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28 Hartford Business Journal • September 19, 2016 www.HartfordBusiness.com EDITORIAL Insurance exchange woes underscore need for further reforms T he strange saga of ConnectiCare's participation on the state's insurance exchange is finally over, at least for now, but the cat and mouse game between the Farmington insur- er and state insurance regulators has left in our minds more questions than answers. First, after ConnectiCare was adamant that the 17.4 percent average rate increase approved by the Connecticut Insurance Department was inadequate and would cause it to lose $20 million next year, why did the insurer have a sudden change of heart? ConnectiCare went so far as to file a rare lawsuit against the Insurance Department accusing the agency of approving rates that would threaten its solvency, a significant charge against a government regulator whose responsibility is to safeguard the finan- cial health of the industry. Did the 17.4 percent rate hike suddenly make financial sense for the insurer? If so, how come? Or, is the company willing to take a loss to preserve competition on the exchange, which now only has two participants left (Anthem and ConnectiCare) after UnitedHealthcare and HealthyCT exited earlier this year? ConnectiCare's exchange business was profitable in 2014 and 2015, earning the com- pany $12.3 million and $13.6 million, respectively, according to ratings agency A.M. Best. The carefully crafted public statements released at the end of this brief public spat didn't reveal much, but it is likely ConnectiCare faced some political pressure to stay on the exchange. In a written statement, ConnectiCare President and CEO Michael Wise said: "After hearing from state officials, providers and beneficiaries about the importance of our plan to Connecticut, we have decided to move forward into 2017 as a plan on the exchange at the rates approved by the department." We may never know the full details of how this dispute played out, but at a time when Connecticut's small businesses and individuals continue to get crushed by ever-increasing health insurance costs (the average 2017 individual rate increase for health plans sold on and off the exchange is 24.88 percent, while small groups face a 12.88 percent average rate hike), the public's confidence in the entire rate-setting system won't be helped by this episode. And it's very likely we haven't heard the end of the exchange's problems. After being hailed as a beacon for state insurance exchanges around the country, Access Health CT has lost half of its insurance participants, as carriers raise red flags about the financial viability of the products they are selling on the exchange. The main conclusion that can be drawn is that unless changes are made to the Affordable Care Act on the federal level, the exchange will experience serious long- term survival challenges. Gov. Dannel P. Malloy, an ardent exchange supporter, agrees with that analysis. Earlier this month, he sent a letter to Sylvia Burwell, secretary of the U.S. Department of Health and Human Services, raising concerns about the market volatility that has resulted from several federal policies, including the Federal Risk Adjustment Formula, which was the main factor that essentially forced Wallingford insurer HealthyCT out of business. He also raised concerns about flaws in the rate-setting process and urged CMS to consider more flexible plan designs — something insurers have been encouraging for years — so more affordable insurance products can be sold on the exchange. Admittedly, there is no silver bullet to providing more affordable healthcare coverage in Connecticut and around the country. Some would argue that government should reduce or even eliminate its role in the system; others say government should completely take control of it. What most people can agree on is the current system remains imperfect — as dem- onstrated by the problems facing Connecticut's own insurance exchange — and needs further reforms. n RULE OF LAW Government must curb its healthcare involvement By John Horak T he lead editorial in the Aug. 18th edition of the Wall Street Journal ("The Aetna Mugging") tells a tale of two foreseeable phenomena: The Affordable Care Act (ACA) is failing to deliver as promised, and insur- ance companies are going to be in the line of fire as the blame game begins. In Aetna's case the stage is set like this: The Hartford insurer is withdrawing from ACA exchanges where it has lost $430 million since 2014 — while simultane- ously fending off the Justice Department's attempt to block its merger with Humana (intended to increase efficiencies, decrease losses and enable it to stay on more exchanges). While Aetna's busi- ness and legal issues are challenging, the poli- tics will be worse, as presaged by Massachu- setts Sen. Elizabeth Warren's barbed comment about the hot seat Aetna occupies. She said: "The health of the American peo- ple should not be used as a bargaining chip to force the government to bend to one giant company's