Weekend update

Last Thursday, the Centers for Medicare and Medicaid Services chief actuary Richard Foster released his report estimating the cost impact of the new health care reform law which Congress enacted in March. I strongly encourage everyone to read this report.

Mr. Foster finds that the new law will cause a net increase in health care spending over the next decade (est. $253 billion) while adding 34 million to the health insurance roll, principally Medicaid. Business Insurance reports that “The number of people enrolled in employer-sponsored plans will actually decline slightly when the new health care reform law is implemented fully” as people shift into the Exchanges and Medicaid.

The minority staff of the Joint Economic Committee published a report on the sizeable health insurer fee which the health care reform law applies to insured plans beginning in 2014. The fee is charged to insurers based on net premiums and is not tax deductible. It starts at $8 billion in 2014 and grows to $14.3 billion in 2018 (and indexed to medical inflation thereafter). This fee along with the fees on medical device manufacturers, brand name pharmaceuticals, etc. all will fall on the consumer. It’s no wonder that the CMS chief actuary expects the health care reform bill to bend the health care cost curve up.

Modern Healthcare reports that “HHS Secretary Kathleen Sebelius said government officials are expecting to face continued resistance from the insurance industry to some aspects of the reform bill, even as the commercial payers are implementing other aspects earlier than mandated deadlines.” I note that many insurers are accelerating implementation of the increased age 26 ceiling for dependent children. As OPM has indicated, this change will take effect for the FEHB Program on January 1, 2010. FEHB plans cannot make this change any earlier because the FEHB Act, 5 U.S.C. Sec. 8901, sets the ceiling at age 22.

In my view, HHS generates insurer resistance by, for example, issuing regulations, such as the February 2, 2010, interim final regulations implementing the 2008 federal mental health parity law, that cater to the medical profession and bend the cost curve up. I am concerned that HHS will follow the same path with the regulations implementing the health care reform law.

Publish Post

As previously noted on the FEHBlog, a group of managed behavioral health organizations known as the Coalition for Parity has challenged the validity of those mental health parity regulations in federal court. On April 14, the Coalition for Parity filed a summary judgment motion together with a supporting memorandum and statement of undisputed material facts. The Government’s response is due on May 3, and any reply is due on May 7. A federal district court decision should be handed down soon after oral argument of the motion (which I assume will take place).