ICYMI: Provider consolidation contributes to rising health insurance premiums in California
Posted by Campaign on February 26, 2010 at 2:37 PM
Respected, independent health care policy experts Robert Berenson, Paul Ginsburg, and Nicole Kemper take a deep dive into the issue of rising health care costs in California. Their report determined that provider consolidation played a larger role than is being discussed in driving health care costs higher. Here are some key excerpts:
- "Growing market power for providers caused a shift that gave providers a stronger bargaining position over health plans, leading in turn to higher insurance premiums."
- "Such provider dominance could offset some or all of the potential of reforms to lower premiums through increased efficiency in delivery."
- "A rapid upward trend began about 1999 that produced average annual increases of 10.6percent over the period 1999-2005."
- "In some cases, payment rates to hospitals and powerful physician groups approach and exceed 200percent of what Medicare pays, with annual negotiated double-digit increases in recent years."
- "Findings from our study of six major California markets are particularly instructive, both because of California's bellwether status and because national health reform proposals encompass features of care as it has been financed, organized, and delivered in much of California."
To read the full report, click here.
BusinessWeek also takes a look at the analysis of provider consolidation and its impact on health care costs in California, finding:
- "California's hospital fees surged 10.6 percent annually from 1999 to 2005, twice the national average, as the state's biggest hospital networks began to demand higher rates from insurance companies, according to the report released today."
- "'Health insurers have been squarely in the crosshairs, blamed for the high cost of private insurance while the role of growing hospital and physician market power has escaped scrutiny,' Robert Berenson, a study co-author and researcher at the Washington-based Center for Studying Health System Change and the Urban Institute, said in a statement. 'Provider power is the elephant in the room that no one wants to talk about.'"
To read the full article, click here.
MUST READ: Politico looks at prospects for cost containment
Posted by The Campaign on February 25, 2010 at 6:41 AM
Politico takes a look at the latest health care reform proposal and what it means for lowering health care costs. Here are some key excerpts:
“They thought [the tax] was a major part of their ability to slow the growth in private-sector premiums. And now, at least until after 2017, it doesn’t look like they will bend the cost curve,” said Ken Thorpe, an Emory University professor and Democratic health policy adviser.
“This was designed to get more support from the Democratic Caucus. Not surprisingly, there’s higher overall costs and fewer steps to get the savings necessary to pay for those costs,” said Mark McClellan, a former Clinton and Bush administration official who is now a health care economist at the Brookings Institution.
The insurance industry has been making the cost-containment case for months and reiterated it when Obama’s plan was released Monday. Democrats have singled out insurers as the poster child for skyrocketing health care costs, and the president’s plan proposed giving the federal government authority to block unjustified rate increases. Karen Ignagni, the president of America’s Health Insurance Plans, said it was wrong to single out her industry when total health care costs as a share of the economy jumped by 1.1 percent last year — the largest increase in history.
“There’s a heavy dose of politics at work. There’s been a strenuous effort to focus on health plans because very few policymakers want to take on the real issue of why costs are rising,” Ignagni said.
Those reasons include the high cost of medical services, a lack of transparency that prevents comparative shopping and payment systems that reward volume instead of value. Premium increases, she said, reflect the underlying increases in the cost of medical services. “Regulating premiums won’t do anything to reduce the soaring costs of medical care,” she said. “This would be like capping the price automakers can charge consumers, but letting the steel, rubber and technology manufacturers charge the automakers whatever they want.”
For the full article click here.
FACT CHECK: Provider Consolidation Driving Up Costs
Posted by Campaign on February 24, 2010 at 8:54 AM
FACT CHECK: Provider Consolidation Driving Up Costs
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients”.
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated: “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.” The report also found that higher hospital prices do not translate to higher quality of care: “[A] narrow balance of the evidence and the evidence from the best studies indicates that hospital consolidation more likely decreases quality than increases it.”
