1. Trends in Coverage and Insurance Regulations
By Michael Bertaut
Healthcare Economist
May 18, 2012
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2.  The opinions expressed in this presentation
by the presenter, and in the slides, do not
represent the stated positions of the
Louisiana Health Services Indemnity
Company, Blue Cross and Blue Shield of
Louisiana, HMO Louisiana, Southern National
Life, Benefit Management Services, Blue
Benefit Services, or any associated entities.
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3. The Issues:
1. Is the Individual Mandate
within Congress’
enumerated powers?
2. Is the Individual Mandate
severable?
3. If yes to (2), what must be
severed?
4. Does the Anti-Injunction
Act apply?
5. Is the Medicaid Expansion
a “commandeering” of the
states authority?
3

4.  Has argued 57 cases
before the Supreme
Court prior to this one
 Was Solicitor General
in 2007 under GW
Bush
 “He is the Lebron
James of appellate
court attorneys”
(Mayer-Brown)
 Continued his SCOTUS
defense of DOMA
even when his firm “One should never stop
fired him because of defending the Constitution of
gay-rights activist the United States simply because
complaints. it causes him financial hardship
or because it is not popular”
4

5.  Solicitor General since
June 9, 2011
 Succeeded Elena Kagan
 Hollywood connections,
Lead Counsel for RIAA
against file-sharing sites.
 Has argued 12 cases in
front of SCOTUS
Lead Counsel in the case of
 “Very low key, better with RIAA vs Thomas, where the
paperwork and rule recording industry made an
making” example of a single mom with a
teenage son who downloaded
music illegally.
5

6. Goal: Expand “Meaningful” Health Insurance
Coverage in a Revenue Neutral way:
1. Medicaid Expansion
2. Health Insurance Exchanges
3. Individual Mandates to buy coverage
4. Employer mandate to offer coverage
5. Define what health coverage is “essential”.
Create federal mandates.
6. Redirect future spending from Medicare to
1,2.
7. Redirect Health Insurance, Pharma, Device
Manufacturing revenue to 1, 2.
8. New Taxes on Individuals
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7. Adult Medicaid Eligibility.
Today: 15% of FPL, About $3,300 for Fam of 4
Means Testing, signficant assets disqualifies
Typically,
40 million enrolled at end of 2010 employees paid $8-
$10/hour will be
Medicaid eligible,
1/1/2014: Up to 138% of FPL, About $30,000 for on
depending
Family of 4 family status.
NO means testing, everybody qualifies
Estimate is 17 million new eligible adults eligible
with up to 11 million signing up Year 1
7
www.census.gov: 2008 Inflation Adjusted Dollars, 2009/2010 FPL guidelines 7

8.  May be State Run or Federally Controlled
 Income ranges from a low of $31,000 per
year up to a maximum level of $92,000 per
year (family of 4).
 Advanced tax credit to purchase coverage is
generated based on FPL level.
 Many carriers may be listed, along with Co-
Ops and national OPM plan run from DC
 Final Reg on STATE-RUN Exchanges issued
(644 pages). Federal Fall Back Exchanges still
pending.
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9. Family Adult 1 Adult 2 Child 1 Child 2
Ages 40 36 6 4
Issuer B B(Benchmark) B B
Metal Level Bronze Silver Gold Platinum
Premium $9,393 $10,963 $12,524 $15,350
Family Income $35,000/year (149% of FPL)
Premium Tax Subsidy $9,393 $9,577 $9,577 $9,577
Family pays: $0 $1,386 $2,947 $5,773
Payment % of Income 0.0% 4.0% 8.4% 16.5%
Family Income $88,000/year (375% of FPL)
Premium Tax Subsidy $2,603 $2,603 $2,603 $2,603
Family pays: $6,790 $8,360 $9,921 $12,747
Payment % of Income 7.7% 9.5% 11.3% 14.5%
9

