My opposition to Obamacare is where pragmatism and cynicism meet. My health insurance premiums are going up faster than my wages and I cannot do anything about it. This is pretty galling for a healthy person who has not made an insurance claim in this century. If Obamacare cannot fix the largest part of the health insurance market, Obamacare as a health care reform is a failure. It is not even a good first step! So I hope for the best and plan for the worst. For the next two to three years I think that the individual health insurance market will be a better deal than the group health insurance market as I wrote in What if Individual Health Insurance Premiums do not go up as fast as expected? According to this Milliman report on health insurance in Ohio, the two biggest cost drivers in the individual health insurance market is pre-existing conditions and community rating. If we can fix these two problems then the individual health insurance market segment will continue to be more attractive than the group health insurance market. Community rating is just another arbitrary cost shifting scheme that disguises cost pressures. If you want market pressures to help reduce health care cost increases, you do not hide the costs. Since I would prefer that we have slower health care cost increases, community rating needs to be dramatically reduced or eliminated. The individual mandate is a really dumb solution for the pre-existing condition problem. It just needs to go away. Here is a more elegant solution to the pre-existing condition from the Heritage Foundation, The Right Way to Limit Pre-Existing Condition Exclusions. Yes, this solution on one page. Work smarter not harder!

Over 90 percent of Americans with private health insurance are covered by employer group plans where existing rules governing the application of pre-existing condition exclusions are not an issue.  Before passage of Obamacare, the law specified that individuals with employer-sponsored insurance cannot not be denied new coverage, be subjected to pre-existing-condition exclusions, or be charged higher premiums because of their health status, when switching to different coverage. Thus, group market, pre-existing-condition exclusions only apply to those without prior coverage, or to those who wait until they need medical care to enroll in their employer’s plan.

These existing rules represent a fair approach: Individuals who do the right thing (getting and keeping coverage) are rewarded; individuals who do the wrong thing (waiting until they are sick to buy coverage) are penalized.

The problem is that the same kind of rules did not apply to the “individual” (non-group) market””about 9.4 percent of the total market for private health insurance. Thus, an individual can have purchased non-group health insurance for many years, and still be denied coverage or face pre-existing condition exclusions when he or she needs or wants to pick a different plan.

The obvious, modest and sensible reform is to simply apply to the individual health insurance market a set of rules similar to the ones that already govern the employer group market.

Instead, Obamacare prohibits the application of pre-existing condition exclusions under any circumstances, thus encouraging everyone to wait until they are sick before buying health insurance. These perverse incentives are a recipe for disaster. To limit the effects of that disaster (of their own making), lawmakers included an unpopular individual mandate to buy health insurance in the health care legislation.

There is an old saying, “Don’t look a gift horse in the mouth”. It is supposed to mean that you should not be ungrateful when you receive gifts. This saying was more relevant when horses were an essential part of our economy. In today’s economy it has a new meaning. As a horse person I can say that horses are easy to get and hard to get rid of. They are very expensive pets so we do not want to go there. Killing horses when they are no longer useful is an unpleasant but necessary business. As a horse person most deals we have been offered involving gift horses were bad deals and if it did not work you got stuck with killing the horse. Since the justification to expand Medicaid rests almost exclusively on the idea of free federal money, I wish Governor Kasich and Scott good luck with their Medicaid expansions. Medicaid expansion looks like a gift horse.

Wow! I must be stuck in a time warp. I still spend money on healthcare like I am in the 1970s.

Health Care Spending In America, In Two Graphs

Lam Thuy Vo and Jacob Goldstein

February 04, 2013 2:26 PM

Spending on health care has, of course, been rising in the U.S. for decades. Health care now accounts for 18 cents of every dollar Americans spend, up from 7 cents in 1970.

But where, exactly, is all that money going? And, for that matter, where is the money coming from to pay for all that health care? We found answers to both of these questions in this data set.

First, here’s where the money is going.

Source: Centers for Medicare and Medicaid Services

Credit: Lam Thuy Vo / NPR

Despite huge changes in medicine and medical technology, the share of health dollars that flows to each major category has changed little in the past 40 years. In other words, spending on each category ”” drugs, hospitals, doctors, etc. ”” has increased at about the same rate.

What has changed dramatically is where the money comes from.

