The national average of medical insurance premium increases hovers around 9%. However, California's average medical insurance premium increases have been around 14%. Why are California's rate increases so much higher?
California has historically had the least expensive medical insurance premiums in the U.S. California has been catching up to the rest of the nation.
Prior to our modern medical care system, sick people were taken care of in their homes either by their families or by charitable organizations that delivered community based facilities. At that time, doctors couldn't do much, and therefore most people with serious ailments ran their course, either getting better or dying.
By the early 1900s, the ability of hospitals to treat diseases increased, and the cost of doing such did as well. At that time, Blue Cross started to sell prepaid medical insurance plans, and Blue Shield followed. These plans covered physician and hospital services. These types of plans were considered to be used for catastrophic injuries and illnesses. Around the same time, Henry Kaiser, a California industrialist, started to provide medical services to his workers as an added benefit. Dr. Sidney Garfield, who had been treating employees of Kaiser in the Mojave Desert, and the enterprising insurance agent Harold Hatch, produced a plan that would cover all medical services and care for five cents a day, which helped recruit Kaiser employees.
In 1944, Kaiser Permanente offered its plan to the general public, and the HMO was born. Even now, California has many more HMO participants than PPO participants.
To try to compete, many HMO competitors followed the same model of prepaid services. This gave California the largest concentration of physicians, the most controlled premiums in the U.S., and the most competition for consumers. Why, then, has California lost that advantage and its low rates?
Years ago, there were so many more HMOs competing for consumers in California compared to now. With all of the business failures, acquisitions, mergers and huge financial and regulatory barriers to enter into the California insurance market, the number of HMOs willing to compete has gotten very slim.
The California legislature hasn't ever met a mandate or a regulation that they don't support. However, the rest of the U.S. can thank California for introducing many provisions that are now federal law, which were initially started as legal requirements in California, such as regulations, privacy, domestic partner coverage, etc. Also, huge investment capital is required in order to comply with all of California's requirements. As an example, numerous hospitals are still having a hard time complying with California's specific seismic retrofitting state laws.
While doctors have struggled with enormous workload demands, increased intrusion into the method in which they manage their medical practices, the high cost of medical malpractice premiums, the pain of capitation (which is the low portion of an insurance premium that a physician earns to manage an HMO patient's medical care), its not surprising that many physicians are not accepting HMOs and HMO patients any longer.
Increasingly, regulations in California are mandating immediate access to a specialist without the requirement of a referral. Since specialists' fees are higher, these costs for claims are quite high, especially if there's unrestricted access to a specialists' services and/or frequency of visits. HMO and PPO premiums used to have premiums that were very far apart. However, the gap in cost between HMO and PPO plans is narrowing.
Health care reform may not be addressing health care costs. Therefore, what can be done to lower California's health care costs? It may require solutions such as focusing on employee wellness and preventative care. Whatever the solution may be, it needs to be done as quickly as possible, because medical costs are uncontrolled and medical insurance premiums are becoming unaffordable for the majority in California.
Despite the recent passage of the Patient Protection and Affordable Care Act, medical tourism continues to rise. Medical expenses are continuing to climb, and as a result, more employers will have to shift a bigger portion of medical care costs their workers to stay profitable. Medical travel has become a very viable and attractive option to employers and their workers, helping consumers handle the increased burden that they must now bear.
Over the past 10 years, traveling outside of the U.S. to obtain medical care has gained popularity, with travelers seeking both specialized surgeries and elective surgeries, such as major dental work, cosmetic procedures, bar iatric procedures, cardiac procedures and joint replacement procedures.
There are numerous factors that are contributing to this trend, including the ability to lessen one's out of pocket expenses for surgeries that are typically high in cost, the cultural diversity of the workforce in the U.S., and the ease in which global healthcare can be incorporated into a medical insurance plan design.
On average, a surgery performed outside of the U.S. saves 40%-80% over the cost of the same surgery in the United States. With more employers offering a consumer directed medical plan, such as a health reimbursement account or a health savings account, it is in the best interest of employers to keep medical costs as low as possible.
There are some facilitators of medical travel that work directly with health care brokers, employers and medical insurance plans in order to offer medical tourism to the employers' employees.
It's become commonplace for employers to provide a 100% benefit to workers who travel to obtain lower medical costs, by waiving all out of pocket expenses and deductible costs for the employee for surgeries. Since the employer lowers costs by offering a medical travel option, then the employee reaps the financial rewards as well.
