Population Health Insider, October 2009

Inside:

California pushes to enact strongest anti-rescission law in the nation

AHIP study: Medicare Advantage provides better care than FFS Medicare

LifeMasters files for Chapter 11 bankruptcy

Four ways to get more young adults health coverage

New efforts to insure young adults may beat reform

Feds lift WellPoint’s Medicare Advantage, Part D suspension

Hospitals could suffer from public plan

Indiana program shows health reform without individual mandate is costly

Nine health leaders respond to Obama’s reform speech

How to stop rising healthcare costs

Group charges health insurers are violating state labor code

Taxing health benefits would hurt poor working families more than the rich

Chiropractors allege ERISA, RICO violations in Blue Cross suit

Public option would add $1 trillion to deficit

Older women have more difficulty obtaining insurance

Americans doubt reform will improve quality, cost

Public plan is being Swift-boated

Inspector general criticizes three states for improper Medicaid claims

Eliminating fees for overlapping services could save millions for Medicare

California pushes to enact strongest anti-rescission law in the nation

A bill that may become the strongest legislation in the nation to prevent health plans from dropping coverage to members who become ill passed the California Senate recently and may soon be headed for the governor’s desk.

If signed by Gov. Arnold Schwarzenegger, as its sponsors anticipate, the legislation would set up an independent board, managed by two state agencies, which would have to approve any health plan’s cancellation of an enrollee’s plan. Only when insurers prove the applicant intentionally misrepresented his or her health on the questionnaire would cancellation be approved. If an insurer tried to cancel a policy without getting approval, the state Department of Managed Health Care and the Department of Insurance would impose administrative penalties.

“This legislation will ensure that health plans and insurers do not act as ‘judge and jury’ whenever they want to rescind or cancel a policy,” the bill’s author, state Assemblyman Hector De La Torre, said in a statement.

The California Association of Health Plans (CAHP) in Sacramento, which represents 39 health insurance companies, is strongly opposed to the bill not because of the requirement for panel review, but because of the difficulty of proving someone intentionally withheld health information in an attempt to deceive.

“It’s hard to prove because it’s virtually impossible to prove what was in a person’s mind or heart,” says Nicole Kasabian Evans, spokesperson for CAHP. “Setting the standard to be based on what information was known or available at the time a person applied for coverage is a more reasonable standard.”

“ Unfortunately, there are some cases where enrollees are not accurately disclosing their health status, and it drives up the cost of insurance for everybody else. It is important to note that health plans rarely rescind policies,” says Charles Bacchi, CAHP executive vice president. “Only one-tenth of 1%—a tiny fraction—of individual policies are rescinded. However, with just 5% of beneficiaries accounting for more than half of healthcare costs, it only takes a few people misrepresenting their health status to make everyone else have to pay more.”

The bill would also standardize the set of health history questions all insurance plans doing business in California are allowed to ask and require plans and insurers to complete medical underwriting prior to issuing a contract. That’s because in many cases, applicants may not know or remember what is in their medical record with enough detail to be honest about it on the application. Such cancellation practices have become increasingly common, with health insurers dumping their members on grounds that they were not forthcoming in their applications about previous health issues, regardless of whether they remembered them and whether they have any bearing on their current illnesses.

Unlike similar language in some of the national health reform bills that call for a guaranteed issue, which would not take effect until 2013, the California legislation would take effect in January 2011. De La Torre of South Gate, who sponsored the bill with the California Medical Association (CMA), says studies of such rescission practices estimate that 1,000 people in the state annually now have their insurance policies cancelled by their health plans because of such practices. Under this new law, they would have no interruption in their care.

“For example, there was a gentleman in his 50s who forgot to mention on his application for health insurance that he had knee surgery when he was 18,” De La Torre says. “They held him accountable and cancelled him after he got cancer, even though there was no connection between the surgery and the cancer. They were happy to take peoples’ insurance premiums as long as they are healthy, but not after they got sick.”

Texas and Connecticut have new rules barring rescissions, but without the teeth of the independent agency that would be required to approve any insurance plan’s petition to cancel a person’s coverage, De La Torre says.

“Insurance companies in California have a long track record of rescinding health coverage after people get sick,” says Dev GnanaDev, MD, president of the CMA in Sacramento, which helped sponsor the Assembly Bill 2 (AB 2). “The practice of rescission puts patients at risk, leading to increasing medical costs for the patient, doctor, and hospital, while the insurer makes a profit.

