ObamaCare Is Raising Insurance Costs

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Raising the game for energy efficiency

By C. David Myers, president, Johnson Controls Building Efficiency - 03/13/13 04:00 PM ET

President Barack Obama later this week will focus on his goal to secure America’s energy future with efforts to find new fuel sources, invest in the development of alternative energy and use our resources more efficiently. The cleanest and lowest cost way to meet our energy needs is to consume less. Strong financial paybacks are the biggest incentives for state and federal governments to raise the game by putting the right tools and policies in place to increase investment in energy efficiency, which will save money, produce jobs and reduce carbon pollution.

To raise the bar, federal and state governments should set ambitious, yet achievable, goals for energy efficiency improvements in buildings. Buildings consume approximately 40 percent of U.S. energy. It can be done. For example, at the landmark Empire State Building, built in the early 1930s, the retrofit project underway is on track to achieve a 38 percent reduction in energy consumption with a three-year payback.

Additionally, governments can and should also lead by example by renovating and upgrading the energy performance of their own existing buildings and leased space, and constructing new buildings to high efficiency standards. 

To provide further perspective, building energy efficiency retrofits is a nearly $280 billion dollar investment opportunity that can save building owners more than $1 trillion over 10 years, according to industry research. All of that work also means more jobs at a critical time for our economy. Raising the bar also means raising minimum building performance, consumer awareness and private investment.

In his first term, President Obama committed to invest $2 billion in federal government building renovations using energy savings performance contracting. Using this approach, energy services companies design, finance, install, and maintain new energy efficient equipment in facilities – at no upfront cost to the taxpayer. The energy savings are guaranteed by the contractor with the investment paid back over time from the money saved on utility bills. Over 260 federal government projects have been successfully completed over the past decade attracting over $2.3 billion in private sector investment.

We must also raise the level of energy efficiency by improving energy efficiency standards for new construction and during major building renovations.  States should be encouraged and supported in adopting and enforcing the most recent national model building codes and appliance/equipment standards. Providing incentives, which cover a portion of the incremental cost for “above code” construction, can be a cost-effective way to capture additional efficiency opportunities.

To make inroads with improving energy efficiency, we must raise awareness of building performance and the opportunities to create positive financial returns. Cities and states should require the disclosure of building energy performance information. Why is it that we have more energy efficiency performance data about our cars and appliances than we do our longest term investments – our homes and buildings?  A simple and understandable label would create awareness and market demand for more efficient buildings.

Where there is market demand, there needs to be a corresponding supply. What is certainly in short supply these days is public funding to support additional investments in energy efficiency. President Obama has proposed $200 million in funding for a Race to the Top challenge for states that implement policies to increase energy efficiency. This is a start, but we need to develop and expand private-sector financing models, like the successful performance contracting model in the public sector, and leverage the $200 million to start attracting the billions of dollars needed to tap the most cost-effective improvement opportunities.

A particularly good model is Property Assessed Clean Energy (PACE) financing which offers long-term loans, limited up-front investment requirements, and low interest rates for commercial building energy efficiency improvements. Building owners get the added benefit of being able to pass payments through to tenants and transfer the loan to new building owners at the time of sale.

There is much more work to be done, but if we raise our game with strong leadership, smart policies, increased awareness and increased private investment, we can save more money, create more jobs and help protect our environment for future generations. All of this can be accomplished and provide a strong financial return.

Myers is president of Johnson Controls Building Efficiency.

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Obamacare Is Raising Healthcare Costs, Not Lowering Them

No one really knows how much Obamacare is going to cost the American government or the American people. All we really know for certain, something that a number of public and private econometric studies have backed up, is that it will be more expensive than the president led us to believe it would be.

There are efforts underway to establish the true costs, or at least to help the American people understand what the out-of-pockets expense will be for them. In early February the House Ways and Means Committee started a website, Obamacare Burden Tracker  as a real-time resource to "help the public keep track of all of the new government mandates, rules, and red tape" resulting from the new healthcare law.

They're not the only ones. A group called SHOUTAmerica, a nonprofit group founded to "educate young Americans about healthcare and serve as a resource so that all are better equipped to navigate the system and the challenges it faces" has created Young Americans for Affordable Healthcare, a web-based group intended to help younger workers understand what the costs of Obamacare are to them.

[See a collection of political cartoons on healthcare.]

The principle feature of the Young Americans site is a calculator allowing users to plug in a few simple numbers like age and zip code and come up with an estimated change in their health insurance costs for 2014. The data it uses comes from the well-respected firm Oliver Wyman, a leading international management consulting firm that is part of Marsh and McLennan.

The numbers take into into account the federal subsidies available to purchase health insurance coverage based upon income, Medicaid eligibility, taxes and fees, new age rating rules and other insurance market reforms, essential health benefits, the transitional reinsurance program, and other factors that will have an impact on premiums under the terms of the Patient Protection and Affordable Care Act.

While the calculator uses national averages, meaning actual results may be slightly different from those shown, it nonetheless is a useful tool for developing a clear understanding of just what Obamacare will do to the costs of insurance for those, especially young workers, who are not part of a group plan and are buying insurance individually. And the picture is not a pretty one.

[Read the U.S. News Debate: Should Congress Repeal the Affordable Care Act?]

The idea behind Obamacare was that it was supposed to bend the healthcare cost curve downward while allowing people to keep the doctors and insurance they already had. It was sold to the American people as a salve for rising costs that would help those who did not have insurance while inconveniencing hardly at all those who did. The reality as we already know it to be is starkly different. Costs are projected to go up, the number of people who have already lost their insurance has risen precipitously, and states are already beginning to warn they are facing a shortage of qualified doctors and other medical personnel and may not be able to keep up with future demand.