One way employers do this is by using a health reimbursement account, high deductible health plan or an HSA, which enables the employee to share the savings for their surgery. For example, the employee may be eligible for their employer to deposit $2000-$8000 into a health reimbursement account because of the lower cost of the surgery outside of the U.S. The funds deposited into that account are tax free for the worker, and tax deductible for the company, and it offers the worker access to money that can help offset health care expenses in the future.
As state officials decide whether or not to drop out of the federal/state Medicaid program, the question lies if poor people would be able to receive subsidies to help them purchase medical insurance coverage in an insurance exchange in 2014.
The U.S. Department of Health and Human Services is contemplating that question, according to the federal center of Medicaid and State Operations. The answer to this question will ultimately determine who is responsible, the federal government or states, for the medical care of low income Americans, who amount to millions. Right now, the federal government and states share the cost for 49 million people on Medicaid. The new healthcare reform law is planning on adding an additional 16 million people to Medicaid, starting in 2014.
According to the new healthcare reform law, anybody that's under 133% of the federal poverty level for a family of four ($29,237) will go onto Medicaid. There's just one exception, which is legal immigrants that are poor, who will receive subsidies to purchase private medical insurance. The law says that just applicable taxpayers who have an income of 100% above the poverty level are able to receive subsidies.
That leaves a question for one category of U.S. residents: those people that have an income between 100%-133% of the poverty level. Those people may be eligible to receive subsidies.
However, the only method of ejecting a particular category of U.S. residents from Medicaid is for the state to get a waiver from the Department of Health and Human Services. That waiver may or may not be approved, depending on who is elected the presidency in 2012.
Meanwhile, the Department of Health and Human Services have declined to state when or whether they'd make this clarification.
The healthcare reform laws are changing the benefits numerous medical care spending accounts, such as Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), Archer Medical Savings Accounts (MSAs) and Health Reinbursement Accounts (HRAs).
Beginning on January 1, 2011, if you withdraw money out of your MSA or HSA account, and it's not spent on medical expenses that are considered qualified, then that money will be taxable and also subject to an extra 20% tax penalty, which is 10% higher than the current tax penalty rate. The only exception to this is if distributions are made after a member's disability or death if the member is less than 65 years old.
Also, beginning on January 1, 2011, if you use your medical care spending account funds for over the counter medications (OTC) or drugs, then you must have a prescription for these medications or drugs from a doctor within the state in which you're making these purchases. However, insulin is excluded from this new requirement. Also, OTC items that aren't classified as drugs (such as supplies for testing blood sugar, bandages, etc.) can still be paid for with spending account funds.
These changes apply to all health care spending account plans, regardless of how long you've had your plan.
The Patient Protection and Affordable Care Act requires that all new health plans issued on September 23, 2010 or later must offer medical insurance coverage for preventative care without any cost sharing, copays or deductibles when performed in-network.
The services that are covered are those that have been recommended by the U.S. Preventative Services Task Force, the Centers for Disease Control and Prevention, and the Health Resources and Services Administration.
Here is a list of the preventative services that are covered for adults:
- A preventative medical exam that is age-appropriate
- Discussions with primary care physicians regarding alcohol misuse
- Discussions with primary care physicians regarding obesity and weight management.
- One time screening for men aged 65-75 who have smoked in their past, for abdominal aortic aneurysm.
- Blood pressure screenings
- Cholesterol screenings for those adults that have a higher risk of cardiovascular disease
- Screenings for colorectal cancer for adults between 50 and 75 years of age
- Screenings for prostate cancer for men between 50 and 75 years of age
- Screenings for depression
- Screening for type 2 diabetes for adults that have high blood pressure
- Discussions with primary care physicians regarding the usage of aspirin for those adults that have a higher risk of cardiovascular disease.
- Discussions with primary care physicians regarding diet counseling for adults who also have a high risk for chronic diseases.
- Immunizations for adults (however, recommended ages, populations, and doses vary)
- Hepatitis A & B
- Herpes zoster
- Human papillomavirus
- Measles, mumps and rubella
Counseling, screening and prevention of sexually transmitted infections such as:
- Tobacco Cessation discussion with a primary care physician.
In addition, here is a list of covered preventative services for women and pregnant women:
- Preventative medical exam, which is age-appropriate
- Chemo prevention discussion with a primary care physician for women that have a higher risk of breast cancer.
- Discussion with a primary care physician about ovarian and/or breast cancer susceptibility due to family history.
- Mammogram screening for breast cancer for women between the ages of 50 and 74.
- Mammogram screening for breast cancer in other age groups, as determined jointly by physician and patient.
- Cervical cancer screening for women between the ages of 21 and 65.
- Osteoporosis screening for women 65 years old or older, and for women who are at a higher risk.
