Have you ever popped open a bag of potato chips only to be disappointed by the number of crisps in your bag? It's not just you. To avoid raising prices, companies often increase their "nonfunctional slack fill" or the difference between the volume of product and its container. We talk about how food packaging affects your recipe and wallet.
The new health care law is national, but its effects will be felt locally by individuals and insurance companies as they interpret and navigate the new rules. We talk to officials in Maryland and D.C. about how the long-sought health care reform will change the local experience in the Washington region.
- Beth Sammis Acting Commissioner, Maryland Insurance Administration
- Gennet Purcell Commissioner and Agency head of the District of Columbia Department of Insurance, Securities and Banking
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast a teenage music conductor takes his act to the national stage, but first, the national health care reform law and its local consequences in the Washington region. Sprawling new federal health care rules are now on the books and more rules will roll out in the coming months. They affect everything, from the coverage of young adults to caps on lifetime coverage. But not every state or jurisdiction will feel these effects the same way.
MR. KOJO NNAMDIJoining us to explore how the federal law will affect people who live in Maryland and the District of Columbia in our Washington studio is Gennet Purcell. She is the commissioner and agency head of the District of Columbia Department of Insurance, Securities and Banking. Gennet Purcell, thank you for joining us.
MS. GENNET PURCELLSure. Thank you for having me.
NNAMDIJoining us from the studios of WYPR in Baltimore is Beth Sammis. Beth Sammis is commissioner of the Maryland Insurance Administration. Beth Sammis, thank you for joining us.
MS. BETH SAMMISThank you. It's a pleasure to be with you.
NNAMDIIf you have questions or comments about how health care reform rules rolling out will affect you, you can call us at 800-433-8850, send us a tweet @kojoshow and e-mail to email@example.com or go to our website kojoshow.org, ask a question, make a comment there. Starting with you, Gennet Purcell. Provisions of the new federal health care law have been kicking in during the past few months, more of them kicked in a few weeks ago. It's been a confusing process for most people to follow. What do people in the District -- first the District and then Maryland -- need to know about how these new rules are going affect the insurance they receive and how they pay for it?
PURCELLRight. Well, I think the most important thing to note is that changes that result as a -- as a result of the federal law implementation are already underway. And so the one place our residents will see this difference is in the coverage options that are available to be them. These have changed. Now to include a greater and wider range of services. And also, in some of the services that they have on their existing plans, things that perhaps previously were not covered are now covered. There is more cost sharing on some of the more PPACA -- what we're calling PPACA-compliant plans. And really, the effects of reform are available to them immediately.
NNAMDIIf you have health insurance coverage in the District through your employer, when will these new benefits and protections be added to your policy?
PURCELLWell, the first range of reform provisions went into effect on Sept. 23 of this year, that being six months after the enactment of the law -- of the federal law. And those include -- there are now limits -- first and foremost, there are now limits on rescissions, which means an insurance company can no longer reject your claim or rescind your policy unless there is a very strict fraud or misrepresentation issue that has to be proven. And so that's a major achievement. Also, there has -- there is now the elimination of cost sharing on most preventative services including, well-baby check-ups, well-woman check-ups, things like mammographies and pap smears, which perhaps, previously, there was an extra charge for, right now included.
PURCELLAnd we're seeing, really, an expansion of coverage for children in two ways. One being that a child on a parent's policy can now stay covered on that policy up to the age of 26, which is new. And second being that a child can no longer be denied coverage because of a preexisting conclusion, I mean...
NNAMDIIt doesn't say anything about...
NNAMDI...how long that child can continue to live in my basement, does it?
PURCELLNo. Has nothing to do with that.
NNAMDIOkay, (laugh) we move on to Maryland. Beth Sammis, could you tell us about how these new rules are gonna be affecting residents of Maryland?
SAMMISYes. It's -- you know, obviously, all of the changes that Commissioner Prucell described apply across the United States to all plans. But as you mentioned in your opening, how it impacts any state really does vary. Maryland, for example, has had a long history of providing very comprehensive benefits through health insurance products that are subject to state regulation. So many of the changes that went into effect on Sept. 23 will really not have much of an impact on individuals in our state who buy coverage -- health insurance policies that are subject to state regulation.