· According to a brief from the National Institute for Health Care Management: “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· The Federal Trade Commission and the Department of Justice held extensive health care hearings in 2002 and 2003, and in their subsequent report noted the correlation between hospital concentration and high hospital prices: “Most studies of the relationship between competition and hospital prices have found that high hospital concentration is associated with increased prices, regardless of whether the hospitals are for-profit or nonprofit.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
Poll Vault: On Health Care, 51% Fear Government More Than Insurance Companies
Posted by The Campaign on February 24, 2010 at 8:12 AM
The following memo was released today by Rasmussen looking at the American public's view of the government and private health plans: When it comes to health care decisions, 51% of the nation’s voters fear the federal government more than private insurance companies. The latest Rasmussen Reports national telephone survey finds that 41% hold the opposite view and fear the insurance companies more. Seven percent (7%) are not sure who they fear the most. Among those who have insurance, 53% fear the government more than insurance companies while 39% take the opposite view. Those without insurance fear the insurance companies more. Adults under 30 fear the insurance companies more while those in their 40s are evenly divided. However, a solid majority of those over 40 fear the government more. These findings help explain fears by some of a government "takeover" of health care under the reform plan proposed by President Obama and congressional Democrats. (Want a free daily e-mail update? If it's in the news, it's in our polls). Rasmussen Reports updates are also available on Twitter or Facebook. Not surprisingly, there is a huge partisan divide on this question. Sixty-seven percent (67%) of Democrats fear private insurance companies more than government while 82% of Republicans hold the opposite view. As for those not affiliated with either major party, 53% fear government more. Most of those who attend church at least once a month fear the government more. Those who rarely or never attend church or religious services fear private insurance companies more. While 41% fear the insurance companies more than the government, just 25% agree with House Speaker Nancy Pelosi that health insurance companies are "villains."
What They Are Saying: Costs and Premiums
Posted by The Campaign on February 24, 2010 at 8:00 AM
What They Are Saying About Costs and Premiums
- Alwyn Cassil, Center for Studying Health System Change: “The biggest factor driving up premiums, she said, is the fast-increasing amount that is spent on medical care. And that is driven by how much doctors are paid and how many services they provide…The price hikes by doctors, hospitals and other providers hasn’t gotten enough attention, she said.” (AOLNews, Who’s the Bad Guy in Insurance Premium Hikes?, 02/21/10)
- Paul Ginsburg, Center for Studying Health System Change: “And ‘the elephant in the room that no one has focused on is providers’ power to get higher rates from insurers.’” (USA Today, Impact of bipartisan summit to be felt beyond health care, 02/24/10)
- Uwe Reinhardt, Economist, Princeton University: “‘Everyone is beating up on the insurance companies, but you may be shooting at the wrong target…’” (AOLNews, Who’s the Bad Guy in Insurance Premium Hikes?, 02/21/10)
- Alwyn Cassil, Center for Studying Health System Change: “‘…this idea that (taking) this $12billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’” (Louisville Courier-Journal, Health insurers defend profits, 02/21/10)
- The Washington Post: “The president also would give the government power to block increases in health-care premiums. Given public concerns about a federal takeover of the health-care system, letting the government essentially dictate premiums hardly seems like a step in the right direction. More than half the states already require their insurance commissioners to approve rate increases in the individual or small-group markets; the House- and Senate-passed bills provide authority to review increases for insurers participating in the newly created exchanges. The White House argues that this power will help shield consumers in the four years before the exchanges are up and running, but its recent use of the insurance industry as a political scapegoat does not bode well for its responsible use of such authority.” (The Washington Post, Editorial: On health care, Mr. Obama lets the next president do the hard stuff, 02/23/10)
- Los Angeles Times: “The unfortunate reality in healthcare reform is that there is no quick fix to reducing premiums or even bringing their growth into line with inflation. The ever-increasing cost of insurance reflects the incessant growth in healthcare spending. And the solution is to reduce the supply of money for healthcare, lower the demand for medical services, or do both.” (Los Angeles Times, Editorial: Back to the drawing board, 02/08/10)
- Kim Holland, Oklahoma Insurance Commissioner: “Holland noted that state regulators are responsible for assuring the solvency of plans, not just reviewing rates. One question about the Feinstein proposal is the consequences that could occur from having the federal government only focusing on rates without specifically having responsibility over solvency. She suggested that federal denial of rate increases could create solvency concerns…Holland emphasized that rising medical costs are the underlying driver of rising premiums and that policymakers need to focus on those rising costs.” (CQ, Insurers, State Regulators Fault Federal Review of Rate Hikes, 02/22/10)
- Sandy Praeger, Kansas Insurance Commissioner: “‘If you want to keep costs under control, it’s not about managing health care premiums…it’s about managing the underlying health care costs.’” (Kaiser Health News, State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10)
- Ralph Neas, National Coalition on Health Care: “‘None of the proposals yet has done enough on cost containment.’” (USA Today, Impact of bipartisan summit to be felt beyond health care, 02/24/10)
FACT CHECK: Health Insurance Premiums -- Rate Determination and Review
Posted by The Campaign on February 24, 2010 at 7:38 AM
Health Insurance Premiums: Rate Determination and Review
Overview
The vast majority of states tightly regulate premium rates for the individual and small group markets throughout the lifetime of a policy. In those states, health plans are required to file their proposed rates with the insurance regulator and state insurance regulators carefully review these rates to ensure that they are neither inadequate nor excessive.
