Obamacare -- the View from California

California, the so-called Golden State, has often been a national leader over the years.

Now, in the arena of national health care reform, California, with its Covered California (CoveredCA), the first state benefit exchange in the nation, claims to be leading the way in the creation of state health insurance exchanges or marketplaces.These exchanges, created by the Patient Protection and Affordable Care Act of 2010, PPACA, the ACA, or Obamacare) will allow both individuals and small businesses with up to 50 employees to purchase qualified health care coverage.

The ACA requires that all states have operating exchanges by January 1, 2014 with plan launch dates three months earlier on October 1 to allow time for people to analyze, purchase, and enroll in the program before the January 1 effective date. Two alternative options are provided for the states to achieve this goal: either create their ownor default to a federally run exchange.

When the law was passed in March of 2010, estimates were that it was likely that of the 50 states, 40 or more would choose to create their own exchange, while the balance would default into federally run programs. In fact, as of this date, the facts show precisely the opposite. Only 17 states have taken the path of doing it themselves, while 33 have decided to leave it up to the Feds. (For a breakdown of which states have chosen which path, see page three here).

We are now only days away from the October 1 launch date on which CoveredCA has promised that plan rates and descriptions will be available for licensed and certified insurance agents to sell.

In the last three business days, I, as one who's been involved in California's health care industry for over 30 years, have spent nine hours in face-to-face seminars and two more hours in a CoveredCA sponsored webinar. I believe that a quick glimpse of some of the hardcore realities of the Obamacare Health Insurance Exchanges would be of interest to my fellow Americans.

Sadly, as of now, there are zero plans with rates or benefits approved for sale by either of California's two state insurance regulatory bureaucracies -- the Department of Managed Health Care (DMHC) or the Department of Insurance (DOI). Even if there were plans available, there's no one to sell them because there are zero licensed and certifiedagents contracted with CoveredCA.

(Due to various internal issues, CoveredCA has not finalized the format of their agent contract and received subsequent legal approval of that contract from the California regulators.  Until the contract is approved by those regulators no one can sign it and become officially approved to sell the plans.)

Yesterday I was invited to join in a webinar sponsored by one of the general agencies (general agencies are essentially insurance plan distributors and are an integral part of the health care landscape) and CoveredCA itself. During the presentation Chris Patton, Vice President of the SHOP (Small Business Health Opportunities Program, the part of the exchange tasked with selling to small businesses) dodged a key question from the audience with the aplomb of an experienced politician.

Responding to the "elephant in the room" question of whether plan rates and benefits would be available for consumers to purchase and agents to sell as of the 10/1/2013 target launch date, Mr. Patton elaborated at some length that we should understand that with 13 carriers in the SHOP, each of whom was offering multiple plans, the regulators had a lot of work to do, and only a certain amount of time in which to complete it. He continued by saying that although he expected that plans and rates would be approved and announced by October 1, and that he had no reason at all to believe that they wouldn't be, he hoped that everyone would remember the immense workload, understand that all parties were doing their best andtrying very hard to achieve that goal.

Now I don't know about you, but that sounds suspiciously like a "no" answer to me.

But let's skip ahead to that time -- whenever it comes -- when CoveredCA starts selling plans.

The media is infested with glowing claims about how ObamaCare will reduce medical plan costs, saving consumers thousands of dollars. Just days ago on September 25, less than a week before the plans go on sale, the Department of Health and Human Services released a glowing report on premiums, pointing out how much lower costs will be than projected.

But, in the words of Forbes magazine, "the reality is starkly different."

Assuming that the price and plan benefit structures of the plans which are eventually approved for sale by CoveredCA end up more or less as they were submitted to the regulators, a full and complete analysis of the 2014 plans vs. the 2013 plans will be very interesting.

Many analysts from all sectors are asking the same question: With the elimination of health underwriting (meaning that unhealthy buyers will pay the same premiums as healthy ones), the mandatory increase of benefits such as pediatric dental and vision care, as well as the mandatory inclusion of ten Essential Health Benefits in all plans, and finally the inclusion of a number of new fees and taxes, how can costs possibly go down?

