department of health and human services

Bucks Blog: Computer Snag Limits Insurance Penalties on Smokers

A computer glitch involving the new health care law may mean that some smokers won’t bear the full brunt of tobacco-user penalties that would have made their premiums much higher — at least, not for next year.

The Obama administration has quietly notified insurers that a computer system problem will limit penalties that the law says the companies may charge smokers, The Associated Press reported Tuesday. A fix will take at least a year.

The problem relates to the computer system where insurers submit their “qualified” health plans to be offered on the new exchanges where individual insurance plans will be sold beginning Oct. 1.

“This is a temporary circumstance that in no way impacts our ability to open the marketplaces on Oct. 1, when millions of Americans will be able to purchase quality, affordable insurance for the first time,” said Joanne Peters, a spokeswoman for the Department of Health and Human Services, in an e-mailed statement.

Starting in 2014, the law requires insurance companies to accept all applicants regardless of pre-existing medical problems. But it also allows them to charge smokers up to 50 percent higher premiums to ward off bad risks. For an older smoker, the cost of the full penalty could be prohibitive.

The underlying reason for the glitch is another provision in the health care law that says insurers can’t charge older customers more than three times what they charge the youngest adults in the pool.

According to a June 28 guidance from the government to insurers quoted by The A.P., “Because of a system limitation … the system currently cannot process a premium for a 65-year-old smoker that is … more than three times the premium of a 21-year-old smoker,” the guidance said. If an insurer tries to charge more, “the submission of the (insurer) will be rejected by the system,” it added.

Ms. Peters said in her statement that the problem is temporary. For 2014 only, “tobacco ratings across age groups cannot produce premiums that are more than a three-to-one ratio,” she said. “In 2015 and beyond, the system will expand to allow issuers to increase this ratio, if they choose to do so.”

Older smokers are more likely to benefit from the delay, experts say. But depending on how insurers respond to it, it’s also possible that younger smokers could wind up facing higher penalties than they otherwise would have.

The glitch could mean that insurers could charge all smokers the maximum allowable surcharge to get around the ratio problem, which would end up penalizing younger smokers with higher penalties than they might otherwise have received. But it is unclear what insurers will do.

“‘We are aware of the issue,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, an insurance industry group. “But I can’t speak to how insurers will respond to it.”

He said he was unaware of any estimates of how many people would be affected by the law’s insurance smoker surcharges.

Premiums for a standard “silver” insurance plan would be about $9,000 a year for a 64-year-old nonsmoker, according to the online Kaiser Health Reform Subsidy Calculator. That’s before any tax credits, available on a sliding scale based on income.

For a smoker of the same age, the full 50 percent penalty would add more than $4,500 to the cost of the policy, bringing it to nearly $13,600. And new tax credits available to help pay premiums cannot be used to offset the penalty.

The administration is suggesting that insurers limit the penalties across all age groups. The guidance document from the Department of Health and Human Services used the example of a 20 percent penalty for young and old alike.

In that case, the premium for a 64-year-old would be about $10,900, a significant cut from the $13,600 if insurers charged the full penalty.

Workers covered through job-based health plans would be able to avoid tobacco penalties by joining smoking cessation programs, because employer plans operate under different rules.

Article source: http://bucks.blogs.nytimes.com/2013/07/10/computer-snag-limits-insurance-penalties-on-smokers/?partner=rss&emc=rss

Health Spending Held Down by Recession

The recession, which lasted from December 2007 to June 2009, reined in the growth of health spending as many people lost jobs, income and health insurance, the government said in a report, published in the journal Health Affairs.

Lingering effects of the recession throttled back the explosive growth of health spending, which totaled $2.6 trillion, or 17.9 percent of the economy, in 2010, according to the government’s annual snapshot of health trends.

Health spending normally grows much faster than the economy. But in 2010 growth rates were similar, so that health care accounted for the same share of total economic output in 2009 and 2010.

“U.S. health spending grew more slowly in 2009 and 2010” than at any other time in the 51 years the government has been collecting such data, said Anne B. Martin, an economist in the office of the actuary at the Department of Health and Human Services.

While the recession crimped spending by consumers, employers and state and local governments, the federal government picked up the slack.

Federal health spending shot up 40 percent in three years, to $743 billion in 2010, from $530 billion in 2007, the report said. Some of the growth resulted from an increase in Medicaid enrollment and a temporary increase in the federal share of Medicaid spending, authorized by the economic stimulus law of 2009.

Medicare spending, for older Americans and the disabled, grew in 2010 by 5 percent, the smallest rate of increase in more than a decade, the report said. The main reason was a slowdown in spending for the managed care program known as Medicare Advantage.

Although some provisions of President Obama’s health care overhaul took effect in 2010, government economists said they had had little impact on the overall level of health spending and, in some cases, simply shifted payments from one source to another.

One of the more remarkable findings in the report is that increases in the volume and intensity of health care services made only a tiny contribution to the growth of health spending in 2010. In the past, this factor, reflecting increases in the number and complexity of procedures, was often cited as a major reason for higher health spending.

In 2010, the study said, hospitals reported a decline in admissions and slower growth in emergency room visits and outpatient visits. Likewise, it said, doctor’s office visits declined, and spending for doctors’ services grew just 1.8 percent, to $416 billion in 2010. Total health spending averaged $8,402 a person, up 3.1 percent from 2009, the report said.

Doctors often prescribe drugs during office visits, and the decline in visits helped slow the growth of drug spending, as did the use of lower-cost generic medications. The number of prescriptions filled rose just 1.2 percent in 2010, and total retail spending on prescription drugs also grew 1.2 percent, to $259 billion, the slowest rate of growth in a half-century, the report said.

For the first time in seven years, total private health insurance premiums grew faster than insurers’ spending on health care benefits, the administration said. Premiums totaled $849 billion in 2010, while spending on benefits totaled $746 billion. The difference includes administrative costs and profits.

The White House said the gap showed that the new health care law was needed to “keep insurance companies in check.” Under the law, insurers must disclose and justify premium increases larger than 10 percent.

In 2010, Ms. Martin said, “total spending on private health insurance benefits grew at the slowest rate in the 51-year history of the national health expenditure accounts.” Private insurance spending slowed, she said, because fewer people had private insurance, insurers shifted some costs to subscribers, charging higher co-payments and deductibles, and some subscribers switched to health plans with lower premiums.

Article source: http://feeds.nytimes.com/click.phdo?i=3aaf5771c9ce9b72395a123710284f1d

Bucks Blog: Computer Snag Limits Insurance Penalties on Smokers

Health Spending Held Down by Recession

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