12/09/2010 05:15 pm ET | Updated May 25, 2011

Waiving Away Affordability of Health Care

It was clear from the beginning of the health care "reform" charade that the insurance industry, the drug industry and other parts of the corporate medical industrial complex were working to assure that any legislation that passed would add to their financial bottom lines. They largely succeeded in this. The following examples illustrate how well some of these industries made out with the final result, the Patient Protection and Affordable Care Act of 2010 (PPACA), which passed in March:

• By way of the individual mandate, insurers will gain 32 million new enrollees, most requiring government subsidies to either patients or employers.

• The drug industry avoided importation of drugs from other countries and again fended off any role of the government to negotiate drug prices, as the Veterans Administration does so well in getting prices down to about 58 percent of usual costs.

• Existing specialty hospitals, physician-owned facilities that allow physicians to "triple dip" their incomes as providers, owners and investors, were grandfathered in.
But that was only the start of a continuing series of compromises by the Obama Administration that further weaken the bill and add fuel to the accelerating rate of health care inflation. When any of the corporate stakeholders raised objections to one or another part of the "reform" package, their objections were generally met with industry-friendly concessions.
The government had little room to negotiate. Having falsely assured the public from the beginning that they could keep their insurance if they liked it, the government had put itself into a corner where it has to cater to the insurance industry. Otherwise, the market would be "disrupted," resulting in many people losing their coverage. Waivers have become the instrument whereby to further coddle the insurance industry, rendering less effective any "teeth" that are in the bill. In the last few months, there have dozens of waivers granted, watering down a number of provisions of the PPACA. Here are some examples:

• When insurers complained that they may have to exit the market if forced to offer coverage of sick children on their parents' policies, the government obliged by allowing brief open-enrollment periods whereby such coverage would be unavailable for much of the year; insurers were also granted permission to raise premiums for sick children until 2014, to the extent that state laws allow.

• Insurers are still free to set their own premium rates, with little effective restraint by a government which can mostly just protest large increases; most rate-setting "controls" are at the state level, where regulators tend to be industry-friendly. Thus premiums may be hiked up to 40 percent in the individual market.

• The industry has strongly resisted the law's requirements to set their medical loss ratios (MLRs) at 85 and 80 percent, respectively, for large employer and small employer/individual plans. That would force them to pay out at least 80 or 85 percent of their premium revenue on medical care. But what counts as "medical care"? The industry lobbied hard for a broad interpretation of that question, to include a number of non-medical expenses, even extending to commissions of insurance brokers. The latest rules, as recommended by the National Association of Insurance Commissioners and adopted by the Department of Health and Human Services (HHS), affect about 75 million people (11 million with individual policies, 24 million with small group coverage, and 40 million with large employer coverage). The insurance lobby won a number of concessions, including counting expenses of quality assurance as medical costs, allowance to deduct many of their taxes from their total premiums before calculating their MLR, and the ability to appeal for a lower MLR standard for up to three years in states where "there is a reasonable likelihood that market destabilization could harm consumers." Four states have already sought such adjustments -- Georgia, Iowa, Maine, and South Carolina.

• Many insurance plans, including most large employers, are already exempt from the PPACA's provisions. These plans have been "grandfathered in" without PPACA requirements, and have even been given other ways (eg. switching carriers) to keep that status.

• A recent ruling by HHS allows more than 100 employers and other insurers to retain very low annual limits of coverage (eg. only $2,000 a year, hardly qualifying as insurance). Employers such as McDonald's Corp., after warning regulators that it might have to drop coverage for 30,000 hourly workers, handily won this concession for their "mini-med" policies.

According to economists at the Centers for Medicare and Medicaid (CMS), health care spending will not be cut by the PPACA. By 2019 they expect that U. S. health spending will reach $4.6 trillion, accounting for almost 20 percent of GDP. By then spending on private health insurance will exceed $600 billion a year (32 percent of all health care spending).

As health care inflation proceeds apace, employers are passing on more costs to their employees. Prices continue to soar throughout the system, even accelerating as hospitals and physician groups gain consolidated market clout. This leaves insurers and employers in a weaker negotiating position. Health insurance and care get less affordable every day for much of our population. And federal subsidies under PPACA are more than three years off in 2014, as is Medicaid expansion.

So the health care crisis continues unabated as proponents of PPACA and a defensive Administration posture how much it is helping us. The urgency and stakes for real reform just notch up with each passing month and year. Despite the losses of progressive policies in the recent midterm elections, there is one bright ray of hope in three states -- Vermont, California and Hawaii -- where the new leadership is supportive of real health insurance reform -- single-payer universal coverage without exploitive profiteering by a dying insurance industry kept alive only by government subsidies of one kind or another.

Adapted in part from Hijacked! The Road to Single Payer in the Aftermath of Stolen Health Care Reform, 2010, with permission of the publisher Common Courage Press.