ago when she no longer qualified for her parents’ insurance plan. She enrolled in a Bronze plan from Anthem Blue Cross for $93 a month after taking into account a premium subsidy.

“I held my breath for the last year without insurance,” worried about incurring big medical bills if something unforeseen happened, she said. “But it is hard to get a twentysomething to pay another bill because so many of us are already drowning in student loan debt.”

AFP Photo/David McNew