Breaking Down Universal Healthcare Concepts

More often today than in the past, people ask “when is the government going to do something to fix our healthcare system?”  The answer to that question actually depends on whether they are referring to federal or state government.  One may argue the last major effort by our federal government to solve the healthcare problem was the Health Security Act of the early 1990s, which would have created a national government-based healthcare system.  However, the Act eventually lost its steam in 1994, and since then, we have not seen any relatively major attempts to change the system from Washington .  With a new Congress and a new President in 2008, we will certainly see more activity on the subject of healthcare reform from Washington in the near future.

At the state level, there has been tremendous activity over the past year as an unprecedented number of universal-coverage initiatives were debated, and in some states, adopted.  Most of the state initiatives focused on access and not on creating true single-payer plans where the government would be the only provider of health insurance.  Here’s a glimpse of what we have seen this past year and maybe a glimpse into the future:

Single Payer
A few states introduced single-payer bills this past year, but the most note-worthy was the California Health Insurance Reliability Act.  This legislation would have created a single state-run health plan designed to provide comprehensive medical coverage to every California resident.  While there was no funding source for the plan, the bill passed both houses, which is significant because it marks the first time both houses of a state have approved such major healthcare reform legislation.  The bill, however, was later vetoed by Governor Schwarzenegger and legislators went back to the drawing board.  Recently, the Governor proposed an alternative plan under which employers with 10 or more workers that don't provide health coverage must pay 4% of their total Social Security wages to a state fund, which would subsidize coverage for California's working uninsured.

Individual Mandate
What if you lived in a state that required every resident to purchase health insurance?  Welcome to Massachusetts !  This is exactly what all residents must do before July 1, 2007, or they will lose their state income tax deduction.  Many of the details are being established right now, but the legislation does include the following options:

• Premium subsidies for the poor
  
• Requirement that employers pay a to-be-determined amount towards insurance
  
• Whenever Creation of a state-run health plan where you can buy coverage
  
• Authorization of individuals and businesses to purchase private insurance
  

New York had similar legislation pending in 2006, and many other states including Maine, Vermont, and New Jersey plan to explore individual mandate legislation in 2007.

Employer Mandate
As the name would indicate, this approach mandates certain size employers to provide health insurance to their employees or pay into a government fund for the uncompensated care of the uninsured.  While several states have taken this approach, Maryland was the first to introduce legislation on the concept.  This legislation, called the “Wal-Mart Bill,” required employers with more than 10,000 employees to spend 8% of payroll on benefits.  However, a federal court overturned the Maryland legislation in July, as it violated ERISA.  Prior to the federal court’s actions, 21 other states had similar legislation in the works.

Premium Subsidies
Many states considered legislation that would use the existing free-market health insurance system and provide premium subsidies to low-income individuals and/or small employers.  As indicated earlier, such legislation was enacted in Arizona, Kentucky, Tennessee, Washington, Vermont, and Massachusetts.

Regardless of which approach you prefer, you must ask yourself the following question: “Will adopting this approach control healthcare costs, or will it simply guarantee access to insurance?”  One of them will certainly address the uninsured population (which is a driver of healthcare inflation), but what about waste, quality of care, over-utilization, and personal responsibility for health?  Simply having coverage via public or private insurance does not solve the problem.  It’s going to take much more than just ID cards in everyone’s pocket.

Currently, we at Hill, Chesson & Woody are accepting any and all suggestions on how we may solve this problem.  Please send your responses, comments, or plans of action to Skip Woody at swoody@hcwbenefits.com.

Questions or comments about this article? Email us at comments@hcwbenefits.com.

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January 19, 2007

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