How are premium rates determined?
State law requires that health plans ensure the premiums collected are sufficient to cover the medical costs of their customers, or they risk financial insolvency. A health plan's actuarial team reviews historical and current data to determine necessary rates, including:
- Known past experience
- Demographic and trend projections
- Predictions of future utilization and costs (based on historical and current data).
How are premium rates reviewed?
The rate filing requirements are set by state laws and provide the state insurance regulator with an opportunity to review the proposed rates. According to the NAIC, "there are 29 states that have prior approval of rates and a number of other states that have other tools for influencing insurers to hold down rate increases."1
State insurance regulators carefully review premium increases for:
- Sufficiency: Are the rates neither insufficient nor excessive in relation to the benefits provided?
- Fair and reasonable: Are they reasonable, not inadequate or unfairly discriminatory?
- Solvency: Will the rates be too low and unable to cover expected medical costs?
- Regulatory compliance: Do the premiums charged comply with all state rating rules?
- Actuarial principles: Do the premiums reflect accepted actuarial principles?
- Adherence to state mandates: Do the benefits provided follow coverage mandates as set by the state?
A state insurance regulator requires a health plan to justify rates by providing:
- A general description of the base rate that the company intends to charge -- this will include a detailed description of actuarial projections.
- A description of the rate increase (if rates are being increased) and a detailed description of the factors that the company used to determine the necessity of the increase.
- The company's projected experience for the appropriate period-generally, this will be at least five years for, and may be for the projected life of, an individual policy, and one year for small group policies.
- Changes in assumptions the carrier makes based on benefit design requirements or mandates.
- Changes in factors, such as demographics for the block of business.
What They Are Saying: Federal Rate Review
Posted by The Campaign on February 24, 2010 at 7:35 AM
What They Are Saying About Federal Rate Review
- Los Angeles Times: “But the more ballyhooed initiative to have federal bureaucrats review insurance premiums…wouldn’t address the forces driving up the cost of medical care.” (Los Angeles Times, Editorial: Obama’s Summit, 02/23/10)
- The Washington Post: “The president also would give the government power to block increases in health-care premiums. Given public concerns about a federal takeover of the health-care system, letting the government essentially dictate premiums hardly seems like a step in the right direction. More than half the states already require their insurance commissioners to approve rate increases in the individual or small-group markets; the House- and Senate-passed bills provide authority to review increases for insurers participating in the newly created exchanges. The White House argues that this power will help shield consumers in the four years before the exchanges are up and running, but its recent use of the insurance industry as a political scapegoat does not bode well for its responsible use of such authority.” (The Washington Post, Editorial: On health care, Mr. Obama lets the next president do the hard stuff, 02/23/10)
- National Association of Insurance Commissioners: “State insurance regulators reacted coolly Monday to provisions in the new White House health care overhaul plan that would the give the secretary of Health and Human Services power to deny excessive premium increases. ‘By and large I think the states are very effective in monitoring’ insurance markets, said an official with the National Association of Insurance Commissioners.” (CQ, Insurers, State Regulators Fault Federal Review of Rate Hikes, 02/22/10)
- Sandy Praeger, Kansas Insurance Commissioner: “‘I think we’re chasing the wrong tail here. It’s really about health care costs…In most cases, the companies have been able to justify them, because of the economic situation. The book of business is probably getting sicker because healthier people are dropping out.’” (NPR, Obama Plan Would Monitor Insurance Premiums, 02/23/10)
- Detroit News: “A new wrinkle added by the president would give the federal government rate-setting oversight for insurance policies. That’s a responsibility now handled by the states. Involving Washington in rate setting would add another political layer to an already contentious process and likely make it impossible for insurance companies to recover their costs, driving them out of business.” (Detroit News, Editorial: Obama’s Compromise Health Care Proposal Looks Too Much Like The Old Plan, 02/23/10)
- Uwe Reinhardt, Economist, Princeton University: “‘Everyone is beating up on the insurance companies, but you may be shooting at the wrong target…’” (AOLNews, Who’s the Bad Guy in Insurance Premium Hikes?, 02/21/10)
- Kaiser Health News: “State insurance regulators said President Barack Obama goes too far with his proposal Monday to give the federal government new power to reject health insurance rate increases. Three veteran state insurance commissioners said in interviews that states are in a better position to judge insurers’ premium proposals.” (Kaiser Health News, State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10)
