Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance > Health Insurance

Orchards of contradiction

Your article was successfully shared with the contacts you provided.

Friedrich Nietzsche wrote, “One is fruitful only at the cost of being rich in contradictions.”

If that is true, Washington, D.C., is the biggest orchard in the known universe. A significant part of the winter harvest seems to be a strange fruit that expands or contracts, solely dependent on the need of the grower on any given day.

In my September 2013 column I cautioned, “As the public begins opening their eyes to how the PPACA ‘panacea’ is going to work in their world — the real world — they are expressing their disapproval.”

One of the examples I cited was a move to control premiums by narrowing networks. “Although early focus groups showed many would be willing to trade lower costs for more restricted networks, it will be interesting to see how quickly that willingness converts to dissatisfaction as policy and reality converge.”

Let the dissatisfaction begin! Last month, ran the headline, “Doc Shock Reaches the Masses.”

As we have previously noted, the equation for pricing a medical insurance policy has only so many variables. Despite the perception of many Americans, there is no health care scheme that can provide unlimited medical care on demand for free.

Faced with fewer underwriting tools and increasing pressure to keep premiums low, carriers used one of the few variables left to them. They crafted narrower networks and drove skinnier deals that achieved the plan price points they needed. We all know how that works where the rubber meets the road don’t we?

Megan McArdle, who authored the Bloomberg article, summed it up brilliantly when she wrote, “However much good, sound policy sense narrow networks might make, they are political poison.”

The fine folks in the orchard who yammered about keeping costs down are now doing the contradiction happy dance. At the time of this writing, lawmakers in Mississippi and Pennsylvania (others are rumored) are considering bills that would force plans to add more hospitals and physicians.

HHS is also involved in tending this garden. Health plans on exchanges are already required to have a sufficiency of “essential community providers.” There is already talk of increasing the requirement to 30 percent in each county by 2015 and if the public outcry grows larger, that number could increase.

According to a December 2013 study by McKinsey & Co., exchange plans with broad networks of hospitals have premiums that are 26 percent more expensive than comparable plan designs with narrower networks.

The contradiction cultivators have been busy planting in other fields as well. While decrying the narrower networks in PPACA exchange plans, they are diligently “farming” proposals to narrow the choices available on the Medicare Part D plan.

The plan is successful in both cost (far less than original projections) and beneficiary satisfaction. It accomplishes that which the framers of PPACA purportedly wanted for nonMedicare consumers: using competition to improve quality and reduce costs.

Ever ready to snatch defeat from the jaws of victory, the administration — the same administration that decries narrow exchange plan networks — has proposed regulatory changes to Part D that will restrain both competition and choices.

The proposal would limit Part D plan sponsors to a single contract and a maximum of two plans in each region. Moreover, only one of those two plans would be allowed to provide benefits beyond the minimum level of coverage.

Reducing the number of plans will limit the ability of patients to find plans that most closely match their needs and will inevitably increase the number of off-formulary drugs they will purchase, thus increasing their costs.

How bountiful is that contradiction harvest? Former CBO Director Douglas Holtz-Eakin noted that, “Part D is a program that came in under cost projections over the last 10 years, provided affordable coverage for seniors and continues to encourage lower costs of prescription drug plans.” Of course, the contradiction factory could not allow this to stand.

People always ask how challenging it is to write a monthly column. I just paraphrase Will Rogers. It is easy being a columnist when you’ve got the whole government working for you. 

See also:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.