Reforms Will Push Up Premiums

At the end of the 2011 and 2012 legislative sessions, headlines crowed about the progress Oregon had made on health care transformation as a result of bipartisan legislation from both sessions. In fact, Oregon has become a national leader on the topic with leadership from Oregon's governor, Dr. John Kitzhaber. From the establishment of Coordinated Care Organizations (CCOs) to the establishment of one of the first exchanges nationwide, Oregon took major steps forward in implementing health care reform.

As CCOs have begun to spring up in different communities throughout the state and details of the health insurance exchange have become more clear, a surprise that legislators didn’t anticipate is beginning to bubble-up to the surface: Major increases in health care costs will hit consumers just as the exchange debuts early next year.

Many of the causes of these cost increases are outside the control of Oregon legislators, but they nonetheless have the potential to unravel public support for reform as front-line consumers come face-to-face with the true cost of health care for the first time. 

Many legislators may have thought their work on health care reform was complete, but their oversight work on implementation may have just begun to ensure the transition to a reform reality doesn’t become a consumer nightmare.

Based on work done by the regional office of America's Health Insurance Plans (AHIP) and reported last week to the Senate Health Care Committee, here are the reasons why premiums are going up:

            *  A major factor is that "underlying medical costs are rising" at much faster rates than overall inflation.

            *  Rising costs of pharmaceuticals is another factor.

            *  Federal and state budget constraints have resulted in an underfunding of Medicare and Medicaid obligations. As a result, doctors, hospitals and other practitioners charge more to the insurance-buying public — sometimes as much as 20-30 percent more. This is what is referred to as the “cost shift.” It has a real impact on consumer rates.  

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What Does Health Care Ruling Mean to Oregon?

There are probably as many interpretations as there are analysts looking at the words that Chief Justice John Roberts wrote for the Supreme Court in a historic 5-4 decision upholding major provisions of the Affordable Care Act.

It is tempting to delay comment because so much of what this landmark ruling means will play out over time, both in Washington, D.C. and around the country in states such as Oregon, where Governor John Kitzhaber has taken the lead in implementing reform measures.

Still, here are a few perceptions:

         *  Regardless of how the Court ruled, Oregon was committed to proceed with a number of reforms that emerged from the last two Oregon legislative sessions. That includes the governor's proposal to create Coordinated Care Organizations (CCOs) as mostly non-profit entities to handle the task of organizing and delivering Medicaid services to low-income Oregonians.

         From the governor's standpoint, the new CCOs — eight of which were approved this week to begin operating August 1 and a number of others are in the queue for a later start — will manage Medicaid closer to where people live, prompt providers to collaborate with each other for the benefit of patients and place a great emphasis on prevention, all (at least in theory) to save money.

         If money gets tighter and the CCO reforms don't work, the tough decisions — cutting recipients off Medicaid, cutting back on benefits or cutting provider reimbursements — will fall into the laps of regional or local CCO directors. In the past, these decisions would have been made on the Capitol Mall.

         *  The ruling does retain momentum toward the day, in late 2013 or early 2014, when Oregonians will have a chance to choose health insurance coverage through an online shopping center called an "insurance exchange."  Oregon already is a long way down the road toward starting its exchange and, arguably, would have continued regardless of how the court ruled. But the endorsement of an individual health insurance purchase mandate means the exchange will have a greater chance to succeed a year or so from now. With a few exceptions, those who now don't buy insurance will have to do so.

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The Possibility of a Nuanced Ruling

Most media focused last week on oral arguments before the U.S. Supreme Court on the controversial federal health insurance mandate for individual Americans. However, justices also heard arguments on other aspects of the legal challenge to what has become known as ObamaCare that could lead to a more nuanced decision and perhaps even more complexity for states.

Justices listened to arguments on whether the constitutional challenge of the individual mandate is ripe because it hasn't gone into effect yet. Commentators expressed doubt the court would effectively punt a big decision for this reason. They also considered the severability of the federal health care reform act. They wanted to know if voiding the individual mandate would void the popular ban on excluding health insurance because of pre-existing conditions. 

A ruling isn't expected until late June, which will allow for a lot of media speculation, political bombast and unease by state officials who will play a key role in implementing health care reform in whatever form it survives from the court case.

Based on the intense questioning by justices and the balky performance of the U.S. attorney arguing the government's case, you could easily conclude the federal individual health insurance mandate is in trouble. The court seems clearly split, but the split echoing from the questioning suggests at best a 5-4 rejection of the mandate.

However, the mandate underpins a grander bargain. Creating the largest possible pool of people with health insurance coverage gives health insurers the ability to absorb and spread costs, including from new insureds who may be combating cancer or suffering from a chronic disease. Dispatching the mandate could put even more pressure on health insurance premiums, which are continuing to rise. That, in turn, could erode the quality of existing employer-provided health insurance and, in some cases, cause employers to drop coverage for employees altogether.

The unspoken part of the story crowded out by commentary on the mandate is what happens if we return to the status quo before Congress approved ObamaCare. The truth is, that status quo has disappeared. 

  • The exclusion of pre-existing conditions and expansion of family coverage to children up to age 26 are very popular provisions, which few would want to lose — especially in an election year.

  • Many employers facing stiff domestic and international competition are looking for ways to trim their health insurance costs. One way is to hire temporary workers without benefits.

  • The public safety net has more holes in it, as Medicaid participation has been limited and funding cut for public health care clinics.

  • Heath care technology continues its steady march ahead, opening new diagnostic and treatment options and adding more costs.

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