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Health Policy Update

Health Plan Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

Proposed Transparency Regulation:  Disclosing Cost-Sharing Information

  • In my most recent update, I provided with you a summary of some the key components to the proposed transparency regulation, which again, requires self-insured plans – as well as fully-insured “individual” and “group” market plans – to disclose (1) specific cost-sharing information, (2) negotiated in-network rates, and (3) “historical” payments to out-of-network providers. I did not, however, have enough room to provide you with my overall thoughts on the policy set forth in the regs, along with the means through which the policy would be effectuated. Let me do that here.
    • Analysis: As the title above states, let me start with the “Disclosing Cost-Sharing Information” portion of the proposed regulation: With respect to the disclosure of specified cost-sharing information to participants, the policy here is pretty much NON-controversial. What I mean is, I do NOT envision insurance carriers and self-insured employers filing a lawsuit to stop the Federal government from requiring them to disclose this cost-sharing information. In my opinion, if carriers and employers did indeed fuss over this new requirement – and, for example, file a lawsuit over being required to disclose cost-sharing information – it would be “bad form” on their part, and the carriers and the employers would be living up the recent claims that “employer-sponsored coverage is BAD, and the carriers and employers are BAD.” I mean come on, who can be against disclosing cost-sharing information to participants?? Especially when everyone knows that participants are shouldering a larger-and-larger amount of the cost of health care in the form of cost-sharing year-over-year?? Having said that though, I definitely think carriers and employers WILL make a big fuss over the means through which the policy of disclosing the cost-sharing information is being effectuated. What I mean is this: Figuring out how to disclose all of the required cost-sharing information to participants is NOT going to be easy.  I want to go so far as to say that the requirements set forth in the proposed regulation are daunting, especially for small insurance carriers and small to mid-sized businesses that self-insure. Heck, the level of personalization and required customization of the cost-sharing information is going to be difficult even for large insurance carriers and large employers to comply with. BTW, from a business perspective, I wish I was a tech-savvy entrepreneur (instead of a legal and policy geek) because I think there will be a lot of business opportunities for this type of third-party service provider once these proposed rules are finalized. What I mean is, I believe that third-party service providers are going to play a HUGE role in helping both large and small insurance carriers and large and small employers with communicating this cost-sharing information to participants. In particular, it will be these third-party service providers that will build the “on-line service tool” and develop all of the necessary algorithms that will accommodate all of the required information that participants will input into the tool to spit back out a participant’s own personalized, and customized cost-sharing information…in real-time.


