Bob Carlson

California sparked a debate by issuing a statement a few weeks ago that premiums on its insurance market in 2014 are likely to be lower than current premiums. That sparked a lot of debate, which I’ve covered on this blog. Now, Ohio is out with its estimate of 2014 exchange premiums, and it paints a very different picture. It says the average individual premium will be 88% higher than 2013 premiums. Ohio also says consumers will have fewer choices.

At the same time, a survey of physicians was released that paints a pessimistic picture. Because of government rules and intrusion, most doctors don’t like what they do. Many would retire now if they were financially able. There’s going to be a shortage of physicians i coming years, especially when all the uninsured receive coverage in 2014. As I’ve said before, be sure to establish relationships with physicians now, because many probably won’t be accepting new patients in a few years.

It’s called “rate shock,” but it’s not shocking to people who understand the economics of health insurance. In August 2011, Milliman, one of the nation’s leading actuarial firms, predicted that Obamacare would increase individual-market premiums in Ohio by 55 to 85 percent. This past March, the Society of Actuaries projected that the law would increase premiums in that market by 81 percent. Like good players on “The Price is Right,” they both came in just under the Dept. of Insurance’s figure.

What are the drivers of the increase? According to Milliman, the two biggest drivers are (1) risk pool composition changes, such as forcing the young to subsidize the old, and the healthy to subsidize the sick; and (2) Obamacare’s required expansion of insurance benefits, particularly its mandated reductions in deductibles and co-pays.

The debate continues. It picked up recently when California announced that preliminary indications were that premiums for policies under the state’s insurance exchange, to go live at the end of 2013, will have lower insurance premiums than policies available today. Since then, a number of commentators have disagreed, saying primarily that California is comparing the preliminary premium proposals to policies today that aren’t comparable or are inappropriate comparisons.

Here’s another and more detailed view that concludes the California exchange policies not only will have higher premiums but also will have inferior coverage and other terms.

Determining whether premiums for exchange plans are higher or lower than premiums of currently available plans is therefore difficult, because the two types of plans are not always directly comparable. However, one firm’s exchange plans can be evaluated against its current product line: Kaiser Permanente. Kaiser is the nation’s largest Health Maintenance Organization that serves its enrollees through its own proprietary network. Its network will be roughly the same in 2014 as it is today, and the wide variety of plans it currently offers makes comparisons more feasible.

This apples-to-apples assessment shows how much higher exchange-plan premiums will be. For example, a 25-year-old male who lives in San Francisco can purchase a “California 40/4000″ policy from Kaiser today that has a $40 copayment for office visits after a $4,000 deductible, with a $5,600 out-of-pocket maximum, for $140 per month. Kaiser’s most comparable exchange policy—a “bronze” plan with the minimum benefits and the highest out-of-pocket costs—has a $5,000 deductible with a $6,400 out-of-pocket maximum, although it allows three office visits per year that are exempt from the deductible. It costs $227, 62% higher than its current comparable plan, the California 40/4000.

California made a big stir recently when it announced preliminary monthly premiums that are expected to be offered on the insurance exchange it is creating under the Affordable Care Act (or Obamacare). Many stated that the premiums were dramatically lower than expected. But some people disagree. They say the rates will be higher than policies currently available.

This post goes into more detail on both sides of the argument. It argues that it is unfair to compare the insurance exchange rates to policies available today, because today’s policies can exclude people for various reasons or charge them higher premiums. This raises a question that hasn’t been answered: How can the insurers participating in the exchange charge lower premiums when they can’t exclude people or charge them higher premiums? Either they will receive substantial government subsidies, or they will increase premiums after the first year.

Some people will find the new rules make insurance more expensive. That’s in part because their health insurance was made cheap by turning away sick people. The new rules also won’t allow for as much discrimination based on age or gender. The flip side of that, of course, is that many will suddenly find their health insurance is much cheaper, or they will find that, for the first time, they’re not turned away when they try to buy health insurance.

