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Coverage Crisis

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The ingredients are there.

The number of Americans with employer-sponsored coverage is on the decline, dropping from 66 percent of the population in 2000 to 61 percent just four years later. Meanwhile, the number of uninsured climbed to around 47 million in 2005. Enrollment in Medicaid programs was up to 42.5 million nationwide by June 2005, and the State Children’s Health Insurance Program ballooned to cover 6 million children the same year, although only 4 million were enrolled at any given time, according to data from the Kaiser Family Foundation.

Factor in a continued decline in the affordability of healthcare coverage, and you have all of the elements for reform. Several states—including Illinois, California and Pennsylvania—are considering following Massachusetts’ lead in enacting broad healthcare coverage initiatives. Such proposals run the gamut from calls for the creation of government-run, single-payer systems to public-private partnerships supported by individual and employer mandates.

With little in the way of a national consensus, however, the future of healthcare coverage remains murky. HealthLeaders asked health plan executives at the forefront of the debate over mandates, benefits and universal coverage to shine a light on what might lie ahead.

Inspiration from across the pond

George C. Halvorson, chairman and chief executive officer for the Oakland, CA-based Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals, has been a consistent supporter of efforts to expand healthcare coverage in the United States. Halvorson also penned a new book on the subject, Health Care Reform Now! A Prescription for Change, that is due out later this year.

“People were burned for a while by the attempt to reform healthcare during the Clinton administration—afterward there was the assumption that it just couldn’t be done,” recalls Halvorson. Since that time, however, coverage has become even less affordable, creating a “critical mass” among labor, employers and politicians that is driving renewed calls for reform, Halvorson says. “And the models are a little different this time around. The reformers are coming at it with a sense that there might be multiple pathways to obtaining universal coverage.”

Make no mistake about it—Halvorson is an unabashed believer that the ultimate goal must be a system of universal healthcare coverage in the United States. While many models are being discussed, he urges the debaters to consider an approach that many European countries have already taken.

“A lot of people and lawmakers haven’t understood that if you’re a citizen of Austria or Germany or Switzerland, you’re actually choosing a health plan. It’s not the Canadian system where everybody gets a card and they’re all on the same system,” Halvorson explains. “There are many competing health plans, and in some countries the plans compete on the front end for the total care—these look a lot like our Medicare Advantage plans. In other cases they sell coverage directly and the money doesn’t even flow through the government, such as in Switzerland, unless you are low-income.”

One aspect of these markets that is crucial for any similar system that might be adopted in the United States is government-mandated coverage, Halvorson says. “Anything short of an absolute single-payer system requires an individual mandate. If you don’t have that, then people will make decisions about coverage that will result in far less than universal coverage,” he says, noting that such a system will need to provide premium subsidies for low-income individuals.

Halvorson, however, is not merely advocating a change in the way consumers pay for health insurance. Instead, he wants to see coverage expansion evolve in step with systemwide changes to improve the quality and effectiveness of care—a point he contends is often missing from the current debate.

“Even though there is awareness in this country that the issues relate to care delivery, the solutions still tend to deal with restructuring the financing of care,” he says. With five chronic conditions accounting for 75 percent of the healthcare spending in the country, Halvorson maintains that the opportunity is there to reap significant savings. “What we need to do is automate the database for care, we need to make care performance computerized and transparent, and we need to hold people accountable for systematically improving care. If we get those things, then universal coverage is easily affordable.”

Testing the universal waters

Unlike his counterparts in states that are only beginning to debate healthcare reform and universal coverage, Charles D. Baker, president and chief executive officer for Harvard Pilgrim Health Care in Wellesley, MA, is living and working in one of the nation’s great healthcare experiments. Harvard Pilgrim is one of seven Bay State insurers that will be participating in Massachusetts’ new Connector Choice program to offer low-cost health plans to the state’s individual market.

“One of the great advantages—or disadvantages, depending on your point of view—that Massachusetts had going into this was that the federal government had basically said, ‘If you don’t come up with a plan to cover more people, then we’re not going to continue giving you the $400 million that we have been providing for services to the uninsured,’” says Baker, reflecting on Massachusetts’ ability to adopt reforms when others have failed. “Most of these other states are thinking about the federal revenue piece as an enhancement to support their plans to cover more people when it was a takeaway for us if we didn’t do it. That created a different kind of pressure to make something happen.”

Even though Massachusetts passed landmark legislation mandating health insurance coverage for every resident, Baker says some of that pressure remains. The legislation established the framework for the Connector Choice program but left many of the details to be ironed out by the Commonwealth Health Insurance Connector and the other parties involved: health plans, employer groups and consumer advocates. Chief among the disputes has been the price point at which plans will be made available to the individual market through the Connector, along with determining what benefit package will satisfy the state’s mandate for credible coverage. The same battles are likely to be waged in other states considering similar changes to their healthcare programs.

