Massachusetts Association of Health Underwriters

MassAHU comments on Payment Reform Commission Report

The Massachusetts Association of Health Underwriters (MassAHU), a membership organization of professional health insurance brokers, consultants and other professionals, shares the concern for affordability of health care in the commonwealth of Massachusetts.  Through the Payment Reform Commission appointed by Governor Patrick, recommendations have been submitted for the restructuring of the health care payment system.  According to this commission, the goal is to make recommendations to reform the current payment system in order to “provide incentives for efficient and effective patient-centered care, and to reduce variations in quality and cost of care”. 

 

While we appreciate the incredible effort that went into this commission’s research, MassAHU is extremely concerned that a small appointed board will determine what payment reform will be without the necessary, vigorous research needed to support this direction.   In keeping a historical perspective on provider payment models of the past, multiple approaches in the market have led to the current prevailing methods.  Some payment methods have disappeared (i.e. the capitation approach) while others have flourished.  This is not to say that the predominent fee for service method works; we share in the perspective that payment reform is needed.  But we do not share in the position that a global solution should be mandated by the state based on a small appointed board.  Instead, we support the enabling of payers and providers to come up with payment reform to meet these goals with appropriate incentives.

 

Health care reform has thus far dealt with accessibility of insurance to all citizens, affordability of insurance through increased subsidies, and minimum insurance coverage standards.  MassAHU feels that before we proceed in sweeping reform of health care payment system, we need to focus on the underlying issues that were identified by the reform commission’s study, as well as other statistical studies, and the initial goals of health care reform in general:

 

→ Lack of sufficient primary care access in the state, which contributes to other issues including low compliance on preventive screenings and management of chronic illness in adult population, as well as overuse of emergency room for non-emergency and/or preventable symptoms

→ Lack of transparency in both cost and quality data for consumers

→ Lack of meaningful medical malpractice reform

→ Lack of incentives for consumer engagement in healthy lifestyles/wellness

While the commission’s recommendations may indeed work for some providers and payers, MassAHU is concerned for the impact on employers and consumers we work with in designing  quality, affordable health insurance programs.  Without addressing the above named issues first, we will not be able to improve the quality of care or the runaway cost of care.  Through the history of our payment system, we have moved so far away from accountability – that is accountability for your own health as a consumer, and accountability for the cost/results as a provider – that it is time to make this a priority and build on payment reform in cooperative partnerships.   Without addressing the cost of care, we cannot impact the cost of insurance, and without relief in the cost of insurance, we will end up with fewer employers and consumers having insurance.  The ‘bottom line’ in payment reform must be to reduce the cost of insurance to consumers, but we cannot pass such sweeping reform as is included in this commission’s recommendation without further vetting out the potential pitfalls of such reform.

Potential Adverse Consequences to Proposed Changes in FSC regulations

MassAHU is concerned about potential adverse consequences of the proposed changes to the Fair Share Contribution regulations to take effect on October 1, 2009 (114.5 CMR 16:00: Determination of Employer Fair Share Contribution).  We understand the changes are designed to help employers who have applied for relief from the FSC responsibility as part of the annual (and now quarterly) filing with the DUA.  We sympathize with businesses who are struggling to pay their liabilities in this difficult economy.  However, changing the regulations benefits exactly the businesses who, in the spirit of health care reform, are not living up to their ‘fair share’ while upsetting the group insurance market for the majority of businesses who are offering group health plans to their employees. 

 

Background

Businesses in Massachusetts are required to contribute at least 50% of a single health plan cost in order to secure a group health insurance policy according to current health plan underwriting requirements.  In fact, studies show that businesses who do provide health insurance to their employees are actually contributing about 70% of the cost.  In other words, they are doing more than their ‘fair share.’

 

The health care reform legislation regarding FSC is intentionally more lenient than standard group insurance requirements because it sets the minimum employer contribution at 33% of the lowest cost health plan offered by the employer.  When some of the MA health plans indicated they were going to drop their minimum contribution requirements to match the HCR requirement, they were ASKED by the Governor’s office NOT to do this.  The reason is simple:  our administration recognized what would happen as a result – businesses would seek the lowest level of commitment to avoid the FSC and reduce their financial support towards insurance protection for their employees.

