HARTFORD (MCT) — Insurers face a daunting task now that the U.S. Supreme Court has declared the health reform act constitutional — creating a market that delivers affordable coverage to millions more people, while meeting a slew of new mandates and continuing to underwrite quality medical care.
In some ways it’s as massive a task private insurers such as Aetna and Cigna would have faced if the law had been overturned. But Thursday’s historic decision allows the companies to stay on the course they’ve been following for more than two years, planning for and adapting to the laws.
Further complicating matters, many states have put off implementing reform until the Supreme Court decided the case. Those states are given wide latitude in interpreting some details of the laws and how they establish their health exchanges — the online markets where people can shop for health insurance starting 2014. Those states now have to scramble to catch up while insurers have to tailor health plans to comply to 50 different sets of rules.
In another sense, however, it is a relief for insurers, as it is for doctors and hospitals who no longer have to change strategies put in place since the law passed.
Health insurers’ stock fell in midday trading Thursday during a day when the market overall was down, with shares of WellPoint, Aetna and Cigna dropping more than those of UnitedHealth Group and Humana.
And some state legislatures may react by creating their own laws — such as a state individual mandate like the one in place in Massachusetts.
Now, the job is managing a law that contains provisions many of these very same people once fought.
At its core, the U.S. health insurance system for most Americans is a collection of private agreements between carriers and employers or individuals buying coverage. The Affordable Care Act of 2010 added rules and required everyone to participate in a plan of some kind — starting in 2014.
In exchange for agreeing to abide by stricter rules, the insurers benefit by a law that forced everyone to buy coverage. The Court decision now sends insurers back to their computers to figure out how to balance prices and guarantees for each health plan.
“You can’t legislate the actuarial math,” said Keith Stover, a spokesman and lobbyist for the Connecticut Association of Health Plans, a health insurance trade group. “You can’t legislate away the risk profile, the adverse selection, anymore than you can legislate or litigate away the sun coming up tomorrow.”
Mandating insurance benefits and adding taxes to insurers, pharmaceutical companies and bio-tech manufacturers is certain to raise premiums, according to insurance executives.
“The law does increase the tax burden to corporations that are providing solutions,” Cigna Corp. CEO David M. Cordani told The Hartford Courant. “So, it provides an additional set of costs, which we don’t think is helpful because there’s an affordability challenge already.”
Cigna’s business in the U.S. is primarily with employers who have 50 or more workers, and that market doesn’t have the issues that reform intends to address: guaranteeing coverage for people with pre-existing conditions,
“What we need to do, is make sure we don’t unwind a lot of things that are working well for the larger employers, but rather we figure out how to take some things that are working positively and leverage them for the individual market and the small employer,” Cordani said.
Even though all 50 states will have exchanges at some point, that doesn’t mean every health insurer will sell plans in each state. Cigna’s strategy is to sell in specific markets — cities — where the company sees potential for growth.
“Today we don’t expect to stand up exchange-based solutions in all 50 states,” Cordani said. “We’ve not publicly laid out which states we would or would not be. We’ve been very actively monitoring how the market is going to unfold here.”
Half of Americans have health plans that don’t include all the perks mandated by the federal government and called “essential benefits,” Aetna’s Chairman and CEO Mark T. Bertolini said Thursday on CNBC.
“This bill was not written well, and as a result, we have a number of things that will drive up premiums much more significantly than the average cost of health care,” Bertolini said.
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The law requires young, healthy people to pay more for health insurance than they would without the law, Bertolini said. The law broadens age ranges, lumping together larger groups of people and driving up premiums for younger people in order to lower premiums for older people. The law also adds taxes to insurers and medical device manufacturers, Bertolini said.
“Until we get other underlying costs out of the system, the near term effects of this bill will be much higher premiums in 2014 and 2015,” Bertolini said on CNBC.
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Connecticut’s biggest health insurer, Anthem Blue Cross and Blue Shield in Connecticut, is moving ahead with its plans to reduce medical costs, improve the quality of care and use technology to aid doctors and patients.
