Fred Hunt, President, SPBA, 1/1/2010, www.SPBATPA.org

Starting The New Year

As we start 2010, this health reform legislative process has achieved one goal. It has brought unity to liberals and conservatives. They share absolute disgust. A leading liberal called it “an ungodly mess of errors, loopholes and massive giveaways”. Most conservatives would say “amen”. It is only the people who play politics as a game who are happy. One of the major players, Senate Majority Leader Reid likes what he calls “vapor” bills and process (vague and ever-changing). So, I predict that there may well not be the actual normal Conference Committee process. Instead, I think we may see just backroom deal-making and then arm-twisting to pass “something” (anything) that can be called health reform and celebrated as a political victory.

What Will the Final Law Be?

I feel like the weatherman being asked to give a specific forecast of the weather for a few years from today. My forecast is below, but let me save your sanity by first explaining what will be playing out when/if a bill passes and is signed into law. There are dozens of factors and processes which can change what you think you see — even when/if the law is passed, and we all have printed copies in front of us and experts analyzing the actual words.

An example arose recently. A year ago, the Defense Authorization Act included what seemed like iron-clad wording that would ease and extend government medical care for wounded soldiers. It was crystal clear. However, a year later, the Defense Department has “interpreted” the law to deny many veterans the health services they thought the law promised, especially for Post-Traumatic Stress Disorder (PTSD). The new interpretation decided to limit care only for things that can be proved to have happened during “armed conflict” in combat zones. This is being challenged, but the interpretation is a blatant way to avoid paying for an expensive group of veterans and leave them uninsured or a cost-shift to employer plans. (This is also yet another lesson for those who think government health care is embracing and caring.)

This example shows how something you read in any final health reform law can have a very different real-world outcome than you think you are reading. There is already some conniving going on behind closed doors in Congress to pull off some of these after-the-fact changes in health reform. So, don’t drive yourself nuts to get the final language, and then assume that what you see is what you get. SPBA’s biggest work begins (not ends) when a law is passed.

Hidden Zingers

The actual language of any bill will have hidden zingers. Then, the Congressional staff draft what is called “the blue book”, which are essentially notes to give reg-writers background and “Congressional intent” of the various provisions. The blue book often pictures things differently or with added pieces that you don’t see in the legislative language. Then come the interpretations which the upper-level Agency officials decide to make (like the Defense Department example). Then come the nitty-gritty interpretations as the reg-writers create the actual regulatory language with which we must comply. Zingers can sometimes take a decade to emerge.

So, it is fine to check the Library of Congress official legislative website at http://loc.thomas.gov as often as you want. You can also read and hear all the interpretations, but the absolute specifics of how things would work will evolve over several years. In the case of this law, I think that the legislative tussle will also go on for several years, with each side trying to slip in later what it did not get in this first round, and parts even being negated or repealed.

My Forecast

So, with all those caveats and explanations, let me share my thumbnail sketch of how I think our self-funded employee benefit market will be impacted.

• Employee benefit plans in general and self-funding were never a target (except, of course, by the hard-core single-payer advocates). So, I think that we will be relatively unscathed. 
• I think most problems that do arise will be from TPAs and self-funded employer plans that may get hit as unintended bystander victims of the punitive measures being thrown at insurance companies.
• There will be much more bureaucratic load and headaches, but there is nothing (intentionally) designed to subvert your client plans or lure people away.

How Did We Miss The Bullet?

Right after the election, the new White House asked me for some more real-world insights and pitfalls; then more. As legislation started, they suggested that I share my insights with the Congressional Budget Office (which we knew would be the most powerful player in the process). I did. Ironically, CBO seems to have relied heavily on the real-world insights, and the net effect has been to give the President and Congressional leaders reality they did not want to hear.

At the Spring 2009 SPBA meeting, we brainstormed with key staffers in the inner circle of the health reform process. Seeing 400 sets of VERY knowledgeable eyes is a credible and persuasive force, and this, again, cemented the fact that health reformers needed to be careful not to hurt their best asset — ERISA self-funded employee benefit plans.

Over the Summer, there was frequent very candid unbiased e-brainstorming with key players, and they would ask us to explain the secret agendas of what other groups were seeking. Many of our members were also educating their Congressmen, being featured in the media, etc. When the final Reid bill was being put together, one of our members and I each got the surprisingly candid invitation, “What do you REALLY want in this bill?” We repeated that for their own good, they should protect ERISA self-funded plans as the biggest consumer-protective (ERISA’s uniquely-firm fiduciary duty) basis of American health coverage. So, I think that is why both chambers of Congress wisely tried to leave a good thing alone.

Good Things

I think there will be some good things for client plans of TPAs. For example, I think:

• More young and healthy individuals who, today, opt out of employer plans because they feel they don’t need health coverage, will be in the plan because of the direct or indirect pressure to be insured. Some plans suffer badly today from young healthy eligible individuals who decline coverage. Employers will take a more energetic role in being sure their workers are in the plan, because there will probably be whopping fines.
• It will be harder for employers to “go bare” and not have a health plan, so that stabilizes and expands the TPA market.
• The medical cost “discount” mess looks like it will have a path to ending If there is an insurance exchange, public option or whatever in which the government (federal Office of Personnel Management ­ OPM – is in the bill) negotiates with doctors and hospitals for a price formula, then I think TPAs and others will adopt that as the new de facto Usual and Customary. This is different than basing on the Medicare price, because back-room deals in 1965 designated Medicare and Medicaid as a special situation helping the old and needy. The new public exchanges would negotiate a presumably-fair price for regular people, so it would be hard for doctors and hospitals to say that a negotiated price for regular people is not fair for your plan participants. The government won’t automatically extend their price to you, but, at last, a credible price list would be available. Doctors and hospitals have also been suffering from the headaches of swirling “discounts”, so they’d probably be glad to have something more uniform as well.
• If the “Cadillac” plan tax remains and/or other cost pressures, cost-efficiency in design and operation of plans will be a gigantic plus. This has always been a forte of TPAs.

Changes in Other Players

• There will be changes in the health insurance companies. Some markets (such as individual policies) might well become money-losers and be dropped. Depending on how a tax provision comes out, insurers may suddenly drop ASO and/or divest TPAs to be stand-alone independents. Insurers may well decide that they want a less-direct role in health coverage, perhaps more Stop-Loss or new arrangements with TPAs or whatever. Meanwhile some non-profit Blues and others will get advantages over for-profit insurers. So, don’t assume that the insurance industry of the future will look like it does now.
• Imposed loss ratios and cost pressures will probably bring the greatest change to agents and brokers. Many markets, or at least sources of income may disappear. Agents and brokers may migrate to life insurance or P&C or create new roles. In the past, many agents and brokers joined TPAs, though the learning curve is steep to become immersed in the endless government compliance from about 100 different agencies and government offices.

So, at the start of 2010, SPBA members are already seeing advantages. Because members have been receiving insider perspective from the start, and have a long reputation for well-informed government compliance, and quick-response to changes in laws and markets, SPBA’s TPAs and Stop-Loss say they are seeing increased interest from both existing and potential clients.

The client plans and employers recognize that knowledge and quick reaction will be the key to success. With insurers and others facing turmoil from health reform, clients and prospective clients are reacting very positively to the knowledge and stability of TPAs.

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This entry was posted by Adam V. Russo on Monday, January 4th, 2010 at 8:53 am and is filed under ERISA, Health Care Legislation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.