SAMMISWe have put together a chart that's available on our website at www.mdinsurance.state.md.us to give consumers a precise overview of what they can expect to change in their policy. I think, in Maryland, probably the most significant change is what Commissioner Purcell mentioned about children being able to be covered in the individual market without a preexisting condition under a family policy. And that's a pretty significant change on the insurance side. Again, in Maryland, for families that are covered under policies that are issued by health maintenance organizations, that prohibition has existed for about 20 years.
NNAMDIAgain, you can call us at 800-433-8850 if you have questions or comments about how health reform rules affect your health insurance. There have been reports that insurers in this region have been asking for rate increases up to 13 percent to cover the cost of the new federal rules. What rate increases can consumers expect? And what are these increases the result of? Again, first you, Gennet Purcell.
PURCELLSure. Well, I think what I've seen, and I know that this may be similar in Maryland, is that some of our larger carriers are pricing their compliant plans slightly higher than comparative plans' pre-compliance. But what we're noting and what we wanted our residents to know is that not only are they getting a wider range of services, but also, there is a wider range of reimbursement options available to them, both federally via tax benefits and incentives that are now put in place as a result of this law. And that they can also expect there to be rebates to the extent that our health insurance do not provide the appropriate amount of cost -- of medical cost on each plan going forward, and that's something that the DISB, my department, will be strictly monitoring.
NNAMDIBeth Sammis, any increases in Maryland as a result of health care reform?
SAMMISThe group market, those plan policies that are issued to employers, small employers and large employers, there have been no changes in rates that are material as a result of changes that took effect on September 23rd. In the individual market, that's the market where you go out on your own and purchase insurance directly from a health insurer, there are going to be some increases in the premiums for new policies, but there will not be any changes for existing policies.
SAMMISSo if you go out now and purchase a plan in the individual market, because you -- certain plan designs can no longer be sold in Maryland, for example, it was not uncommon in the individual market to have an annual maximum of $500 per year per prescription drug policies, that benefit plan design is no longer permissible. Under the federal law, the annual limit must be $750,000. So that's an expansion of benefits. It provides coverage for more people, but it will cost a little bit more.
NNAMDIHere is Richard in Bethesda, Md. Richard, you're on the air. Go ahead, please.
RICHARDYeah, that comment was incredibly timely because I'm in the individual market myself. I pay for health care myself. I'm a health care provider as well. And my policy if you're Blue Cross and Blue Shield of Maryland went up over 30 percent in December of last year. We got a letter in January with no warning basically saying that the policy would increase that much. It had been increased recently prior to that as well. All this was taking place while the health care debate was going on. They managed to, for no reason, there's no changes in my status at all, to raise that premium over 30 percent, and what I've found even more strange was the conversation at that point with how California Blue Cross and Blue Shield had had the audacity to raise rates around that time as well, but nobody mentioned anything about that incredibly huge increase right in our own backyards here, right outside of the District of Columbia. So can you comment on that, please?
NNAMDIBeth Sammis, what do you know about that?
SAMMISI'm very familiar with the rate increases that have been occurring in the Blue Cross plans. In Maryland, all premium rates are subject to prior approval. That means that no company can sell a product in the state of Maryland for which the price has not been approved by my department. There are a number of issues that are very technical, and I'm happy to get into those. Publicly, this is not the right forum, so if the caller would give me a call in the office, I'd be happy to discuss it further with him to go through exactly what is happening.
SAMMISBut the bottom line is essentially that a number of the products that were being offered in the market were underpriced, and the premiums that were being collected were no longer covering the cost of the claims. So we have been allowing CareFirst to increase their rates at around 20 to 24 percent in certain of those products to bring them up to a level in which the premium is beginning to cover the claim's cost.
NNAMDISo Richard's figure was 30 percent. Does that seem to you to be a bit high?