It's easy.

• Find doctors who'll work more cheaply

• Restrict consumer choice so plan members can only go to those lower priced doctors

• Degrade the benefits of those much ballyhooed "cheaper" plans.

To explore how insurance companies get doctors who'll work more cheaply requires a brief explanation of provider networks, often called PPO (Preferred Provider Option) or HMO (Health Maintenance Organization) plans.

The way both of these types of networks operate is that the insurers get together with doctors and negotiate prices. Those doctors who agree to give the insurer lower prices, or perhaps who capitulate to the insurer's demands for lower prices, depending on one's perspective, are the ones who get on the network.

Both PPOs and HMOs have become the standard in the medical plan world over the past 25 to 30 years. Most insurance carriers have developed comprehensive, widespread networks that include many outstanding medical practitioners, including such famous medical centers as Stanford, Cedars-Sinai, UCLA, UCSF and many more.
But which hospitals and doctors do you think we'll see on the new restricted, leaner, limited networks? The famous ones who have six-week waiting lists to get seen? Don't bet on it.

The Los Angeles Times wrote in May, "People who want UCLA Medical Center and its doctors in their health plan network next year, for instance, may have only one choice in California's exchange: Anthem Blue Cross. " But less than a month later Anthem Blue Cross pulled out of the California SHOP. Let's see, one minus one equals zero, right?

In the same article, Blue Shield admitted that its slimmed-down CoveredCA members would see only 37% of the doctors who make up Shield's regular, long-established network.

Health Net, the only other statewide carrier with a variable size network, a network that the insurer can enlarge or reduce at will by modifying the requirements for participating doctors, may have as few as 33% of their regular network providers available to CoveredCA members in many geographic areas. Health Net explains that to the currently uninsured, price is a key factor, so it built a narrow and hence less expensive network to serve that target market.

That's fine, shave your costs and restrict your networks to help push the prices down -- but then don't use those plans to tell us that Obamacare Exchanges are reducing costs.

Interestingly, Kaiser, which historically has been the lowest cost plan provider in California, will very likely lose that distinction in the Exchange. Why? Because Kaiser doesn't have a variable size network; it has its own closed network, and the size of that network is fixed. If you're on a Kaiser plan, you have to go to a Kaiser doctor in a Kaiser facility or you won't be treated. And Kaiser has no way to further shrink its own proprietary network. Kaiser is Kaiser, end of story.

As to my comment about degrading plan benefits, during the seminar which I attended today, one of a series of many nationwide events held by an industry-leading insurer, there was a PowerPoint slide which compared one of their 2013 current plans with an "equivalent" 2014 plan (which they're hoping the California bureaucracy will soon approve).

The slide showed a 2013 $500 deductible, $30 office visit copay plan with what was offered as an equivalent 2014 plan, a $1500 deductible, $20 office visit copay plan. Remember, the deductible is that amount that must come out of your pocket before the insurance company starts paying the big bills, like surgery, hospitalization, MRIs, CT scans, lab tests, and so on.

Seriously? Since when does a 2013 deductible of $500 become equivalent to a $1500 deductible plan in 2014? That's 300% inflation -- not equivalent! If you're comparing costs between those two plans, it's not hard to see how you'd think the 2014 plan was cheaper, but only until you have a claim.

I will leave you with two critical questions to ponder:

1 -- If California, the alleged national leader, is this far behind where they promised to be and where they should be to have a viable, functional product available by October 1, how far behind the deadline are all the rest of the states and the federal government?

2 -- If CoveredCA is this far over their heads in getting ready to sell these brand new plans to millions of people all over California, how ready are they going to be to administer, service, and satisfy those millions of people as customers once they sign up for coverage?

I, for one, have no great interest in becoming one of the first guinea pigs in the beta testing of any of the Obamacare Medical Exchangeupcoming product launches. Do you?