Medical expenses are the wild card in all retirement plans. They are very difficult to estimate and control. Fidelity Investments has been putting out an annual estimate of retirement medical spending for several years. The good news in this year’s estimate is that the total retirement cost estimate is reduced, because medical spending increased at a slower rate the last few years, and that is incorporated in the numbers. The bad news is that for the average couple in retirement it still is a large chunk of money. The other bad news is that it is a lot more money than most people are expecting to spend.

The news isn’t all awful, but it’s not great either. Retirees still need to save up a big chunk of change to keep themselves in good shape as they age, and from the looks of it, so far we haven’t been thinking big enough. About half of 55 to 64-year-olds polled by Fidelity said they’d only need $50,000 to cover health care in retirement.  This year and 2011 notwithstanding, health care cost estimates have risen 6% every year since 2002, according to Fidelity.

“While lower, this year’s estimate is still daunting for many retirees, and it will consume a considerable amount of a couple’s retirement savings,” said Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business.

Some time ago I wrote in Retirement Watch how veterans can pay for assisted living or other long-term care with an Aid & Attendance benefit from the Department of  Veterans Affairs. The benefit is available and is generous to those who qualify. But the rules are complicated, and an oversight or mistake could cost you the benefit. Here’s an overview of the benefit and some advice on how to plan to qualify for it.

Annuities, often used to provide clients with a steady stream of income, can prove problematic when coupled with these two benefits.If a client needs money early to meet expenses, back-end surrender charges may be due.

In addition, a client with a deferred annuity who needs to qualify for Medicaid to obtain long-term care may need to convert the investment into an immediate annuity. But Medicaid rules require that the immediate annuity name the state as the “remainder beneficiary” for when the policyholder dies. This permits the state to get reimbursed for the client’s medical assistance, long-term care and community services. Otherwise, an annuity could be a “countable asset,” toward the $2,000 asset threshold needed to qualify for Medicaid. Only beneficiaries who are a community spouse and/or minor or disabled child may be named to a priority position over the state.

Some of us have asserted that one reason medical costs seem out of control is the lack of transparency. Hospitals don’t post their charges for procedures in advance, and their bills are inscrutable to most people. If people could shop around the way they can for almost everything else, they might be wiser consumers. Also, hospitals might feel pressure to reduce their charges and manage costs more effectively.

One of the first steps in that direction is the government’s releasing the charges of hospitals on 100 common inpatient procedures. It’s only a first step. The data is from 2011 and covers only 100 procedures. It’s not something you can use to shop around today. The list also is for the charges likely to be imposed on those without insurance. It doesn’t reveal the charges negotiated by the government and insurer.

But it begins to reveal the problem. The costs vary widely, even among hospitals that are close to each other and very widely around the country. Also varying widely are the amounts hospitals are reimbursed for the procedures, especially compared to what they say the charges are. Take a reading of the information.

Elsewhere, Las Colinas Medical Center just outside Dallas billed Medicare, on average, $160,832 for lower joint replacements.

Five miles away and on the same street, Baylor Medical Center in Irving, Tex., billed the government an average fee of $42,632.

In downtown New York City, two hospitals 63 blocks apart varied by 321 percent in the prices they charged to treat complicated cases of asthma or bronchitis. One charged an average of $34,310; the other billed, on average, $8,159.

Experts attribute the disparities to a health system that can set prices with impunity because consumers rarely see them — and rarely shop for discounts. Although the government has collected this information for years, it was housed in a bulky database that researchers had to pay to access.

It shouldn’t have to be this way, but some people need to hire someone to figure out their medical bills and fight the charges. Medical bills are designed for the bureaucrats and computers at insurance companies, Medicare, and Medicaid, not for the actual consumers of medical care. So when a patient has care that isn’t covered by someone else, the patient needs to be sure the items on the bill are accurate and the prices are what they should be.