SAMMISDepending upon the product, no, and also depending upon his age. The other thing that occurs in health insurance policies is that the price of the policy depends upon your age. And if you move from one age bracket to another, an individual could see premium increases of even higher that amount. We are going through a process in Maryland and I believe the District is as well as a result of monies that have been made available to us by the Department of Health and Human Services to improve how we actually scrutinize and approve premium rate increases and how we provide greater transparency to the public to understand why it is that we are approving the rates that we do. And we were -- we've just issued two RFP's to begin that process. And I'm very hopeful that beginning some time in September of next year, we'll be able to provide more detailed information to the public, so that they can understand what is ultimately driving the increases that they see. But again...
NNAMDIDid you already give Richard a number to call or an email address to send to? Would you care to repeat it?
SAMMISHe can either e-mail me at bsammis, S-A-M-M-I-S, @mdinsurance.state.md.us, or he can call me at 410-468-2090.
NNAMDIRichard, thank you very much for your call. We're gonna take a short break. When we come back, we'll continue this conversation on local insurance and how it has been affected by health care reform rules. We're taking your calls at 800-433-8850, or you can go to our website, kojoshow.org, and join the conversation there. I'm Kojo Nnamdi.
NNAMDIWe're discussing the effects of health insurance reform on you, residents in the DMV, the Washington Area. We're talking with Beth Sammis. She is commissioner of the Maryland Insurance Administration. And Gennet Purcell is the commissioner and agency head of the District of Columbia Department of Insurance, Securities and Banking. Gennet, what have insurers been telling you are the costliest effects of the new law?
PURCELLWell, what we've seen and what we've heard are largely the administrative costs that are associated with getting all the new provisions into play, creating the new plans and ensuring that all the mandated benefits are provided at the local level.
NNAMDIWhat factors, Beth Sammis, do you consider when an insurer submits a request to you for a rate increase?
SAMMISIn Maryland, we have a requirement for health insurers to meet certain minimum medical loss ratios, and that is a measure that's been talked about a lot under federal health care reform. But in our state, it is simply a mathematical formula wherein card claims are divided by earned premiums. And for every health benefit plan that is sold in the individual market, the premium must have a medical loss ratio of 65 percent, and in the small group market, the medical loss ratio must be at a minimum 75 percent. If the health insurance demonstrates to us -- if the health insurer demonstrates to us that it's meeting those medical loss ratios at the time at which it files its rates and on an annual basis of the aggregate level, we have no authority except to approve those rates.
NNAMDIIn the District of Columbia, Gennet Purcell, is it comparable?
PURCELLIt is comparable.
PURCELLAnd I think we are all -- we're also both guided by a statutory provision which varies among states but generally states that all premiums submitted for approval must be actuarially sound, must be justified and must not be excessive. And these are some of the factors we take into consideration in reviewing those rates.
NNAMDIHere is Jen in Washington, D.C. Hi, Jen.
JENHey. I've got to say that -- just a comment on what you just said that when they're charging extra for the administrative cost, that just further confirms my belief and knowledge that the insurance companies are nothing but pimps. They provide no real service, no medical treatment to people, but they are just a barrier for people to get to their -- what they really need, which is the doctor. And we wouldn't have to worry about the administrative cost if I could just walk down the street and go to a family doctor. That having been said, I'd like to hear how the -– how it will impact -- these changes will impact the D.C. health care for low-income individuals. Thanks.
PURCELLWell, just to address her comment, I think -- I would like to clarify, administrative costs go into each rate that is submitted. I think what I was responding to was the question -- was that what am I hearing from my insurers as something that will likely increase or maybe the largest impact to them going forward as a result of reform. But it doesn't necessarily mean that all of those administrative costs are carried through and passed through on each individual plan. We actually look at and scrutinize line items that delineate exactly how much administrative charges are going into each rate that we approve. And those are things that we sometimes go back and ask them to justify as well. How health reform will impact low-income residents in the District? Only for the better, I think.
PURCELLOne thing I can assert is that the District historically has a very low amount of uninsured residents. I think we sit at about 6.2 percent currently, second in the nation only to Massachusetts. And so, what we've successfully been able to do is to already convert I think over 30,000 of our residents from some of our public benefit plans, such as Alliance to Medicaid, which has a new expanded benefit plan, and that's a very, very good thing. Some of the other ways it will eventually impact our lower-income residents is that we will get to a place where everyone in the District, regardless of financial situation, has access and availability to quality health care insurance. And that means better health care outcomes, better options for all of our residents. And that's an immediate change that will really take form in 2014.