 

At Issue

With the increasing cost of health care and health insurance in the state, we are concerned that this change will invite some employers to discontinue their group plan and replace it with a 33% PRA for their employees, fully knowing that the lower paid employees will in most cases not elect it due to affordability.  With no group health plan, this will also ‘free up’ some lower paid employees to obtain subsidized coverage through Commonwealth Care, increasing the burden on the state. 

 

The employers will still be able to meet their FSC requirements by a) offering the 33% PRA, and b) by ‘taking care’ of their management employees to help them purchase individual coverage, increasing their pay to offset the increase in personal insurance costs, and meeting the 25% FSC participation requirement.  In effect, the unintended affect of this policy change will result in fewer people being covered in commercial plans, more people covered under the state, and less employer funding into either insurance or the state FSC.

 

The further we move away from group insurance in our state, the higher the cost to those who remain insured in the commercial market.  With a 33% contribution to individual health insurance, where the standard 75% group health plan participation is no longer a concern, uptake in such a plan will be lower.  People will do the math.  If they have health issues, they will buy the insurance.  If they don’t, they will opt out, even if it means a state income tax liability (because it is lower than the cost of insurance).  This raises the claims cost to the insurance pool, because once again, we will be losing the healthier individuals from the insurance risk pool.

 

Increasing commercial insurance costs directly impacts the employers who are in the commercial market, primarily those very employers who are offering group health plans to all their employees at substantially higher contributions and participation.

 

Summary

Dropping the standards of FSC to allow employers to use the PRA will have an adverse effect on the group health insurance market in Massachusetts.  It will decrease the number of insureds in the state, increase the state’s costs to fund the uninsured through Commonwealth Care, decrease the state’s FSC funds, and increase the commercial insurance market rates.  This is not to say it will all happen overnight, but it will happen as an unintended but damaging consequence to Health Care Reform.

 

In summary, FSC rules already exempt businesses with less than 11 FTE from the requirement.  FSC rules already give employers with 11-50 FTE the leniency to comply with either the 25% participation or 33% contribution.  The $295 assessment is by all standards a very low contribution compared to what Massachusetts businesses who provide group health insurance are contributing to insurance.  Adopting regulations to further exempt employers from the FSC rules in this manner is counterproductive to the objectives of HCR.

MassAHU's 7th Annual Statewide Conference & Trade Show

National Health Care Reform – Government’s Role – what are the potential impacts?

                                     

BENEFEST 2009, the premier industry conference for employee benefits professionals in Massachusetts has once again pulled together business leaders and chief executive officers of four major health insurance carriers to provide their perspectives on healthcare reform at the local, state and federal levels. 

 

Tim O’Brien of Blue Cross Blue Shield of Massachusetts, Bruce Bullen of Harvard Pilgrim Health Care, James Roosevelt of Tufts Health Plan, and Eric Schultz of Fallon Community Health Plan will share their insights on topics that have many perplexed and overwhelmed: insuring the uninsured, controlling spiraling healthcare costs and the role of government.  These topics and more will be examined at the Massachusetts Association of Health Underwriters’ (MassAHU) annual conference and trade fair on September 23rd. 

 

This year’s conference will be at the DoubleTree Hotel in Westborough and it will focus on issues surrounding national health care reform, cost control and transparency.  “Healthcare reform is complicated and there are no easy answers – just ask any one paying attention to the national debate all across our great country this summer.  In MA, we covered most of the uninsured and that was a great first step – now we must tackle the cost and provider access challenges and once again, simple solutions to these complex challenges will be hard to find” said Mark S. Gaunya, president of MassAHU. 

This year’s Benefest is filled with distinguished speakers who will talk about healthcare reform and the leadership necessary to take the next step in a very long journey.  It will also provide us with an opportunity to say a special thank you to Charlie Baker for his 10 years of service to our market – his leadership during difficult times is an example we all can follow,” Mark continued to say.

 

Tim Murphy, MPP President & CEO of Beacon Health Strategies, LLC is one of two keynote speakers for Benefest.  Mr. Murphy served as the Secretary of Health and Human Services for the Commonwealth under Governor Mitt Romney.  Mr. Murphy is a recognized leader in healthcare policy having helped develop and implement the landmark Massachusetts Healthcare Reform Law.

 

Bryan Dodge - one of America’s most sought after speakers on leadership and the author of “The Good Life Rules” will share his insights on leadership and living a balanced and productive life – a special message for these challenging times.