“Unfortunately, fines and lawsuits have not deterred such practices, and settlements amount to a slap on the wrist after the damage is already done,” GnanaDev says. “Assembly Bill 2 would protect patients when they need it most, making certain that health plans and insurers do not act as judge and jury whenever they want to rescind or cancel a policy.”

Enactment of the bill into law is not a slam dunk. Schwarzenegger vetoed similar legislation last year. However, after that veto, he and his staff worked with the governor’s office to make certain changes in the bill that resolved Schwarzenegger’s objections, De La Torre says.

“We have to hold him to his word that was why he vetoed,” De La Torre says. “Now he should not have any excuse for not signing this. And for all the health reform debate going on now about this same practice, people are all the more sure they want to protect those who have health insurance” from such arbitrary cancellations.

Current law prohibits insurers from post-claims underwriting, which includes rescinding, canceling, or limiting a plan contract due to the plan’s failure to complete medical underwriting and resolve all reasonable questions arising from the application, De La Torre said in a statement.

“It is well publicized that health plans and insurers have paid large bonuses to their employees for rescission of policies, practice illegal rescission, and put patients in harm’s way by rescinding their health coverage when they need it most.”

Last year, the state Department of Managed Health Care reached settlement agreements with some of the state’s largest health plans that were accused of illegally cancelling the health policies of some 3,400 Californians after they became ill. The agency ordered the plans to restore coverage and pay back all medical expenses the cancelled policyholders incurred in their efforts to receive treatment.

Consumer Watchdog, a Santa Monica–based advocacy group, has collected numerous stories of patients whose policies were cancelled, such as the case of Selah Shaeffer, age 4. Blue Cross allegedly cancelled her parents’ Blue Cross policy, stating that they had intentionally withheld information about her jaw tumor on their application. “However, the family doctor did not diagnose the tumor until months after the policy had taken effect,” the advocacy group said.

Another is the story of Ana Maria Simoes, who needed gall bladder surgery. Blue Shield said her husband failed to disclose his own high cholesterol on their policy and denied her gall bladder coverage on those grounds, even though her husband, a Portuguese immigrant with limited English skills, did not know he had high cholesterol at the time. “His doctor simply told him that he was prescribing Lipitor because men his age often needed it,” the advocacy group said.

“Without AB 2, insurers will continue to rescind coverage even if patients honestly filled out their applications for coverage,” says Consumer Watchdog spokesperson Jerry Flanigan.

AHIP study: Medicare Advantage provides better care than FFS Medicare

The health insurance industry’s lobbying group says new government data support its claim that Medicare Advantage provides better coordinated, more efficient care, along with its average 14% higher per-person cost.

America’s Health Insurance Plans (AHIP) says its analysis of data gleaned from the federal Agency for Healthcare Research and Quality (AHRQ) shows that seniors enrolled in Medicare Advantage programs in California and Nevada spent fewer days in the hospital, had fewer hospital readmissions, and were less likely to have potentially avoidable admissions for common conditions such as uncontrolled diabetes and dehydration when compared with seniors enrolled in traditional fee-for-service (FFS) Medicare.

The AHIP analysis comes as the health insurance industry is furiously lobbying Congress in opposition to proposed cuts to Medicare Advantage, which a March MedPAC report said cost about 14% more per person than traditional Medicare. The Congressional Budget Office estimated that Medicare will spend an additional $54 billion through 2012 for Medicare Advantage plan payments above traditional Medicare spending.

“The entire Medicare program, including Medicare Advantage, should be carefully evaluated as part of comprehensive healthcare reform,” says Karen Ignagni, president and CEO of AHIP in Washington, DC. “However, seniors in Medicare Advantage should not be forced to fund a disproportionate share of the costs to reform the healthcare system.”

AHIP says Medicare Advantage is cost-effective because its emphasis on preventive care and disease management for seniors with chronic illnesses keeps their conditions under control and reduces hospitalizations and potentially harmful complications.

Marc Steinberg, deputy director of health policy at Families USA in Washington, DC, says singling out California and Nevada as examples of Medicare Advantage effectiveness is misleading because both states have a long history with Medicare managed care that predates the 2003 creation of Medicare Advantage.

“They are looking at a very specific geographic area that is not representative of the nation as a whole,” Steinberg says. “There are plans in California like Kaiser Permanente that do get pretty good results, and if we could replicate that model across the nation, we might have something. You would hope you would get something for 14% extra.”

The problem is that new Medicare Advantage plans—lured by the higher profit potential—often lack the expertise, staff, capital, networks, and coordination of care that makes Kaiser Permanente so effective, says Steinberg.