NNAMDIAnd when you say alliance, you refer to the D.C. HealthCare Alliance.
PURCELLThat's right. That's right.
NNAMDIHere is Chris -- and Jen, thank you for your call. On to Chris in Montgomery County, Md. Chris, you're on the air. Go ahead, please.
CHRISYeah. Hi, Kojo. Thanks for taking my call. I'm a physician in a three-member private practice. We're essentially a small business, and we insure our employees through Blue Cross Blue Shield. The premiums that we have to pay, our business has to pay for our employees, just went up 18 percent, and that translates into a lot of money when you look at our bottom line. Now, the way I see it, is that health care reform will expand health care services and that money has to come from somewhere. The horizon was bleak to me because I believe that these costs will be transferred to small businesses and will make it very hard for private medical practices and other small businesses to stay afloat. And I'll take the answer or comments off the air. Thank you.
NNAMDIBeth Sammis, can you respond to Chris' concerns, please?
SAMMISI understand his concerns. And of course, whenever health care premiums go up, it has an impact on employers and on individuals and their families, and it is not a good thing. But of course, we have a fiduciary responsibility as regulators to be sure that the premiums are adequate and that they will cover the cost so that the -- we can be sure that the insurance company will have the financial resources to actually carry through with its promises that it’s made to its policyholders. Again, with the situation of CareFirst, there were a number of products that had been underpriced in the marketplace. We've been working very hard with CareFirst to bring those up to adequate rates. And it is my great belief and my hope and is going to be part of my regulatory challenge going forward in the next year to be sure that CareFirst is now on track, and that those increases in cost will be directly related to any increases in claims as opposed to mistakes in pricing from the past.
NNAMDISpeaking of -- go ahead please.
SAMMISAnd so we're working very hard to get the increases to track more closely medical care inflation so that businesses like the two that have called in won't see the kinds of jumps that they have experienced. But again, if he has questions about his own policy, I'm very happy to take a look at it to explain what portion of the increase was due to a change in what we call the base rate as opposed to the age of the group. And again, he can reach me at firstname.lastname@example.org or at 410-468-2010, 29.
NNAMDIWe'll try to make sure we put a link to that on our website, kojoshow.org. Gennet Purcell, speaking of cost, there's been a lot of back and forth about whether implementing this new law will save money or cost more for states and jurisdictions that will be in charge of carrying it out. What do you see for your jurisdiction when you run the numbers?
PURCELLWell, I think one thing that benefits not only the District of Columbia but all states is that HHS has committed to providing states with a maximum number of grand opportunities to implement all the provisions of the PPACA law. To date, the District has already submitted and been awarded over $2 million in grant funds to implement our health exchanges in 2014 to help with the planning of those exchanges and to, as Commissioner Sammis referenced, enhance and reform our rate review process at the department. So certainly, we will take advantage of all of these federal grant opportunities but also it's gonna be incumbent on us to budget appropriately to ensure that the District agencies that have been charged with implementation work into their plan and their staffing and so on all the resources that they'll need to fully implement the law going forward.
NNAMDIHow about cost in the state of Maryland? Beth Sammis.
SAMMISWell, obviously, one of the most exciting things about the federal reform is that when 2014 comes, there will actually be financial assistance available to individuals to help them cover the cost of health care or health insurance premiums through the exchange for anyone who has between 100 and 400 percent of federal poverty and purchases commercial health insurance through the exchange will be eligible for premium tax credits. Similarly, small businesses, in addition to the premium tax credits that are the -- subsidies that are available to them today in the State of Maryland, will have available to them premium income tax credits as well when they purchase coverage through the exchange.
SAMMISSo I think that that is going to go a long way to helping all of us be able to afford and keep our health insurance costs. Over the long haul, all of us as policy makers and as consumers have to take a hard look at the health care delivery system. In Maryland, we've already made great strides. Governor O'Malley and Lieutenant Governor Brown have championed such things as the Patient Centered Medical Home, electronic medical records to try to move us ahead, to improve how health care is delivered in our state and to make sure that it is done in the appropriate, most cost-effective manner so that we can start to bend the healthcare cost curve without any downturn in quality.