 

In addition to these highlights, Benefest 2009 offers five outstanding sessions to help employee benefits professionals stay up to date on the latest innovations, changes and laws in employee benefits.  Starting off the day, Richard A. Szczebak, Esq., Counsel to Parker Brown & Macauley will present the Continuing Saga of Imputed Income.  Next, Debra Wein, an internationally recognized expert on health and wellness will present Seven Elements of a Successful Worksite Wellness Program.  Then, Patrick O’Keefe, VP Mergers & Acquisitions with Digital Insurance will provide a presentation helping to explore key value factors and rules to consider before beginning the process of selling an employee benefits practice.  And, Linda Slevoski, Vice President of AIM Employer’s Resource Group, will present the latest updates and information on the New Data Breach.   Finally, Eric Bach, an experienced member of the insurance field for on individual disability and executive benefit planning will close the education sessions with Individual Disability Income Insurance: Contracts & Products.

 

Benefest 2009 will round out the afternoon with a senior executive panel discussion with the top 4 health plans in MA and end the day with a special reception for Charlie Baker, the former CEO of Harvard Pilgrim Healthcare.

This year’s conference sponsors include BCBSMA, Harvard Pilgrim Health Care, Tufts Health Plan, Fallon Community Health Plan, #1 Agency, Health Advocate, HR Concepts, and Humana.

Interim Solution helps Address Affordability Options for Small Businesses

The Massachusetts Association of Health Underwriters (MassAHU)  is concerned about the affordability of health insurance to small businesses and individuals in the state of Massachusetts.  Although health care reform established 'affordable' products in the state, several factors contribute to the continued escalation of health care costs and health insurance costs in the state.  Earlier this year, Governor Patrick requested that the health plans and medical providers come up with ways to get plan costs under control.  Payment reform is being hashed out and release of any reform plan has been delayed to the end of July at the earliest, with the reform aimed at long term rather than short term results.

The Massachusetts Association of Health Plan (MAHP) proposal is not a long term solution but rather an interim solution to help address affordability options for the small group and individual market.  We believe that immediate steps must be taken to provide another choice to businesses and consumers who are already struggling to pay the 'bronze level' plan costs.  Short of trying to effect lower costs through amending minimum creditable coverage standards, limited mandate plans, etc., which could get bogged down in legislative approval and which would likely meet opposition in the market, MassAHU believes the proposal will provide the temporary rate relief that is so desperately needed by many in our state. 

It is vital that if this is approved, the product is available to individuals and small groups through brokers as well as through the connector and/or the carriers directly. 

Massachusetss Health Care Reform: Lessons for Other States

The Massachusetts Health Care Reform Law has captured the attention of the nation as an innovative experiment that extended health insurance to thousands of uninsured residents and drove better worksite access for employees through employer mandates and penalties.

 

Massachusetts should be commended for its unique ability to bring all parties to the table to fashion a consensus and to acknowledge a social and civic responsibility to insure all state residents. The individual mandate, combined with new programs, has resulted in Massachusetts having the highest percentage of insured residents in the nation.

 

However, nearly three years into the process, the state is feeling the law’s unintended consequences and its long-term sustainability is in question. Even before the economy faltered, employers were frustrated with the complex regulations, while the new entitlement programs have outstripped the state’s cost projections.

 

More disturbing is the possibility that Health Care Reform may set the stage for the unraveling of employer-provided coverage, especially among small businesses in recessionary times, by allowing them to opt out and pay less as long as a Section 125 plan is offered.

 

This brief summary by the Massachusetts Association of Health Underwriters (MassAHU) highlights the law’s accomplishments, but also offers words of caution to the country and other states as they attempt to address the same issues.

 

 

The Accomplishments of Health Care Reform

 

 

The Individual Mandate & Social Responsibility

 

The individual mandate has been one of the most successful accomplishments of Health Care Reform in terms of compliance and personal responsibility.

 

It mandated that residents over age 18 must have health insurance or pay a penalty, with waivers allowed for low-income residents. Through a well-orchestrated media blitz of ads, newspaper stories, direct mailings and broker education, residents got the message and responded.

 

A survey conducted last summer by the Urban Institute reported that only 2.6% or 167,300 of state residents were uninsured. The Massachusetts rate for working-age adults only is now between seven and eight percent.  A more recent report, The MassHealth Waiver 2009-2011…and Beyond, states that  442,000 residents obtained coverage through new programs or their employer, driven by several factors.

