Susan Shargel’s Healthcare Reform Blog

Last Wednesday evening, President Obama made his case for health reform to the American people.  He said, “Concern and regard for the plight of others… is part of the American character–…a belief that in this country, hard work and responsibility should be rewarded by some measure of security and fair play; and an acknowledgment that sometimes government has to step in to help deliver on that promise.”

In furtherance of this goal, in the coming weeks Congress will be drafting, negotiating, and voting on health reform legislation. It’s time to set clear goals about what this legislation absolutely must accomplish.

Health reform must restructure the individual insurance market so that everyone has access to health insurance.

As insurance brokers, we have the horrible job of explaining to people why their application for health insurance will be declined.  You would expect that people with chronic conditions such as diabetes or heart disease would not be able to find coverage.  But insurers also routinely decline people with regular health issues: asthma and allergies, lower back pain, impotence, etc.

Yes, we do have some significant legislative protections-federal COBRA and state COBRA plans enable people to continue their employer sponsored plans when they have been laid off.  And HIPAA laws provide for coverage for people who have exhausted these benefits-at a price.

But if you happen to have made the terrible mistake of not keeping your coverage in force when you lost your job, you or a member of your family may very well be uninsurable.  Or, if you just graduated from college where you were insured under a student plan and consulted a doctor for depression and anxiety, or threw your back out in a car accident, you will find yourself closed out of the individual insurance world.

Then, if you are fortunate to live in a state with a high risk pool and no waiting list for coverage, you can purchase some form of largely inadequate insurance.  However, there are states, like Georgia, where if you are sick, you simply have to move to get health insurance!

We can and must do better!

The proposed reforms to assure access to insurance depend on each other and work together.  President Obama correctly recognizes that everyone has to have the responsibility to obtain health insurance.  With an individual mandate, we can create regulations that require insurers to accept all applicants and to have no restrictions on pre-existing conditions.  Everyone will be covered and the risk shared among all of us.

Without an individual mandate, these changes are impossible.  Why?  Because if insurance is available on demand, people will delay buying insurance until the ambulance arrives, leaving only the sick to purchase coverage and creating a financial night-mare.

The scope of insurance coverage can’t be ignored. What we have seen in California and across the country is a move to design and market lower benefit plans in order to keep the cost of insurance affordable.  This phenomenon is creating a “rush to junk” as people downgrade their real plans and purchase these so called “insurance policies” with alarming holes in coverage-holes that they will find only at time of need.  Then they’ll be horrified to learn that their insurance doesn’t fulfill its purpose; to save them from ruinous medical expenses.

Any effective health reform legislation needs to establish a minimum level of benefits to assure that families are adequately protected at the time they are most vulnerable. Of course, it is possible to design plans that allow people to assume a level of financial risk commensurate with their financial situation; more affluent families can afford higher out of pocket expenses. We also need to recognize that high-deductible plans are not the answer for everyone; for lower income families, the cost of meeting a $1500 to $3000 deductible will prevent them from utilizing the plan.

It is only by providing subsidies to those who cannot afford the cost of decent insurance, that we can require everyone to have insurance.  These subsidies will represent a major percentage of the cost of reform.  Many legislators are looking to pare them down to bring the cost of reform under $900 billion over the next 10 years. However, it is critical that the subsidies must be sufficient to make insurance affordable to lower and middle income Americans or the effectiveness of the entire plan will be compromised.

A comprehensive health reform plan must provide these protections:  It must assure that individuals can and do purchase health insurance.  This insurance must adequately protect against large medical expenses and be affordable for everyone.

These realities are clear.  We need to write our legislators and express our commitment to these reforms.  And we must call for them to develop realistic proposals to finance this plan.

Let us hear from you! Your ideas and recommendations are most welcome!

In a previous blog I wrote that taxing employer paid health benefits with high premiums is not a real source of funding.

Now an alternate version of this tax has been proposed–a tax on insurance companies. The current proposal is to tax companies for policies they sell with premiums more than $25,000, or twice the value of the average federal employee health plan.

This proposal has great grass roots appeal.   Proponents say that it targets insurance companies and high-earning employees of companies like Goldman Sachs who have $40,000 tax free insurance plans.  Who better to pay for health reform?

