September 27, 2007
By Beverly Gossage
The ink is barely dry on HB 818, a ground breaking health reform bill with a free market approach, encouraging individual responsibility and employer participation. Other states in the Midwest, including Kansas, are looking to copy it. Now comes “Insure Missouri,” a plan to provide health insurance to low-income adults, loosely modeled after the government-run, connector type Healthy New York program. This new proposal does not continue down the path to the free enterprise reform that put Missouri on the map.
Insure Missouri is designed to be implemented in three phases over a fifteen month period.
Phase One is to offer coverage to working parents and caregivers with children in the home whose income is at or below the poverty level. This group is estimated to be 54,500 adults. The only cost to adult participants would be up to$3 for a co-pay.
Phase Two is to subsidize coverage to an estimated 77,000 adults, not necessarily parents, whose income is up to 185% of the poverty level, that’s about $18,900 for an individual and about $31,800 for a couple with one child. The cost will be based on income and will not exceed $145per month.
Any children of the adults in these two phases are already eligible for a different government program. When participants were charged a small amount to keep their children on the SCHIP program in the past, many pulled their kids out of the program and blamed the governor.
Phase Three is small business reinsurance. This was offered before, but it was not used so they sunset it in 1994. Little is mentioned about this phase. If is follows the Healthy New York model, the employer must pay 50% of the premium and have 50% of his employees participate in the program.
Under the Insure Missouri program, the participants may call in or go online to sign up for a state program for a health plan designed by the state, offered through providers contracted by the state at rates controlled by the state. Critics of this plan point out that it is just another step down the road to government subsidized, government controlled health care.
The price tag to cover approximately 189,000 adults on this program has been estimated at 19 million initially and bumped to 46 million state dollars in 2010. Hundreds of millions more will be needed in coming years according to Rep. Doug Ervin. This is not the most economical way to insure health care for the needy. The Insure Missouri literature refers to “maximizing private and public funds.” The overview brochure continues, “Missouri will use state and federal funds along with individual and employer contributions to fund the program.”
Here are some other unknowns: How many of those who qualify for this proposed plan already have insurance with a private plan or through their employer? Will the policies be underwritten like private plans or guaranteed issued (no one can be declined) and community rated (everyone in an area is charged the same premium) which raises rates substantially? One representative said in Phase Two participants will purchase the plan through their employer. Will employers be mandated to contribute to this plan? What if participants change employers? What is the total estimated cost per participant? Where does this money come from? How does that compare to how much the state is spending now in disproportionate share to providers?
New York started the Healthy New York program because it was determined that low income working adults could not afford the private health insurance rates. According to the Healthy New York 2006 report, the monthly premiums for private plans are nearly $700 for an individual and $2000 for family. No wonder. Current private health insurance premiums are mandated to be guaranteed issued (no one can be declined) and community rated (everyone living in a certain area pays the same rates). Rather than change the mandates that caused these high rates, they created Healthy New York. Maybe it had something to do with the high rate of matching federal funds that they could get for this program (evidently federal funds are free money).
Unlike New York, Massachusetts, and other states with guaranteed issue and community rating, Missouri boasts a competitive private health insurance marketplace, so an average policy for an individual is $192 and $332 for family. Thanks to HB818 that Gov. Blunt signed into law this summer, several carriers have lowered or expanded their individual/family rates, especially their consumer driven health plans (CDHP). A healthy 25 year old could pay as little as $37 per month for one of these plans that includes a free annual physical. Plus his employer can contribute to the premium, put money in his health savings account that grows with interest, and funnel both payments through a cafeteria 125 plan pretax.
The goals of any health reform program should be to:
- Emphasize wellness and promote individual accountability for maintaining a healthy lifestyle through proper nutrition and exercise to reduce the high cost of health care of which 80% is due to lifestyle choices.
- Incentivize citizens to be wise consumers of health care, which will promote transparency in health pricing.
- Minimize mandates that tend to raise the cost of health insurance policies
- Reserve any government subsidies for health care/ health insurance for the truly needy—at or below the poverty level.