“The whole message of the reform was to create more options and more flexibility for people purchasing either individual coverage or coverage through small groups, not less,” says Baker. “To create real prescriptive rules and definitions around what’s considered adequate coverage would be a mistake. The goal is to get people who don’t have coverage in, not to make people who already have coverage that they think works either buy up or pay a penalty.”

Baker says Massachusetts must walk a fine line in developing the regulations. “If you set the minimum requirements higher than what’s on the market today, then you raise the price of any product being sold, which will reduce affordability and make it harder for people to comply with the mandate,” he maintains.

The Bay State is still wrestling with the issue. While the mandate to have coverage takes effect on July 1, the minimum credible coverage requirement will be phased in over the next two years. As currently drafted, a health plan would have to include prescription drug coverage in order to meet the minimum coverage requirement.

A mandate? Definitely

Bruce G. Bodaken, chairman, president and chief executive officer for Blue Shield of California, has been championing efforts to create a system of universal coverage for the better part of this decade. Now with serious discussions under way in the Golden State, Bodaken is playing a key role in a new coalition of health plans, provider organizations and labor unions formed to further the state’s movement toward universal coverage.

“It’s kind of like an actor who has been in the wings waiting for their big chance,” says Bodaken, who has been trumpeting a plan for universal coverage for the past five years. “Our proposal has been in the works since 2002, and now we find that most of its essential elements are the basis for the proposals that are being put forward around the nation—and certainly in Gov. Arnold Schwarzenegger’s proposal here in California.”

A key element in Bodaken’s “Universal Coverage/Universal Responsibility” proposal is the individual and employer mandate, which he maintains is crucial to obtaining at least near-universal coverage. “We’ve been watching this issue for some time, and the market has been creative in building products that are lower cost and offer a number of ways to bring people into the market,” he notes. “But at the end of the day, 25 percent of the uninsured are those who can afford it but choose not to buy the benefit or are the working poor who simply can’t afford it without a subsidy. So I think it’s unrealistic to think that we’ll get everyone covered unless we have a mandate for at least a basic benefits package.”

While he’s encouraged by the serious discussions around the concept of expanding coverage, Bodaken says he’s also keenly aware of the potential pitfalls of political wheeling and dealing.

“We are very concerned that there might be some kind of guaranteed issue requirement without an individual mandate,” he says. “The worst of all worlds would be to be required to offer people coverage but then allow them to self-elect. That would mean the healthiest would stay out of the pool because they don’t need the care, and that’s when it becomes very difficult to create a healthcare system that works.”

Among the proposals in California, Bodaken is supportive of a provision in Gov. Schwarzenegger’s plan that calls for health plans and providers to have a financial stake in making universal coverage a reality. Under the proposal, health plans would have to spend at least 85 percent of premiums on medical care, while physicians would have to return 2 percent and hospitals would have to return 4 percent of their patient care revenues to the state to help fund the coverage expansion.

“We’ve said for several years now that there are no free lunches. We all have to take some responsibility to keep this system viable and successful,” he says, adding that the government should do its part by raising its reimbursements to providers. “This has to be a multi-tiered, comprehensive proposal. We can’t just fix the issue of people not being able to get access to health insurance, we have to fix the fact that providers need to be paid a reasonable amount if they’re going to provide services. Otherwise it won’t work long term.”

A mandate? Not necessarily

As vice president of state affairs for Indianapolis-based WellPoint, Anne-Louise Kuhns has been an integral part of the company’s contributions to the healthcare reform debate. She has also been involved in promoting the company’s own proposal for expanding coverage to more uninsured Americans.

“I think the Massachusetts proposal ignited a lot of people’s interest. Governors talk to each other. Legislators talk to each other. And it presented a new way perhaps of approaching a problem that’s of interest to a lot of people,” says Kuhns. “But these global proposals would require raising new revenues and imposing requirements on employers and individuals, and it’s going to be very difficult politically to get all of those pieces to come together.”

Instead of widespread adoption of plans for universal coverage, Kuhns expects states to pass mostly incremental reforms to broaden existing programs. “I think we can get most of the way to universal coverage without the need for mandates,” she maintains, noting that WellPoint released a proposal earlier this year that outlines a plan to do just that.

WellPoint is calling on states to make coverage for children universal and create new options for uninsured working Americans, such as expanding coverage in state programs to 200 percent of the federal poverty level for parents and 100 percent for childless adults. At least a portion of the expansion could be funded through an increase in taxes on tobacco products.

“In California, for example, 80 percent of the uninsured are under 300 percent of the federal poverty level. By expanding SCHIP and expanding Medicaid and then supplementing this with some premium subsidies for low income populations, we think we would get essentially 80 percent of the way to universal coverage,” she says. “We think we could then fold in the remaining 20 percent by allowing plans to offer more flexible products and providing tax incentives to employers.”

