Episode 045 | The Health Care Executive Order

Episode 045 | The Health Care Executive Order


welcome to Side Affects with an A when
effect is normally used it’s a noun it’s already occurred affect is a verb
meaning action action influences outcomes
I’m Scott McGohan and I’m Anne Marie Singleton we will provoke you to think
differently Side Affects where problems are defined solutions exposed welcome to Side Affects I’m Scott McGohan and I’m Anne Marie Singleton we’ve got an amazing guest
with us here today the fountain of knowledge as I refer to him Grant Reid
thanks for being here thank you it’s my pleasure so you’ve been with McGohan
Brabender for a long time we’re really grateful for all your support but
also you’ve got a long track record in regards to expertise in this in this
industry so what did you what did you start your career I started my career
actually on January 6 1975 Grant’s not very exact yeah it was a Monday and so
this coming January it’ll be my 43rd year in this business Wow well one of
the things we want to do is there’s a sense of urgency in regards to the
Affordable Care Act and this most recent executive order yes and there’s a lot of
questions that people have yes what does this mean
and what should we do exactly yes what’s interesting about this is
this kind of came from left field the the actual wording in the executive
order and we do have the executive order I understand we’ll be uploading it to
our site for people to download if they’d like to read it but there have
been a lot of talk in really several months up to this executive order
talking about selling across state lines yeah as an underwriter right away I’m
starting to to yell at the television saying so simply selling across state
lines won’t do anything because if I’m an insurer that doesn’t have business in
Indiana let’s say and I decide that because I can sell across state lines
I’m going to go Indiana sell a product my pricing is
gonna be so much higher than everyone else because I don’t have a discount
right if I’m able to get a discount then maybe I can compete but simply selling
across state lines is not the answer because the carrier needs a relationship
with the health systems in order to offer a competitive rate that’s exactly
right there were some people that clearly didn’t understand the direction
they were going that talked about the different mandates within the states and
the National Association of Insurance Commissioners came out just a few weeks
ago and said they looked at the cost of all these mandates across all the states
and the variation is only at most 5% so that’s certainly not going to open up a
market for you by you know it’s interesting you bring that up and I know
we’re gonna talk about the executive order but you talked about the funding
that we spent in this country on coops yes right that was part of the original
exactly and a majority of them are gone that’s correct they did not survive very
quickly they went away but quickly your reference point is the fact that they
didn’t have the pricing model in the markets and in which they were doing
business that’s correct so you and I if we were gonna buy water we would assume
that the price for water Indiana’s similar as it is in in Dayton it’s close
its close yes Healthcare just defies all laws of
economics that’s great and so when we hear selling across state lines the
public hears operation right I’m the skeptic and I’m like that you know
that’s just a unfortunately a deceptive way to put hope in the American people
that health care cost is gonna become lower because it’s it’s just not well
even if they were to overcome they being the insurance companies were able to
overcome that that Network discount let’s look at the profits that the
insurance companies make there’s been all kinds of talk this week about the 17
billion dollars that they’ve made so far this year well they have a trillion
dollars of exposure so that’s only about 1.7 percent that’s a very narrow profit
margin and if we withhold these see the these cost-sharing reduction payments
that’s seven million dollars that’s going to eat away
the profit they’ve made I don’t know about you but I would like my insurance
company to have money to pay my claims right that would certainly be good I
know him to be excessive but there’s already provisions in there that control
how much profit they can make the MLI yes through the loss ratio so we’re
already controlling it that way this just tells me though
they’re not making a lot of money on other coverages in addition to the
hundreds of millions of dollars that they’ve lost on the marketplace right
and so the cost sharing that you’re talking about has to do with the
subsidies and the amounts that are available for people through the
exchanges yes if I have income less than 250% of the federal poverty level and I
buy a silver plan right they they that will give me effectively a lower
deductible lower out-of-pocket just based on these cost sharing reductions
so when enabled me have better coverage for a better price it evaporates once
you get to 250% of the federal poverty level but what happened this executive
order we got just a few days ahead of time people started talking about it was
going to make a change to ERISA now ERISA I am a child of ERISA
I started in 1975 ERISA was signed in September 1974 one of the first tasks I
was given when I came into it was Medical Mutual of Cleveland at the time
they said figure this ERISA stuff out we had no cell phone and clients so really
didn’t apply to us but it gave me a chance to get in and read the the pages
of the law and try and understand what it was they were doing and they were
recognizing that you have these corporations that are really