California, the so-called Golden State, has often been a national leader over the years.

Now, in the arena of national health care reform, California, with its Covered California (CoveredCA), the first state benefit exchange in the nation, claims to be leading the way in the creation of state health insurance exchanges or marketplaces.These exchanges, created by the Patient Protection and Affordable Care Act of 2010, PPACA, the ACA, or Obamacare) will allow both individuals and small businesses with up to 50 employees to purchase qualified health care coverage.

The ACA requires that all states have operating exchanges by January 1, 2014 with plan launch dates three months earlier on October 1 to allow time for people to analyze, purchase, and enroll in the program before the January 1 effective date. Two alternative options are provided for the states to achieve this goal: either create their ownor default to a federally run exchange.

When the law was passed in March of 2010, estimates were that it was likely that of the 50 states, 40 or more would choose to create their own exchange, while the balance would default into federally run programs. In fact, as of this date, the facts show precisely the opposite. Only 17 states have taken the path of doing it themselves, while 33 have decided to leave it up to the Feds. (For a breakdown of which states have chosen which path, see page three here).

We are now only days away from the October 1 launch date on which CoveredCA has promised that plan rates and descriptions will be available for licensed and certified insurance agents to sell.

In the last three business days, I, as one who's been involved in California's health care industry for over 30 years, have spent nine hours in face-to-face seminars and two more hours in a CoveredCA sponsored webinar. I believe that a quick glimpse of some of the hardcore realities of the Obamacare Health Insurance Exchanges would be of interest to my fellow Americans.

Sadly, as of now, there are zero plans with rates or benefits approved for sale by either of California's two state insurance regulatory bureaucracies -- the Department of Managed Health Care (DMHC) or the Department of Insurance (DOI). Even if there were plans available, there's no one to sell them because there are zero licensed and certifiedagents contracted with CoveredCA.

(Due to various internal issues, CoveredCA has not finalized the format of their agent contract and received subsequent legal approval of that contract from the California regulators.  Until the contract is approved by those regulators no one can sign it and become officially approved to sell the plans.)

Yesterday I was invited to join in a webinar sponsored by one of the general agencies (general agencies are essentially insurance plan distributors and are an integral part of the health care landscape) and CoveredCA itself. During the presentation Chris Patton, Vice President of the SHOP (Small Business Health Opportunities Program, the part of the exchange tasked with selling to small businesses) dodged a key question from the audience with the aplomb of an experienced politician.

Responding to the "elephant in the room" question of whether plan rates and benefits would be available for consumers to purchase and agents to sell as of the 10/1/2013 target launch date, Mr. Patton elaborated at some length that we should understand that with 13 carriers in the SHOP, each of whom was offering multiple plans, the regulators had a lot of work to do, and only a certain amount of time in which to complete it. He continued by saying that although he expected that plans and rates would be approved and announced by October 1, and that he had no reason at all to believe that they wouldn't be, he hoped that everyone would remember the immense workload, understand that all parties were doing their best andtrying very hard to achieve that goal.

Now I don't know about you, but that sounds suspiciously like a "no" answer to me.

But let's skip ahead to that time -- whenever it comes -- when CoveredCA starts selling plans.

The media is infested with glowing claims about how ObamaCare will reduce medical plan costs, saving consumers thousands of dollars. Just days ago on September 25, less than a week before the plans go on sale, the Department of Health and Human Services released a glowing report on premiums, pointing out how much lower costs will be than projected.

But, in the words of Forbes magazine, "the reality is starkly different."

Assuming that the price and plan benefit structures of the plans which are eventually approved for sale by CoveredCA end up more or less as they were submitted to the regulators, a full and complete analysis of the 2014 plans vs. the 2013 plans will be very interesting.

Many analysts from all sectors are asking the same question: With the elimination of health underwriting (meaning that unhealthy buyers will pay the same premiums as healthy ones), the mandatory increase of benefits such as pediatric dental and vision care, as well as the mandatory inclusion of ten Essential Health Benefits in all plans, and finally the inclusion of a number of new fees and taxes, how can costs possibly go down?