- Tobacco cessation discussion with a primary care physician.
- Screening for chlamydia infection for sexually active men and women who are at higher risk.
- Screening for gonorrhea for all women who are at higher risk.
- Scheduled prenatal office visits and first postpartum visit.
- Screening for syphilis in all pregnant women, and those women that are at a higher risk.
- Screening for anemia for pregnant women
- Screening for urinary tract infections or other infections for pregnant women.
- Screening for Hepatitis B for pregnant women at their first prenatal visit.
- Breast feeding discussion with a primary care physician about interventions to support and promote breast-feeding.
- Folic acid supplements discussion with a primary care physician for women who may plan on becoming pregnant.
- Screening for prescription incompatibility for pregnant women, and follow up testing for those women that may be at a higher risk.
Here is a list of children's covered preventative services:
- Preventative medical exam that's appropriate for the child's age
- Medical history records for all children through the years of their development
- Body mass index, height & weight measurements
- Behavioral assessments by a primary care physician for children of all ages.
- Developmental screening and surveillance by a primary care physician for all children less than 3 years old.
- For adolescents, a discussion with a primary care physician about drug and alcohol use assessments.
- Screening for autism for children at 18 months of age, and 24 months of age, performed by a primary care physician.
- Screening for cervical dysplasia for females that are sexually active.
- Screening for congenital hypothyroidism for newborns.
- Screening for phenylketonuria (PKU) for newborns.
- Screening for dyslipidemia for children that may be at a higher risk of lipid disorders.
- For young children, a risk assessment for oral health performed by a primary care physician.
- A screening for lead amongst children that may be at risk of exposure.
- A discussion with a primary care physician about screening for obesity and obesity counseling.
- Medication to prevent gonorrhea for all newborns' eyes.
- Screening for hearing for newborns.
- Screening for vision for all children.
- Screening for hemoglobin or hematocrit
- Screening for sickle cell or hemoglobinopathies for newborns.
- Testing for tuberculin amongst children who have a higher risk of tuberculosis.
- Screening for HIV amongst adolescents that may be at higher risk.
- Counseling for the prevention of sexually transmitted infections amongst adolescents that may be at higher risk.
- A discussion with a primary care physician about fluoride supplements for those children that don't have any fluoride in their water.
- A discussion with a primary care physician about iron supplements for 6-12 month old babies that may be at risk for anemia.
- Immunizations from birth to 18 years old (recommended populations, recommended ages and doses vary):
- Haemophilus influenza type B
- Hepatitis A
- Hepatitis B
- Human papillomavirus
- Inactivated poliovirus
People who wish to apply for child-only coverage through Aetna Advantage Plans for Individuals, Families and the Self-Employed are out of luck.
Aetna Medical Insurance Company is no longer entertaining applications for this kind of coverage this year due to some issues with the new health care legislation. Consumers, however, are assured that there are reasonable alternatives that are available to them at this time.
Aetna's Reasons for the Change
Under the new law, insurance coverage for minors (persons under 19) is required, with no exclusions. This will undoubtedly drive premium prices to such high levels as to make it unaffordable for most people. Instead of this scenario, Aetna is phasing out their child-only coverage product in favor of more reasonable alternative medical insurance plans.
Not all Policy Holders are Affected
Those who have existing child-only coverage need not worry. Aetna will still honor their commitment to these customers. Only new applicants are affected by the change.
Implementation of the Change to Different States
Connecticut and Ohio residents will no longer be able to apply for Aetna child-only coverage beginning November 1, 2010. There is no date set yet for the implementation of the change in Maryland and Oklahoma.
Minors (aged 19 years and below) can still have medical insurance by being listed as a dependent in either parent’s medical insurance plan.
Aetna is hopeful that it will be possible to come up with a more affordable child-only medical insurance product within the next five years. The new child-only coverage will be compliant with the new health care legislation.
Health Net has recently announced that their medical insurance plans have implemented some important changes in 2010 because of healthcare reform.
Some of the changes to their plans this year are:
- Medical insurance plans can't put lifetime limits on what's considered essential medical benefits, such as hospital stays, for plan years starting on September 23, 2010 or later. However, they may put a restricted yearly limit only on the value of what's considered essential medical benefits. There's still some ambiguity regarding what exactly is included in an "essential benefits package". Therefore, we're waiting for further clarification from legislators.
- Both individual and group medical insurance plans will raise the age for adult children up to 26. However, for existing group medical plans, this does not apply if the young adult has insurance offered to them through their employer.
- Children that have pre-existing conditions cannot be denied medical insurance.