conglomerates of businesses that cross state lines and those were the leaders
in self insurance so it said these corporations they call in control groups
are really one corporation for the purpose of ERISA so you’ve had like 150
500 file different things like that and you were
allowed to sell or to purchase coverage across state lines since you were one
employer but it was state in the state in which they were housed right yes yes
yes what this does what this executive order does
it comes in and says well we’re going to also call Association health plans as a
corporation we’re going to include it under that which would give you then the
ability for a small group and an individual to join together and make a
large corporation and be recognized under ERISA
now the Devils in the details as I mentioned before 60 days the Presidents
given them to come up with the regulations – that will apply to this
this is very critical over whether or not this is going to be a success or a
failure the reason the Affordable Care Act has
failed is the regulations depend to the underwriting regulations that the
carriers do right you have to have a balance of the risk that you’re bringing
into this and frankly there’s a couple of things specifically that are within
the ACA that have caused that balance not to happen most of the the people
that are signing up for the marketplace are in the 55 plus age category we’re
not attracting the very they’re very young right you know what the one ages
that has the most people alive in the United States right now 26 that’s one of
the lowest categories of people signing up for the ACA so we’re not bringing
those people in the reason is their prices are so much higher than it used
to be and when they look at the what the cost is they say it’s not good value I’m
going to go ahead and pay the penalty if I need it even a price to me kind of
hard to get a job as a young person so you may not have a good job and I got a
waiver and so you don’t even have to pay the tax penalty so you’ve got that the
key things are someone in writing the law thought it was discriminatory that
we would charge more for female than a male well it just happens that it is
more expensive for a female than a minister especially during childbearing
years yes and and really it it’s not as much related to childbearing it’s the
fact that there is a female reproductive system and there’s so many more issues
that arise with that than it does with in the mail they also had this notion
that hey last time I checked I think my insurance when I was 18 was a
a lot more than my sister’s car insurance oh well that’s different
that’s a different that’s discriminatory Scott you shouldn’t allow that
by golly but the other thing is is this whole notion of age fans the the authors
of the law thought if they narrowed them from you know carriers traditionally one
eight to one ten to one if they narrowed it to three to one that these costs
would meet in the middle that’s not what happened at all you stole a dollar
amount to insure the same set of people exactly right in the law of large
numbers is all about a lot of people paying for a few people and when they
compressed these ranges what they did was they brought the higher age ranges
down just a little bit but those lower integer angels had to come way up to
meet them right so that’s what pushed the cost up for the younger people those
are the people that come to the table without any claims and that caused it to
fail because the young people said I’m not going to pay 250 dollars a month for
coverage that I’m not going to use right I mean it’s important you can take you
can pay almost in in Montgomery County for a bronze plan you can pay almost
$250 a month or almost $3,000 a year and for that you get a seven thousand one
hundred and fifty dollar deductible so you have to have almost ten thousand
dollars in claims for that to pay off yeah so in part of that soap I’m 62 my
rate might have been you know pick a number nine hundred dollars and a twenty
six-year-old might have been a male would be $80 female my bed and $300 yeah
so what happened is now that 26 year olds premium is you know three or four
hundred dollars correct that 62 year old is now seven hundred dollars and the
young people just jumped out of the pool yelled fish out of water
that’s correct so we can fill this pool yes adverse selection well a minimum two
went on their parents plan because they can which I’ve heard people say that’s
free what’s not free do you know what any a 25 year old costs on average this
is data out of our data analytics system two thousand six hundred and forty eight
dollars a year that’s not free that’s shifting the cost on to the
lawyer so many employers have borne that cost and it continues to drive up the
costs for our groups you know this you said this came out of sort of left field
and we had hearing that not much was gonna happen after you know
there was the whole situation where it didn’t go to a vote and then the focus
was other places and everything seemed to be fairly quiet and then we get this
executive order that’s two pages and a quarter or something fairly short so
what do you think what led up to this Wyatt Wyatt came out out of them well
it’s clearly Senator Rand Paul’s idea he had been talking about it we didn’t have
you’ve been talking about it again in terms of simply selling across state
lines being the end-all what this does though this changes ERISA to allow
individual groups and individuals to join together to form a corporation
under ERISA if if they do not put any regulations in that restrict the
underwriting what this does other than the fines and penalties is that it
repeals the Affordable Care Act because every insurer will amend in the