 

• About 181,220 – that’s 41% of 442,000 residents enrolled in the newly created and subsidized Commonwealth Care plans. Previously, these individuals fell between the cracks – they did not qualify for Medicaid, but could not afford commercial coverage. If employed, they were not offered a group plan at work because they worked part-time or their employer did not provide health insurance. 

 

• Another 39,780 individuals, or nine percent of the newly insured, who could afford their own individual commercial policies, enrolled in new commercial plans created under Health Care Reform. And, residents ages 19 to 26 were encouraged to enroll in the newly created Young Adult Plans with lower premiums and benefits designed for this age bracket. 

 

• Some employers began offering group health plans for the first time to their employees.

 

• Meanwhile, employees who previously refused group insurance, enrolled in their employer’s plan to avoid the individual mandate penalty. A total of 145,860 or thirty-three percent of the newly insured joined Employer sponsored health plans with the help of brokers.
  
  

 

 

Improved Access to Individual Health Plans

 

Health Care Reform required Massachusetts insurers to merge the risk pools for the individual and small group markets. Carriers reported that the merger caused small group rates to increase two to nine percent, depending upon the carrier, but individuals who had to buy their own coverage saw plan options expand and individual premiums decrease as much as 25% under Health Care Reform.

 

Equally important, premiums continue to be based upon age, with no evidence of insurability required. Long a critical underpinning of the state’s individual market, the principle of guaranteed issue ensures access to coverage, eliminates discrimination and protects people in their time of greatest need.

 

 

 

 

The Unintended Consequences of Health Care Reform

 

 

Affordability of Health Insurance

 

Despite the broad reach of Health Care Reform, it has done little to control the state’s health care costs, health insurance premiums and utilization trends, which remain among the highest in the nation.

 

 In a study, the state Division of Health Care Finance and Policy reported that health care spending in Massachusetts is 26% higher per capita than the rest of the country. Much of the cost is attributed to hospital spending and the clout of Massachusetts’ renowned teaching hospitals. 

 

Under a less publicized aspect of the law, the Health Care Cost and Quality Council was created to collect and publish information on health care outcomes. Consumers can now view information on-line for specific doctors and hospitals. However, it doesn’t tell them how costs vary among providers based upon health plans and their specific contracts.  

 

While the Council marks an important first step, true health care reform requires real transparency. Consumers must have the right to compare the total cost of an actual procedure at an actual hospital, but some carriers and providers continue to block such transparencies, citing proprietary contracts.

 

 

Employer Obligations

 

Health Care Reform imposed unique and complex administrative burdens on state employers and resulted in unanticipated costs related to tracking employee coverage and satisfying state requirements.

 

Some employers saw significant increases in employee enrollment and, thus health plan costs. Others struggled with complex state formulas for calculating health plan participation, the daily tracking of participants and the monitoring of seasonal employees’ status. 

 

For employers with group health plans, the state mandated the minimum eligibility (35 hours or more a week,) employer contributions, employee waivers and Section 125 plans for both benefit and non-benefit eligible employees.

 

What is sometimes overlooked is that the law does not actually require employers to offer a group health plan. An employer can give employees a Section 125 plan and let them make pre-tax deductions for individual insurance. The employer is assessed an annual surcharge of $295 per employee by the state, an option that employers may find increasingly attractive. 

 

 

 

 

Minimum Creditable Coverage

 

Beginning January 1, 2009, the state mandates the minimum coverage that residents must carry with their health insurance or face a penalty. This part of the law has been particularly problematic and controversial. In the opinion of MassAHU, the current standards jeopardize affordability and set the bar too high.

 

The standards also fail to address the realities of the workplace and marketplace. Take the example of a resident who works for an out-of-state employer. That employee’s group plan – issued in another state – does not meet the Massachusetts minimum standards. The employee is in an untenable position – he can’t meet the standards with his group plan, yet he can’t beef up his coverage because supplemental plans are not available in Massachusetts.

 

 

 

Distribution of Commercial Health Plans

 

In addition to managing the Commonwealth Care subsidized plans, the Massachusetts Connector Authority also functions, in essence, as an insurance broker, marketing commercial health plans to individuals and small employers.

 

MassAHU questions the state resources devoted to creating a duplicative distribution center for commercial plans. Any individual or employer can purchase the same plans directly from the insurance carrier.  Indeed, half of the newly enrolling individuals purchased plans directly from carriers.