Proposed Transparency Regulation:  Disclosing Negotiated In-Network Rates

  • If you want controversy, you got it with the requirement that insurance carriers and self-insured plans must disclose ALL of their negotiated in-network rates for the medical items and services covered under the plan. You have already heard the insurance carrier community cry foul. When it comes to the self-insured crowd, some of them have not quite wrapped their head around this requirement, while other self-insured employers are saying: “How can anyone be against disclosing medical prices to their participants”?? On this latter point, some of these self-insured employers do NOT want to be viewed as anti-transparency, while other self-insured employers are actually welcoming this new requirement because it will allow them to see whether the providers in a particular geographic area are ripping them off relative to other employers and insurance carriers that are also negotiating prices with these local providers.
    • Analysis: The argument that will likely serve as the primary basis for a legal challenge is that the Federal government CANNOT force one private party that negotiates with another private party to disclose information that results from these private negotiations. In particular, some in the insurance carrier community have argued that the prices that carriers privately negotiate with providers is a “trade secret,” and thus, carriers cannot be compelled by the Federal government to make public their “trade secrets.” Think of Coca-Cola (Coke) when Coke was sued to reveal its “secret formula.” A court of law ruled that Coke’s secret formula was a protected “trade secret,” and the secret formula could NOT be disclosed to any third-party. While I am definitely NO expert in “trade secret” law – and the Coke example above is NOT exactly on point because the Federal government is involved here – I think I know enough to question whether the insurance carrier community (or anyone else) will actually win if they were ever to challenge the requirement to disclose negotiated in-network rates.  Here is how I am thinking about this:
      • Let’s say I am BestBuy, and I negotiate with Samsung and Vizio and Panasonic to sell their flat screen TVs in my store at a specified price. Then I – as BestBuy – post this price as the price I want to charge consumers looking to buy a flat screen TV. By my posting the prices to consumers for sale, have I disclosed “how” I negotiated with Samsung and Vizio and Panasonic to come up with this specified price?? NO. All I did was post the prices I negotiated with Samsung and Vizio and Panasonic as the “sticker price” for the TVs I am selling. I am NOT disclosing a “secret formula” or any “secret negotiation tactics” I use during the negotiation process. Down the street, Circuit City, CostCo, and Flat-Screen-TVs-R-Us are doing the same thing. They are negotiating with Samsung and Vizio and Panasonic to sell flat screen TVs at a specified price. Based on certain factors specific to each of these company’s “negotiations” with Samsung and Vizio and Panasonic, this yields differences in the prices that are charged by Circuit City, CostCo, and Flat-Screen-TVs-R-Us…and also charged by me as BestBuy. Now, let’s say that I – as BestBuy – was able to “negotiate” a lower price relative to what Circuit City, CostCo, and Flat-Screen-TVs-R-Us “negotiated,” making me – as BestBuy – the lowest cost option for Samsung and Vizio and Panasonic flat screen TVs. Again, in this case, no one disclosed any “secret negotiation tactics” or “secret formula” that could be viewed as proprietary.  All that ended up being disclosed was the ultimate negotiated price that consumers now have to consider when shopping for TVs on “Black Friday.” It seems like this is what is going on with this proposed regulation. That is, Insurance Carrier XYZ is negotiating with Provider ABC to determine the price that will be charged to consumers who are seeking to purchase a medical item or service from the provider. If and when this price is disclosed on a public website that can be accessed by participants, researchers, regulators, and entrepreneurs, is Insurance Carrier XYZ disclosing “how” it negotiated with Provider ABC to come up with the specified price for the medial item or service?? NO. So here, there is NO disclosure of any “secret” negotiation tactics” or any other “secret formula” that could be viewed as proprietary. Down the street, Insurance Carrier 123 also negotiated with Provider ABC to set prices that will be charged to consumers. BUT, based on various factors specific to Insurance Carrier 123, this Carrier negotiates a different price than the price Insurance Carrier XYZ negotiated. In this case, Insurance Carrier 123 did NOT disclose any “secret negotiation tactics” or any other “secret formula” that could be viewed as proprietary. All that is being disclosed is a price for medical items and services that can now be viewed – and compared and contrasted – by the public. Maybe there are smarter people than me who engage in these “negotiations” everyday who will say that it is more complicated than the crude and elementary way I am analyzing things. But, maybe not.  Either way, I do NOT see where the proposed regulation is violating any “trade secret” laws and/or abrogating a contract that is negotiated between two private parties.


More on Disclosing Negotiated In-Network Rates

  • There are some folks out there who will say that it is NOT fair to force insurance carriers to disclose their negotiated in-network rates to consumers because their competitors will now know what their negotiated rates are. Others are saying that disclosing these negotiated prices will actually increase costs to consumers.
    • Analysis: To the first point, it is important to emphasize that in every other market where goods and services are bought and sold, consumers are informed about the prices associated with the respective goods and services. And, in these markets, the sellers of these goods and services compete with one another to charge the lowest price so as to attract consumers.  These sellers also compete on quality. For example, a Mercedes Benz is great quality relative to a Honda Accord, but you are paying for that quality. Many consumers are willing to pay for that quality, while others want a low cost option like a Honda Accord.  In this case though, a consumer “knows” about the price and the quality, and the consumer makes an informed purchasing decision based on the information they “know.” Not so much when it comes to health care. Typically, a consumer does NOT “know” about the price and the quality of a medical item or service that they purchase. While communicating “quality” in health care is difficult, disclosing prices is generally NOT difficult. So in the case of disclosing prices, isn’t it the fair thing to do? Another question I have is this:  Won’t insurance carriers benefit from communicating to consumers that they have the lowest, most competitive negotiated prices? After all, insurance carriers primarily make their money on volume. Not only from compounding all of the premium payments from policyholders, but also from a “risk” perspective (i.e., the more policyholders you have, the greater the ability to spread health risks across a whole host of lives, which allows the carrier to keep their premiums low so as to attract more consumers). Soooo, wouldn’t insurance carriers want to tell consumers that they are a better option than their competitor down the street by disclosing their negotiated rates?? This disclosure to consumers, of course, will allow a particular carrier’s competitors to know what their negotiated prices are. But why should an insurance carrier care?  If, for example, a particular carrier cannot compete with its competitors on price (because, for example, maybe this carrier cannot negotiate the same low prices), this particular carrier can out-compete its competitors on customer service, or technology, or the “quality” of the provider they contract with, thereby attracting policyholders by distinguishing themselves from carriers with the lowest negotiated prices. Call me naïve, but I just don’t see why it is NOT fair to require insurance carriers to disclose their negotiated prices to consumers because their competitors will now know these negotiated prices too. With respect to whether disclosing negotiated prices will actually increase costs to consumers, I can see how this could be an issue if there are a number of different providers in a geographic location. What I mean is, Provider ABC generally does NOT know what Provider 789 negotiated with a particular insurance carrier or self-insured plan. And in this case, Provider ABC may under under-charging for a particular medical item or service, while Provider 789 may be over-charging. And if Provider ABC now knows what Provider 789 is charging – because carriers and plans now have to disclose their negotiated prices – then maybe Provider ABC increases the amount they are charging to be closer to what Provider 789 is charging. This would definitely increase health care spending. BUT, is this really going to happen? Actually, won’t the reverse happen? That is, won’t the carriers and the plans move all of their covered lives to Provider ABC because Provider ABC is charging lower amounts for medical items and services? And won’t this force Provider 789 to lower the amounts it charges so as to re-capture those covered lives that are now being directed to Provider ABC? This would actually lower health care spending.


