William Perkins, President of Northwest Marketing Resources, an insurance marketing company, weighs in on what lessons Federal reform could take from Washington State–and why he thinks the ACA is missing the target (hint: it’s all about the money).
Q: It sounds like a number of the changes that health reform brings or requires were already in place here in Washington?
A: Yes, we did already have a lot of the initial items that they rolled out. Covering children to age 26, a lot of the carriers in the state of Washington were doing 23 and 25, so that’s not a big change. The preventive care with no cost sharing, most of the plans in the state of Washington have preventive benefits, but there have been co-pays.
We have shorter pre-existing condition waiting periods then most other states because our association plans that cover most of the small businesses are typically 90 day pre-existing. So there really wasn’t anything onerous out front in the first round of changes, but it’s the things on the backside in the future–moving to the health insurance exchanges, having the four levels of bronze, silver, gold and platinum benefit design–that will make it different for the insurance companies. So here we’re not seeing the impacts and effects yet of the federal legislation.
Q: Do you think that Washington State is in a better or worse position than other places in the country to weather these changes?
A: We’re probably better off than most places in the country because we’re going to have the least amount of change to go through. We’ve already been through it. We in Washington State basically got Clinton’s health care plan in 1992. In 1995, the major things that were onerous about it got gutted. Then in 1999, because of the guarantee issue of the individual plans, the individual marketplace evaporated in the State of Washington; you couldn’t buy a health plan here if you were an individual for almost three years. So we moved to a modified guarantee issue and created a high risk pool. That’s worked very well and the insurance companies basically fund the entire cost of that.
The bad news is that politicians don’t like to learn from other people’s mistakes. We had healthcare reform, we went without an individual market for three years. You couldn’t buy a health plan in the State of Washington until the State and the insurance companies got together and said, what do we do to make this work? So while we’re probably in a better position to handle all these changes going forward, we’re also one of the highest cost tiers in the country already. So what does the country have to look forward to? They get to look forward to what we’ve had and all of a sudden people will start looking backward and saying, ‘well why don’t we look at Washington with the individual market before we made these laws?’
It’s going to be interesting to see, but pretty scary because if the legislation goes forward, what we’ve done here will go away by 2014.
Q: How so?
A: Because it will be back to guarantee issue for individuals and you can go on any health plan you want and as soon as you get what you need you quit and then you’ll be able to go on any other health plan because there will be no pre-existing conditions.
WP: The issue we have in health care today is the cost of care. It’s not whether people can get coverage or have a health plan or anything like that. It’s whether or not they can afford the premiums if they have to pay the premiums, but secondly is when you have large claims, the cost of care is astronomical. My wife had to have major brain surgery three months ago, and I think we were almost into $400,000. MRIs are being billed at $5,000, CAT scans are being billed at two grand. When you look at the cost of care, where there’s preventative care or even major surgeries against premiums, and you couple that with prescription drugs, the carriers in Washington State right now are operating between a 82% and 88% loss ratio already without the mandated law. If your insurance premiums are $400 a month–$4,800 or $5,000 a year in premiums–you could be on two medications and use up 50% of that money. In the “old days” 50% of people never made a claim, prescription or otherwise or if they did, their prescriptions were five, ten, twenty bucks. In the new plan with the Feds, they want to give everything away, but who’s going to pay for it? We are. Number two, how are you going to get your care? Because there are a lot of doctors that are bailing out of Medicare and Medicaid and you’ve got a whole segment of doctors between 50 and 60 that are saying, ‘maybe this is a good time for me to quit and retire.’
Q: So do the reforms address affordability at all?
A: No. In fact, they add the extra administrative costs on top of it.
Q: What about the health insurance exchange?
A: It’s just another way of cost shifting. It’s another way for the government to manage and control health care and we can’t afford for the government to do it.
You’ve got to get the Feds out of pricing, and they’re into the pricing because of Medicare. They dictate the reimbursements to the doctors for Medicare and Medicaid patients. So, what do the doctors do? They raise their rates as high as they can under the preferred provider contracts in the commercial marketplace to offset the reimbursement they get from the Feds. So what a lot of doctors are doing now saying, ‘well, we’re not taking anymore Medicaid. In fact, we’re not going to do any Medicare.’ Especially down here. If you’re on Medicare, it’s hard to find a doctor to take you for primary care, even if you have a Medicare Advantage plan, because the doctors are just quitting. You have a balancing act between the providers, the insurance companies and the consumers and the more the government gets involved, the higher admin costs are going to be. They already added a new layer: the insurance companies are spending hundreds of million of dollars right now trying to determine and decipher and get ready for the new regulations that are three years away. Hundreds of millions of dollars we could be using on caring for people.
Q: So what are your predictions?
A: I think that in the end, we’ll have Medicare Part D for everybody paid through a payroll tax and the insurance companies will sell supplemental. The whole PPO network provider contract, all that will just go away. So, in the end, I think the best that could happen with the passing of the legislation is that people have to do something now, whether it’s repeal it or change it. You’re not going to get embracing, because it’s just not affordable.