The AHIP study analyzed hospital admissions in California and Nevada compiled by AHRQ and compared utilization rates among enrollees in Medicare Advantage plans and Medicare. AHIP says its study factored in age, sex, and 70 Hierarchical Condition Categories that are used in Medicare risk adjustment.

AHIP said the AHRQ data show that:

• Hospital days were reduced by 30% in California and 23% in Nevada for Medicare Advantage beneficiaries when compared with traditional Medicare enrollees
• Medicare Advantage readmissions in the same quarter for the same condition were 15% less often in California and 33% less often in Nevada compared to Medicare
• In both states, Medicare Advantage seniors were 6% less likely than seniors in Medicare to be admitted to the hospital for conditions described by AHRQ as “potentially avoidable,” such as dehydration, urinary tract infection, or uncontrolled diabetes

AHIP says the AHRQ data also found that Medicare Advantage seniors with chronic conditions in California and Nevada:

• Spent an average of 18% fewer days in the hospital than seniors in Medicare
• Had an average of 27% fewer visits to the ER than those seniors in Medicare
• Experienced a 42% lower rate of hospital readmissions than seniors in Medicare
• Had avoidable admissions that were 13% lower than those seniors in Medicare

AHRQ officials did not dispute the AHIP report, saying they had found similar results on preventable admissions for 13 states. However, the agency added that its latest research—which is still under review—did not find the same favorable results for Medicare Advantage enrollees as in other studies. AHRQ also noted that several studies show Medicare Advantage plans don’t follow the same random selection process that is used for traditional Medicare enrollees, making any accounting for risk variability difficult.

Robert Zirkelbach, spokesperson for AHIP, says California and Nevada were chosen because “those are the only states that have the data publicly available where you can actually track patient readmissions.

“We are trying to see if we can get into other states,” says Zirkelbach. “Right now, California has historically had some of the best data sets in the nation to allow these analyses. We are going to continue to try to get as much data as we can nationally.”

LifeMasters files for Chapter 11 bankruptcy

One of the leading population health management companies announced it has filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. LifeMasters^® Supported SelfCare, Inc., based in South San Francisco, alleges that the costs associated with participating in CMS’ demonstration projects is one reason for the decision.

George Pillari, the new LifeMasters president, says LifeMasters owes CMS $125 million for participating in three demonstration projects during the past four years, as well as “another few million” to other creditors.

Pillari, managing director at Alvarez & Marsal Healthcare Industry Group, LLC, has been working with the company and its board as a restructuring advisor prior to the filing, and replaces Christobel Selecky, an industry leader and longtime president and CEO of the company. Selecky will remain on the company’s board of directors and will work as a senior advisor on a consulting basis for the company.

Over the past four years, LifeMasters has participated in three CMS demonstration projects that tested disease management (DM) in the senior and dual-eligible populations, most notably the Medicare Health Support demonstration project, in which CMS reported that the DM programs did not demonstrate success based on CMS’ study design and measurement methodologies.

“Rather than endure a costly and time-consuming legal path to challenge CMS, we have chosen to restructure
our CMS and other liabilities through the Chapter 11 process,” Pillari says. The company, along with others involved in the Medicare Health Support project, which tested DM in the senior population, need to repay fees to CMS “earned in excess of savings generated during the multiyear projects.”

Pillari says the Chapter 11 process will give LifeMasters “resolution with CMS” and allow the company to move forward “just fine.”

LifeMasters has to transition from a company that a year ago had one-third of its business coming from Medicare to moving forward without any Medicare business because its demonstration projects have ended.

The commercial business is progressing, and LifeMasters cut staff associated with Medicare. “I think the rest of our business runs pretty well,” Pillari says.

Four ways to get more young adults health coverage

Health insurers know the importance of signing up so-called “young invincibles” to their health plans, but many of these sought-after individuals are not interested—either because they can’t afford health insurance or they simply think they don’t need coverage.

Health insurance companies understand that having these low-cost prospective members paying into the system could decrease member health insurance costs across the board.

Young adults aged 19–29 are one of the largest segments of the U.S. population without health insurance, according to The Commonwealth Fund’s Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help.

A whopping 13.2 million, or 29%, of young adults lacked health insurance coverage in 2007. Many of them lost coverage at or after age 19 when they graduated from high school or college. In fact, turning 19 increased the uninsured rate nearly threefold, according to the report. Young adults might think they don’t need insurance, but The Commonwealth Fund thinks otherwise. Not having insurance creates barriers to care and leaves young adults and their families exposed to hefty out-of-pocket costs, according to the report.

