It happened again on Friday. Another COBRA victim.  I have talked with three people in the last few months who lost money due to COBRA.  There is talk of ending or, at the very least, amending the Consolidated Omnibus Budget Reconciliation Act (COBRA).  That should be a goal for the spring of 2017.

What is COBRA? This is from the Department of Labor:

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.

COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

In English – You get to keep your health insurance policy if your ex-employer 1) had a policy, 2) had more than 20 employees, and 3) if you pay the full monthly premium plus up to 2% for processing. You may keep the policy for up to 18 months, 36 months if you are losing coverage due to death or divorce.

COBRA was very important. Prior to the Patient Protection and Affordable Care Act (PPACA or Obamacare), unhealthy individuals and families could be declined for coverage due to preexisting conditions.  COBRA guaranteed 18 months to find an acceptable option.

COBRA also allowed someone who had already met an annual deductible to retain coverage for the balance of that calendar year. This may still prove useful even under the new law.

COBRA, retaining the ex-employer’s policy, may also be less expensive than purchasing a new policy. This is more likely if the individual is in his/her late fifties or early sixties.

So far, so good. What could be bad?

Christopher (name changed) worked for over twenty years at a local service organization. His position was consolidated with two others and he was let go.  This was in October.  The first six months of COBRA were paid by his ex-employer as part of a generous severance package.  Chris was shocked by the $1,100 bill he received in late April for his May premium.  He had no idea.  He was referred to me and we met a few days later.  I was forced to deliver terrible news.  Chris missed the Annual Open Enrollment.  Discovering that you have expensive COBRA does not qualify for a Special Enrollment Period.  Christopher must keep this policy for the balance of 2016 if he wants to retain PPACA compliant coverage.  What looked like a lifesaver had become cement shoes.  His ex-employer didn’t understand how COBRA works in this new environment.

Another issue is that COBRA and Medicare are like oil and water. If you are over 65 and work for a business that has over twenty employees, your group health insurance is primary.  Medicare is secondary.   Most of these people save their money and don’t enroll in Medicare Part B.  But, COBRA doesn’t count.  Failing to enroll in Medicare Part B when you become eligible may result in a penalty and being forced to wait until the annual enrollment period the following January.  This is an expensive common mistake.

Angela (name changed) made the above mistake. She was supposed to enroll in Medicare Part B six years ago, a few months into COBRA.  She didn’t.  Angela got a new job with benefits about a year later.  Now, at age 71 and ready to retire, she will be forced to wait until next July for Medicare to begin.  Angela will pay more than twice as much for inferior coverage due to her error six years ago.

My last example is Charlotte (ditto) who visited my office on Friday. Her last day at a major Cleveland employer was June 30^th.  She spent twenty-nine years at a really big company.  Charlotte signed up for Medicare Part B.  Since she didn’t have the time to do any research and had zero help from H.R., she enrolled in her employer’s retiree COBRA plan, a mediocre $400 Medicare Supplement-like policy.  A month later she realized that her friends all have better coverage for a lot less.

Charlotte paid a price for convenience. Even though she is 66, this was her Medicare Initial Enrollment Period.  You have just one bite of the apple and she picked a bad one.  She still has options, but she has forfeited some of the flexibility and guarantees that had been available in June.

There is still a place for COBRA under Obamacare, but it is not as important as it once was. So maybe it is too early to unleash the mongoose, but I’m keeping mine fed and ready.

DAVE

There was a time, back when I was in high school, when a boy asked a girl out for a date and paid for the evening. Movies, a dance, even dinner – he asked and he paid.  A cheap date was a girl who didn’t insist on the fanciest restaurant for every date and didn’t search the menu for the most expensive meal. When we got into our twenties, a cheap date was someone who might only order one or two glasses of wine and didn’t view dating as a competitive drinking sport.

The young woman in my office last week has never been a cheap date, at least not from an insurance perspective. Millie (name changed) is an insulin-dependent diabetic, has been most of her twenty-four years.  She has lots of claims every year.  There was a time, about ten years ago, when her mother and I had real concerns about finding health insurance for her.  Now it is no big deal.

I used to be a cheap (insurance) date. The only time I saw the doctor most years was for my annual physical.  No Rx.  No issues.  This year has permanently changed my status.  University Hospital and the doctors have submitted bills for over $550,000 for my care.  Millie and I now have something in common.  No Insurance company would take us if they had a choice.

We are not alone. Many of you have pre-existing conditions from an illness or injury.  You used to be cheap dates.  You paid your premiums and seldom filed a claim.  An accident or ailment changed that.  The most important benefits of The Patient Protection and Affordable Care Act (Obamacare) are the absence of medical underwriting and that all policies cover pre-existing conditions.  Millie and I can apply for coverage with no fear of being turned away.

Are those benefits safe?