- Structure this subsidy to utilize free market competition and to keep rates low for all, while allowing the least disruption when one transitions into the private world of budgeting for health needs. (Yes, the goal of any welfare plan is to transition people off of the plan.)
Missouri could start with using the subsidies allotted for the current health welfare programs (MO Health Net and SCHIP). At present a couple with three children making up to $72,396 annually can qualify for assistance for their children’s health care. We could convert these subsidies into premium assistance vouchers on a sliding scale based on income to be used to purchase private health plans or to join an employer’s plan. The participants would have the option to add their own funds to purchase a more expensive plan or select a lower premium plan, and if it were a CDHP, they could contribute the balance of the funds into a health savings account (HSA) or health opportunity account (HOA).
There should not be a rush to subsidize low income adults without waiting for HB 818 to have an effect. If a subsidy were instituted, it should be a pilot program, extending vouchers to the adults mentioned in Insure Missouri’s Phase One.
The advantages of premium assistance vouchers to purchase private plans would include:
Health welfare recipients may select from all of the carriers and plan designs already available in the large private, health insurance market place in Missouri. They may buy up to a richer plan or purchase a lower premium plan, such as a CDHP and put the balance of their voucher into an HSA/HOA. These funds may be used for day-to-day health expenses such as pain relievers, allergy meds, cold capsules, dental, and vision needs, or save up for a future health expense. These funds encourage consumerism and promote wellness and responsibility.
Consider this, those who qualify for food stamps learn to watch for bargains and stretch their dollars. They may use them as vouchers to shop in their choice of supermarket and are not limited to a certain grocery store contracted by the state, whose products are controlled by the government. As their income increases and they transition off of the government subsidy, they are using their own dollars to shop like they did before.
Lower rates for all
Subsidizing this mostly healthy, mostly young group (820,000 are already on MOHealthNet and SCHIP) to join the general public pool, adds their premiums to the coffers, reduces the overall risk, and lowers rates for everyone. The more people are on government plans, the more the privately insured are charged to pick up the slack. Allowing carriers to compete for this business does what free market always does—lowers rates.
Greater access to care
Since many providers no longer accept Medicaid/SCHIP patients due to the lesser reimbursement rate, having a private insurance plan gives the health welfare recipient a wider choice of providers, less wait time, and a shorter distance to drive to locate a doctor.
Families can stay together
Currently parents are on one plan and the children another—different networks and doctors. Providing vouchers for all health welfare programs allows families to combine the subsidies to purchase a private family plan or add the family to an employer’s plan. They can take advantage of family discounts offered by carriers.
Recipients keep their dignity
Those folks that I’ve met whose children are on SCHIP would rather receive vouchers that can be paid to their carrier and applied to a private plan, so that they can walk into any in-network provider and be accepted and declare, “I have Carrier ABC’s insurance,” rather than “My children are on Medicaid.”
Easier transition and portability
As their income increases, they are not left without insurance, but merely absorb a larger portion of the insurance premium. They may keep the plan they have, even if during the time that they were receiving government premium subsidies, they became uninsurable due to health conditions.
In conclusion, with HB818, Governor Blunt and the Missouri Legislature have turned the eyes of the nation to Missouri’s free market approach to health care. A recent Kansas Health Institute article reads:
Missouri passed two health reform bills earlier this year. The one capturing most attention in Kansas has been Missouri House Bill 818… Small-business advocates here have closely studied HB 818 and are eager to see something similar implemented here.
Greg Scandlen the highly respected founder of the Council for Affordable Health Insurance (CAHI) and Consumers for Health Care Choices (CCHC) said in his newsletter,
The folks in Missouri have decided to take a different approach from mandates and The Connector of Massachusetts. Missouri’s Approach (with HB818) is so good and such a model for other states that it should change its motto from “The Show Me State” to “The Show Us (How to do it) State.”
Missouri should not veer off to a path that leads to government controlled health care, but continue to lead the march down the road to personal responsibility and free market health reform.
Beverly Gossage is a consumer-based health care expert and research fellow with the Show-Me Institute.