Health policy 2007 - 2008: Coming revolution?
By Robin Smith, Ceridian manager of Government Relations
This is the second of a two-part article examining proposals at the federal and state levels to address rising health insurance costs. Read part one of the article. Last month's Legislative Update article in Ceridian Connection focused on President Bush's proposal to replace the present income exclusion on employer-based health insurance coverage with a standard deduction for all Americans who have health coverage. While the president's ideas can usually command the largest audience, some health care measures circulating in Congress and state legislatures are no less ambitious. The main difference between President Bush's proposal and other headline plans is their focus: Bush has targeted the "bias" in tax law that favors employer-based coverage over individual market coverage and aims to "level the playing field." Democratic alternatives seek to extend the availability of health insurance, ideally achieving "universal coverage." Chief among alternative plans is legislation by Senator Ron Wyden (D-OR) that would replace the current employer-based health coverage system with state-run insurance pools. Also getting attention is former Massachusetts Governor Mitt Romney's health insurance "Connector" program, a newly created public-private insurance market that eligible Massachusetts residents will be able to tap into to purchase health coverage. The Wyden plan: State pooling arrangementsIf enacted, Senator Wyden's plan would eliminate in one fell swoop all employer health plans. Over the next two years, businesses would be required to pay increased wages in an amount equal to the money they previously spent providing employee health benefits. In turn, all workers would be under mandate to purchase health insurance through newly created state-based marketplaces called "Health Help Agencies." After two years, employers would have to make what Wyden calls "shared responsibility payments" of 17 to 25 percent of the average premium for the market's minimum benefits which would be used to cover low-income individuals. These payments would be phased in over that same two-year period for employers who currently do not provide health insurance. Each state Health Help Agency would offer a pool of community-rated private health insurance plans, administer plan enrollment and provide consumers with information regarding plan quality and cost. At a minimum, the plans would have to provide coverage equal to the basic Federal Employee Health Benefits Program (the plans used by members of Congress). Premiums would be collected by the IRS when individuals file federal income taxes, and the federal government would subsidize premiums on a sliding scale for people between 400 and 100 percent of the poverty line, with people under the poverty level paying no premiums. Massachusetts Connector
Massachusetts' health plan was enacted last April after a long series of negotiations between former Republican Governor Romney and the heavily Democratic Massachusetts state legislature. Under the law, beginning in July of this year, all Massachusetts residents will have an individual mandate to obtain health insurance. Like the Wyden plan, the cornerstone of the Massachusetts law is a state run marketplace of private insurance plans. Beginning on May 1, 2007, Massachusetts residents who work at companies with 50 or fewer employees will be able to use the "Commonwealth Health Insurance Connector" to shop for private health plans. Uninsured low income individuals were able to receive care through the system in October 2006. And those eligible for COBRA continuation coverage would also be eligible to buy insurance through the Connector. Through the pooling arrangement, the Connector gives individuals access to a wide variety of portable health insurance products at a cost comparable to the rates larger businesses are able to negotiate. The basic plans will cover primary physician care, prescription drugs and preventative care, and consumers will have the option to purchase additional coverage as needed. All premium payments employees or their employers make will be pretax, and the state will provide subsidies for individuals who earn up to 300 percent of the poverty level. In addition, the Connector will provide an information system participants can use to research provider quality and cost data. Are these viable solutions?