The proposal’s policy justification is the claim that “gold plated” insurance plans, those that provide very comprehensive coverage with minimal out-of-pocket costs, are a significant contributor to the growth of national health care spending. This characterization of such plans is misleading and I will explain why in the next post.

Regardless of who owns them, such expensive policies are a lot less common than we’re led to believe; about 1% of health policies cost more than $25,000 a year and 0.3% of workers with employer-provided coverage in 2008 have such plans. So this is not a huge source of waste or of potential funding for reform. We can hardly blame this small population for the high cost of health care!

Whatever we think of Goldman Sachs, this approach will not fund universal health care.  As soon as this tax is approved, these plans will be modified to provide insurance benefits that cost just below the amount that would trigger the tax.

The obligation to pay for health care reform will remain.  Any new tax can’t disappear.  We need a real and dependable income stream that will keep up with the health care cost curve.

We are pleased to have Betaya Boorda, our office manager and the administrator of the blog, as a contributing author this week.

Opponents of health care reform often invoke fears of rationing in order to discourage changes to our current system. Think cold, calculating government bureaucrats making coverage decisions that determine whether you or a loved one lives or dies based on rigid “cost effectiveness” formulas. Democratic legislators are quick to defend their positions by stating that they are against rationing and that it has no part in their reform proposals. It seems to be a foregone conclusion in our country that rationing is cruel, politically untenable, and would lead to worse health outcomes.

Peter Singer, a professor of bio-ethics at Princeton University investigates these assumptions in a thought provoking article published in last week’s New York Times Magazine titled, “Why We Must Ration Health Care”. From the article:

It is hard to see how the nation as a whole can remain competitive if in 26 years we are spending nearly a third of what we earn on health care, while other industrialized nations are spending far less but achieving health outcomes as good as, or better than, ours. Rationing health care means getting value for the billions we are spending by setting limits on which treatments should be paid for from the public purse.

Singer re-frames the idea of rationing; think doctors and policy experts using ethical considerations and rigorous research methods to determine which treatments do the most good at the least cost and how the public health care dollars that we have can be used to support the greatest number of quality years of life possible. It is also important to recognize that we are already experiencing rationing by ability to pay in the form of ever increasing deductibles, co-payments, out-of-pocket maximums, and premiums that are prohibitively high for millions of Americans.

In my opinion we shouldn’t allow fear of change to stop consideration of a policy approach that may well save American health care and our personal finances. I encourage you to read the full article as it provides a lot of cogent information on a little discussed but crucial topic in the reform debate. Americans may not be ready for it now, but there will come a time in the near future when health care costs have ballooned to the degree that we must reconsider our stance on rationing.

Another great Times article on the rhetoric of rationing can be found here.

As Congress searches for funds to pay for expanding health insurance coverage to the 50 million Americans who are uninsured, taxing employer paid health benefits is becoming a focus of debate.

The current proposal is to tax the “richest” plans-those that cost some amount higher than the average federal employees’ health plan.

The arguments against this proposal are: first, it is unpopular with middle class voters, who are looking for premium relief.  They are already paying a higher percentage of the cost of their employer paid insurance each year in higher premiums, deductibles, and co-pays. A compilation of four public opinion polls reviewed by lawmakers showed that 59%to 70% percent of respondents oppose taxing health care benefits. This has caused Congress to begin rethinking their approach.

Secondly, it is unfair.  Employees with richer plans are already paying for the high cost of health care through lower salaries and lower salary increases. Many of those who choose higher benefit plans do so because they, or members of their families, have significant health problems and need to be able to keep their out-of-pocket costs under control.

My argument is more basic: it won’t work. The market will respond quickly.  Insurers will redesign their plans and employers will adjust their health insurance plan offerings so that the premiums will come in just under wherever the cap is set.  This will contribute to the trend of reducing the level of benefits for everyone and will restrict access to the most comprehensive plans for many who need them. The hundreds of billions of new tax dollars will never be collected. We will have a huge shortfall.

To gain the support of the American people, we need to find a source of funding that works, is sustainable, and shares the cost of expanded coverage fairly between everyone.

Let’s get real and find a solution.