- Kim Holland, Oklahoma Insurance Commissioner: “‘Health insurance is very localized and states already have a number of tools to monitor rates,’ she said. ‘Overall, I think state regulators do a good job.’” (Kaiser Health News, State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10)
- Chicago Tribune: “Price controls. Yes, price controls…That practice would not work any better in health insurance than elsewhere. It would induce companies to cut back on the procedures they cover, cutting costs by reducing services. It would also encourage WellPoint and other insurers to simply get out of the individual policy business entirely, to the benefit of no one.” (Chicago Tribune, Editorial: Price controls?, 02/23/10)
- Robert Laszewski, Health Care Policy Analyst: “There is nothing new in it save a health insurance rate regulatory board that is an awkward political proposal at best…Fundamentally, what good would insurance rate regulation do if the President’s plan has only tepid cost containment built into it in the first place?” (The Health Care Blog, The President’s Health Care Plan, 02/22/10)
- Joel Ario, Pennsylvania Insurance Commissioner: “‘It could end up as a “who’s on first and what’s on second” problem,’ he said.” (Kaiser Health News, State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10)
- Seattle Weekly: “Practically, however, a rate board is unlikely to do much, judging by Washington state’s experience with similar regulation…Stephanie Marquis, a spokesperson for Insurance Commissioner Mike Kreidler, says her boss’s hands were tied. He has to go along with rate increases if insurance companies show that they are paying out more money than they are taking in. And the reality is, Marquis says, that insurance companies lose money in the individual market, which holds just a sliver of the total population, and one that tends to need a lot of expensive care.” (Seattle Weekly, Washington State Offers Dismal Lesson for Obama's New Attempt to Save Health Care Reform, 02/23/10)
- The Wall Street Journal: “The bill’s one new inspiration is a powerful federal board that would regulate premiums in the individual insurance market. In all 50 states, insurers are already required to justify premium increases to insurance commissioners, who generally have the power to give a regulatory go-ahead, or not. But their primary concern is actuarial soundness and capital standards, making sure that companies have enough cash to pay claims. The White House wants to create another layer of review that will be able to reject any rate increase that is ‘unreasonable or unjustified.’ Any insurer deemed guilty of such an infraction by this new bureaucracy ‘must lower premiums, provide rebates, or take other actions to make premiums affordable.’ In other words, de facto price controls.” (The Wall Street Journal, Editorial: ObamaCare at Ramming Speed, 02/23/10)
- Sandy Praeger, Kansas Insurance Commissioner: “‘If you want to keep costs under control, it’s not about managing health care premiums…it’s about managing the underlying health care costs.’” (Kaiser Health News, State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10)
- Kim Holland, Oklahoma Insurance Commissioner: “Holland noted that state regulators are responsible for assuring the solvency of plans, not just reviewing rates. One question about the Feinstein proposal is the consequences that could occur from having the federal government only focusing on rates without specifically having responsibility over solvency. She suggested that federal denial of rate increases could create solvency concerns…Holland emphasized that rising medical costs are the underlying driver of rising premiums and that policymakers need to focus on those rising costs.” (CQ, Insurers, State Regulators Fault Federal Review of Rate Hikes, 02/22/10)
- Portfolio.com: “States apparently can’t do this job themselves, according to the White House’s thinking. If that’s the case, where was this proposal a year ago, when the hard work of crafting health care reform legislation began?” (Portfolio.com, The Problem With Obama’s Plan, 02/22/10)
- Dave Shove, Analyst: “BMO Capital Markets analyst Dave Shove, who follows the insurance industry, said he doubts a federal rate review would push health plans into insolvency. But he said many details remain to be resolved, and a federal regulator might motivate insurers to stop selling individual policies in some markets. ‘That is a very real possibility,’ he said. ‘You probably will reduce choice for consumers.’” (AP, Insurers see potential for plan insolvency behind Obama's premium regulation proposal, 02/22/10)
- Alwyn Cassil, Center for Studying Health System Change: “‘…this idea that (taking) this $12billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’” (Louisville Courier-Journal, Health insurers defend profits, 02/21/10)
FACT CHECK: Health Plan Competition and Provider Consolidation
Posted by The Campaign on February 23, 2010 at 2:31 PM
Health insurance plans operate in highly competitive markets across the country and consumers have numerous choices in the types of plans and in insurers. To the extent that research has raised the question of competition as a factor in rising health care costs, it has pointed to consolidation among providers, not health plans.