will." My interpretation of the situation is that we are seeing what happens when traditional and sound business decisions (avoiding losses, merging and defending your turf in court), run into political expectations about how much health care the federal government can deliv- er or make available to the people — directly (Medicare and Medicaid) or indirectly (pres- suring providers and insurance companies). The traditional business approach is based on the notion that a "doctor's visit" represents a private economic exchange of value between a patient and a provider with insurance absorb- ing financial risk. On the other hand, the case for government involvement is increasingly based on the notion (advanced by President Obama since 2008) that affordable health care is a civil right that the government (as the creator or guardian of rights) stands ready to enforce — to the extent of vanquishing any "giant company" standing in the way. The two approaches are like oil and water. From the traditional perspective, Aetna's $430 million loss is a bad business outcome; from the second it is a redistribution of wealth from Aetna's shareholders to the failing exchanges. As the post-election Congress and new president grapple with this predicament, my observation is that federal involvement in health care over the past 50 years has expand- ed past a point of diminishing returns; and my suggestion is that we will end up in a better place if we ratchet back both the govern- ment's involvement and the political grand- standing about what it can actually deliver. My suggestion is not based on theoreti- cal principles, or the opinions of healthcare policy experts, but on something more hum- ble to which I can bear personal witness: Government involvement has created an enormous self-perpetuating bubble of legal complexity populated with healthcare law- yers (a relatively new specialty), consultants, lobbyists, experts and administrators (on both the government's and the provider's side of the tables) who spend their working hours duking it out over the meaning of obscure reg- ulatory terms, pondering the clinical neces- sity of services rendered, making sure each clinician's touch of a patient's body is properly coded, and the like seemingly ad infinitum. After watching this complexity in motion I am convinced that German philosopher Fried- rich Nietzsche was right when he said that the commonest form of stupidity is to forget what we are trying to do in the first place (provide clinical care). Anyone who thinks I am inflating a bubble of my own should read the May 2016 decision of the U.S. Court of Appeals in Caring Hearts Per- sonal Home Services v. Burwell (the Center for Medicaid and Medicare or CMS). The law allows providers to bill Medicare for "reasonable and necessary" expenses of "homebound" patients. CMS claimed that Caring Hearts overbilled Medicare $800,000 in 2008 because patients were not "homebound" (such as an 85-year- old, 352-pound man with "diabetes, high blood pressure, and a host of other ailments … who by all accounts could not easily walk 20 feet"); or because the services were not "reasonable and necessary" (such as the physical therapy provided to a 71-year-old woman with diabetes, degenerative joint disease, chronic pulmonary disease, and uncontrolled pain in her lower back, hips and right leg.") Let me paraphrase what the court said as it threw CMS out the courthouse door: The fed- eral rules had "grown so exuberantly it's hard to keep up," that "no one seems sure how many more hundreds of thousands (or maybe even millions) of pages of less formal policy manu- als, directives and the like might be found float- ing around," and that CMS issues "thousands of new or revised guidance documents (not pages) every single year," of which 37,000 (not a complete inventory) "can be found on the CMS website." But even worse, CMS got lost in its own forest because it "applied the wrong regu- lations" to Caring Hearts. The $800,000 assess- ment was based on rules that were "but fig- ments of the rulemakers' imagination" in 2008 and did not become effective until years later. At the end of the decision the court noted that "[t]his case has taken us to a strange world where … the agency responsible for promulgat- ing the law … seems unable to keep pace with its own frenetic law making." I plan to send the court a copy of this op-ed to let it know that this strange new world floats comfortably with the enormous self-perpetuating bubble of legal complexity first mentioned above. n John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. His opinions are his own. HARTFORDBUSINESS.COM POLL Should municipalities be allowed to levy taxes beyond the property tax? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Would a $15 minimum wage help or hurt CT's economy? 21.3% Help 78.7% Hurt John Horak OPINION & COMMENTARY Send Us Your Letters The Hartford Business Journal welcomes letters to the editor and guest commentaries for our opinion pages. Electronic submissions are preferred and welcome at: editor@HartfordBusiness.com.