There are also health reasons for why young adults need insurance. Fifteen percent of young adults have at least one chronic health condition, such as asthma, cancer, or diabetes; young adult mothers gave birth to 2.6 million children in 2007; and injury-related visits to the ER are more common among young adults than any other group (1,453 per 10,000), according to The Commonwealth Fund.

How can health insurers and policymakers change this trend? Here are two ways health insurers can do it:

Promote individual health insurance to young adults and their parents. Health insurers need to do a better job at promoting their offerings. This goes beyond creating a cute, fuzzy mascot to preach the importance of Acme Health Insurance. That may make young adults aware of you, but that still doesn’t mean they know that they are eligible to sign up for those plans. They may view health insurance as something for their parents.

One way to promote your services to young adults and parents is knowing state-dependent laws and reaching out to parents and children about individual health insurance options when children reach their late teens.

After you have informed them, it’s time to take the next step. When the child exceeds the dependent age and loses coverage, the insurer should create a mechanism (e.g., a phone call, e-mail, or traditional mail) to reach out to parents and young adults about their health insurance options. Many don’t realize there is an individual insurance option available to them, so it’s up to insurers to tell them.

Not only would you benefit from gaining young adults as members, but your company could also acquire a lifelong member.

Make individual health insurance more desirable. Once young adults have signed up for insurance, it’s important to give them what they want and in the form of communication they want.

This means investing in technology and allowing young adult members to work with their health insurer on their own schedule via the Web; venturing into the social media world of Facebook and Twitter; and creating applications that allow individualized communication.

Every industry is moving toward individualism. Young adults will expect it from their health insurers, too. That’s the best way to reach them.

The following are two pieces of state legislation that could improve health coverage access to young adults:

Increase the age that young adults can be considered dependents for insurance purposes. New Jersey and New Hampshire allow residents to include their children under their health insurance up to age 30. Another 24 states have similar laws with less liberal age requirements. Most of them allow parents to cover their children until age 25.

States have created these laws because many young adults lose their parents’ coverage once they graduate from college. The transition from school to the workforce often includes low wages and no health benefits and leaves many young adults without health insurance. Providing a safety net by increasing the dependent health insurance age could resolve that issue.

Allow mandate-lite health plans. Some states have options that allow insurers to offer health plans with few state mandates, which reduces the costs of offering those plans.

There are about 2,000 mandated healthcare benefits and providers throughout the country, and those mandates increase healthcare costs by more than 50% in some states, according to the Council for Affordable Health Insurance.

Some of these mandates include services such as hair and limb prostheses, bone mass measurement, and care for TMJ disorders; providers such as dentists, optometrists, and marriage therapists; and covered persons such as noncustodial children and adopted children.

The benefit of mandate-lite plans is that they are low-cost options for young adults who simply want preventive and catastrophic coverage. The downside is that they might not cover certain services, such as maternity care. Educating young adults about these plans is critical if your state provides mandate-lite options.

These are a mere four ways health insurers and policymakers can tackle the issue—short of implementing a federal individual mandate that would require all Americans to have health insurance. All four ideas could be implemented without much difficulty or capital.

In a time when the healthcare industry is facing fewer employer-based members and a potential public insurance option, think about how the infusion of millions of uninsured young adults would benefit health insurers. These proposals could add new members who are lower cost than the general member population—especially elderly and sick members.

New efforts to insure young adults may beat reform
proposals to the punch

One of the largest groups of uninsured in the country today is young adults—those aged 19–26. Although they make up about 18% of the adult population, they account for up to 28% of the uninsured: an estimated 10.3 million young adults—or about one in three (32%)—lacked health insurance coverage this year, according to figures from the Urban Institute.

“Because young adults face so many transitions—graduation, job changes, and in this economy, unemployment—they are especially vulnerable to the risks of being uninsured,” Commonwealth Fund President Karen Davis said earlier this summer in response to a study of this group. Davis noted that “comprehensive health reform would go a long way toward ensuring that young adults have stable, affordable health coverage” that would give them access to the care they need.

It appears that the dilemma of young people has not been far from the minds of health reform–makers on Capitol Hill. For example, in the healthcare reform bills approved by the Senate Health, Education, Labor, and Pensions Committee and the House, provisions were included that call for:

• Allowing young adults to stay on their parents’ health insurance policies until age 26—during the years when they are least able to afford their own coverage
• Using an insurance exchange to give young adults the option of enrolling in lower-cost insurance plans—with recognition that young adults often have few health needs and are less able to afford coverage at the start of their working careers
• Making health insurance available to those without job‑based coverage, with premium assistance available to those who can’t afford it

However, even if reform measures are approved at the federal level, it will take time for these provisions to be enacted. Actions have been going on elsewhere to provide younger individuals with healthcare coverage.