Key facts about health plan competition:
· There are eight or more health insurers in each of the top 40 metropolitan statistical areas (MSAs) in the nation.
· Physicians contract, on average, with about a dozen health plans. Only about half of their practice revenues come from health plan contracts while the rest comes from the federal government through Medicare and Medicaid.
· Aggressive competition among health insurance companies has also increased the number of product options available to both consumers and their employers. New types of products—like consumer-directed health plans, or HSAs—afford more choices, in addition to the many and varied PPO, HMO, POS, and indemnity options, both fully insured and self-funded.
· The states which are allegedly the most concentrated actually have some of the lowest health care costs in the nation.
· The list of participating insurance plans that are available through every state insurance department show that there are a variety of choices for consumers.
Additional information on provider consolidation:
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients.”
· According to a new report in Health Affairs, Paul Ginsburg and Robert Berenson found that “providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned.”
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated, “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.”
· According to a brief from the National Institute for Health Care Management, “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
Capps paper on AMA data
AHIP recently submitted a report to the DOJ and FTC on the Horizontal Merger Guidelines Review Project that calls into question the AMA data on concentration. The paper, “Federal Health Plan Merger Enforcement is Consistent and Robust,” written by Cory Capps, PhD, of Bates White, LLC is available here: http://www.ftc.gov/os/comments/horizontalmergerguides/545095-00009.pdf. In our cover letter we said the following:
“…the American Medical Association market share and concentration figures (“AMA data”), which have been offered by the AMA for a number of years, are plagued by a number of significant limitations and appear to be unreliable. Most critically, the data are incomplete and omit various competitive alternatives, with the result that the market share figures do not reliably reflect the actual state of competition in such markets. While market share data are only a starting point, the review of any merger, in any industry, depends critically upon the use of accurate data. Simply put, the AMA data are no substitute for the DOJ’s practice of relying upon actual data from actual markets, and the use of these data in advocacy efforts demonstrates the danger of detaching merger analysis from specific, and accurate, market facts.”
“…critics have offered no evidence that lower payments to healthcare providers or lower quality healthcare have resulted from health insurer mergers generally or from any specific health insurer merger. Indeed, the evidence reviewed in the Capps Paper suggests that increased payments to providers of healthcare goods and services account for all or nearly all of the premium increases over the last decade. While general facts do not determine the results of individual merger reviews, this fact may be informative as DOJ and the FTC determine where to focus their enforcement resources.”
ICYMI: Seattle Weekly -- Washington State Offers Dismal Lesson for Federal Regulation of Premiums
Posted by The Campaign on February 23, 2010 at 10:21 AM
The health care reform debate has been focused recently on why premiums are increasing. What the data shows is that premiums track closely with underlying medical costs -- in fact the Department of Health and Human Services National Health Expenditure Accounts data shows this exactly.
Despite this data showing that underlying medical costs are driving premiums and health care spending ever higher, there continue to be arguments made that the federal government should play a larger role in regulating premiums.
However, the below two resources point out the exact problems with regulating (or dictating) premiums.
The news site Seattle Weekly points out "Practically, however, a rate board is unlikely to do much, judging by Washington state's experience with similar regulation...Stephanie Marquis, a spokesperson for Insurance Commissioner Mike Kreidler, says her boss's hands were tied. He has to go along with rate increases if insurance companies show that they are paying out more money than they are taking in. And the reality is, Marquis says, that insurance companies lose money in the individual market, which holds just a sliver of the total population, and one that tends to need a lot of expensive care." For more click here.
Several years ago, the California Healthcare Foundation and RAND performed an analysis on legislation in the California State Senate that would have regulated premiums. The study found "if health care costs continue to rise while premiums are frozen, stringent rate regulation could lead to undesired consequences." Click here for the full study.
MUST WATCH TV: Health Plans Talk About What is Driving Premiums Higher -- Underlying Costs
Posted by The Campaign on February 23, 2010 at 9:53 AM
Yesterday, AHIP's Karen Ignagni released this statement outlining the real reasons why premiums are going higher -- underlying medical costs; setting the record straight on profits; and talking about ways in which health care reform could truly contain costs.
AHIP also did several interviews on news shows outlining the same arguments as to why premiums are increasing and setting the record straight on various attacks on the health plan industry. Watch the segments below:
AHIP's Karen Ignagni on the Nightly Business Report:
AHIP's Robert Zirkelbach on BBC America:
AHIP's Mike Tuffin on CNBC:
