Friday, May 31, 2013

Obamacare’s Other Surprise

Published: May 25, 2013

LISTENING to the debate about President Obama’s health care plan, some critics argue that Obamacare is going to need Obamacare — because it’s going to be a “train wreck.” Obama officials insist they’re wrong. We’ll just have to wait and see whether the Affordable Care Act, as the health care law is officially known, surprises us on the downside. But there is one area where the law already appears to be surprising on the upside. And that is the number of health care information start-ups it’s spurring. This is a big deal.
The combination of Obamacare regulations, incentives in the recovery act for doctors and hospitals to shift to electronic records and the releasing of mountains of data held by the Department of Health and Human Services is creating a new marketplace and platform for innovation — a health care Silicon Valley — that has the potential to create better outcomes at lower costs by changing how health data are stored, shared and mined. It’s a new industry.
Obamacare is based on the notion that a main reason we pay so much more than any other industrial nation for health care, without better results, is because the incentive structure in our system is wrong. Doctors and hospitals are paid primarily for procedures and tests, not health outcomes. The goal of the health care law is to flip this fee-for-services system (which some insurance companies are emulating) to one where the government pays doctors and hospitals to keep Medicare patients healthy and the services they do render are reimbursed more for their value than volume.
To do this, though, doctors and hospitals need instant access to data about patients — diagnoses, medications, test results, procedures and potential gaps in care that need to be addressed. As long as this information was stuffed into manila folders in doctors’ offices and hospitals, and not turned into electronic records, it was difficult to execute these kinds of analyses. That is changing. According to the Obama administration, thanks to incentives in the recovery act there has been nearly a tripling since 2008 of electronic records installed by office-based physicians, and a quadrupling by hospitals.
The Health and Human Services Department connected me with some start-ups and doctors who’ve benefited from all this, including Dr. Jen Brull, a family medicine specialist in Plainville, Kan., who said that she was certain she had been alerting her relevant patients to have colorectal cancer screening — until she looked at the data in her new electronic health care system and discovered that only 43 percent of those who should be getting the screening had done so. She improved it to 90 percent by installing alerts in her electronic health records, and this led to the early detection of cancer in three patients — and early surgery that saved these patients’ lives and also substantial health care expense.
Todd Park, the White House’s chief technology officer, said many new apps being developed have been further fueled by the decision by Health and Human Services to make available massive amounts data that it had gathered over the years but had largely not been accessible in computer readable forms that could be used to improve health care. 
It started in March 2010 when Health and Human Services met with “45 rather skeptical entrepreneurs,” said Park, “and rather meekly put an initial pile of H.H.S. data in front of them — aggregate data on hospital quality, nursing home patient satisfaction and regional health care system performance. We asked the entrepreneurs what, if anything, they might be able to do with this data, if we made it supereasy to find, download and use.” They were told that in 90 days the department would hold a “Health Datapalooza,” — a public event to showcase innovators who harnessed the power of this data to improve health and care.
Ninety days later, entrepreneurs showed up and demonstrated more than 20 new or upgraded apps they had built that leveraged open data to do everything from helping patients find the best health care providers to enabling health care leaders to better understand patterns of health care system performance across communities, said Park. In 2012, another “Health Datapalooza” was held, and this time, he added, “1,600 entrepreneurs and innovators packed into rooms at the Washington Convention Center, hearing presentations from about 100 companies who were selected from a field of over 230 companies who had applied to present.” Most had been started in the last 24 months.
Among the start-ups I met with are Eviti, which uses technology to help cancer patients get the right combination of drugs or radiation from Day 1, which can lower costs and improve outcomes; Teladoc, which takes unused slices of doctors’ time and makes use of it by connecting them with remote patients, reducing visits to emergency wards; Humedica, which helps health care providers analyze their electronic patient records, tracking what was done to a patient, and did they actually get better; and Lumeris, which does health care analytics that uses real-time data about every aspect of a patient’s care, to improve medical decision-making, collaboration and cost-saving.
Obamacare will be a success only if it can deliver improved health care for more people at affordable prices. That remains to be seen. But at least it is already spurring the innovation necessary to make that happen.

According to a recent study:

  • Admissions to Intensive Care Units (ICU's) from Emergency Departments (EDs) increased from 2.79 million in 2002/2003, to 4.14 million in 2008/2009
  • This is an absolute increase of 48.8% and a mean biennial increase of 14.2%
  • At the same time, overall ED visits experienced a mean biennial increase of only 5.8%
  • Across all years, mean ED length of stay for ICU admissions was 304 minutes, and mean hospital length of stay was 6.6 days
Source: "National Growth in Intensive Care Unit Admissions From Emergency Departments in the United States from 2002 to 2009," Academic Emergency Medicine, abstract only, May 14, 2013,

Thursday, May 30, 2013

According to a recent study, in 2012:

  • The total cost of medicines declined by 3.5% on a real per capita basis, to $325.8 billion
  • Lower-cost generics accounted for 84% of all prescriptions
  • The average pharmacy benefit co-pay declined by $2 to $121
  • Patients filled 72% of all retail prescriptions with a co-pay of $10 or less
Source: "IMS Health Study Points to a Declining Cost Curve for U.S. Medicines in 2012," IMS Institute for Healthcare Informatics Press Release, May 9 2013,

Federal exchanges attract about 120 health plan issuers

May 30, 2013

Officials have not said how they're defining "issuer."

White House officials have given "interested parties" a peek at federal Patient Protection and Affordable Care Act (PPACA) exchange plan application results in a new memo.

The 19 states with "federally facilitated exchanges" (FFEs) have attracted applications from "over 120 issuers," officials said in the memo.
Officials did not list the issuers or say, for example, whether they are counting multiple operating companies that are owned by the same holding company separately.
Applications from carriers that want to sell medical coverage, or "qualified health plans" (QHPs), through the federal exchanges were due April 30.
PPACA calls for the U.S. Department of Health and Human Services (HHS) to set up exchanges, or Web-based health insurance supermarkets, in all 50 states and the District of Columbia by Oct. 1, 2013.
Seventeen states and the District of Columbia are setting up state-based exchanges, and 15 are working with HHS to set up "partnership exchanges."
Drafters of PPACA included a "multi-state plan" (MSP) provision that is supposed to increase the level of competition on the exchanges by requiring exchanges to make shelf space available for MSPs.
The U.S. Office of Personnel Management (OPM) would oversee the MSPs, and the MSPs could operate in more than one state.

OPM has been running an MSP bidding process but has not said anything about the results.
In the new memo, White House officials said it believes that carriers will offer MSP options in at least 31 states in 2014.

"OPM is currently reviewing over 200 proposed Multi-State qualified health plan options," officials said.
Reports from the FFEs, the state-based exchanges and the partnership exchanges suggest that about 90 percent of "target exchange enrollees" will be able to choose from plans sold by at least five carriers, officials said.

The carriers participating in the exchange program hope to offer about 15 QHPs per state, officials said.
White House officials said they believe the level of competition available through the exchange QHP menus will be much better than the level of competition consumers in many states now enjoy.
In 2012, in 11 states, the largest two issuers covered 85 percent or more of the enrollees in the individual market, officials said.

In 46 states, officials said, two insurers covered more than 50 percent of the enrollees in the individual market.

Officials are predicting that 7 million people will buy coverage through the exchange system in 2014.
About 85 percent of those people live in one of the 46 states in which two insurers now cover more than half of all individual market enrollees, officials said.

In FFE states, 75 percent of the exchanges have attracted at least one new provider of individual health coverage, officials said.

"Given market sensitivities and the fact that plan agreements are not signed until September, HHS will not release state-specific rate information until September when rates are finalized," officials said.
State regulators can help oversee exchange plans even in FFE states. State regulators in some FEE states may choose to post plan rate filing or approval information for exchange plans before September,
officials said.

Medicare Spending Variations Mostly Due To Health Differences, Study Concludes

KHN Staff Writer
May 28, 2013
The idea that uneven Medicare health care spending around the country is due to wasteful practices and overtreatment—a concept that influenced the federal health law -- takes another hit in a study published Tuesday. The paper concludes that health differences around the country explain between 75 percent and 85 percent of the cost variations. 
“People really are sicker in some parts of the country,” said Dr. Patrick Romano, one of the authors.
That’s a sour assessment for those hoping to wring large savings out of the health care system by making it more efficient. Some, such as President Barack Obama’s former budget director, Peter Orszag, assert that geographic variations in spending could mean that nearly a third of Medicare spending may be unnecessary.
Their conclusions are based on the wide differences in spending, which in 2011 ranged from an average of $14,085 per Medicare beneficiary in Miami, to $5,563 per beneficiary in Honolulu, even after Medicare’s cost of living and other regional adjustments — but not health status — were taken into account.
The new study comes as advisors to the government consider whether regional differences are a useful tool to reduce health spending. An Institute of Medicine panel is preparing a report on whether Congress should pay less to hospitals and doctors in areas where there is heavy use of medical services, and more in regions where spending is lower. That report is due out this summer, but an interim version indicated that the panel was opposed to the idea.
The new paper is one of the sharpest attacks yet on the work of the Dartmouth Institute for Health Policy & Clinical Practice, whose three decades of research has popularized the theory that the unexplained regional differences in spending are due to the aggressiveness of some physicians to do more, in large part because it enriches them. The theory, popularized by a 2009 New Yorker article on high spending in McAllen, Texas, has divided health policy experts.
Dartmouth’s research has influenced a generation of health policy thinking. It helped provide a rationale for part of the health law that pushes hospitals to operate more efficiently by penalizing high cost ones.  Dartmouth researchers were also among the original architects of  “accountable care organizations,” to create financial incentives for physicians to avoid unneeded tests and treatments. 
In the study published in the journal Medical Care Research and Review, researchers affiliated with the Center for Studying Health System Change, a Washington think tank, purport to poke holes in the methods that Dartmouth uses. They conclude that it is “erroneous” to compare spending on different Medicare beneficiaries in their final months of life. By looking at the diagnoses included in Medicare claims, the researchers concluded the patients in different parts of the country were not equally ill, explaining much of the higher spending.
“The trouble with Dartmouth is they were trying to spin a simple story from a world which is far more complex and far more nuanced,” said James Reschovsky, the lead author on the paper. “They are to be credited for highlighting that there’s a lot of inefficiency in the delivery of health care in the United States. They defaulted by hanging their hat on geographic determinants of efficiency, and I think that premise is fundamentally being torn down, not only by my research, but also by the IOM work and a bunch of other studies.”
Dartmouth strongly disputed the study, which they said they could not replicate. Jonathan Skinner, a Dartmouth economist, called the study “fatally flawed” in an email. He noted that the Institute of Medicine’s preliminary report stated that “although a non-trivial amount of geographic variation can be explained by specific demographic and, potentially, health status variables, a substantial amount of variation remains unexplained.” (Dartmouth's response can be read here.)
Skinner also noted that Dartmouth researchers have never endorsed the idea of adjusting Medicare spending by region.
Dartmouth researchers have long maintained that experts shouldn’t trust Medicare diagnosis records, which the new study used for its analysis. They believe that doctors in some areas of the country are more aggressive in diagnosing people with serious ailments than doctors elsewhere.
The new paper disputes this by looking at conditions such as hip fractures, head injuries and heart attacks, in which there’s little diagnosing discretion. The geographic differences in spending for those conditions were “strikingly consistent” with conditions where doctors might have more wiggle room in attaching a diagnosis.
“You can’t tell me that major head injuries, heart attacks, and amputations are underdiagnosed in low-spending areas,” said Romano, a professor at the University of California Davis School of Medicine. Jack  Hadley of George Mason University was the third author of the paper.
But Skinner said that Dartmouth’s efforts to reproduce the new study's findings, using its own cache of Medicare data, led to very different results. Dartmouth for instance, found that hip fractures in the highest-spending areas were only 13.5 percent more frequent than in low spending areas--much less than for conditions where doctors had leeway in diagnosing. “That completely pulls the rug out from under their point – from their paper, in fact,” Skinner wrote.
Maribeth Shannon, a senior official at the California Healthcare Foundation, which has given grants to both Dartmouth and the Center, said that Dartmouth’s research was more carefully couched than its popular depictions. “People are stretching the research beyond the reasonable bounds,” she said. “We always have to take the research with its limitations.”
2008 “white paper” from Dartmouth directed at policy makers and titled “an agenda for change” implied the possibility of substantial savings if Medicare rooted out inefficiency and unnecessary treatments. “How much could Medicare save?” the paper asked. “Given the strong national reputations enjoyed by such organized practices as the Mayo Clinic and Intermountain Healthcare, and the objective evidence that they deliver more efficient, higher quality care, it seems reasonable to use these systems as benchmarks for the rest of the country. Were all providers in the country to achieve the same level of efficiency for inpatient spending on supply-sensitive care, we estimate a 28 percent reduction in hospital spending under a Mayo benchmark and a 43 percent reduction under an Intermountain benchmark.”
Previous research also has picked at some of the pillars of Dartmouth research and assertions made by its advocates. A 2010 study questioned whether health spending in the employer market tracks Medicare spending, as the New Yorker article had claimed.
More recent studies have found that spending varies wildly within regions of the country, in some cases more than it varies around the country.
Still, while faulting Dartmouth's methods, the new paper left between 15 percent and 25 percent of geographic differences unexplained. And Romano said he agrees there are substantial differences in how medicine is practiced. “I really do believe there is huge practice variation, but I don’t think we see that variation at the level of these large geographic units,” he said. “We see those variations at the level of individual physician practices.”
This article was produced by Kaiser Health News with support from The SCAN Foundation.

Immigrants Contribute More To Medicare Than They Take Out, Study Finds

KHN Staff Writer
May 29, 2013
As Congress mulls changing America’s border and naturalization rules, a study finds that immigrant workers are helping buttress Medicare’s finances, because they contribute tens of billions a year more than immigrant retirees use in medical services.
“Immigrants, particularly noncitizens, heavily subsidize Medicare,” the researchers wrote in the journal Health Affairs.  “Policies that reduce immigration would almost certainly weaken Medicare’s financial health, while an increasing flow of immigrants might bolster its sustainability.”
The Hospital Insurance Trust Fund, which pays for Medicare’s Part A inpatient hospital care, skilled nursing facilities, home health and hospice for the aged and disabled, had assets of $244 billion at the start of 2012 but is projected to run out of money in 2024 as the population ages, according to estimates of the Medicare trustees. It is financed by payroll and self-employment taxes.
The study examined the impact of 29 million immigrants counted in the Census on the financing of the Medicare program. It included those who had become U.S. citizens as well as those who hadn’t, but, the authors noted, probably excludes many illegal immigrants who dodged the survey.
The study found that in 2009, immigrants contributed $33 billion to the trust fund, nearly 15 percent of total contributions. They received $19 billion of expenditures, about 8 percent, giving the trust fund a surplus of $14 billion. People born in the United States, on the other hand, contributed $192 billion and received $223 billion, decreasing the trust fund by $31 billion, according to the paper’s lead author, Leah Zallman, a scientist at Cambridge Health Alliance in Massachusetts,  
Between 2002 and 2009, immigrants generated a cumulative surplus of $115 billion for the trust fund, the study found. Most of the surplus contribution came from noncitizens. The immigrants created a net gain primarily because of demographics: There are 6.5 immigrants of working age for every one elderly immigrant, but only 4.7 working-age native citizens for every one retiree. Although that ratio could change in the future, the report notes that the Census Bureau projects that the share of immigrants in the United States will increase for the next 18 years.
In addition, care for immigrants also costs Medicare slightly less. The average expenditure was $3,923 for immigrant enrollees and $5,388 for U.S. born enrollees, a difference “of borderline significance,” according to the paper, written by Zallman and health professors at the City University of New York and Harvard Medical School.
The researchers wrote that changes in the nation’s immigration policy that would create a path to citizenship for undocumented immigrants would increase revenues for the trust fund, as many workers would shift from under-the-table employment to work where payroll taxes were collected. Also, they would have an easier time getting higher-paid jobs. However, letting the undocumented become citizens would also increase the number eligible for Medicare and, therefore, the expenditures on their behalf.
The researchers did not factor in the Supplementary Medical Insurance Trust Fund, which finances Medicare Part B to pay for physician services and outpatient care, into most of their calculations. That’s because the financial trajectory of that fund is less clear, as it relies on enrollee premiums and annual appropriations from Congress. There was no significant difference between the amount spent on immigrants and U.S.-born people from that fund, the study noted.
The authors interjected personal views normally not found in academic papers of this sort: “Having ourselves witnessed immigrants dying needlessly because of lack of health care, we (and many of our colleagues) are motived by the belief that all patients have a human right to health care. But economic concerns — including the worry that immigrants are driving up US health care costs — have often dominated the debate over immigration. Our data offer a new perspective on these economic concerns.”
The paper anticipates that the immigrant surplus to the hospital trust fund will continue for many years, as most of those workers are decades away from retirement. In an interview, Zallman said, “If we continue to have a steady influx of working age immigrants, we’re likely to see the subsidy continue for many years to come.”
This article was produced by Kaiser Health News with support from The SCAN Foundation.

Feds, States, Plans, Start Early Campaigns Promoting Exchanges

Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.

By Neal Learner, Editor
May 20, 2013 Volume 4 Issue 10
While the big marketing push is expected later this summer, some states and private insurers, along with the federal government, already are launching consumer-awareness campaigns to promote the insurance exchanges that start in October. Colorado and a multistate Blues operator are among the players getting an early jump on finding and encouraging millions of uninsured individuals to seek coverage. HHS also recently released guidance on how agents and brokers should sign up people, and announced it would provide $150 million for community health centers to provide enrollment assistance.
These efforts come amid increasing attacks by Republicans — and nervousness from some Democrats — that far fewer people than expected will purchase plans offered on the exchanges.
A top official involved in Massachusetts’ 2006 effort to enroll individuals tells HRW that there is still plenty of time to attract people for enrollment. But others say no efforts should be spared at this point to ensure that the next phase of the Affordable Care Act (ACA) is successful.
“It’s all hands on deck,” says Timothy Jost, a professor at the Washington & Lee University School of Law and consumer adviser to the National Association of Insurance Commissioners.
“We need everybody we can to get people signed up, because many of these will be people who have not traditionally bought health insurance, and they’re going to be — some of them — pretty hard to reach,” he tells HRW. “Many of them don’t speak English, many of them have limited reading capacity, many of them have limited ability to deal with numbers, and many of them don’t have access to computers. We really need to get out there and find them.”
These are among the factors behind Colorado’s May 6 launch of a $2 million ad campaign to introduce residents to the state’s online marketplace, known as Connect for Health Colorado. The campaign, which is the first state outreach effort around the ACA’s exchanges, features television, print, radio and billboard ads.
A similar consumer outreach effort is under way by Health Care Service Corp. (HCSC), which operates Blues plans in Texas, Illinois, Oklahoma and New Mexico.
The “Be Covered” campaign, launched this spring, stems from HCSC research that shows the vast majority of the uninsured in its markets are confused about the ACA, have little experience with the insurance industry, and need help understanding how they can connect to health care services in general, says HCSC spokesperson David Sandor.
“Before engaging in product marketing, we believe that basic education is needed to address the knowledge and experience gaps our research uncovered,” he tells HRW. “To gain traction with so many people in such diverse communities, we had to start early and establish relationships with credible community organizations that could reach and motivate people.”
The Be Covered campaign provides a grassroots infrastructure for education and ongoing discussion, Sandor explains.
“You cannot approach this as a mass advertising sprint through an open-enrollment period. To succeed will require a social marketing marathon fueled by a sophisticated understanding of diverse cultures, demographic trends and differing value propositions,” Sandor says, likening the effort to long-term campaigns around seatbelt use and eating a balanced meal.
Colorado’s and HCSC’s efforts likely will be welcomed by federal officials who have a limited budget to publicize the exchanges. Despite requesting $249 million from Congress for consumer-outreach efforts, HHS received just $54 million for the Navigator program, which will help consumers understand and find coverage options on the exchanges (HRW 3/25/13, p 1).
The lack of federal funding is a major concern, says Jost. “It’s distressing that on the one hand the opponents of ACA are doing everything they can to starve it of resources to make it very difficult, if not impossible, to do its job,” he asserts. “And on the other hand, they’re saying, ‘it’s a train wreck, they’re not getting it done.’ I don’t know what you do in that situation other than soldier on.”
Republicans in Congress have been unwilling to allocate new money to finance government outreach efforts. And even Democratic Sen. Max Baucus (D-Mont.), Senate Finance Committee chairman and an architect of the ACA, worried that the rollout could result in a “train wreck.”
Aiming to avoid this outcome, HHS said on May 9 that it would use $150 million in new funding to hire staff, train existing staff and conduct outreach events and other educational activities through the nation’s roughly 1,200 community health centers, which serve approximately 21 million patients per year.
“Health centers have extensive experience providing eligibility assistance to patients, are providing care in communities across the nation, and are well-positioned to support enrollment efforts,” said HHS Sec. Kathleen Sebelius.
These workers will be seeking out a public that is still mostly unaware of the exchanges. A recent Kaiser Family Foundation survey found that 77% of people know little or nothing about them.
President Obama did his part to raise awareness of the exchanges during a May 10 speech that showed how the ACA was especially benefiting women. Obama acknowledged that some people are anxious about the effort to date. “So I’m here to tell you, I’m 110% committed to getting it done right,” he said. “It’s not an easy undertaking, but if it were easy, it would have already been done a long time ago.”
Furthermore, CMS this month released guidance on the role of agents and brokers in educating and enrolling consumers through the federally facilitated and state partnership marketplaces (see chart, below).
According to the guidance, agents or brokers appointed by the insurer can initiate enrollment of a consumer through the insurer’s website without having to show all of the plans that are available through the exchange, Jost says.
“It’s going to get producers and insurers more excited about trying to use the exchange and getting people signed up,” he says. “On the other hand, one of the major purposes of the exchange was to create a competitive marketplace. If all you’re seeing are the Blue Cross plans or the United plans or the Aetna plans, that’s not a competitive marketplace, that’s preserving the kind of market concentration we already have in health insurance.”
The guidance does say that the agent or broker has to inform the consumer of his or her right to go to the exchange website and see all of the options. “But there is always the problem, are they going to mutter that under their breath, put it in fine print, or is it going to be right up there out front?” Jost says.
Mass. Offers Glimpse of Enrollment Outcome
The 2006 health reform law in Massachusetts, which served as the model for the ACA, may offer a glimpse of how efforts around awareness and enrollment might play out this fall and into 2014.
The state and the private sector launched major advertising campaigns leading up to implementation of the Massachusetts law, which, like the ACA, required everyone to obtain insurance or pay a tax penalty, says Patricia Andriolo-Bull. She is the former director of Commonwealth Choice at the Massachusetts Health Connector and now vice president of payer business development at consulting firm athenahealth.
The effort included all types of media, including television and radio, she tells HRW. One of the most effective campaigns, especially to reach the “young invincibles,” involved a partnership with the Boston Red Sox. “If you know anything about Massachusetts, that’s a really good way to capture people’s attention,” she says.
Andriolo-Bull contends there is still plenty of time to gain people’s attention and enroll them in the fourth quarter and early 2014.
“I think as people get back into school and parents get back into a rhythm and kids go back to college, you’re going to capture more people through an advertising campaign,” she says. “September probably makes the most sense if you want value for your dollar. It’s soon enough and they’ll start hearing about the exchanges, and there will actually be exchanges that they can start thinking about, and you can tell them where to go and they can get information.”

Sizing Up Health Costs

How Three Business Owners Are Coping With New Insurance Requirements
Updated May 29, 2013, 8:25 p.m. ET
Companies with fifty or more full-time employees will soon have choices to make to comply with the Affordable Care Act. WSJ’s Jason Bellini breaks down the options.
Small employers across the U.S. are struggling to get a handle on their health-care costs under the Affordable Care Act.
Many of them say they expect their operating expenses to jump in 2014, when the law's employee health-insurance requirements take effect. But they acknowledge that their forecasts are back-of-the-envelope calculations based on only partial information.
Starting next year, the federal government will impose penalties on any business with 50 or more full-time equivalent employees that doesn't provide adequate health-insurance coverage to workers who clock 30 or more hours a week.
If such employers choose not to offer health coverage, they will face a penalty of $2,000 for each full-time worker, excluding the first 30.
If they do offer coverage, but the insurance doesn't meet the law's minimum requirements, they face a penalty of $3,000 for each worker who gets a federal subsidy through state insurance exchanges.
Owners with between 50 and 200 full-time employees are in a particularly tough spot. These businesses are big enough to meet the government's threshold for penalties, but they lack the purchasing power to negotiate the best rates with insurers.
The Obama administration says the law will help small employers. It will let them "pool risk with other small businesses to get more competitive rates, says Erin Shields Britt, a spokeswoman for the Department of Health and Human Services, through new small-business insurance marketplaces, known as "exchanges," which are expected to open this fall.
Here's a look at how three small employers are bracing for the change:
"We don't want to curtail expansion plans" because of the health-care law, says president Richard Stark. But the business will need to find a way to absorb the law's costs.
Currently, the pizza chain doesn't offer its 350 workers an employer-sponsored health-insurance plan. It does offer its 40 salaried managers reimbursements if they obtain health-insurance coverage elsewhere.
Richard Stark, right, president of a small pizza chain in Phoenix, says he doesn't want health costs to curtail the business's expansion.
Mr. Stark was a loyal patron of NYPD—short for New York Pizza Department—for three years before becoming a part owner in 2000.
The 58-year-old, who has a professional food-service background, consulted the two brothers who founded NYPD and helped them open a second location. Mr. Stark became the majority owner in 2008. NYPD now has 11 locations, and Mr. Stark says he is on track to double the number of locations within five years.
Next year, Mr. Stark intends to offer a health-insurance plan for the first time to comply with the law. "At the end of the day, if we take care of our team members, they will take care of the guests," he says. "I philosophically believe people having health care, regardless of age, is positive."
But it could be expensive. In addition to its 40 managers, NYPD has 90 hourly workers—mostly kitchen staff—who are considered full-time under the law and who would therefore be eligible for the benefits.
Mr. Stark isn't sure how many of those workers will opt into the company's new plan, considering that most are younger, healthier and lower-paid workers who might go on a parent or a spouse's plan, or who may forgo insurance coverage and pay a minimal penalty.
One way to offset the new expense is to negotiate with vendors for lower-cost ingredients and packaging, such as pizza boxes. Mr. Stark also plans to streamline business operations, perhaps by preparing some items like sauces and dressings at an off-site location, and by investing in equipment like dough mixers and vegetable slicers to automate certain tasks, he says.
Employees may see less take-home pay "because their total compensation is increasing, from our perspective," if they take health benefits, Mr. Stark says. Managers' bonuses are tied to company profits, so if the law erodes profit, managers may get smaller bonuses, he says.
And as a last resort, NYPD would raise prices of some menu items, Mr. Stark says.
"We will have to work smarter to be more efficient and more profitable," he says. "We will need to find the pennies and nickels and dimes everywhere."