 

The Connector initially expected 65,000 residents to enroll in the non-subsidized Commonwealth Choice plans. However, the Connector reported 2008 enrollment of 18,000. Another 14,000 residents enrolled in plans directly with the carriers.

 

Even before the state budget crisis, many argued that the state dollars would be more wisely spent supporting Commonwealth Care instead of selling commercial insurance. (It should be noted that the Connector is partnering with brokers, including MassAHU members, to market plans, so we are less concerned about the impact on brokers, although this could change.)

 

 

Expanded Entitlement Programs

 

As discussed above, the Commonwealth Care program provided a much-needed safety net for residents who lacked access to a group plan yet did not qualify for Medicaid.

 

However, MassAHU worries that Commonwealth Care may have been overly ambitious from the start, offering rich benefits and greatly underestimating the demand for health care. As the state wrestles with falling revenue and budget shortfalls, the program’s long-term viability from a financial perspective is now in question.

 

For fiscal 2008, the state budgeted $472 million for Commonwealth Care, but costs were $625 million because of the larger than expected enrollment.

 

In a few cases, Commonwealth Care has had the perverse effect of encouraging employers to reduce benefits. Employers in low-income industries may limit benefits to full time employees so their part-time workers can qualify for Commonwealth Care.  And, some small employers cancelled their group plans so their full-time employees could eventually qualify for Commonwealth Care.

 

 

The Working Poor

 

The full-time, low-income worker who can’t pay his share of employer sponsored premiums remains no better off under Health Care Reform – uninsured, unable to afford the employer plan and ineligible for Commonwealth Care. The state reported that highest percentage of uninsured residents remains adults earning less than 300% of the federal poverty level.

 

In 2007, the state reported that 69,000 residents went uninsured, but were exempt by their low income from the Individual Mandate penalty.

 

 

Words of Caution on Health Care Reform

 

 

From this state’s experience with Health Care Reform, MassAHU offers the following advice:

 

• Use individual mandates to require residents to obtain health insurance coverage within a reasonable timeframe, but provide a safety net for those who need it. 

 

• Strive for moderation and affordability when setting minimum standards for state or national health plans. The Massachusetts Minimum Coverage rules, effective January 1, 2009, would fail in most states and may eventually be undone by cost.

 

• Consider national uniform regulations, timeframes and reporting requirements for the non-group and group markets so employers operating in multiple states are better able to manage their obligations.

 

• Engage employers and clearly communicate their obligations, but do not overwhelm them with costly and complex regulations. Small businesses, in particular, are the backbone of the country and have struggled the most under Health Care Reform to manage costs and the administrative burden of the reporting requirements.

 

• Leverage the existing infrastructure of commercial insurance carriers and their broker distribution channels, instead of a Connector, to manage the Individual and Small Group plans. The success of commercial plans in Massachusetts flowed from regulations that allowed the creation of new, more affordable plans in marketplace.

 

• Require true transparency from insurance carriers and providers so consumers can make well-informed decisions. This information must be accessible, easily understood and well communicated to the public.

 

• Maintain attractive and diverse commercial health plan options for individuals and provide them with access to Section 125 plan pre-tax deductions at work.

 

• Encourage lifestyle changes with tax incentives for employers that offer worksite wellness programs and for employees who participate and adopt healthy behaviors.

 

• Build upon existing programs to expand coverage to the uninsured through the workplace. For example, Massachusetts could save money by expanding its worksite Insurance Partnership, which captures the employer contribution and would require smaller state subsidies.

 

 

Universal health care is the core principle of the Massachusetts Health Care Reform Law and it is a noble objective. MassAHU believes that true health care reform should require all stakeholders to participate in responsible reform.

 

Individuals must assume responsibility for enrolling in a health plan and participating in the cost. Employers must provide access to health insurance and a minimum funding level if employer-sponsored plans are to continue.

 

Carriers need to provide competitively price products and manage risk effectively. Providers need to disclose both the cost and outcome of their services, while being rewarded for improving quality and protected from frivolous lawsuits.

 

Expand the Insurance Partnership to Provide More Health Insurance Coverage

While the state is struggling to finance many programs, health care reform has expanded the state’s responsibility to help those who cannot afford health insurance.  Of the state subsidized programs, only one requires an active financial participation on the part of an employer, thereby lowering the state’s burden.  Under the Insurance Partnership, an employer requirement provides at least 50% towards the cost of health plans. This allows the state to provide smaller dollar subsidies, ultimately helping more people afford insurance since they can partner with employers to share the cost.