Medicare-For-All Update

Candidate Warren Releases Proposal to “Pay” for Medicare-for-All

  • I purposefully avoided talking about Medicare-for-All in my most recent update. Mostly because I wanted to give you a break from the issue, but also because there was a bunch of other stuff to talk about. BUT, the Medicare-for-All debate has recently experienced some zigs-and-zags that are worthy of discussing. For example, Democratic Presidential Candidate Warren released a proposal on how to “pay” for Medicare-for-All, and – WOW – that went over-like-a-ton-of-bricks. I mean seriously, I could NOT believe the blow-back! I always knew that a proposed plan to “pay” for Medicare-for-All would be met with resistance and skepticism. BUT, I did NOT expect it to be this bad.
    • Analysis: What do I mean by “this bad”? Well, a number of Democratic Senators publicly stated that they would NOT vote for Candidate Warren’s plan to “pay” for Medicare-for-All, even if Candidate Warren was elected President. BTW, I don’t think I have ever heard such a straight-forward statement from members of a Candidate’s own party in response to a campaign proposal. In addition, a number of the richest business-people in this country – who are known to be anti-President Trump and/or they lean Democrat from a party-affiliation perspective – have criticized Candidate Warren’s proposal. Despite all of that, what I find most interesting about Candidate’s Warren proposal to “pay” for Medicare-for-All is this: Employers would be required to pay to the Federal government the same amount of money employers are paying for their employees’ health care. While the employer community has not yet voiced their opinion on this proposed requirement, an idea like this is going to go over-like-a-ton-of-bricks. Why? First, employers want to LOWER the amount of money they are paying for their employees’ health care. They do NOT want to lock-in the amount of money they are currently paying for health care, and then pay that money over to the Federal government year-over-year to fund a Medicare-for-All program. Also, if employers are required to pay this “tax” to the Federal government each year, how would the amount they are currently paying for health care be indexed for future years? Right now, costs for employers go up by the “cost trend” of health care for the prior year (i.e., how much health care are people utilizing in one year, determines how much premiums go up in the following year). If the required employer contribution for Medicare-for-All is indexed at something less than the annual “cost trend” – for example, the index is to medical inflation – maybe over time that reduces the amount of money an employer is required to pay to the Federal government relative to what they would be paying under the current system. This would actually be welcomed news to employers. BUT, what happens if the lower amounts that employers have to pay the Federal government results in a short-fall in the amount of money that is needed to fund Medicare-for-All? The Federal government is going to need to make up for this short-fall somehow. To make up the short-fall, does the Federal government impose some type of supplemental tax on employers? Do you increase taxes on million- and billionaires and/or capital gains and financial transactions? Are you going to be forced to raise taxes on the middle-class, something that Candidate Warren said would NOT happen under her proposal? Here is another thing to think about: Candidate Warren’s proposal exempts small employers that are not currently offering health coverage from funding Medicare-for-All. You can bet your bottom-dollar that if Candidate Warren were ever to be elected, virtually every small employer would drop their health coverage the day after the election. It is reasonable to believe that any legislative proposal codifying Candidate’s Warren plan would have a look-back rule, but it won’t be easy to figure out whether a small employer simply dropped their health coverage on Nov. 4, 2020 or whether the small employer NEVER offered coverage to begin with. This would impact the projections on the amount of revenue that the Federal government would collect, thus likely producing a shortfall, which as discussed above, would have to be shored up with a supplemental tax on employers, or million- and billionaires, and/or capital gains and financial transactions.Last comment: Candidate Warren is proposing that Union employers will NOT have to “pay-in” the same amount as Non-Union employers so long as the Union employers give back to their employees (in the form of wages) some of the money these Union employers are currently devoting toward health care.  Look, Union employers – like Non-Union employers – would love to increase their employees’ wages. They BOTH would love to pay less on health care too.  BUT, Union employers are NOT going to want to make a dollar-for-dollar exchange here. Union employers – like Non-Union employers – want to lower their liabilities (i.e., both their wage and health care liabilities). They do NOT want to maintain status quo and re-distribute their liabilities in different ways.


