Insurance industry eyeing health reform turn-around

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Insurance companies will be watching the Supreme Court arguments about the Affordable Care Act closely next month, because it could mean they can get rid of some of the reforms they consider onerous.

The Supreme Court will be ruling on the constitutionality of the health care reform act, popularly known as Obamacare. If the law is overturned, however, it won’t necessarily be a return to 2009. Instead, insurers are likely to pick and choose which reforms to keep, and will possibly make people pay more for them.

The changes likely to stick around: insuring all children without pre-existing or chronic conditions, keeping kids on parents’ insurance until the age of 26 and maintaining electronic health records.

Those the insurers will discard quietly: the medical loss ratio, which limits money spent on administrative costs and brokers’ commissions; insuring people with serious or pre-existing conditions; and insuring everyone who wants insurance. Insurance companies are also likely to get rid of the rules that say they cannot charge a company with high-risk employees more than they charge a company with low-risk employees.

While some will pay more to keep the reforms they’ve grown used to in the past two years, others won’t see big increases.

“The insurance companies have jacked up premiums in anticipation of having to insure everyone, regardless of condition,” said Dr. Steve Berkshire, director of the health administration program at Central Michigan University. “That means they aren’t likely to raise them if that mandate goes away.”

They also aren’t likely to stop insuring children to the age of 26, he said. And they might still take kids with pre-existing conditions. However, keeping those mandates — without the requirement of insuring everyone to spread the risk — might just mean that it will cost people with those policies more money.

“They are extremely popular,” said Adela Flores-Brennan, a health care attorney at the Colorado Center for Law and Policy. “It’s unlikely that those provisions will go away — no matter what happens. People might have to pay more to keep them, however.”

The Affordable Care Act passed with the goal of trying to end the ever-increasing rise of health insurance premiums. About 40 million people in the United States don’t have insurance, and estimates are that passing along the cost of treating those people adds about $1,000 on to a family of four’s insurance premiums every year. Among other things, the act mandates insurance coverage for everyone; requires coverage in the individual market for children with pre-existing conditions; and creates a new system of payments for Medicare and Medicaid patients. It also greatly expanded the Medicaid program in the states, but gives them a large part of the money to pay for it.

Several lawsuits followed. The National Federation of Independent Businesses sued, alleging the requirement to have health insurance violated the Constitution. Half the states followed suit, saying the Medicaid expansion was “coercion” by the federal government.

The Supreme Court is set to hear the case next month, and will make a decision in June. The justices will be considering four questions: is the individual mandate legal? If it isn’t constitutional, can the rest of the law stand without it? Was the federal government within its authority to expand Medicaid to the states? And, finally, the court will consider if this is an appropriate time to consider the constitutionality of the law — given that it doesn’t go into effect until 2014.

But even as the cases went through the court system — several are still on hold, waiting for the court decision — pieces of the law have already been implemented. The Centers for Medicare and Medicaid Services has already implemented some of the quality measures, and has already initiated pilot programs for Accountable Care Organizations and bundled payments.

Most of the states are working on the health care exchanges required under the ACA. Texas, Louisiana and Alabama are the exceptions. Texan Gov. Rick Perry has said the state is waiting on the Supreme Court decision.

Colorado hasn’t waited, but opponents to the ACA say that the state’s health exchanges aren’t tied to the law, and will continue no matter what the justices decide.

“We wrote the state law that way on purpose,” said Tony Gagliardi, Colorado director of the NFIB. The organization is a party to the lawsuit, but believes health exchanges on their own can lower costs to small and independent businesses.

“The exchanges are a good idea, it’s competing in a marketplace,” he said. “We oppose the individual mandate because it clearly oversteps Congressional authority. What’s next? If the court says this is OK, then Congress can tell us we have to eat broccoli three times a week.”

While legal scholars are divided on how the Supreme Court will rule, the insurance industry is likewise split.

“Non-profit companies would be more likely, in my mind, to retain some of the changes that have benefited their members,” said C.J. Moore, spokeswoman for Kaiser Permanente’s southern Colorado region. “The companies who had recision departments before the Act was passed might possibly consider reinstating those — for some it was a money-saving way to cancel a policy in the event of a high dollar medical crisis.”

Moore agrees that guaranteed issue for kids without pre-existing conditions and extended dependent coverage would probably continue, as would a prohibition on lifetime limits on health policies.

Other parts that she thinks would out-last an overturn of the health reform law: gradual closing of the Medicare Part D “donut hole” and freezing Medicare Advantage rates.

“Women’s preventive services and all preventive services will be covered too,” she said. “It’s proven to save health care money in the long run.”

While some insurance reforms are here to stay, it’s not at all certain health care reform will remain after June. Berkshire said the justices might tip their hands, however.

“What we’ll all be listening for (in March) is the questions they ask,” he said. “If they really question the government hard on why they think they have authority for the law, that will tell us what they’re thinking. If they ask the states to explain why they think the law is unconstitutional — that will tell us as well. We’ll have to see who gets grilled the most.”

In the meantime, the next six months means more changes from the ACA are embedded into the health care industry, he said. But the Obama administration does have an option. They can institute some of the changes in the law using the Centers for Medicare and Medicaid Services, and the insurance companies will have to follow suit.

“It’s going to be hard for the insurance companies to go back,” Berkshire said. “But some of the regulatory things the industry must do — those aren’t going to go away, no matter what the industry wants.”