 

By expanding the Insurance Partnership program, the state would not necessarily be increasing its costs, but instead would be transferring some of its costs away from Commonwealth Care, Premium Assistance, and the uncompensated care pool, in which 40,000 people remain.  It would encourage employers to maintain health insurance programs for their employees at a minimum 50% contribution level and would provide a more equitable treatment of similarly situated people in the state.

 

Expanding the Insurance Partnership requires Legislative reform. First and foremost, the 6-month crowd out provision needs to be eliminated. The Massachusetts Association of Health Insurance Underwriters (MassAHU), the state’s trade association of independent insurance brokers who specialize in health insurance and employee benefits for hundreds of businesses, families and individuals, suggests a phase in enrollment of currently insured persons, which would not overburden the state immediately.  This would be accomplished by expanding eligibility over two years, and by eliminating the employer subsidy for currently insured applicants.  We also suggest expanding the Insurance Partnership eligibility to employers with 50 or more employees without an employer subsidy.

 

To be effective, the Insurance Partnership program must remain a true partnership between the state, the employees covered, and the employers who contribute to an employer sponsored group health insurance program.  As the need for increased employee cost-sharing is needed for subsidized programs in the state, the employee cost-sharing in the Insurance Partnership should not be overlooked. The main objective of making changes to the Insurance Partnership plan is to encourage people to opt into their employer sponsored coverage rather than become increasingly dependent on the state to provide their health care. This will help as many people as possible obtain health care coverage without further sending the state’s budget into distress.

 

Julia Jennings is a vice president at the Sylvia Group and is the immediate past president of MassAHU. She is also on the Legislative Council of the National Association of Health Underwriters and Legislative Committee of MassAHU.

Don’t Price Out Those Who Had the Foresight to Prepare for the Future

By Board of Directors of the Massachusetts Association of Health Insurance Underwriters

Due to overly aggressive rate increases, many Massachusetts residents are being priced out of a product they purchased with a great degree of foresight not even 10 years ago. Long term care insurance (LTCI), which covers home care, assisted living care, adult day care, hospice care, and nursing home care, has become a critical coverage in many residents’ financial and estate plans.  Traditional health insurance and Medicare provide very limited benefits when it comes to long term care scenarios. Unfortunately, as policyholders look to the future, the benefits of owning a LTCI policy will either no longer be available to them, or the coverage will have been reduced to a meaningless amount.

 

Rates on existing LTCI policies have risen as much as 60% in some cases and are currently being reviewed by the Commissioner of the Massachusetts Division of Insurance. Considering skyrocketing health care costs, it is understandable that insurance companies would seek increased rates. Under current economic realities, a 20% increase in LTCI premiums could be considered reasonable, but 60% seems opportunistic.

It is one thing for insurance companies to raise rates going forward on new business, but going back to existing policyholders with excessive increases is simply unfair. Consumers who weighed and measured their options and then made appropriate purchasing decisions should not be penalized for the failure of insurance company actuaries to project adequate returns on their own investments, as well as the high persistency of this line of insurance.

Other states have been able to maintain a stable long term care insurance market without passing on inappropriate rate increases to their consumers. To bring stability to long term care insurance in the Commonwealth, the Massachusetts Association of Health Underwriters supports the enactment of our state version of the National Association of Insurance Commissioners Long Term Care Model Act.

GOOD IDEA OR JUST “BAD” POLITICS?

Two years ago, the MA Healthcare Reform Law went into effect with the admirable goal of insuring the uninsured – and it asks everyone to participate – the government, insurers, providers, employers and individuals.

Is it working?

According to the latest press release by the Commonwealth Connector – the government authority responsible for administering the new law – there are 340,000 newly insured MA residents, giving the Commonwealth one of the lowest uninsured rates across the nation – and some say a universal healthcare model for the rest of the country.

What’s wrong?

With all the newly insured people coming into the system so rapidly, we are having trouble finding enough doctors to treat them and – we are having trouble finding the money to pay for it.  In fact, some estimates show that the new law is under-funded by as much as $150-$200 million.

What does the Governor propose?