marketplace and then move over and they’ll have these Association health
plans the other thing it does is we have these short-term limited duration
policies that one’s existence and the Obama administration shortly before the
end they shrunk the time down that you could have these it’s an excellent
alternative this especially if you’re kind of bridging the gap you know if you
could have it up to a year you don’t need this comprehensive coverage maybe
you’re still contributing something to the pool and that’s what we need is we
need more short-term plans yes yes it does the other part of that is the
health reimbursement arrangements using those to actually you can give them to
your employees and they can use that to purchase coverage on their own you know
if if they do not put any regulations on under any again in these Association
health plans what it will do is allow the insurers to go back out and return
to their pre a CA pricing that would apply to the individuals that would
apply to the small groups I mean the the when the small groups get into the ACA
rates it’s horrible waste we run set tests all the time it doubles their
rates right off the bat because of the compression of the age ranges primarily
so if they don’t do that that that repeals that web get rid of the fines
and penalties somehow but nobody will be offering insurance in the marketplace so
you said you’ve been with ERISA since the beginning yes and really I’ve been
in this industry 11 years so not quite as long as you were you but there hasn’t
been very many changes to the ERISA law over time has there
well you and Cobra HIPAA those were extensions Women’s Health Care Act that
was part of that but nothing nothing major I mean Cobra and HIPAA were for
specific things you know around portability of coverage trying to get
away from pre-existing conditions which is an another thing that I hope this
doesn’t address if it allows carriers to adjust rates for pre-existing conditions
that’s another important part of that so what you’re so really you know the crux
of this is prior to 2010 our health care system was an epic mess well we had an
cost we had an uninsured problem and no I would contend that it wasn’t not
compared to now we’ve got many states where with this most recent rate change
the rates of quadruple since the Affordable Care Act went into place a 22
year old person could by mail could buy coverage for 75 bucks a months and it
was a PPO plan it offered very good coverage well now the whole system has
been pulled up I mean yes we have a lot of older people that have signed up for
the plan but we still may have the healthy ones insurance so we’re not
driving that cost but now what this would do if there’s no underwriting
regulations being impacted here it would put us back to March 22nd 2010 there we
would have this the spread of rates maybe 8 to 1 we would have males that
are paying less than females at certain ages it it crosses once you get into
your 50s then that wide range of rates would make the coverage more affordable
for a lot of the people that are staying the plan but what that does is that puts
us back to we have that pool of people that are uninsured and what do we do but
when you talk about that I mean one is pre-existing conditions is a big deal
that scares people to death yes and my personal opinion is is prior to 2010 I
think it was very disappointing that this country had a health care system
that people when they needed it couldn’t get it I just think it was wrong so did
they address it in the right way financially this country the answer is
no no absolutely not however the future of this so I think the the premise that
everybody wants is they want to keep what they have but they want it to be
less and they want better quality and they want better access and the truth is
the answer to that is no no so in order to change this it is gonna be
significantly disruptive yes but what this would allow our country to
experience is you would have carriers so the anthems the United’s the Aetna’s the
sickness other carers come back into the individual market yes come back into the
employer market they wouldn’t be shackled with the metallic plants which
destroys a strategy for an employer right and it would probably drive
additional competition back up into the individual market and we would see lower
cost right because we would get more people joining them you know and you
said something’s not people want to keep what they have and I think that you met
globally people you don’t want to have their PPO plan or what have you but I
would say that most employers in this region don’t want to keep what they have
they want something better because they’ve had to go to plans that they
don’t feel like are offering the type of coverage that that they want to to their
workforce most of them are at a high deductible plan many of them have a 60%
plan as as their plan because that’s what they can afford yeah I think one of
the things to Grant is when you look at this
so obviously you had I don’t care if you’re left or right yeah you had that
laugh now you have the right and nobody wants to touch it with a ten-foot pole
but this is a Jenga tower I mean this thing’s gonna topple yes what did you
like it or not yes it’s just a matter of time yes yeah and so here’s my opinion
doing nothing is a terrible option terrible right just right even eat alone
mm-hmm because if you pay taxes yes last time I checked I do we all do I mean so
so we’re all paying for this paying for this yes we are and we’re better than
this yeah and we can make significant changes so what what’s the likelihood of
I mean 60 days pretty sure right 60 days is pretty short if if they put it
through with no tampering of the under any regulations you keep saying that
