The Collateral Damage

By ALLISON BELL

Published 6/2/2011 

The Patient Protection and Affordable Care Act of 2010 (PPACA) is costing some health insurance agents their jobs, interfering with the shift to the ICD-10 diagnostic coding system, and encouraging many employers to think about dropping group health coverage.

Witnesses talked about those observations today during a hearing on the effects of PPACA on efforts to maintain health coverage and jobs.

Rep. Joe Pitts, R-Pa., chairman of the health subcommittee at the House Energy and Commerce Committee, organized the hearing.

Pitts, a critic of PPACA, federal agencies have issued about 3,500 pages of PPACA-related rules, notices and corrections, with many of the rules published through an interim final rule process that bypasses the usual public comment period system.

President Obama said in July 2009 that, “If you like your plan, you’ll be able to keep it,” and PPACA includes a “grandfathering” system that is supposed to help individuals and employers keep their coverage, Pitts said, according to a written version of his remarks.

But the Obama administration itself estimated in June 2010 that about half of all employers will lose grandfather status in the next 2 years, Pitts said.

Another provision, the minimum medical loss ratio (MLR) provision, is supposed to require insurers to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care or quality improvement, but HHS already has granted waivers to Maine, Nevada and New Hampshire, and nine other states have applied for MLR waivers, Pitts said.

Ethan Rome of the Health Care Action Network, Washington, argued that the real problem is health insurer efforts to boost profits.

States require health insurers to have about $14 billion in risk-based capital, but the biggest publicly traded and nonprofit health insurers now have about $97 billion in risk-based capital, Rome said.

Health insurers complain that they have an overall average profit margin of 4.4%, but, because their revenue is so high, that transplants into a total of $347 billion in profits during the 10-year period that will end in 2019, Rome said.

From 2003 to 2010, publicly traded health insurers used $64 billion in cash to buy back their own shares, rather than pay for care or lower premiums, Rome said.

Janet Trautwein, the chief executive officer of the National Association of Health Underwriters (NAHU), Arlington, Va., said that the new MLR rules have led health insurers to cut agent and broker commissions 20% to 50%.

Carriers that have held commissions steady say they too will have to cut their commission rates if the current rules stay in effect, Trautwein said.

When NAHU surveyed members in February, 21% of the self-employed agents said they have had to downsize their businesses because of the compensation cuts, and 5% of the survey participants who had been working as agents for others said they had lost their jobs, Trautwein testified.

The typical annual compensation for health agents and brokers ranges from just $45,000 to $62,000 per year, and the compensation cuts are a severe blow, Trautwein said.

Randi Reichel, who appeared for America’s Health Insurance Plans (AHIP), Washington, said the official definition of “health care quality improvement activity” has been causing problems.

The United States is in the midst of an effort to shift to using ICD-10-CM, a modified version of the latest edition of the World Health Organization’s International Classification of Diseases (ICD) code set, by Oct. 1, 2013.

Maintaining the ICD-10 system might be an administrative cost, but converting to the new system from the ICD-9 system is clearly a quality improvement cost, Reichel said.

HHS officials themselves have recognized that the shift to ICD-10 is being made to improve health care and agencies’ ability to track the rise and spread of diseases that could cause epidemics, Reichel said.

AHIP members say ICD-10 implementation costs are averaging about $12 per member, and that means the shift could cost a total of about $3 billion industrywide, Reichel said.

Edward Fensholt, a compliance services director at Lockton Companies L.L.C., Kansas City, Mo., reported that 37% of client employers it surveyed see new PPACA wellness program rules are a benefit of PPACA.

But Fensholt noted that 31% of the employers said they like PPACA because they see the new health insurance subsidy system as a way to eliminate pre-65 retiree medical coverage