Consultant Asks a Broker
Business: Future State Inc., Walnut Creek, Calif.
Rough calculations: Health-care costs could rise by $200,000 to about $400,000 a year.
Options considered: Dropping insurance and paying a $2,000-per-employee penalty.
"I could make more money in the short term if I cut benefits," says Steven Laine, president and chief executive of business consulting firm Future State, but he fears he would lose employees.
His 93-person firm now pays more than 50% of the premiums for 32 employees who currently take the coverage it offers, spending roughly $200,000 total a year.
If all 77 full-timers were to participate in the company's plan next year, its health-care costs likely would more than double, he says. But he doesn't know how many will join the company plan, which makes it very difficult to estimate and plan for the costs.
Steven Laine, CEO of a consulting firm in Walnut Creek, Calif., decided against dropping health coverage, partly for fear of losing employees.
"Some of the folks have other sources of insurance, like a spouse," he says. "But right now I can't predict how many that might be."
Mr. Laine, 52, a University of California Los Angeles graduate with three children, says he spoke to his insurance broker in December and was told that when he renews his company's health plan for 2014, his premiums could go up by anywhere from 15% to 60%—regardless of whether more employees choose to be covered by his firm.
"The message is, 'We really don't know; we have no way to predict for you what it will cost in any reasonable way,'  " he says.
On the other hand, his firm could drop insurance, and face $94,000 in penalties. But the decision is a lot more complicated than which option is cheaper. Insurance benefits are tax-free, and a lot of firms don't want to risk losing workers to competitors—or getting bad publicity for ditching coverage.
Mr. Laine is worried that it would be difficult to attract or retain staffers without a health plan. Moreover, dropping insurance "fundamentally goes against our organization's values," he says.
IT Firm Foresees an Edge
Business: Pro Computer Service LLC, Moorestown, N.J.
Rough calculations: Premiums stabilize, or perhaps even decrease.
Options Considered: No changes because the company hopes it will gain a competitive boost.
Anthony W. Mongeluzo believes the health law will lower and stabilize insurance premiums for his 13-year-old information-technology-services firm. He also thinks it could give his business a leg up against rivals.
Mr. Mongeluzo, the company's 32-year-old president, has roughly 40 employees today, but since his firm is growing—he says revenue is on track to reach $7 million in 2013, up from $6 million last year—he is hiring. He expects his head count to be above 50 by January, when the employer provisions of the health law go into effect.
The company already offers a health-insurance plan that covers hospitalizations, doctor visits, maternity care and prescriptions, so the law "isn't going to hit my wallet," he says.
Mr. Mongeluzo relies on technology and streamlined business processes to keep his overhead low, so he can afford to cover 55% of premiums for employees and their families.
"My understanding from talking to my broker is that we will be in compliance" with the law, he adds.
Under the health law, insurers must justify to regulators any plans to increase premiums more than 10% a year. For this reason, Mr. Mongeluzo, who started Pro Computer Service after graduating from college in 2000, says he doesn't expect his firm's future premiums to increase as much as they have in the past, an average of roughly 20% a year.
Mr. Mongeluzo says he has always offered his employees health benefits, in part because he believes it helps with retention, and he stresses that turnover at his firm is low.
His staff also enjoys regular office videogame competitions. "You'll see squishy balls flying around the office," he says, adding that he is a pretty eccentric entrepreneur, often working out of a sport-utility vehicle retrofitted with a three-foot-long desk, two computer screens, a fax machine and shredder.
Because many of his competitors currently don't provide health benefits to their employees, he thinks some will be forced to raise prices, or lay off workers to avoid the law. That, he figures, might give him the opportunity to offer lower rates than his rivals and land more clients.
—Christopher Weaver contributed to this article.

CA bill would make PPACA exchange deals public

May 21, 2013

LOS ANGELES (AP) — Two lawmakers are backing a bill that could give the public much more access to information about Patient Protection and Affordable Care Act (PPACA) exchange contracts, officials said Monday.

Republican Sen. Bill Emmerson and Democratic Sen. Mark DeSaulnier have introduced the PPACA exchange deal records bill, Senate Bill 332, in the state Senate.
The Associated Press recently reported that California has given the state's Covered California exchange program much more vendor contract privacy than other states have given their PPACA exchanges.
"It should all be transparent," Emmerson said in an interview.
Covered California was given authority "to do things no one else could do," Emmerson said. "There was no sunlight on it."
An AP review of the 16 other states that opted for state-run marketplaces found the California agency was given powers that are the most restrictive in what information is required to be made public, and that explicit exclusions from open-records laws might run afoul of the state constitution.
The bipartisan bill, if passed in the Legislature, would take effect immediately "in order to ensure that public resources are managed efficiently," according to the text. Only narrower, temporary exemptions would be allowed, consistent with long-standing state law.
n August 2010, when California was sprinting to become the first state to embrace the most extensive health care changes since Medicare, state lawmakers gave the new agency the authority to keep all contracts private for a year and the amounts paid secret indefinitely.

According to agency documents, Covered California plans to spend about $458 million on outside vendors by the end of 2014. The agency plans to make contracts with lawyers, consultants, public relations advisers and others.

By reversing the law, the bill, S.B. 332, would make public meeting minutes and records that reveal recommendations, research or strategy of the board or its staff, or those that provide instructions, advice or training to employees.

The indefinite ban on releasing rates of pay to companies and individuals receiving contracts would be scrapped. That provision goes beyond exemptions for other state health programs, such as Healthy Families, which withholds rates of pay from disclosure for up to several years, but not permanently.

The new law would mirror Healthy Families, providing a one-year delay in release of contracts only with large health plans and a three-year delay for rates of pay with only those firms, which are intended to promote fair competition.

However, those contracts would be open for inspection — at any time — by the Joint Legislative Audit Committee.

All other contracts would be pulled under state open-records laws, rather than exempted from them. It's routine in government to keep bids secret until contracts are awarded, so one vendor does not get an unfair advantage over others. After a bid is awarded, contracts generally become fully public.

"I am proud that California was the first in the nation to establish a health care exchange, but we should also be taking the lead in promoting transparency and accountability," DeSaulnier said in a statement. "An open process will only benefit the implementation of the" health overhaul."

Currently, it's not clear how many contracts the agency has executed, for how much or with whom.
In Massachusetts, the state that served as the model for Obama's health overhaul, the Health Connector program is specifically covered by open-records laws. The same is true in Idaho, where its exchange was established as a private, nonprofit corporation, and in New Mexico.

The Maryland Legislature subjected its exchange to the state's public information act, but protected some types of commercial and financial information.