10.  Incarcerated
 Income above 400% of FPL
 Offered qualified coverage at work (affordable
and essential benefit coverage)
 Accept non-qualified coverage at work
 Medicaid or CHIP eligible (income <138% fpl)
 Claimed as a dependant on someone’s taxes
 In the country unlawfully (but you do get 90
days of Medicaid coverage while your
citizenship is being verified)
 Unable to attest to residency in a single state.
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11.  Law that requires all Americans to have health
insurance policy
 Starts 1/1/2014
 Exemptions for unaffordable coverage (above
8.5% of income), certain religious groups,
native Americans.
 Failure to comply means confiscation of tax
refund starting at $95 for first year and rising
to $695 or 2.5% of income by 2017.
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12.  Applies to all firms or control groups that
regularly use more than 50 FTE’s of labor.
 3 options:
1. Must offer “affordable”, “essential” health
coverage to employees.
2. If “no” to 1, may offer “sub-standard” non-QHP
coverage. Employer is fined $250 per month per
employee who “leaks” to the Exchange
3. May choose not to offer coverage at all, employer
must pay $2,000 per year per uncovered
employee minus first 30 lives.
12

13. Goal: Expand “Meaningful” Health Insurance
Coverage in a Revenue Neutral way:
1. Medicaid Expansion
2. Health Insurance Exchanges
3. Individual Mandates to buy coverage
4. Employer mandate to offer coverage
5. Define what health coverage is “essential”.
Create federal mandates.
6. Redirect future spending from Medicare to
1,2.
7. Redirect Health Insurance, Pharma, Device
Manufacturing revenue to 1, 2.
8. New Taxes on Individuals
13

14.  Cover “essential
benefits”
 Not be priced on
medical/health status
 Be guaranteed issue
 Be age rated only 3:1
 Be priced to be gender
neutral
 May rate up to 50%
higher for tobacco use
 May alter rates for
family status
 Have at least 60%
Actuarial Value (Bronze,
70% Silver, 80% Gold,
90% Platinum)
 Are never grandfathered
14

15.  PPACA lists 10 specific areas of coverage that
ALL health plans must include:
◦ Ambulatory patient services
◦ Emergency services
◦ Hospitalization
◦ Maternity and newborn care
◦ Mental health, substance abuse, behavioral health
◦ Prescription drugs
◦ Rehabilitative and habilitative services and devices
◦ Laboratory services
◦ Preventive, wellness services, chronic disease mgt.
◦ Pediatric services including oral and vision care
15

16.  STATES will select essential
benefits benchmark from
following options:
◦ 1 of the 3 largest, by
enrollment, small group (<100
lives) products sold in the
state.
◦ 1 of the 3 largest, by
enrollment, products offered
to state government
employees
◦ The largest FEHBP offering in
the state
◦ The largest commercial HMO
offering in the state.
16

17. ITEM Individual Group ASO
No Lifetime Limits on Coverage/MLR Existing, E, N E, N
Restrictions New
No Annual Limits on “essential New E,N E,N
benefits” (except 1400 waiver groups)
Dependents to Age 26 (married is ok) E, N E,N E,N
Rescission (intentional fraud, fact), E,N E,N E,N
External Review
Guarantee issue For <19 year olds. New E, N E, N
Schedule A & B, immunizations at 1st New New New
Dollar (45 Tests & Screenings)
Emergency Room Equal Payment New New New
No discrimination based on salary N/A New New
“Existing” = Grandfathered; “New” = Non-Grandfathered
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18. ITEM Individual Group ASO
W-2 Reporting of all health benefits N/A All All
(pushed back to 2012, 13, or 14
depending on group size)
Uniform Benefit Summaries E,N E,N E,N
Essential Health Benefits New New ??
(Punted to States)
105h Discrimination Update N/A E,N E,N
(GF Safe Harbor)
New External Review Processes New New New
New Women’s Coverages New New New
MLR Requirements E,N E,N N/A
Rate Review (reasonable?) E,N E,N N/A
“Existing” = Grandfathered; “New” = Non-Grandfathered
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19.  Applies to all Non-GF Groups save Churches
 Begins with renewals 8/1/2012
 Services are Free to Insured
 Includes:
◦ FDA Approved Contraceptive Methods:
 “Morning After” Pill
 Tubal Ligation
 All (generic) pills, IUD’s, other methods
◦ Screening for gestational diabetes
◦ HPV DNA Testing (women over 30)
◦ STD counseling
◦ HIV screening and counseling
◦ Breastfeeding “support”, supplies, counseling
◦ Domestic violence screening and counseling
19