I get the calls at least once week:

• Are they going to repeal Obamacare?
• What happens if the Republicans win?
• Is my policy going to be cancelled?

My standard answers are:

• No.
• Nothing.
• Probably not, but if it is we’ll find a new one.

We just watched the four day infomercial for the Republican Party and are moments away from the Democratic Party’s version. Did you hear a substantive discussion about healthcare, 20% of our economy?  Of course not.  Six years of Obamacare have yielded millions of dollars of negative political ads but not even one serious alternative proposal.  Even if we wanted to, we can’t magically return to February 2010.  We can’t just repeal the PPACA and then begin the difficult process of creating a new program.  If there is to be an alternative, it must be designed with a seamless transition.

That is, of course, just my opinion. This blog has reviewed all of the Republican plans including Speaker Ryan’s latest last month.  I have been trying to include coverage of the Libertarian Party’s proposal.  In May I interviewed one of the candidates who had been running to be the standard bearer for the Libertarians.  His suggestion was to eliminate the PPACA and to make charitable donations a dollar for dollar tax reduction.  People would then donate to hospitals and everyone would receive the care they needed without any government involvement.  I laughed until I realized that he was serious.  Their official platform has no information or details.

But with no disrespect to either the Libertarian or the Green Parties, our next president will most likely be either a D or an R. But that doesn’t mean that there aren’t major issues with the PPACA.  The insurers have not found a way to make money under this new system.  They will continue to tinker with their networks and plan designs.  Hospital and doctors are looking at different business models to reduce expenses and maximize payments from the government and insurers.  A new president may be more successful working with a new Congress to make the needed changes to Obamacare.  Perhaps, under new leadership, we can get a bipartisan buy-in once we change the name.

It is important to remember that we are talking about 20% of our economy. Our population is aging.  Our cost of care is rising.  Americans demand the very best of care.  And we are never a cheap date.

Dave

There is a lot going on. Today’s blog post will also be sent separately to my clients.  The next blog will deal with high concepts, today we tackle some of the basic issues that affect most of you.  But as I said,   this blog will be duplicated as my current client letter.  Read this and you get to skip the letter.

This isn’t as easy as it looks.  Running a health insurance company is a lot than it appears.  Any number of hospitals, medical organizations, not-for-profits, and government entities have invaded my business over the years.  On paper it doesn’t look like that big a deal.  Collect a lot of money (premiums) and pay the doctors and hospitals for services rendered (claims).   We’ve recently lost InHealth, one of the government created CO-OP’s, and Catholic Health Partners’ foray into insurance, HealthSpan.  Both entities were spectacular flops that failed to survive five full years.

Unfortunately, even the pros are having their struggles. I have seen a massive increase in insurance company errors.  This may be, in part, due to the Patient Protection and Affordable Care Act (PPACA or Obamacare).  As the companies expend millions of dollars to comply with new regulations, they are also limited in how much of each premium dollar can be spent on infrastructure (Medical Loss Ratio).  Something has to give.  The problems created y insufficient staffing and quick fixes directly affect you.

Quick example – A client recently purchased a policy with a $5,000 deductible. The application was accidentally changed to a $1,000 deductible at the Home Office.  Understaffed, this major insurer had no one to catch the error.  The system simply spat out the more expensive policy and a bill.  The client called as soon as he got the bill.  It only took me an hour or so to figure out the problem and to get the insurer to promise to fix it.  What a waste of time and money.  And yes, cancelling and reissuing the policy costs them a lot of money. These costs will eventually be passed to us.

Billing is a huge issue.  Let’s say that you arrange to have your monthly premium electronically withdrawn from your checking account or credit card.  Your policy will lapse if the money doesn’t transfer.  It doesn’t matter if the insurer screws up and fails to take the money (more common than you’d think).  No one cares if Chase gets hacked again.  You will get no pity if your check bounces.  It is up to you to make certain that the money left your account or was charged to your card.  And if it isn’t, you must call your agent or the insurance company immediately.  We don’t have the flexibility we once had.  I currently have four clients in limbo due to this.

Grace Periods are for emergencies.  Too many people think that a 30 day grace period means that their policies are due on the 30^th of the month, not the 1^st.  You know what happens.  They are a touch late, miss the end of the grace period, and are then shocked that they are suddenly uninsured.  This can be a really expensive lesson.  Many of us cannot afford to be without coverage.  The first check I authorize each month is my health insurance bill, FOR THE FOLLOWING MONTH.

Short Term Policies are under attack.  Many of my clients have been purchasing short term major medical policies.  These policies are not compliant.  Preexisting conditions are not covered and the policies are not guaranteed issue.  The premiums for these policies and the tax penalty for opting out of Obamacare may still be a lot less than a compliant policy.  The State of Ohio recently expanded the definition of short term to 360 days, further enhancing this consumer safety valve.  The people who purchase these policies tend to be very healthy.  And that is the problem.