Last week, Governor Patrick issued a proposal asking businesses, insurers and hospitals to contribute about $100 million to fund the shortfall – and according to some new polls, consumers are supportive of his idea because they think “others” need to step up and pay “their share” – suggesting that recent increases in co-payments and deductibles prove consumers are already doing “their part.”

What are the specifics for the Governor’s proposal?
The Governor proposes raising $100 million in three ways:

1. Changing the “or” test for employers to “and” ($33 million) – if employers fail, they must pay a $295 annual assessment for each employer
      ü      Specifically:  employers with more than 10 employees must pay at least 33% of worker’s premiums within their first 90 days “or” have at least 25% of their worker’s covered by an employer plan
2. Tax health insurance company reserves ($33 million) – these monies are used to pay claims and a certain amount must be kept on hand by each insurer to make sure those claims can be paid
3. Tax hospitals ($28 million)

What’s wrong with this plan?

The problem with the Governor’s plan is it’s a HIDDEN TAX on consumers – and it doesn’t fix a thing!  Why?

The government, insurers, providers, employers and consumers all play an important role in the healthcare equation…let’s take a closer look.

The MA state government collects a big check from the federal government every year (last year, almost $4 billion) to pay for Medicare and Medicaid healthcare expenses.  The problem – the government does not pay its fair share – they pay about $.80 for what costs $1.00 for doctors and hospitals to deliver in the form of care for me and you.

The big insurers in MA (BCBS, Harvard Pilgrim, Tufts and Fallon) are all non-profit.  They make about 1-2% profit margin on every premium dollar they collect from us (employers and employees) and put those profits into the bank (reserves) to pay claims.  Insurers negotiate contracts with the government, doctors and hospitals to deliver care to you and me (their members).  Because the government only pays 80% of what it should, doctors and hospitals charge insurers about $1.20 to make up for the government’s shortfall.

The doctors and hospitals also negotiate contracts with the government and insurers.  As we already discussed, they charge insurers more than the actual cost of care to make up for what the government isn’t paying (see estimated figures above).

Employers sponsor health insurance for their employees.   Most work with brokers and consultants to find the best plan for the least amount of money and on average – employers pay about 75% - 80% of the cost for their workers.

Employees (consumers) pay for about 20% - 25% of the health insurance premium and when they use their health plan – they pay co-payments and deductibles as well.

How can it be a hidden tax when the Governor’s plan calls for everyone else to pay?

When you understand who is involved in healthcare and the role everyone plays – it becomes clearer to see the impact:

1. Insurers – taxing reserve accounts will lower “money in the bank” (reserves) and require the insurers to increase health insurance premiums to replace them
2. Hospitals – faced with already tight budgets, hospitals will be forced to demand more money from insurers to deliver care and insurers will have to give it to them or risk not being able to offer their members access to “my doctor” “my hospital”
3. Employers – changing the test from “or” to “and” will increase assessments (fines) which means employers will have less money to hire, give raises, pay for benefits, etc.
4. Consumers – will pay higher insurance premiums because employers can’t afford to pay the premium increases insurers will demand

Where do we go from here?

We need to ask the EVERYONE to be more prudent with the way they spend their money – let’s see what that looks like:

1. Government – we need the government to pay its fair share and manage OUR money more wisely…why is that such a foreign concept?  Spend less than they take in to give us a balanced budget and money to fund greater access to care and to help lower what doctors and hospitals need to ask insurers for
2. Insurers – we need insurers to continue to find ways to reduce their administrative expenses (now about $.10 on every $1) and help members get the right care, at the right time and in the right place and teach them how to live a healthier lifestyle so they need less care
3. Hospitals/Doctors – we need our providers to also find ways to reduce their administrative expenses (now about $.25 on every $1) and helps their patients get the right care, at the right time and in the right place and teach them how to live a healthier lifestyle so they need less care (sound familiar? the word partnership comes to mind)
4. Consumers – WE need to understand that healthcare is expensive and that relative to the rest of the country, we are NOT paying more.  In fact, the Boston area has the best healthcare in the country and WE really don’t pay as much as others do.  WE need to demand accountability from everyone in this “food chain” as well as ourselves…it’s simply the right thing to do!

In the end, asking employers, insurers and hospitals/doctors to pay more taxes to pay for our new healthcare law is just another way of taxing us – it’s “bad” politics and a hidden tax…so hold onto your wallets!