20.  Auto-enrollment for groups >200 lives delayed
beyond 2014
 Under employer mandate, all employees 30
hrs/week or above must be offered coverage (up
to 12 month look-back period allowed)
 No waiting periods >90 days long
 W-2 Wages will be used to determine
“affordability”, not household income
 SBC/UBS in effect 9/23/2012
 GRANDFATHERING AUDITS CURRENTLY
UNDERWAY!!!!
 Small self-funded plans, reinsurance with low
attachment points, under attack from CMS.
20

21.  Created to honor
President’s promise “if
you like the insurance
you have, you can keep
it”
 Provides a safe harbor
against some changes
in PPACA, delays others
 Impact varies by size of
Group and type of
coverage
 Over 75% of fully
insured groups and 60%
of ASO groups are still
grandfathered (EOY
2011)
21

22.  Avoid the claims cost of new first dollar
coverages (See Women’s Coverage slide).
 Avoid coming fully insured rate compression.
 Avoid paying for USPTF Schedule “A” and “B”
testing at first dollar.
 Avoid paying for experimental treatments.
 Avoid higher payments to ER Docs without
protection from balance billing.
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23.  Change Carriers or certain plan changes (fully insured groups).
 Any change in coinsurance that increases employee share of
medical payments (like going from 80/20 to 70/30).
 Any increase in a fixed payment amount (except co-payments)
of more than medical inflation plus 15%.
 Any increase in a co-payment that exceeds the greater of
medical inflation since 3/23/2010 plus 15%, OR $5 plus medical
inflation.
 Decrease of employer contribution to premiums by more than
5% below the level on March 23, 2010. (Ex. If employer lowers
contribution on family coverage from 80% to 70% this violates
grandfathering)
 Eliminating any benefit for diagnosis or treatment or any part of
treatment for any particular condition that was covered by the
plan on 3/23/2010.
23

24. Goal: Expand “Meaningful” Health Insurance
Coverage in a Revenue Neutral way:
1. Medicaid Expansion
2. Health Insurance Exchanges
3. Individual Mandates to buy coverage
4. Employer mandate to offer coverage
5. Define what health coverage is “essential”.
Create federal mandates.
6. Redirect future spending from Medicare to
1,2.
7. Redirect Health Insurance, Pharma, Device
Manufacturing revenue to 1, 2.
8. New Taxes on Individuals
24

25. PAYING FOR PPACA: THE FIRST 10 YEARS
2011-2019
Source Type Amount ($B)
Medicare Reimbursements I.P.A.B. Changes, F,W,A. Changes $285
Medicare Premiums Increased for higher income individuals $210
Medicare Advantage Subsidies Reduction in Subsidy to MA Plans $136
CLASS ACT Mandatory long term insurance program $76
$942B in REVENUE
Health Insurance Providers
Medicare Part D Claims
Annual Fee to Sell Insurance in U.S.
Increased rebate requirements to Pharma
$60
$43
FOR FIRST 10 YEARS
Health Insurance Tax on Premiums Tax on high value health insurance $32
Drug Manufacturers Annual Fee to Sell drugs in U.S. $27
Medical Device Manufacturers Impose 2.3% VAT on sales $20
Taxpayers with medical expenses Medical expense deduction to 10% (fr. 7.5%) $15
Individuals, Businesses Fines for Non-Compliance $15
Limit contributions to FSA's to $2,500
Employees annually $13
Medicare Part D Premiums Reduction in Subsidy $10
25

26.  On 1/15/2012, we were able
to identify 177 different new
sets of regulations/bulletins
comprising over 30,000
pages spawned specifically
by PPACA/HCERA so far.
 4 separate university and
Congressional analysis show
costs may be understated by
up to 50%.
 Former CBO Director
Douglas Holtz-Eakin says
PPACA will overspend by
$560B in first 10 years.
26