Source: Centers for Medicare and Medicaid Services

Credit: Lam Thuy Vo / NPR

In 1970, by far the biggest share of health care spending was what people spent out of their own pockets. Today, insurance (private plans along with Medicare and Medicaid, which are government-run) covers almost everything.

We emailed Uwe Reinhardt, the Princeton health economist, to ask about this shift.

Insurance coverage has become much more comprehensive, he said.

For example, in 1970, people typically had to pay for drugs out of their own pockets. By 2000, it had become routine for private insurance to cover drugs. Medicare drug coverage began in 2006.

What’s more, he said, in many cases, employees gave up some freedom of choice in health care in exchange for less out of pocket spending. But that trend is reversing itself, he said.

"Now we are going the other way, with higher deductibles and coinsurance for employer-based plans," he said.

A giant, long-term study conducted in the ’70s and ’80s is relevant here. Researchers randomly assigned people to receive different types of insurance ”” some had full coverage, while others had to pay for a big chunk of the care they received.

People had to pay more for care tended to get less care. And people who were poor and who had to pay more for care fared worse on some key health measures.

The underlying question here is one of the oldest and most contentious in health economics: What costs should health insurance cover, and what costs should be left to individual patients?

For more, see our recent story on insurance coverage for breast pumps, and see the Kaiser Family Foundation’s Health Care Costs Primer.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Health Care Spending In America, In Two Graphs
Mon, 04 Feb 2013 19:26:00 GMT

On Friday I decided to follow-up with the Department of HHS about my question about HRA, “Can a firm with less than 50 employees continue to offer HRAs since these firms are specifically exempt from the Affordable Care Act(2711) regulations?” So I called the HHS switchboard and they transferred me to a regional office where I left a message. As a person covered by a HRA in which I purchase health insurance in the individual insurance market, I am a person with “skin in the game” and I doubt that my place of employment will add a group sponsored health insurance to the HRA plan. My boss had said they chose a HRA with individual health insurance since it achieved the same results with less cost to the firm. That is an interesting statement. I found confirmation for his statement in the brief, Spending for Private Health Insurance in the United States, and posted my results in the post, Spending for Private Health Insurance in the United States. This begs the question, “Why is the HHS promoting such an inefficient health care policy?” I think I know the answer. Some things are better left unsaid if I want my particular situation to stay unchanged.

Follow-up to my Questions about Health Reimbursement Accounts | alazycowboy.com

Last week on the Health Affairs Blog I read the post, Implementing Health Reform: Health Reimbursement Arrangements And More, and it pissed me off. As a healthy person with a healthy family I hoped the unintended consequences of the Affordable Care Act would not affect me. Here is the part that bothered me.

The FAQ clarifies that this approach is not possible under section 2711.   The agencies intend to issue further guidance on the issue, but have concluded that stand-alone HRAs used to purchase individual coverage will not be considered to be integrated coverage that complies with the annual dollar limit requirement.  Indeed, if employees are offered an HRA and group coverage, but decline the group coverage, the stand-alone HRA coverage will violate section 2711.  The FAQ does permit amounts accumulated in a stand-alone HRA prior to January 1, 2014 to be drawn on after that point if certain conditions are met.

After I read the FAQ I realized that my days of benign neglect are over. I also read the Federal Register Section 2711. It appears that the Department of Labor opted to for an interpretation that makes HRAs illegal. FAQ #11 states that: "The Departments intend to issue guidance providing that for purposes of PHS Act section 2711, an employer-sponsored HRA cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore will violate PHS Act section 2711." As a person who is presently using a HRA to pay for my health expenses I strongly disagree with their interpretation and have started the process of fighting their decision. My first step is to ask the Department of Labor for clarification on two questions. It should be interesting how far I will be willing to go with this issue.

Q#1. Can a firm with less than 50 employees continue to offer HRAs since these firms are specifically exempt from the regulations?

Q#2. I use my HRA to purchase health insurance in the individual insurance market. Although my health insurance is a grandfathered plan, my insurance company is making a good faith effort at complying with Section 2711. I discussed our future health care options at our small business and we have two options, a HRA or nothing. I think they would prefer nothing. Can you explain the logic why the Department of Labor prefers that I pay for my health insurance completely out of pocket versus my present arrangement with a HRA?

Let us be perfectly honest here. With this ruling it is obvious that I was much better off before the Affordable Care Act. Is this really a step forward in health care?