Will Insurers Get Too Much Leeway to Set Benefits Under Health Reform?

February 10, 2012 at 1:08 pm

All too often, Americans with private health coverage discover their policy has major holes at exactly the wrong time — when the treatment they need is not covered.

To ensure that people have access to comprehensive coverage, the health reform law (Affordable Care Act, or ACA) calls for the Department of Health and Human Services (HHS) to establish a set of “essential health benefits” that most insurers in the individual and small-group markets must cover starting in 2014.  Unfortunately, HHS’ initial proposal contains a troubling element for consumers.

As widely reported, the proposal would let each state designate one of several specified health plans — for example, one of the three largest plans in the state’s small-group market — as its benefits “benchmark.”  That plan would then set the standard for the “essential health benefits” in that state. What’s received much less attention, however, is that insurance companies could then deviate from the benchmark as long as the benefits they offer are “substantially equal” to the benchmark plan’s benefits.

In other words, insurers could provide less coverage of an item or service than the state’s benchmark as long as they provided more coverage elsewhere.  An insurer, for instance, might be able to limit occupational therapy coverage to 15 visits per year, compared to a state’s benchmark of 30, while covering more visits of physical therapy than the benchmark.  Or an insurer might impose a limit that is not part of a state’s benchmark  — such as on kidney dialysis treatments — and increase coverage elsewhere to make up for it.

Allowing insurers to significantly vary from a state’s benchmark would make it much harder for consumers to make informed choices about which health plan to purchase.  Consumers would have to wrestle with potentially significant (and hard to understand) variations in benefits, such as differences in what’s covered and to what extent.  Consumers already will have to wrestle with differences in cost-sharing charges, provider networks, and other elements that are expected to vary widely between plans, so this proposal to give insurance companies additional leeway would burden consumers even more.

In addition, some insurers would likely design their benefit packages in ways that attract healthier people (who cost less to cover) while discouraging sicker ones.

A number of stakeholders have raised similar concerns about the proposal, including the American Cancer Society Cancer Action Network, the American Academy of Actuaries, and officials in Rhode Island and New York State.

One key ACA goal is to encourage insurers to compete primarily on the price and quality of their products, not on their ability to deter enrollment by those in poorer health, as they do today.  Allowing insurers to vary from a state’s benchmark plan would impede progress toward this goal. HHS should drop this element of its proposal.

Debunking the “Entitlement Society” Myth

February 10, 2012 at 11:44 am

Contrary to claims that government benefit programs are creating a dependent class of Americans who are losing the desire to work and would rather collect government benefits than find a job, a major report we issued today finds that these programs’ benefits go overwhelmingly to people who are elderly, disabled, or members of working households.

As it states:

Contrary to "Entitlement Society" Rhetoric, Over Nine-Tenths of Entitlement Benefits Go to Elderly, Disabled, or Working Households

Some conservative critics of federal social programs, including leading presidential candidates, are sounding an alarm that the United States is rapidly becoming an “entitlement society” in which social programs are undermining the work ethic and creating a large class of Americans who prefer to depend on government benefits rather than work. 

Read more

Bernstein on Income Inequality

February 9, 2012 at 2:21 pm

Testifying at a Senate Budget Committee hearing today on “Assessing Inequality, Mobility, and Opportunity,” CBPP Senior Fellow Jared Bernstein explained that, “even with recent improvements in the job market, the American economy still faces significant challenges, particularly the historically high levels of income and wealth inequality, the squeeze on middle-class incomes, and elevated rates of poverty.”  Below are the main findings of his testimony:

  • It is important to examine trends in income inequality through the lenses of various different data sources, as each has its own strengths and limitations.
Read more

Safety Net Spending Is Supposed to Rise in a Weak Economy

February 9, 2012 at 2:08 pm

In my blog post this week for US News & World Report, I highlight CBPP’s recent analyses of safety net programs and explain why the rise in spending on most of these programs during the Great Recession and subsequent slow recovery is an important feature of them, not a sign of something amiss:

[B]ecause these social safety net programs expand to meet the greater needs in a weak economy, they cushion the loss of purchasing power, keep the economy from weakening further, and prevent still more job loss.

Read more

Dos and Don’ts to Improve State Economies

February 8, 2012 at 4:36 pm

Our new guide to state fiscal policies that can create jobs now and prepare states for long-term prosperity has four main recommendations:

  1. Boost revenues and target investments to strengthen the economy. The deep cuts in education, health, human services, and other areas that states have imposed to close their recession-driven budget shortfalls are job killers.  They directly eliminate jobs in both the private and public sectors, and they indirectly cost other jobs by reducing consumer buying power.  Moreover, research shows, spending on education, transportation, and public safety is among the most important keys to economic growth and job quality in the long run.
Read more