Mark S. Gaunya
Principal
Borislow Insurance
Board Member of MassAHU

Expanding the Insurance Partnership Is The Responsible Way to Insure the Uninsured Employees

Earlier this month, the Commonwealth Connector board discussed ways to cover 30,000 uninsured residents who can't afford health insurance offered by their employers. They are recommending expansion of the Commonwealth Care program to address this population, in spite of the staggering budget projection of over $1 billion for fiscal year 2009, and the very strong likelihood that employees will start dropping their employer health plans to sign up for the subsidized Commonwealth Care plan.

For several years, an innovative program called the Insurance Partnership has been in existence.  Employees of small businesses, where the employer contributes at least half the cost of their health insurance plan, can qualify for financial assistance from the state to pay their share of the health plan.  Until health care reform legislation was passed, eligibility was limited to those earning less than 200% of the federal poverty level.  With Massachusetts health care reform, that income limit was increased to 300% of the federal poverty level, but was only made available to employees who were uninsured for the prior six months due to a 'crowd out' provision in the law.  Additionally, larger employers with 51 or more employees and their employees are not eligible for the Insurance Partnership, regardless of whether their employees earned less than the 300% income level.

As a result, we have experienced a very lopsided approach to helping people obtain insurance in this state.  Employees who earn between 200-300% of the federal poverty level have struggled for years to contribute to their employer sponsored health plan and their share of the increasing cost of insurance. They receive no assistance under MA health care reform because of the six month crowd out provision. Meanwhile, their co-workers who have the same income level, and who have gone without insurance and contributed to the free care pool costs for the past several years, are able to sign up for Insurance Partnership assistance. 

Their neighbors, who also have the same income level, but who happen to work for a large manufacturer or retailer next door, cannot qualify for Insurance Partnership because their employer has over 50 employees. They must struggle to pay their share of their employer sponsored health plan on their own. Their co-workers, who also have the same income level, and work less than full-time hours for the employer, aren't eligible for their employer plan, but receive subsidized insurance through Commonwealth Care.

Before we think about expanding Commonwealth Care to people who have access to employer sponsored health insurance, we should look to expanding the Insurance Partnership to level the playing field among our productive employees in the commonwealth.  If employees meeting the income limits qualify – regardless of whether they have insurance now or whether they work for the neighborhood donut shop or a major box retailer – the state should want to give them a hand in paying their share as long as their employers are willing to pay one half the cost of their health insurance plan. This plan is considerably less expensive to the state, and we wouldn't have to worry about people dropping their insurance to hop onto a state plan.   This expansion of the Insurance Partnership has been recommended to the Legislature and to the Connector, and is an integral part of the position of the Massachusetts Association of Health Underwriters in promoting the goals of health care reform in a responsible way.

Julie Jennings, RHU, LIA, CLTC 
Massachusetts Association of Health Underwriters, Inc.

All Pushing In the Same Direction - Returning the Connector to Its True Mandate

The Massachusetts Association of Underwriters (MassAHU) supports Health Care Reform and the noble goal of providing health insurance for all citizens of Massachusetts.  Health insurance brokers are an integral part of the health insurance system and have become part of the Commonwealth Connector’s distribution network. However, we are concerned about the Connector’s determination to write group health insurance plans, which we fear may contribute to the unraveling of the entire health care system.

We realize that the Massachusetts Legislature worked diligently to write the enabling legislation, and we all recognize that significant progress has been made. But, the evolving role of the Connector continues to concern us.  Specifically, in July, 2008, the Connector is planning to market Commonwealth Choice plans to Massachusetts employers – even employers who already have existing health insurance policies for their employees through one of the major health plans in Massachusetts including Blue Cross Blue Shield, Tufts and Harvard Pilgrim.  The solicitation of existing policyholders will cause significant disruption to the current distribution model and lead to tremendous instability in the pricing of small group plans.

Unnecessary rising premiums will result in a dangerous backlash by local carriers and small businesses. The ensuing instability will bring negative attention nationwide, undermining the great strides that already have been made. The long-term success of health care reform depends upon all stakeholders pushing in the same direction.

It is imperative that the Connector return to its true mandate of insuring the uninsured, instead of attempting to insure groups that already are covered. The direct intervention of our elected leaders is needed to redirect the Connector’s purpose and to prohibit it from marketing to or accepting business from Massachusetts employers who already have coverage.

Jean Russell, President, MassAHU