Candidate Warren’s “Pivot” on Medicare-for-All

  • I wanted to lead with Candidate Warren’s proposal on “how to pay for Medicare-for-All” to get to this post. In short, due to the significant blow-back Candidate Warren experienced – which led to substantive questions and concerns about whether Medicare-for-All could ever become a reality – Candidate Warren pivoted. And that “pivot” was to supporting a “public option.”
    • Analysis: Saayyyy Whhaaaattt?!? Your telling me that one of the staunchest supporters of Medicare-for-All (next to Sen. Sanders (I-VT)) is moving away from Medicare-for-All to a much more moderate “shade” of single-payer (i.e., a “public option”). Weeelll, not exactly. I say “not exactly” because Candidate Warren is STILL proposing a shift to Medicare-for-All.  BUT, that “shift” would NOT occur until Candidate Warren’s 3rd year as President. Then when does the “public option” happen? During the first 100 days Candidate Warren would be in office. Interestingly, below is a passage from an Associated Press story that I think sums up how people are reacting to Candidate Warren’s “pivot” here:
      • The Massachusetts senator announced Friday that her administration would immediately build on existing laws, including the Affordable Care Act, to expand access to health care while taking up to three years to fully implement Medicare for All. That attempt to thread the political needle has roiled her more moderate rivals, who say she’s waffling, while worrying some on the left, who see Warren’s commitment to a single-payer system wavering. There are also some interesting parallels between Candidate Warren’s “pivot” and what Gavin Newsom, the Governor of California (CA), is doing, which POLITICO recently pointed out:
      • Governor Newsom ran on creating a single-payer health care system in CA. Now as Governor, Newsom’s health care program has been more incremental than promised, annoying some allies in the single-payer movement while winning some unexpected praise from industry groups. But he also may have found something larger than his own agenda: A health care path that builds on past successes, enacts fresh reforms and may eventually lead to a single-payer system — without the political earthquake that so many predict under Sanders’ bill or Warren’s financing plan. What Candidate Warren is doing looks and sounds a lot like what Governor Newsom is doing.

        I also cut and pasted the above passage from POLITICO to point you to some specific words. The article talks about Governor Newsom choosing a “health care path that…may eventually lead to a single-payer system.” Stop right there. Isn’t this the ultimate prize for Medicare-for-All proponents?? Isn’t the end-game here some sort of “path” that will ultimately “lead to a single-payer system”??

        Based on the above, I believe that most if not all of the staunchest Medicare-for-All supporters are going to accept Candidate Warren’s “pivot” here. Also, I believe that the moderate wing of the Democratic party that supports a “public option” is also going to okay with what Candidate Warren is doing here.


Remember back in May when I said this:

While my boss on the Senate Finance Committee was Senator Grassley (R-IA), my immediate boss was a gentleman named Mark Prater, long-time Chief Tax Counsel for the Finance Committee. Mark would always tell me stories how both Congressional Democrats AND Republicans would come up with “grandiose” policy changes that in the end, were too big to ever get enacted. BUT, the late-Senator Kennedy (D-MA) took a different approach. Mark would tell me: “Senator Kennedy would do a little bit here, and do a little bit there, and when Senator Kennedy would finally get all of these little things into the law – viola – Senator Kennedy would get the grandiose policy change he wanted all along.” To me, it feels that this is going on with the debate over Medicare-for-All and the various “shades” of single-payer.  What I mean is this: You have the full-throated, pedal-to-the-metal supporters of Medicare-for-All who have dominated the air-waves over the past year or so.  And, through their full-throated, pedal-to-the-metal support of Medicare-for-All, an idea that was once on the fringe is now part of the mainstream debate in American politics. BUT, Medicare-for-All is a “grandiose” policy change that most policy analysts – including me – think will never happen. BUT, the fact that the debate over Medicare-for-All and the various “shades” of single-payer is now in the mainstream, it allows elected officials – maybe a President Biden – to pull a late-Senator Kennedy and “do a little bit here, and do a little bit there” by enacting the various “shades” of single-payer (e.g., a Medicare-Buy-In program, or a “public option,” or other government price-controls), and viola, in a decade or so, elected officials finally get the Medicare-for-All they have been wanting all along. Maybe it is a President Warren – not President Biden – who wins in late-Sen. Kennedy fashion.