More Problems Emerge In Implementing Health Care Reform

Democrats are going to have a hard time trying to explain this one in any coherent manner. The Obama Administration approved waivers for major corporations, including McDonalds, so that they do not have to comply with new regulations set to take effect next year.

That avoids the contentious issue of major corporations dropping insurance coverage affecting hundreds of thousands of workers at McDonalds alone. But it also means that more than 1 million workers wont get health care benefits as promised under the health care reform program.

Thirty companies and organizations, including McDonald's (MCD) and Jack in the Box (JACK), won't be required to raise the minimum annual benefit included in low-cost health plans, which are often used to cover part-time or low-wage employees.

The Department of Health and Human Services, which provided a list of exemptions, said it granted waivers in late September so workers with such plans wouldn't lose coverage from employers who might choose instead to drop health insurance altogether.

Without waivers, companies would have had to provide a minimum of $750,000 in coverage next year, increasing to $1.25 million in 2012, $2 million in 2013 and unlimited in 2014.

"The big political issue here is the president promised no one would lose the coverage they've got," says Robert Laszewski, chief executive officer of consulting company Health Policy and Strategy Associates. "Here we are a month before the election, and these companies represent 1 million people who would lose the coverage they've got."

The United Agricultural Benefit Trust, the California-based cooperative that offers coverage to farm workers, was allowed to exempt 17,347 people. San Diego-based Jack in the Box's waiver is for 1,130 workers, while McDonald's asked to excuse 115,000.

How exactly did the Administration come to the conclusion to provide the waiver - and is a question that deserves scrutiny since it appears to be arbitrarily based.

Well, they had to balance the bad politics of going back on a campaign promise saying that people wouldn't lose coverage under the health care legislation and the bad politics of providing waivers to companies enabling those companies to avoid having to pay more for increased mandates on health care coverages.

The government took the latter approach, which was the easy way out, but which also creates more uncertainty in the marketplace. You wont get a comprehensive approach nationally since many of the decisions will be done at the state level.

Insurers have also sought waivers to maintain limited plans, which aren't nearly as comprehensive as the plans sought under the health care reform.

The insurers have a point - they should have a right to continue selling policies that people want, including low cost alternatives that are right for their lifestyles, rather than comprehensive coverages that they may never want or need. Those comprehensive policies are mandated because of a desire to bend a cost curve to get more healthy people who underutilize medical facilities to balance out those who are chronically ill or require expensive treatment options. Yet, the costs will rise for all as the costs for implementing new technologies rises and there is little effort to curb the costs.

This legislation was badly flawed, but this is just the tip of the iceberg since provisions will gradually take effect - some provisions wont become effective until 2014, while others have already taken effect.

Among those that have already taken effect and those taking effect on January 1, 2011, the one that will cause the greatest amount of confusion is the changed rules dealing with FSAs. That includes requiring doctor's prescriptions or statements of medical necessity to use health care FSA dollars to pay for over-the-counter medications. Currently, there is no such requirement. The new requirement translates into more paperwork, higher costs for patients who do not have the time or inclination to get those documents from doctors, and buries doctors' offices under still more paperwork that takes time away from seeing patients and maximizing quality of care. Far from reducing costs, this change will result in increased costs for doctors and patients alike with no tangible benefit. Moreover, it reduces the overall utility of the FSA, which is used by patients to reduce their health care costs for over-the-counter medications and other out of pocket medical expenses.

Other changes, including increasing the mandatory coverage for children and dependents up to age 26 will mean higher premiums that will inevitably be passed on to the customers.