It's easy.

• Find doctors who'll work more cheaply

• Restrict consumer choice so plan members can only go to those lower priced doctors

• Degrade the benefits of those much ballyhooed "cheaper" plans.

To explore how insurance companies get doctors who'll work more cheaply requires a brief explanation of provider networks, often called PPO (Preferred Provider Option) or HMO (Health Maintenance Organization) plans.

The way both of these types of networks operate is that the insurers get together with doctors and negotiate prices. Those doctors who agree to give the insurer lower prices, or perhaps who capitulate to the insurer's demands for lower prices, depending on one's perspective, are the ones who get on the network.

Both PPOs and HMOs have become the standard in the medical plan world over the past 25 to 30 years. Most insurance carriers have developed comprehensive, widespread networks that include many outstanding medical practitioners, including such famous medical centers as Stanford, Cedars-Sinai, UCLA, UCSF and many more.
But which hospitals and doctors do you think we'll see on the new restricted, leaner, limited networks? The famous ones who have six-week waiting lists to get seen? Don't bet on it.

The Los Angeles Times wrote in May, "People who want UCLA Medical Center and its doctors in their health plan network next year, for instance, may have only one choice in California's exchange: Anthem Blue Cross. " But less than a month later Anthem Blue Cross pulled out of the California SHOP. Let's see, one minus one equals zero, right?

In the same article, Blue Shield admitted that its slimmed-down CoveredCA members would see only 37% of the doctors who make up Shield's regular, long-established network.

Health Net, the only other statewide carrier with a variable size network, a network that the insurer can enlarge or reduce at will by modifying the requirements for participating doctors, may have as few as 33% of their regular network providers available to CoveredCA members in many geographic areas. Health Net explains that to the currently uninsured, price is a key factor, so it built a narrow and hence less expensive network to serve that target market.

That's fine, shave your costs and restrict your networks to help push the prices down -- but then don't use those plans to tell us that Obamacare Exchanges are reducing costs.

Interestingly, Kaiser, which historically has been the lowest cost plan provider in California, will very likely lose that distinction in the Exchange. Why? Because Kaiser doesn't have a variable size network; it has its own closed network, and the size of that network is fixed. If you're on a Kaiser plan, you have to go to a Kaiser doctor in a Kaiser facility or you won't be treated. And Kaiser has no way to further shrink its own proprietary network. Kaiser is Kaiser, end of story.

As to my comment about degrading plan benefits, during the seminar which I attended today, one of a series of many nationwide events held by an industry-leading insurer, there was a PowerPoint slide which compared one of their 2013 current plans with an "equivalent" 2014 plan (which they're hoping the California bureaucracy will soon approve).

The slide showed a 2013 $500 deductible, $30 office visit copay plan with what was offered as an equivalent 2014 plan, a $1500 deductible, $20 office visit copay plan. Remember, the deductible is that amount that must come out of your pocket before the insurance company starts paying the big bills, like surgery, hospitalization, MRIs, CT scans, lab tests, and so on.

Seriously? Since when does a 2013 deductible of $500 become equivalent to a $1500 deductible plan in 2014? That's 300% inflation -- not equivalent! If you're comparing costs between those two plans, it's not hard to see how you'd think the 2014 plan was cheaper, but only until you have a claim.

I will leave you with two critical questions to ponder:

1 -- If California, the alleged national leader, is this far behind where they promised to be and where they should be to have a viable, functional product available by October 1, how far behind the deadline are all the rest of the states and the federal government?

2 -- If CoveredCA is this far over their heads in getting ready to sell these brand new plans to millions of people all over California, how ready are they going to be to administer, service, and satisfy those millions of people as customers once they sign up for coverage?

I, for one, have no great interest in becoming one of the first guinea pigs in the beta testing of any of the Obamacare Medical Exchangeupcoming product launches. Do you?

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