“The road to implementing health care reform will be a challenge,” said Anthem spokeswoman Sarah Yeager. “However, we look forward to working constructively with policymakers and other key stakeholders to build a health care delivery system that provides security and affordability to all Americans.”
Aetna spokeswoman Susan Millerick said, “We are prepared for the changes ahead and will continue to fully comply with the requirements of the Affordable Care Act. At the same time, we know that much more must be done to fix the problems that remain in our health care system. We believe there is still time — if people can come together in a bipartisan way — to improve quality and affordability. That security is what Americans want and need.”
In the days and weeks before the historic Court decision, insurers said they would continue many provisions of health reform, though there would be no law requiring them to do so. The insurers also stopped short of agreeing to two major benefits — a guarantee that a person could buy health insurance regardless of pre-existing medical conditions, and restrictions on premiums that require insurers to spend 80-to-85 percent of all premium revenue on patients’ medical expenses, depending on the health plan.
In advance of the decision, some insurers said they would keep certain provisions required by reform even if the law was struck down.
Minnetonka, Minn.,-based UnitedHealthcare said earlier this month it would voluntarily continue coverage of preventive services — including screenings for high-blood pressure and diabetes, and allowing parents to keep children on policies until age 26. It also said it would not limit the amount of money it spends on a patient during his or her lifetime.
“Health care modernization did not begin and must not end with the enactment of the Patient Protection and Affordable Care Act,” said company spokesman Daryl Richard. “UnitedHealth Group strongly supports making high-quality health care accessible and affordable for everyone. Now is the time to apply proven ideas and best practices to build a better health care system.”
Aetna spokesman Matthew Wiggin said in early June that Aetna intended to keep provisions such as coverage for dependents to age 26, 100 percent coverage for certain preventive care, and access to appeals through independent third parties in our benefit plans, regardless of how the Supreme Court ruled.
The Court decision also keeps in place a number of consumer protections, such as those prohibiting insurers from dropping customers who have pre-existing conditions or refusing to sell coverage to them in the first place.
Health insurers have said for years that federal mandates that bolster health plans by allowing preventive care without a co-pay, and other perks, drive up premiums that customers pay. An individual mandate would have offset the higher prices by bringing more people into the health plan — largely young people who wouldn’t otherwise buy coverage to balance out sick people who need insurers to pay medical bills.
Without the mandate, insurers have warned that the marketplace for individual health plans would suffer “adverse selection,” meaning only sick people would buy insurance. A health plan full of sick people would drive up premiums. Higher prices could force out the least sick people in the plan, dwindling the batch of people who buy insurance to those in the worst health, creating a spiral of higher prices and a sicker batch of people who buy coverage.
The individual mandate, however, comes with a weak penalty, insurers have said. When the mandate goes into effect in 2014, young, healthy people would only pay a small fine if they don’t buy health coverage.
Those penalties are $95 in 2014 and $325 in 2015 before rising in 2016 and beyond, to the greater amount of $695 or 2.5 percent of a person’s taxable income, up to $2,085.
“There are multiple schools of thought on this,” Stover said. “One is, the mandate as it exists isn’t all that robust. So, the people who really want to opt out of the system as individuals certainly can and presumably will.”
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The individual mandate is not at the heart of the Affordable Care Act or at the heart of preventing people from “gaming the system” by waiting until they get sick or injured to buy health insurance, said Kathleen Stoll, deputy executive director at Families USA, a consumer advocacy group in favor of broader coverage through federal reform.
“What we’re losing sight of in this public debate is that the Affordable Care Act also provides premium tax credits,” Stoll said.
The credit is actually a federal subsidy to help people pay for health insurance. A family of four making up to $92,000 in household income annually would qualify for the credits, Stoll said. It is a subsidy delivered through the tax code, available in advance. It’s available to families who make less than 400 percent of the federal poverty level. It protects a family from having to spend more than a portion of income on healthcare, she said.
Health insurers are less confident about the subsidy. The trade group America’s Health Insurance Plans made reference to Harvard economist and director of health policy research at the Kennedy School of Government who said of the Massachusetts 2006 reform law, “Healthy people don’t purchase insurance until they’re forced to by the mandate,” and “subsidies are not enough to get people to purchase health insurance.”