Earlier this summer, New York became one of about two dozen states requiring commercial insurers and managed care organizations to offer an option to continue coverage for unmarried young adults—in this case, through age 29—regardless of financial dependence under a parent’s group health insurance policy. This adult child does not have to be a student, must not be eligible for other coverage, and must either work or reside in the state.

Florida, New Mexico, and Washington also have extended insurance coverage to adults who are not students up to age 25. In Florida, a provision is available to extend that coverage until children reach age 30.

But changes also are occurring at the collegiate level. For example, at 11 campuses of the University of North Carolina (UNC) this fall, students who do not have their own coverage or coverage through their parents will be required to have coverage, which can be obtained through a new plan “designed to leverage the UNC system’s buying power,” according to UNC. This coverage will be factored into financial aid packages.

Students will have a $300 deductible and be covered for up to $100,000 under the UNC package. A 2008 study by the General Accountability Office found that more than half of collegiate plans had a maximum benefit of less than $29,000.

Young adults who are not in school full‑time after graduation from high school are much more likely to be uninsured primarily because it is much more difficult for them to obtain access to employer coverage: 37% of part‑time and nonstudents aged 19–23 were uninsured, compared with 18% of full‑time students, according to a recent study from The Commonwealth Fund.

“Loss of health insurance coverage impedes young adults’ access to the health system at precisely the time they should be establishing their own relationships with physicians and puts them and their families at significant financial risk,” said study author and Commonwealth Fund vice president Sara Collins.

Although young adults are healthier than older adults, about 15% have chronic conditions such as asthma, and more than half weigh more than what is considered to be healthy. In addition, 2.7 million births are attributable to women in this age group, and young adults have the highest rates of injury-related visits to the ER of any age group, according to the study.

In the absence of comprehensive change or reform in the health insurance system, the following three policy changes could “incrementally extend coverage” to a portion of uninsured young adults and prevent others from losing coverage in the future, according to the study:

• Extending eligibility for Medicaid/State Children’s Health Insurance Plan public coverage beyond
  age 18.
• Having states ensure that all colleges and universities require full‑ and part‑time students to have health insurance and offer health insurance coverage to both.
• Extending eligibility for dependents under private coverage beyond age 18 or 19.

Feds lift WellPoint’s Medicare Advantage, Part D suspension

WellPoint, Inc., will resume marketing its Medicare Advantage and Medicare Part D health plans October 1 and begin enrolling new customers November 15 for the 2010 contract year after CMS lifted a nine-month ban on new enrollments.

In a letter to WellPoint, CMS program compliance and oversight director Brenda J. Tranchida noted, “WellPoint has made sufficient progress in correcting its deficiencies to merit lifting the marketing and enrollment sanctions.” However, Tranchida also noted that “a recent CMS audit identified some continuing deficiencies in WellPoint’s appeals and grievances processes.”

As a result, WellPoint will remain under its existing corrective action plans for its appeals and grievances processes, she said. The insurer will also disclose to CMS any new significant compliance issues. CMS will periodically ask WellPoint for specific data to ensure that the deficiencies do not recur.

CMS also told WellPoint that it will not be automatically assigned new low-income subsidy members, although those low-income members can again choose WellPoint products during the upcoming Annual Enrollment Period. CMS imposed the sanctions January 12 after a rash of consumer complaints about cost hikes and denied drug benefits. WellPoint blamed the snafus on a series of computer glitches, but CMS said at the time that it was suspending enrollment because the health insurer had failed to take corrective measures.

A CMS review of the insurer in January found “widespread and continued failures by WellPoint to properly administer their contracts in accordance with CMS requirements.” CMS had identified WellPoint’s noncompliance in several areas, including enrollments and disenrollments; benefits administration, including determining premiums and copays; grievances and appeals; marketing; claims processing; coordination of benefits; billing; and meeting call center and customer service requirements.

Indianapolis-based WellPoint is the nation’s largest health benefits company, with more than 34 million members in its affiliated health plans. It owns Blue Cross and Blue Shield plans in 14 states. In January, WellPoint had 1.9 million beneficiaries in its Part D plans and 472,000 in its Medicare plans.

Hospitals could suffer from public plan

The financial effect of a public plan on private insurance premiums depends in large part on how many currently insured enrollees are allowed to migrate to a government exchange, according to a report published in the online edition of the journal Health Affairs.

On the plus side, the rapid increase of uninsured people in a government-run plan, with no enrollment of those who currently have private insuran