NNAMDIGennet Purcell, Beth Sammis talks about 2014 when states can set up exchanges, marketplaces where individuals and small businesses can shop for plans. Are you preparing to -- for 2014? And if so, what challenges do you expect to confront as you set up these exchanges and how do you plan on tackling them?
PURCELLRight. Certainly, we are preparing. I serve as co-chair on the District's Health Reform Implementation Committee along with Julie Hudman, director of the Department of Health Care Finance for the District. And together we, as well as a subcommittee that's been appointed with members, stakeholders in the District are working specifically on planning the District's future exchange. We have several subcommittees, but one of them is dedicated solely to forming and planning the structure and governance of the exchange.
PURCELLAnd it certainly will be a challenge. But again we're -- we have the federal grant dollars that we’ve already been awarded to help us in that planning. And we certainly have the support of national organizations such as the NAIC and just really stakeholders in the District who have really come together and mobilized to participate on the subcommittee, to offer their ideas and perceptions of what the District exchange should look like, to keep us informed of what our residents need and where the needs lie. And I think it will be a challenge, but we will slowly but surely get to that place.
NNAMDIAnd how do residents get in touch with your office in the District of Columbia?
PURCELLAbsolutely, absolutely. They can call our office directly at 202-727-8000. They can call me directly at 202-442-7776. Our website is located at www.disb.dc.gov, and I would also direct our District residents to www.healthreform.dc.gov, which is really a hub of all of the District agencies' health reform efforts in one place.
NNAMDIHere's Patty in Clinton, Md. Patty, go ahead. You're on the air.
PATTYHi. I didn't know if it was kind of common knowledge that the TRICARE dependents that are 21 and 23 are not included in the statement that all children will be covered until their 26th birthday. And I didn't know if that was -- I mean, my son just turned 21 and he's not a full-time student. He's only getting 10 credits this semester. So on his birthday, he lost his insurance. And his birthday was September 21 (unintelligible)
NNAMDIWhat's a TRICARE dependent?
PATTYWhat -- a military dependent. I'm sorry.
PATTYMy husband was in active duty. He is a military dependent. So our military dependents are excluded from the plan. And I didn't know if that was common knowledge.
NNAMDIBeth Sammis, can you talk about how that's handled in the state of Maryland?
SAMMISWell, of course, the states do not regulate any federal programs like TRICARE or the federal employees' health benefit plan for which there are a number of folks in both our jurisdictions who have health insurance coverage through one of those two means. I'm not personally familiar with TRICARE, I don't know the rules and I accept the caller's observation as fact. With regards to the age of the rolling in of the coverage up to the age of 26, it is true that that does not necessarily mean that if you have a health insurance policy today that your child can remain on that policy up to the age of 26. Now, that's -- that provision will become applicable when your policy is -- or plan year -- a new plan year begins. But in the state of Maryland, if you are in the health insurance market today, in the regulated market, which is about a third of the commercial market, those policies already require your child to stay on the policy if they were a dependent, up until the age of 25. So this will be an expansion because a child can stay up on -- up until the age of 26 won't have to be a dependent and can actually be married, but when it kicks in, will depend upon the specifics of when your policy renews or the new plan year begins.
NNAMDIAnd Patty, thank you very much for your call. That's about all the time we have. But we have a lot of people who are clearly interested in this issue, so Beth Sammis and Gennet Purcell, please stand ready to come to the show again because...
NNAMDI...obviously as this is rolled out, more people will wanna know what's going on. Beth Sammis is commissioner of the Maryland Insurance Administration. Thank you for joining us.
SAMMISThank you very much. It was a pleasure.
NNAMDIGennet Purcell is the commissioner and agency head of the District of Columbia Department of Insurance, Securities and Banking. Thank you very much for joining us.
PURCELLThank you very much for having me.
NNAMDIWe're gonna take a short break. When we come back, the young conductor of the Baltimore Symphony Orchestra, at least for next weekend, he's just 17 years old. Meet Ilyich Rivas. I'm Kojo Nnamdi.
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