To put it simply, the American people were sold a pig in a poke. If "repeal and replace" is no longer an option—and let us hope that is not at all the case—then Congress must take the lead on reforming the mess as it considers how to fund the implementation of the new law over the next two years.

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Some Employers Could Opt Out of Insurance Market, Raising Others’ Costs

Companies can avoid many standards in the new law by insuring their own employees, rather than signing up with commercial insurers, because Congress did not want to disrupt self-insurance arrangements that were seen as working well for many large employers.

“The new health care law created powerful incentives for smaller employers to self-insure,” said Deborah J. Chollet, a senior fellow at Mathematica Policy Research who has been studying the insurance industry for more than 25 years. “This trend could destabilize small-group insurance markets and erode protections provided by the Affordable Care Act.”

It is not clear how many companies have already self-insured in response to the law or are planning to do so. Federal and state officials do not keep comprehensive statistics on the practice.

Self-insurance was already growing before Mr. Obama signed the law in 2010, making it difficult to know whether the law is responsible for any recent changes. A study by the nonpartisan Employee Benefit Research Institute found that about 59 percent of private sector workers with health coverage were in self-insured plans in 2011, up from 41 percent in 1998.

But experts say the law makes self-insurance more attractive for smaller employers. When companies are self-insured, they assume most of the financial risk of providing health benefits to employees. Instead of paying premiums to insurers, they pay claims filed by employees and health care providers. To avoid huge losses, they often sign up for a special kind of “stop loss” insurance that protects them against very large or unexpected claims, say $50,000 or $100,000 a person.

Such insurance serves as a financial backstop for the employer if, for example, an employee is found to have cancer, needs an organ transplant or has a premature baby requiring intensive care.

In a report to clients last year, SNR Denton, a law firm, wrote, “Faced with mandates to offer richer benefits with less cost-sharing, small and midsize employers in particular are increasingly considering self-insuring.”

Officials from California, Maine, Minnesota, Utah, Washington and other states expressed concern about the potential proliferation of these arrangements at a recent meeting of the National Association of Insurance Commissioners.

Stop-loss insurers can and do limit the coverage they provide to employers for selected employees with medical problems. As a result, companies with less healthy work forces may find self-insuring more difficult.

Christina L. Goe, the top lawyer for the Montana insurance commissioner, said that stop-loss insurance companies were generally “free to reject less healthy employer groups because they are not subject to the same restrictions as health insurers.”

Insurance regulators worry that commercial insurers — and the insurance exchanges being set up in every state to offer a range of plan options to consumers — will be left with disproportionate numbers of older, sicker people who are more expensive to insure.

That, in turn, could drive up premiums for uninsured people seeking coverage in the exchanges. Since the federal government will subsidize that coverage, it, too, could face higher costs, as would some employees and employers in the traditional insurance market.

Large employers with hundreds or thousands of employees have historically been much more likely to insure themselves because they have cash to pay most claims directly.

Now, employee benefit consultants are promoting self-insurance for employers with as few as 10 or 20 employees.

Raeghn L. Torrie, the chief financial officer of Autonomous Solutions, a developer of robotic equipment based in Petersboro, Utah, said her business started a self-insured health plan for its 44 employees on Jan. 1 as a way to cope with the uncertainties created by the new law.

“We have a pretty young, healthy group of employees,” she said.

In Marshfield, Mo., J. Richard Jones, the president of Label Solutions, an industrial label-printing company with 42 employees, said he switched to a self-insurance plan this year “to hold down costs that were going up because of government regulation under Obamacare.”

The Township of Freehold, N.J., made a similar decision in January to gain more control over benefits and costs for its 260 employees.

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White House: Raising Medicare Eligibility Age Is Off The Table

The Obama administration has ruled out raising the Medicare eligibility age from 65 to 67 as a means of reducing spending, White House Press Secretary Jay Carney announced during a briefing on Monday.

The measure — which the President floated as part of a larger deal to reduce the deficit in 2011 — is widely supported by Republicans, but would only save the federal government a net $5.7 billion, while shifting an added $11.4 billion in health care spending to states, employers, and individuals.

The proposal could also devastate the majority of seniors. While the richest Americans have fared well during the sluggish economic recovery, most Americans continue to struggle with falling wages and job uncertainty. According to a recent report from the Conference Board, 62 percent of workers between 45 and 60 plan to delay their retirements, a stark jump from 2010 — when 42 percent of workers planned a delay.

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Kansas Governor’s Tax Plan Will Cost Hundreds Of Millions Of Dollars, Despite Raising Taxes On The Poor

Kansas Gov. Sam Brownback (R), like Republican governors all across the country, aims to implement a regressive tax plan that involves cutting income taxes for the rich while, in his case, maintaining a sales tax hike that primarily hurts the poor. The sales tax increase was supposed to be temporary when it was adopted in 2010, but Brownback now wants to make permanent.

Sales taxes disproportionately impact the poor, who are more likely to spend all or most of their income. According to an analysis by the Institute on Taxation and Economic Policy, Brownback’s plan will raise taxes on the poorest Kansans, but still lose hundreds of millions of dollars in revenue due to huge tax cuts for the rich:

– The poorest 20 percent of Kansas taxpayers would pay 0.2 percent more of their income in taxes each year, or an average increase of $22.

– The middle 20 percent of Kansas taxpayers would pay 0.2 percent less of their income in taxes each year, or an average cut of $104.

– Upper-income families, by contrast, reap the greatest benefit with the richest one percent of Kansans, those with an average income of over a million dollars, saving an average of $6,528 a year.

The plan would cost the state $340 million in revenue, despite hiking taxes the poor. And Kansas already has a regressive tax system, with the poorest residents paying a rate more than twice as high as the richest 1 percent.

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