It took a while but Health and Human Services Secretary Sylvia Burwell has realized that one of the reasons health insurance premiums are skyrocketing is that lots of healthy people are opting out.  Sales of short term policies are higher now than in 2013.  Secretary Burwell wants to restrict the policies to 90 days in an effort to force healthy Americans back into the general risk pool.

The perspective short term regulations were just announced a few days ago. The next step is a 60 day period for public comment.  The final regulations, if any, will be crafted mid-August.  I will be monitoring this issue.

As a point of personal privilege, I’d like to thank so many of you for your cards, calls, and emails.  The post Shedding Pounds By Shedding Organs is the quick explanation of how I got here.  I started radiation on June 6^th.  9 weeks.  5x per week.  I’m fine.  I feel stronger every day.

Open enrollment is still several months away. We will get through this together.

DAVE

I got caught. One of my readers noticed that I had yet to say a word about Senator Bernie Sanders and his health plan.  I have reviewed plans from Scott Walker to Donald Trump.  I’ve even covered Obamacare-lite plans from the Senate Republicans.  But like Secretary Clinton, I just kept waiting for him to go away.  But he hasn’t…

I read Senator Sanders’ plan over the weekend.  It is very easy to understand, especially if you are five years old.  Go to the doctor and Dad pays the bill.  You may, or may not, get a lollipop, but no one will ask you, at age five, for any money.  Need a prescription?  Go to the drugstore.  Dad’s got it covered.  Hospital?  Physical therapy?  Inpatient substance abuse?  Whatever you need, don’t worry.  Dad’s got you covered.  Great Dad.  Rich Dad.  Really rich.

Dad is the federal government.

Senator Sanders plan provides 100% coverage. No deductibles.  No coinsurance.  No copays.  He pulls all of the consumer money out of the system.  He eliminates all patient incentives to limit or question care.

Where does the federal government get all of this money?

• 6.2% income-based health care premium paid by employers
• 2.2% income-based premium (after deductions) paid by households
• Tax capital gains and dividends as ordinary income
• Limit tax deductions for households earning over $250,000
• Rejuvenate the estate tax
• Increase marginal income tax rates to 37% for a $250,000 family income to 52% on incomes over $10,000,000

That is a lot of tax.  It would take a very different Congress to pass a funding bill that looked anything like the wish list, above.

It is difficult to illustrate an apples to apples comparison.  Your average 40 year old has an insurance premium, deductible, coinsurance, and copays.  This plan has none of that.  The closest I can provide would be Medicare.

My clients love Medicare.  They’ll tell you how they don’t pay anything at the doctor’s office and how they never saw a bill after a hospital stay.  Even prescriptions are manageable.

Of course, that’s not Medicare.  That is traditional Medicare plus a Medicare Supplement Plan F plus a Medicare Part D (Rx) plan.  But most people just see it all as Medicare once it is all put in place.

Medicare is not free.  We have all been paying into it for years.  The doctors and hospitals are paid on a fee schedule that is more subject to politics than market forces.  This is what you would pay if you turned 65 next month and went on to Medicare.

• Medicare Part A – No Charge
• Medicare Part B – $121.80 per month
• Medicare Supplement Plan F – @$150 per month
• Medicare Part D (Rx) – @$20 per month

The total for someone just turning 65 would be about $292 per month or $3514 per year.

The Sanders plan does not factor in age, just income.  A 22 year old pays the same as a 72 year old, probably more.

How much would an unemployed/retired 65 year old pay under Senator Sanders’ plan? Assuming a Standard Deduction:

1. Annual Income of $20,000 – $281.60 per year
2. Annual Income of $40,000 – $721.60 per year

100% coverage for $281.60, an annual savings of over $3,200!  It takes a lot of income tax on rich people to make these numbers work.

Does this prove that the Sanders plan can’t succeed?  No, but I believe that it would take a giant leap of faith to make these numbers fly.  The lack of consumer/patient involvement dooms the program.  I still believe that the Patient Protection and Affordable Care Act (Obamacare) has put us on the path to a single-payer system.  I just don’t see how it could be a 100% plan.

Free.  We want free.  But we’re not five and Dad, even a Dad that can print money, can’t afford to give us everything we want.

DAVE

Picture is of a dad, but not one who can print money.

Quick Personal Update – Thanks for asking. I’m feeling stronger everyday.  Already spending too much time at the office.

Frank (name changed) knew exactly what he wanted. Frank wanted the kind of policy he used to have twenty years ago when he worked in the family business.  He wanted a small deductible, office copays, and an Rx card.  A throwback.  The policy needed to cover him and his twenty year old son.  He wanted Platinum in a Silver or Bronze environment.  Frank was insistent.