- The expansion of medical coverage for early retirees: To keep employer medical insurance for early retirees until the medical insurance exchanges are open in 2014, the new legislation has created a temporary reinsurance plan to reimburse companies for the cost of particular medical benefits to retirees. The reimbursements apply just to a certain percentage of medical claims that cost $15,000-$90,000 for individuals that are age 55 to 64 who are signed up with an early retiree medical benefit program, and aren't actively working for that employer, and who are not eligible for Medicare, along with their dependents and spouses who are covered. This program will end on January 1, 2014 or when the federal funding for this program has been used up, whichever occurs first.
- Seniors who have reached the gap in their Medicare prescription drug coverage (aka "the donut hole") will each receive a $250 rebate this year.
- The Health & Human Services department will be establishing a process to review unreasonable premium rate increases that occur within the individual and group medical insurance market.
- Grandfathered plans - any individual plan or group plan that a member was enrolled on as of 3/23/10 is considered a grandfathered plan. Grandfathered plans are exempt from some of the healthcare reforms. However, grandfathered plans will become un-grandfathered if they decide to make changes that either diminish benefits or raise consumer costs.
Emergency services coverage - For plans that cover emergency services, they must meet now not require prior authorization, and they must cover services performed by non-participating providers and not allow out-of-network cost sharing to be more than in-network rates. In addition, plans have to provide coverage for a variety of preventative care services.
Anthem Blue Cross is conducting a one month enrollment period from November 1, 2010 until November 30, 2010 for certain eligible members.
Adult dependents between the ages of 19 and 26 who aren't enrolled on another member of Anthem Blue Cross's plans or who had been cancelled from an Anthem Blue Cross's member's plan because of their age, marital status, or student status, qualify for this open enrollment. However, the member's plan that the adult dependent will be placed has to have an effective date of before September 23, 2010. Further, if the adult dependent is added to a family plan that's grandfathered, then the adult dependent also will have grandfathered status under the plan.
For Anthem Blue Cross members who have reached their lifetime limits, they too will be eligible for this one time enrollment by enrolling for coverage on a current member's existing plan during November.
Coverage for eligible family members that are enrolled from November 1, 2010 until November 30, 2010 will start on January 1, 2011. Premium adjustments for adding dependents onto plans will be made, as appropriate. Medical history will be reviewed to determine the final rate.
Members will be receiving enrollment instructions through the mail, and will also be referred to Anthem's website at www.anthem.com/ca to download the appropriate applications. The member should then fax or mail the completed application to the fax number or address that's listed on the application. All applications are required to be faxed or postmarked no later than November 30, 2010.
Latest Public Opinion on Healthcare Reform
Just days before the mid-term elections, a Rasmussen Report reported that the majority of American voters still are in favor of repealing the healthcare reform law, and the number of Americans that see this as a likely scenario is at an all-time high.
46% of American voters believe that it's at least somewhat likely that the healthcare reform law will be repealed, which is 6 points higher than earlier this month. It is the highest level that's been measured since this question has been tracked beginning last April.
The SHRM/National Journal poll also reported in their recent findings that 51% of American voters would support repealing the new healthcare reform law if the Republicans took control over the Senate and/or House.
Nationwide Enrollment in Pre-Existing Insurance Plan Programs Lagging
As part of healthcare reform and the Patient Protection and Affordable Care Act, each state was required to develop and implement a high risk pool medical plan for those Americans that have pre-existing conditions, who have not had medical insurance in the last 6 months. However, enrollment applications has been much lower than projected.
The high risk plans started to accept applications beginning this past summer, and plans are up and running in each state in America. However, enrollment is very low because people that are eligible for the plan are finding out that the plans are priced too high.
These high risk plans are meant to be a bridge between now and 2014, when medical insurance exchanges will be up and running, as per the healthcare overhaul.
Key features of this plan that vary by state are the deductible sizes, the coverage of medicines and preventative care services before meeting a deductible, and the restrictions on out of pocket costs for medical care received outside of a plan's network.
Many Companies May End Up Dropping Medical Plans in 2014
If changes are not made to the current healthcare reform law, many employers may be seriously contemplating dropping their medical plans for employees in 2014, and instead help them with getting medical insurance through an insurance exchange instead. Unfortunately, the financial incentives are just too great for companies to ignore. This will result in higher federal outlays in order to support all of the federal subsidies that'll be given to individuals that apply through the exchanges. The generous subsidies that will be paid out through these exchanges will result in a healthcare reform law that drives many more Americans than projected out of company sponsored medical insurance and instead into the largely subsidized federal medical system.