27. 6% Salaries/Admin
85% of Premiums Went to Medical in 2011 5% Commissions
In 2011, BCBSLA collected 3% Reserves
$2.5B in risk premiums, 1% Taxes
broken out like this:
$925M; $775M; $357M; $425M;
37% 31% 17% 15%
10¢
Admin
Cost Including
Taxes,
Commissions
3¢
Future Claims
Reserves/Profits
NATIONAL 31¢ 30¢ 6¢ 2¢ 1¢ 2¢
13¢ Nursing Home
Other
AVERAGES
Hospital Physician Prescription Dental
and Clinical Drugs Services Professional Home Health
Services Services Care
BCBSLA Audited Financial Results FY 2011
National Averages From NIHCMF 2010 Update (2011) 27

28. Commercial Uninsured Louisianans (in Thousands)
Individual 590
78 13%
2%
Medicaid n = 4,574,836
1,126 Government
Commerical
24% Insures 39.5%
Group
739
16%
Medicare
Blue Cross
502
Blue Cross Group
11%
Individual 1,234
127 Dual Eligibles
27%
3% 179
BC Share 30% 4%
Data from Variety of sources including (but not limited to) U.S. Census Bureau, LIMRA, BCBSLA internal
membership counts, DHH, Kaiser StateHealthFacts, CMS 28

29. EXCHANGE Louisianans (in Millions)
Uninsured 0.632m
0.106m 14%
2%
n = 4.533m
Comm. Ind Government
0.035m Medicaid Insures 49%
1% 1.43m
Comm. Grp 32%
0.542m
BC Share 23% 12%
Medicare
BC Group 0.64m
0.97m 14%
BC Individual
21%
0.052m
1%
Dual Eligibles
0.11m
3% 29

30. Hospital Payment-to-cost Ratios for Medicare, Medicaid and Private Payers
1995-2009
“Our research shows 87% of hospitals
nationwide either lose money or break
even treating Medicare Patients. Of the
13% that don’t lose money the average
140%
profit margin is 3%.” John Whittlesey, 131% 133% 131% 132%
Healthcare Management Council 2010 129% 129%
124%
Paymenr-to-cost Ratio
122% 122%
118% 116% 119% Break Even (Payment = Cost)
120% 115% 116% 117%
SGR Limits Enacted
104% 102%
99% 102% 100% 99% 98%
98%
100% 95%
92% 92% 91% 91% 92% 91%
96% 97% 96% 95% 96% 96%
94% 95% 92%
90%
87% 87% 88% 88% 86%
80%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
Private Payers Medicare Medicaid
Note: Payment-to-cost ratios indicate the degree to which payments from each payer covers the costs of treating that provider’s patients.
Data are for community hospitals and cover all hospital services. Imputed values were used for missing data (about 35% of observations).
Most Medicaid managed care patients are included in the private payers’ category.
Source: Adapted from the American Hospital Association and Avalere Health TrendWatch Chartbook 2007: Trends Affecting Hospitals and 30
Health Systems

31.  $8B (in 2014) to $14.3B (in
2017) in new taxes for
carriers (BCBSLA Share $36m
in 2014, projection is 2% of
trend going forward).
$1-2 per head tax for
PPACA

Patient Centered Outcomes
Research Institute (2013).
 $18-24B in risk adjustment
pool funding by 2014.
 MLR adjustments.
 Rate Caps (over 10% Health
increase “unreasonable”). Insurance
Carriers
31

32.  PPACA indicates children
must be covered on
parent’s policies without
regard to Pre-Existing
Conditions
 HHS expanded to
“Guaranteed Issue for all
Children” before Mandate.
 Four of Five Individual
Carriers have left Louisiana.
32

33.  In an Emergency, PPACA orders carriers to
pay out of network Emergency Departments
the same as in-network without limiting
balance billing.
 ER’s Docs are leaving networks in droves
 Patients insurance will provide no protection
in the ER, even in an in-network hospitals.
 Around 1/3rd of Network Hospitals have
O.O.N. ER Docs.
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34. Office: 225-297-2719
Cell: 225-205-4628
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