Kuhns says WellPoint’s new Tonik line of health plans targeting young adults is an example of the type of product that can draw more people into the insurance pool. “It has a different benefit design than a traditional HMO product. It’s got some preventive care in there, it’s got between a $1,500 and a $5,000 deductible, and it’s at a price point that the younger population can afford,” she maintains. WellPoint is also championing the idea of guaranteed access—instead of a policy of guaranteed issue—through the creation of high-risk pools that are funded by an assessment on insurers.

“But we don’t think that a coverage mandate per se is going to be effective with either individuals or employers,” Kuhns maintains. “People are not going to buy something unless they see the value of it, and the way to provide that value is to provide a product that they think works for their particular needs.”

Brad Cain is editor of California Healthfax and associate editor with HealthLeaders magazine. He may be reached at bcain@healthleadersmedia.com.



$154 and Change

At the forefront of the healthcare reform movement since passing its landmark legislation last year, Massachusetts is preparing to offer residents a full-coverage health plan for as little as $154 a month for the typical uninsured Bay Stater, according to estimates from the state agency charged with bringing affordable health plans to market.

The low-cost health insurance policies are an integral part of a reform effort being watched by several other states considering similar reforms. Massachusetts’ plan requires all residents to have health insurance coverage by July 1. Residents can meet the requirement by enrolling in either a state- or employer-sponsored health plan, if eligible, or by purchasing healthcare coverage on their own. The state has already enrolled more than 45,000 low-income residents in its subsidized program known as Commonwealth Cares, which is available to residents earning up to 300 percent of the federal poverty level.

The new policies will be available through the Commonwealth Health Insurance Connector Authority, which negotiated with 10 insurance carriers to ultimately develop the package from seven health plans that start operation on July 1. The final package includes offerings from some of the state’s largest insurers, including Blue Cross and Blue Shield of Massachusetts, Fallon Community Health Plan, Harvard Pilgrim Health Care and Tufts Health Plan.

The policies, known as Commonwealth Choice plans, will be available with a range of premium options based on the benefit levels, plan design and provider network selected. Regardless of the benefit level selected, all of the plans will cover inpatient and outpatient medical care, emergency room visits, mental health and substance abuse, rehabilitation services, hospice and vision care.

The new Commonwealth Choice policies, however, are not without controversy. The cheapest plans can be had for less than $200 a month, but many facing the healthcare coverage mandate will spend much more for their coverage—either up front in the form of higher premiums or at the back end after receiving care through high deductibles or co-insurance provisions. Residents age 56 or older will see premiums rates that are two to three times what their younger counterparts enjoy.

The actual cost of the plans, however, can be reduced significantly if purchased through Section 125 plans using pre-tax dollars. The $175-a-month premium for a 37-year-old Boston resident earning $50,000 a year would be reduced to $109 a month through this method.

—Brad Cain



Governors Step Up

Following the lead of Maine, Massachusetts and Vermont, which have adopted plans for universal or near-universal coverage in their states, governors across the nation have unveiled far-reaching proposals to expand healthcare coverage for their uninsured residents.

California: After rebuffing many healthcare reform efforts from the legislature, Gov. Arnold Schwarzenegger introduced a package that promises universal coverage and better pay for providers. The plan includes an individual and employer mandate for coverage while expanding coverage under the state’s Medicaid and SCHIP programs. Subsidies would be available for low-income families. The plan would also boost Medicaid payments to providers by $10 billion to $15 billion, but would extract a fee of 2 percent or 4 percent from physicians and hospitals, respectively, based on patient care revenues.

Connecticut: Gov. M. Jodi Rell introduced two proposals to expand health insurance coverage to every uninsured child in the state and many uninsured adults. Rell’s Charter Oak Health Plan would be a public-private partnership to offer health insurance to uninsured adults at group rates. Rell also proposed expanding the existing HUSKY Plan by waiving premiums for the first two months of a newborn’s life.

Illinois: Building on the All Kids program, which extended coverage to all children in the state last year, Gov. Rod R. Blagojevich unveiled his Illinois Covered proposal this spring to expand access to every resident. The program would allow individuals without employer-sponsored coverage to buy health insurance through a state pool with guaranteed issue, while small businesses that cover at least 70 percent of their workers’ premiums would also be able to participate. The plan also includes direct premium assistance from the state for low- and middle-income families.

Pennsylvania: Having already expanded access to healthcare for uninsured children through its Cover All Kids program, Gov. Edward G. Rendell introduced what he called a Prescription for Pennsylvania to increase access to affordable healthcare coverage for everyone. The proposal calls for the creation of a state-run pool to allow individuals and small business that have not provided coverage access to affordable health insurance. Participants earning less than 300 percent of the poverty level would receive state assistance, while those earning more could ultimately face a mandate to purchase coverage if too few sign up voluntarily.

—Brad Cain