we’re gonna talk about that in a second okay then that’s going to put us back to
pre ACA time right sure one’s Back to the Future strike and back to the future
yes yes watched every one of those movies so but the problem is that puts
us back to a large pool of uninsured people correct and I’ve looked and
looked I’ve yelled at the television long enough that my wife quarrel finally
said why don’t you do something about it and a rope a proposal and the proposal I
have is a payroll tax it’s a very significant payroll tax it’s something
along the order of 200 billion dollars a year but in my opinion that’s what we
would need in order to fund the uninsured we we need to get out of the
business of tampering with the group insurance that’s a huge portion of our
healthcare expenditure every year in the United States we need to leave that
alone we need to let that continue to go on and and the Cadillac tax which as it
is would come in a couple years would do a lot to exit employers from
there but we need to address the uninsured the ACA did not effectively
address the uninsured it shifted a lot of uninsurance around but now if we can
get back to we have good competitive pricing and good products in the small
group and individual market we still need to figure out a way to solve the
uninsured population my proposal does it with a payroll tax what was the
percentage of that payroll tax it would be 1%
on the recipient of a w-2 it would be 1% on the payer of a w-2 okay with the 1099
the person that’s paying the 1099 would pay 3% of that because they’re not
providing insurance to that person they’re paying the 1099 to and if
they’re paying they being the employer something in the w2 to someone that does
not get insurance from them then there’d be an additional charge for that as well
and in figuring the cost of this I didn’t include those extra amounts at
all it just seemed to me that we need some kind of an incentive for employers
don’t continue to offer group cars should pay a little bit less maybe we
get some of those part-time jobs coming back to be full-time if we if we did it
this way that would give us enough money I believe so that every child that
doesn’t have insurance through a group plan or a government plan would be able
to enroll in a chip program in Ohio we have the O chip program some of the
states would have to bring their quality of their program up to date it don’t
provide full coverage through that so there’d be some adjustment there that
would cost about twenty two billion dollars then we would have over a
hundred and seventy billion dollars left to help provide coverage for the
uninsured so if I’m a a new business person that I can barely make payroll
well my employees automatically have a bronze plan right Benjamin Franklin had
a great quote that I love that we we must make the poor uncomfortable in
their situation so let’s give everybody that doesn’t have coverage through a
group plan a bronze plan not the best coverage in the world but maybe you can
scrape together the cost to meet that out-of-pocket expense you’re not going
to lose everything with a hundred thousand dollar claim and we’re not
going to burden society with that hundred thousand dollar claim when you
show up that at one of the local hospitals and you don’t have any money
to pay for that that that’s it kind of in a nutshell I don’t see any other
alternative to this we we need we have this great structure that existent
within the group we have a workable individual program if we come in with
some income restrictions which I didn’t look into my proposal that would further
a narrow down the the availability of this but if we if we find a good point
at which if you’re at this percent of the federal poverty level and you can’t
afford to buy this insurance then it’s only given to you for free so if
someone’s making $20,000 a year their employers are taking $200 out of their
pay their employers contributing 200 there’s four hundred of the nesting but
if somebody is making a hundred thousand or even a million they’re contributing
much more than that and I really believe all of us will
spend some time in that space where we need coverage now timing this is crucial
we’re getting ready to have some type of tax reform maybe some type of tax
reduction right if we can piggyback that with this change you know if you go to
employer and say your rates going from thirty five to twenty but we’re going to
charge you a 1% on your payroll which isn’t your full cost right maybe it
would be except that sounds really simple yes we’re incapable of making
those decisions today the guys throw in that time and I completely agree with
you so so one of the things is you know this is a problem oh and status quo is
quite frankly it’s just not an option that just isn’t will this work I think
it’s it’s really anybody’s guess could it stabilize the market again
potentially potentially so so one of the things that we will do is we will put
this executive order out on healthier birthdays doc yeah it’s two pages I’d be
worth taking a look at also Grant shared with this kind of a white paper written
– written by the actuaries Association American Academy of Actuaries about
selling across state lines regarding why that might work or not might not work
great across state lines because I’ve had a lot of calls about that okay so
we’ll just keep on this subject and keep on this topic and hey thanks for being
with us today thanks for all your work and all your
all your effort and everything you do for all of us join us next time thanks
for listening and opening your mind if you’re interested in learning more you
can reach us at [email protected] or [email protected] we hope you’ll join us next time on Side Affects

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