With Health Care Premiums Up 14%, Virginia Should Act

Lasik eye surgery . Eww, it looks gross. But it's cheap, it's safe and it's unregulated and unsubsidized.

Lasik eye surgery . Eww, it looks gross. But it’s cheap, it’s safe and it’s unregulated and unsubsidized.

by James A. Bacon

Insurance companies participating in Virginia’s Affordable Care Act health exchanges are asking to increase rates by an average of 14% next year. In making presentations to the State Corporation Commission yesterday, they said the increases reflect (1) general health care inflation that affects everyone, and (2) and an imbalance in sick versus healthy participants in the plans.

Under state law, the SCC is required to review and approve premium rates for all types of health plans, reports Katie Demeria with the Richmond Times-Dispatch. If an insurance company’s rate filing has met the state’s minimum loss ratio requirements and all assumptions are defensible from an actuarial perspective, it is virtually impossible to turn down the rate-hike request.

“Some of these rate increases are more than what people would want and, in some cases, could be more than what some people would bear,” said Commissioner Mark Christie. “But we also have an obligation to ensure that these companies remain in business so that the can pay the claims they’re obligated to pay by the people who pay their premiums.”

Bacon’s bottom line: There is not much that the Commonwealth can do about the imbalance between sick and healthy participants. The Affordable Care Act (widely known as Obamacare) anticipated the problem by taxing people who fail to enroll. The incentive, as stiff as it is, is not sufficient to induce as many healthy people to enroll as are needed. This design flaw in the federal legislation is beyond the power of Virginia lawmakers to fix.

But the General Assembly does influence how health care markets operate in Virginia, and lawmakers can affect the general cost of delivering health care. Not only do legislators have a political responsibility, they have a moral responsibility to create the conditions for Virginia health care markets to become more affordable and accessible.

Existing state-level laws and regulations muck up the efficient functioning of health care in many ways. First and foremost is the Certificate of Public Need (COPN) law that thwarts competition from newcomers and ossifies the existing delivery system in place. Legislators are on top of that one, and they’re not letting go.

But there are many other areas that need reform. The most glaring is state-mandated benefits for small-group insurance policies. Employers big enough to self-insure can structure their policies packages any way they want. Small employers who have to band together to create a viable risk pool don’t have that option. Insurers must package some 30 state-mandated benefits into their policies, whether those benefits are desired or not. These include everything from “newborn children” to “reconstructive breast surgery” and “colorectal cancer screenings.”

While any one of these benefits may not seem unreasonable in itself, the collective package severely limits the ability of insurers to offer affordable, trimmed-down plans. For example, one plan that I think would sell well (because I would buy it) would have two main features: (1) negotiated rates so I don’t have to pay the outrageous nominal fees that hospitals and doctors charge, and (2) catastrophic coverage if medical bills exceed, say, $20,000 in a year. In other words, I would pay all bills out of pocket up to $20,000 but at negotiated, discounted rates, and I would be protected from catastrophic loss. Such a plan, as I understand it, is illegal. That’s why you cannot find it in the Virginia marketplace.

A third way the state could help is increase price transparency so patients can exert consumer pressure on health providers for discretionary procedures. Consumer pressure has kept down the cost of Lasik eye surgery and cosmetic surgery, which are not regulated or funded by government. Consumers could exert downward pressure on many other procedures as well if they had easy access to the price data.

There’s much more, but those are the big three. As a nation and a state, we can continue to fixate on the zero-sum question of “who pays?” — transferring wealth from Peter to Paul — or the win-win question of how we make the system function better for everyone. The wealth-redistribution approach has not worked well for anyone. It’s time to try win-win.

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8 responses to “With Health Care Premiums Up 14%, Virginia Should Act

  1. Federal health care statutes should be amended to include a provision reasonably comparable to Section 253 of the Communications Act of 1934, as amended, 47 USC 253. That section, while preserving state authority to impose regulations “necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers” and to regulate public rights of way, declares state and local laws and regulations that serve as a barrier to market entry invalid.

    “(a) No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.”

    And procedurally, “[I]f, after notice and an opportunity for public comment, the [FCC] determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b) of this section, the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency.”

    In McLean-Falls Church, we’ve seen multiple providers of assisted living care oppose construction of another facility by a competitor on the grounds of “too much competition.” The proposal raises land use and traffic congestion issues that make the desired location a bad fit, but limiting competition should not be part of the equation.