Given how revolutionary these ideas are, it's hard to draw a solid conclusion on whether they will work. And there are many arguments that can be raised against them. For one, an individual mandate to purchase health insurance would be difficult to monitor and could add yet another layer of bureaucracy to a market that is already plagued by burdensome reporting requirements and inefficiencies. Second, the cost of health care itself will continue to rise, which will make it difficult for state pools to reliably offer so-called affordable health insurance options. However, the progress both of these plans could make toward reforming what most agree to be a broken health market makes them worthwhile options for improving the way Americans purchase, choose and think about health care. As covered in last month's article, health insurance on the individual market is extremely difficult to buy. And more people are being added to it every year due to an employer-based system that is "melting away like a popsicle on the summer sidewalk," as Senator Wyden puts it. Indeed, one recent study estimated that while 69 percent of employers offered coverage to their workers in 2000, that figure had dropped to 61 percent by 2006. Not only are the individual market costs astronomically expensive, there is no reliable source of information or research tools consumers can use to compare plan prices and options. The Wyden and Massachusetts plans aim to solve both of these problems at once. The new state-based frameworks under the Massachusetts Connector and Wyden's proposed Health Help Agencies provide a single marketplace where individuals can shop for health plans, research provider cost and quality, and receive help with enrollment. All companies that offer services are closely vetted by the state, so participants would be assured of receiving quality products. On top of that, these large pools of potential customers would give insurers new incentive to offer competitive prices that are currently only available to larger employer group plans. In the real world, the state pooled model is predicted to save participants significant money compared to existing individual market plans. According to the Massachusetts Commonwealth Health Insurance Connector Authority board of directors, the least expensive Connector health plan will have a $175 monthly premium, an annual deductible of $2,000, and will provide coverage for preventive care, primary physician visits and prescription drugs. By comparison, the board said an individual plan that currently offers comparable coverage in the state carries a monthly premium of $335, an annual deductible of $5,000, and does not provide drug coverage. In addition, since people will have the option to purchase lower cost plans and tailor their benefits to meet their individual needs, they should have greater incentive to stay healthy and take advantage of the preventive care services the Connector offers. On a national level, a study by the Lewin Group, a well-respected consulting company that specializes in health care actuarial data, showed that Senator Wyden's plan would be cost neutral to the federal government. The study also predicted the legislations would provide coverage for 99 percent of Americans and save them roughly $1.48 trillion in health care expenses over the next decade. What's more, in March Congress's Joint Committee on Taxation released estimates that show the Bush health tax deduction plan saving the federal government $333 billion over the next 10 years. According to The Wall Street Journal, "the revenue windfall the [Committee] is predicting would be so large over time that there would be enough money left over to underwrite a $5,000 health-care insurance voucher to millions of the nation's uninsured - without increasing the budget deficit." What's next?
These plans aren't the only possible solutions out there, but they seem to be the most compelling. "Single-payer" proposals similar to the so-called "Hillarycare" legislation the Clinton White House proposed in the 1990s have cropped up in several states, but Congress and state legislatures have historically rejected these plans. In fact, the only time Congress has gotten to the point of voting on a national health plan was in 1935 during the Roosevelt administration, and both California and Oregon recently voted down state single-payer bills. It would take several more articles to go through the merits and short comings of a single-payer system, but their legislative track record and political infeasibility thus far speak for themselves. California, Illinois, Pennsylvania and New Jersey are currently considering plans similar to Massachusetts' and it's no exaggeration to say that all state legislatures will be watching Massachusetts closely as the Connector rolls out on May 1. Also look for Senator Wyden and President Bush to ramp up their efforts to educate policy makers and the public on their proposals as our nation's health care woes continue to grow. No plan that aims to provide coverage for thousands (or millions) of people is going to be perfect. Every broad health care measure will have its good and bad points, and these plans would undoubtedly be amended somewhat if they were enacted on a national level. Regardless, what they would appear to do is bring much-needed fairness to the rapidly growing individual insurance market. All opinions aside, it's hard to argue that this change wouldn't be a good thing, and the cost savings these plans could generate should be a central part of any serious health reform legislation. Currently, almost our entire health market is inexplicably geared toward selling health plans and services to employers. If any of these plans were enacted on a national level, we would see a dramatic shift in emphasis toward developing products that would be sold directly to those who actually use the insurance. People would be empowered to make their own health decisions and purchase coverage that meets their individual needs, all while reducing health spending and covering most of the uninsured. Regardless of what action the states and Congress eventually take, the reality is that the employer-based health market will continue to erode. In effect, more and more people will enroll in individual, consumer-directed health coverage, and people will have more decision making and financial responsibility for their own care. What makes the Wyden, Bush and Romney plans important is that they all aim to harness this current market momentum and facilitate equity rather than attempting to force it into a one-size-fits-all government program. Ballooning costs, the growing population of uninsured, a crumbling insurance market and an anxious electorate have set the stage for the 2008 presidential elections to be a turning point in our nation's raging health care crisis. And the Bush, Romney or Wyden plans could play a large role in this process. Together, they represent the newest thinking in a debate that has stretched out for far too long, and we can only hope that one of these ideas will move us toward some real progress. For more information, please visit the following sites: Senator Ron Wyden:
http://wyden.senate.gov/media/2006/12132006_Healthy_Americans_Act.htm Massachusetts Connector:
http://www.mass.gov/?pageID=hichomepage&L=1&L0=Home&sid=Qhic Bush health proposals:
http://www.whitehouse.gov/stateoftheunion/2007/initiatives/healthcare.html