A medical billing advocate or assistance company can help. Some charge by the hour while others take a percentage of the reduction they’re able to negotiate. But it’s an unregulated industry. Anyone can set up shop as a billing advocate and call himself an expert. Here’s a review of what the profession is, how someone could help, and what you as a consumer should know.

Yet finding the right advocate can be tough, and those in the direst situations can ill afford the typical $75- to $130-an-hour rate. “This business is painfully slow-growing,” says Becky Stephenson, co-president of the Alliance of Claims Assistance Professionals (ACAP), an advocate trade group. “There are a lot of people with problems but not a lot of people willing to pay you to help them.” Despite long experience, Stephenson herself has trouble making a good living purely from advocacy, so she supplements her income by serving as an expert witness in medical lawsuits.

Employees working at sizable companies may already have access to a health advocate. Just over half of U.S. companies with more than 500 employees offer it as a benefit, according to Steven Noeldner, a senior consultant for Mercer’s Total Health Management practice. Many employees don’t know the benefit exists, he says, and the services generally aren’t as customized as those of an independent billing advocate.

One reason some business managers give for not expanding is that they don’t know what the implementation date of the Affordable Care Act of 2010 will have on their businesses. Most individuals don’t know either and could be in for big surprises. Here’s a review of some changes that are likely to occur.

It looks like individuals and those in small group plans (employees of small businesses) are likely to see the biggest effects. For many, either the coverage they have now won’t be available or will cost considerably more. Some people who retire early will benefit in one way. They can’t be denied coverage because of age or medical conditions. So, they’ll be able to fill that coverage gap that can occur when employer coverage stops and Medicare kicks in. But the downside is that coverage is likely to be expensive.

This average masks big differences. While some firms (primarily those that employ older or sicker workers) will see premium decreases due to community rating, firms with younger, healthier workers will see very large increases: 89% in Missouri, 91% in Indiana and 101% in Nevada.

Because the government subsidies to purchasers of health insurance in the small-group market are significantly smaller than those in the individual market, I estimate that another 10 million people, the approximately two-thirds of the market that is low- or average-risk, will see higher insurance bills for 2014.

Higher premiums are just the beginning, because virtually all existing policies in the individual market and the vast majority in the small-group market do not cover all of the “essential” benefits mandated by the law. Policies without premium increases will have to change, probably by shifting to more restrictive networks of doctors and hospitals. Even if only one third of these policies are affected, this amounts to more than five million people.

Reports are rampant that congressional leaders are negotiating a way to exempt themselves and their staffers from the requirements of the Affordable Care Act of 2010. It seems they are able to identify the negative effects on employees and believe the employer won’t be willing to subsidize the employee premiums to the extent they’re used to. Here’s a good link that gives a good overview plus links to other items on the topic.

Even the medical insurance experts don’t understand a lot about the Affordable Care Act of 2010, or Obamacare. Con artists are taking advantage of the confusion and misunderstanding to prey on citizens, especially older Americans. They’re calling up people with various pitches about health insurance, Medicare, and related topics, according to this article. The specific pitches vary, and they don’t really matter. What counts is that they’re using confusion over the law to extract either personal information or money from you.

Don’t engage with anyone you don’t know who calls about changes in Medicare, medical insurance, or anything related to that. Don’t give them personal information. Deal only with people you know and after you initiated the contact.

“The first line of defense is don’t take a call from out of the blue from anyone who’s offering to help you navigate the new health care market,” cautions Greisman. “Those kinds of cold calls just shouldn’t take place, same thing with an unsolicited email, an unsolicited text.”

Many people see through those sorts of simple scams, says Sally Hurme, an elder law attorney at AARP.  “But even if one in a thousand falls for the scam and gives up info or agrees to send information off to who knows where, they’ve made [the scammer’s] day. That’s what their job is,” says Hurme.  As the Affordable Care Act ramps up, the country is likely to see more frequent insurance scams, and they’re likely to get more sophisticated, she adds.