    And to get healthier people to buy insurance, Congress should also phase-out the Emergency Treatment and Labor Act (EMTALA) over some reasonable period of time. Taking away this safety net would likely encourage more “invincible” people to purchase some type of health care insurance.

  2. There’s some things to make clear:

    1 the SCC process works for ALL insurance premiums not just the ones on Obamacare.

    2. – When the exchanges prices go up – keep in mind the subsidies that help pay for it – also go up.

    3. – Finally – when it comes to sick and healthy – yes Ocare does attract people who cannot easily get market insurance but keep in mind that the Federal govt REQUIRES all employer-provided insurance to offer insurance to the sick (cannot turn them down) as well as ALSO have the healthy subsidize the sick on employer-provided health plans because by law everyone pays the same premium self-only or family regardless of the health status of the insured.

    My point here is not allow a narrative that uses a double-standard on health care. Ocare really does not do a whole lot different than employer-provided but the myths are propagated with respect to employer provided.

    beyond the fact that Federal law requires employer-provider insurers to offer insurance to the sick that the free market would not – they also require the insurer to not charge them more than the healthy – which is what Ocare does also but the claim is that Ocare does that uniquely by law while other insurance does not.

    the truth is that market insurance did not but employer-provided – did and does.

    finally – the subsidy for Ocare is equivalent to the govt subsidy for employer-provided – which is tax-free – not only Federal and State but FICA.

    that’s called a tax expenditure – income not taxed – and it costs the US treasury about as much as the current deficit.

    The irony is where the subsidies for Ocare came from… they came from reducing the tax breaks for Medical in the tax code.!

    People who used to try to buy insurance on the “free market” got NONE of the tax breaks that people got with employer-provided.

    And the GOP answer to Ocare? Well – they’re talking about taking the tax-free subsidies away for employer-provided!!! and giving EVERYONE a tax-credit for health insurance -no matter where you get it – employer- or free market!

    How would that be “felt” by those on employer-provided?

    well the cost of their health insurance would go up about 40% – the value of the Fed and State govt tax breaks.

    Cany you imagine what would happen if employer-provided insurance went up 40% and it got blamed on the govt?

  3. re: ” And to get healthier people to buy insurance, Congress should also phase-out the Emergency Treatment and Labor Act (EMTALA) over some reasonable period of time. Taking away this safety net would likely encourage more “invincible” people to purchase some type of health care insurance.”

    the question is what would you do with people who CAN buy insurance but do not when they get to the ER?

    this is where the pedal meets the metal on ideology.

    those who advocate not having guaranteed medical care at the ERs – what is their solution for the folks that show up that don’t have insurance?

    serious question – what do we do with people who don’t have insurance?

    this is also tangentially similar to the question about what do you do with the elderly who did not buy long-term care insurance and end up in long-term care facilities that Medicare does not cover.

    what would you do with these folks?

    this is where ideology has to deal with reality.

    • If we want more people to buy health insurance, especially when they think they are invincible – as we all did at one time in our lives – the free ER care safety net has to be eliminated or reduced to “stabilize.” Or maybe the hospitals might still provide some charity care. But maintaining the status quo puts people in the position that they can avoid buying insurance of any kind.

      • re: ” the free ER care safety net has to be eliminated or reduced to “stabilize.” Or maybe the hospitals might still provide some charity care.”

        TMT -how do you decide this?

        forget the invincibles… how about the 50 year old who works at a 7-11 or does landscaping or uber?

        are you going to turn these folks away from the ER?

        they come in with a broken arm or their kidneys are failing – and you do what?

        you’re going to do what with them?

        “charity care” is paid for by who?

  4. I can give you a list of legislators who’ve done nothing regarding concerns about health costs and quality. Those specifically go for those with medical degrees/backgrounds like Stolle, his sister Senator Dunnavant, O’Bannon, and those on the boards including Del. Heretick (Federal State Boards). I’ve tried getting in touch with Louise Lucas and Lionel Spruill. Seems to want to put nothing in writing.

  5. The very first thing that needs to happen with health care is for the truth to come out about the government’s actual role in it – not just Medicare and Medicaid but also employer-provided.

    All this hue and cry about Obamacare and subsidies and the “free market” is a bunch of hooey based on mythical beliefs of the folks who shout the loudest – who are among the most willfully ignorant.

    a true free market in health care would allow any and all insurance companies to deny coverage to those that they deem too high a risk to insure – period. No exceptions.

    that would apply to ALL insurance INCLUDING employer-provided.

    Then you would have about 70-100 million people who would not be insurable without the government requiring it.

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