There was a way. I could put Frank and his son into the Government Exchange.  Medical Mutual of Ohio was still offering a Gold Level policy through the Exchange, and even though he didn’t qualify for a tax credit subsidy, we could access this contract for them.  I DIDN’T WANT TO DO IT.   I warned Frank that accessing the Exchange needlessly simply multiplied our chances for failure.  But Frank was insistent.

I can’t tell you how many hours I have invested in this disaster. It is difficult to even explain how healthcare.gov messed this up.  But they did.  The original mistake isn’t the interesting part.  It is all of the subsequent steps that leave us today, May 2, 2016, with Frank and his son uninsured.

Let’s skip ahead to April 9, 2016. Frank sat in my office for almost two hours that day.  We were on hold for over 40 minutes before we got to talk to anyone.  We were lucky.  The woman we worked with seemed both knowledgeable and caring.  Here is what she told us:

• I can see where we corrected the initial problem and got Mr. Frank and his son covered as of March 1, 2016
• I can see where we corrected that mistake and got Mr. Frank and his son correctly covered as of February 1, 2016
• I can see that the policy then automatically cancelled itself out on March 1, 2016 through no fault of the insured
• I can see that this was supposed to be expedited
• I can see that it was never expedited

She promised to get this into the right hands and assured us that there was no reason for this problem to persist. We actually felt pretty good about the process when we finally hung up with her.

Don’t get too comfortable

The rejection letter came three weeks later. The government had decided that he didn’t deserve to have his policy reinstated.  The letter helpfully included the marketplace appeal hotline 855.231.1751.  Frank came in today.

By the way, this isn’t a specific problem of the Patient Protection and Affordable Care Act (Obamacare).  This is a bureaucracy issue.  This is a regulatory issue.  This is a full-fledged screw up.

Frank sat in my office as I called the hotline. Working through the automated system I finally hit the button to file an appeal.  WE WERE IMMEDIATELY DISCONNECTED.

Second call. This time, to the surprise of a Ms. Shannon, I managed to get to a human being.  She had no interest in hearing why we were calling.  The process demanded that we must first go to healthcare.gov, file an appeal, and then, and only then, will anyone talk with us.  Maybe.  I tried.  She wouldn’t budge.

We went to healthcare.gov with her on the line. She made sure to point out the next to the last section, Choose an Authorized Representative.  Frank had the right to name me as his contact, someone who could easily answer their questions and make sense of this.  We got off the phone and completed the appeal form.

And once the appeal form had been completed we hit the link to the special authorization form. The picture at the top is where the link takes you.  We’re so screwed…

DAVE

Consumer Directed Health Plan. One of the biggest jokes in the health insurance industry is the illusion of control.  We pretend that you, the consumer, can control your medical expenses.   We created products that, by law, have high deductibles, no office visit copays, and no Rx card.  We know that you will shop for the best deals in primary care doctors and cardiologists.  We are counting on you to force the doctors to justify every blood test, CT scan, and procedure.  You know that you are a great shopper.  Here’s your chance to prove it.

Can you shop for a deal when they are wheeling you in to the hospital with a blocked artery? “Hold up Mr. EMT. I just got a text alert that Hillcrest is having a sale on bypasses this week.”

But of course, none of this is real. There is no way to know the real cost of medical services in advance.  And who amongst us wants health care by the lowest bidder?  Plus, do we know anyone who is prepared to say to his doctor, “Another surgery?  Gosh I don’t think we should spend so much just to save my life.”

The client is in the early stages of his treatment for prostate cancer. He and his doctors discussed the various ways to remove his prostate, external beam radiation, and even radiation seeds that can be implanted.  The patient chose external beam radiation.  The doctors then suggested that he also have hormone therapy.

Hormone therapy almost appeared to be an afterthought. By taking pills or getting shots the patient would inhibit testosterone production, shrink the prostate, and slow the growth of cancer.  What shot?  Which pill?  The patient was told that the nurse practitioner would tell him when they met.

The client had a shot and got a bill a few weeks later. Ready?  The shot cost $34,228.50.  Surprise.  The Anthem Blue Cross negotiated price for the shot was $18,932.99.  The client’s deductible was $5,500.  He blew past that.  The client maxed out his share and Anthem paid the rest.

I looked at the bill and the first question I had was, “Did they buy you dinner?” I mean for this price he should have received a gift card for The Cabin. Sadly, all he got was an off switch for his libido.  My second question was, “Is this some new miracle drug?”  No, he was given Lupron which has been in use for over 30 years. The good news that it was a double shot, good for 6 full months.

$34,228.50 for one shot. Who knew?  That’s easy.  Everyone but the patient.

We have no control. Remember our friend the next time you wonder why your insurance premiums are going through the roof.  I wouldn’t have done anything differently.   You would have been just as surprised as he was.  This shot is just one more example of a broken system in search of a solution.

Dave

www.cunixinsurance.com