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UAHU = Utah Association of Health Underwriters
The UAHU Health Policy Reform Plan for Utah
Original Release 10/18/2007 v1.4
The UAHU agrees with the general consensus that we are in a perfect time and place for significant, substantive and realistic health care legislation and reform. However we also recognize that Utah enjoys the lowest costs and some of the highest quality care in the country. Our small group market is thriving and growing – with two new major carriers added in the last year. Yet costs are too high and are growing at unsustainable inflationary rates. Too many people cannot afford to purchase insurance. We appreciate and agree to the fact that any true reform plan will take two to three years or possibly even longer to implement. The UAHU plan will require similar fortitude.
If now is the time for true reform, then it is important that we define our goals and our principles:
Goals & Principles
1) To lower the core rate of health care inflation.
To simply rearrange the payment system or to simply generate some tax savings is not enough. Those are one time savings that will be eclipsed shortly if we don’t actually lower the medical inflation rate back down to general standards. We believe that this issue drives most of the other issues. We would be wary of any “major change” proposal that does not address this critical issue.
2) To increase the number of people with insurance.
Everyone should have affordable health insurance coverage. However many health reform advocates grossly overstate the cost shift savings of Universal Coverage. (A recent Stanford study indicated that there is only about a 2.8% cost shift associated with the uninsured in California. The cost shift associated with under-funded government programs such as Medicare & Medicaid was much greater.) Nonetheless we recognize that it is important for everyone to have coverage for their long term well being. The very best strategy for increasing the demand for health insurance is to lower the price of health care.
That being said, we also understand that some people cannot afford health insurance coverage – even with lower prices. UAHU believes that it is the role of government to define what is and is not affordable and then provide subsidy for those that truly need help.
3) To focus on private, market based solutions.
We are wary of proposals that make fundamental changes to the current employer based system. This includes so-called connector or exchange ideas that would usurp private functions of the current market. Since the Utah health insurance market is arguably the best in the country, inserting a new dynamic is risky. Any proposal that would chase away any major health insurance carrier from writing business in Utah should be opposed. We believe that any proper health care reform proposal will promote competition. If any reform plan causes any major carrier to walk away from the most robust health insurance market in the country, Utahans should take that as a sign that the proposal is unwise.
UAHU Proposal for Utah Health Care Reform
1) Introduce Consumerism into the 3rd Party Payment System
In order to actually reduce the cost of health care, the 3rd party payment system must be re-structured by adding market forces into the equation. Consumerism is the only proposed reform program that can do this. This is the most important part of the UAHU reform package because Consumerism actually lowers the cost of health care.
Consumerism is a systematic method of bringing transparency into health care commerce. UAHU has attached articles outlining the basic philosophy of Consumerism and how it can be integrated into health care commerce. In order to facilitate the change, the state would need to do two things:
a) Empower, direct and provide funding for the Department of Health to collect outcome data from all licensed providers. This would be a cooperative effort in conjunction with the Utah Medical Association and other professional provider organizations.
(See the UAHU discussion paper outlining a methodological process that is fair for providers and useful for consumers.)
b) Create a task force of providers and payers that would identify specific procedures and chronic conditions that lend themselves to the principles of Consumerism. The DOH would assist providers and carriers in creating comprehensive episode-of-care priced treatment plans. Both Medicaid and PEHP should participate with the Consumerism model.
(See the UAHU discussion paper which describes Consumerism, including many of the obstacles and opportunities presented by such a transformation.)
Although introducing Consumerism seems a daunting task, it is actually the natural state of health care commerce. It is the 3rd party payment system that is artificial and forced, creating tremendously costly adverse consequences. Every health care transaction that is outside of the 3rd party payment system is priced globally and efficiently. This is true world wide.
2) Create the Utah Health Insurance Matrix
The Utah Health Insurance Matrix would be a web-based source of consumer information established and maintained by the Department of Health. The Matrix would contain special portals to help employers, individuals, social workers and insurance professionals find and implement appropriate health plan options. Establishment and maintenance of the Matrix would require some programming resources and design effort between the Department of Health, the Department of Insurance and the private insurers.
a) The Business Portal
The business portal would be a wonderful tool for any business. It would contain unbiased information about the principles and rules of group insurance. It would explain modern insurance concepts such as Health Savings Accounts and Self Funding. It would also explain how businesses can help employees pay for individual policies.
The portal would provide the legal documents to allow for federal payroll tax deductions for individual policies. Section 125 premium payment plans should be provided free of charge through the Matrix. It would also be a place to access government subsidies for the purchase of private health insurance, such as UPP funding.
(Note: On August 6th of 2007, the IRS issued a ruling to allow employees to be reimbursed for their individual health insurance policy premiums upon receipt of substantiation under a Section 125 plan. Because of this ruling, it is no longer necessary to create an Exchange entity as a method to allow pre-tax deduction. This proposed ruling is scheduled to take effect January 01, 2009.
The business portal could also be a source for information on wellness. Businesses that register on the Matrix can receive email alerts to various programs in their area. This could include flu shots, health fairs, fitness incentives and education, health assessments, smoking cessation programs blood drives as well as classes in workplace safety or human resource management issues.
Finally, the portal could be a source for referrals to private coverage. This could include actual rates and product designs of Utah insurance plans. It could also include lists of insurance agents and consultants that are certified Utah Health Insurance Matrix professionals.
b) The Personal Portal
Individuals and families could access the portal to find a complete list of all public and private sources for coverage. By simply entering basic information such as income and ages, the Utah Health Insurance Matrix would provide a complete and comprehensive list of all access points for coverage.
This listing would include a variety of private individual policies (including rates and benefits) as well as public or charitable sources for coverage. CHIP, Medicaid, Indian Health Services, Veterans Health and UPP can all be on the list, if the family qualifies.
Families could also sign up for email notices on wellness programs and other matters of health care interest. If funding were available, the Matrix could even include interactive health coaching and exercise programs.
c) The Counselor Portal
The Matrix can fill the knowledge gap between public and private counselors as they assist their clients in acquiring coverage. Using this portal, insurance agent, social workers and charitable aide counselors can get a complete and comprehensive listing of coverage options.
Private sector agents are not well trained in social programs like Medicaid. The Matrix will make sure that those options, if applicable, are presented. It will also provide information on all the various private sector plans in a summary form.
Social workers and other charitable counselors also have gaps in knowledge that the Matrix can fill. As their clients are emerging from poverty into self-sufficiency, social workers are not trained in private sector options. In many cases, private sector pricing is surprisingly affordable. The Matrix will allow them to present a variety of private sector options, with enrollment instructions.
*(See the attached MATRIX chart which shows an overview of the various health plan options available to Utah residents)
3) Create a Low Cost “Necessary Benefit Plan”
One of the most overlooked dangers of being uninsured is that one looses the provider discount arrangements that comes with any decent health policy. That means that uninsured individuals pay “billed charges” which are typically 30% above the charges contractually allowed with an insured situation. For example, the typical allowed amount for a full normal delivery (global cost) is about $6,000. If an uninsured person has exactly the same services, their bill would likely exceed $9,000. This provider discount (or surcharge to the uninsured) increases dramatically with the most expensive procedures. It would not be unusual to see a $100,000 billed charge be reduced to under $50,000 under an insurance contract. The uninsured would owe the entire $100,000.
A way around this is to create a Necessary Benefit Plan. This would be added to the private carrier’s portfolio and could even be offered as an option under the HIP benefits. The plan would have a $25,000 deductible for medical conditions, but would have a 100% benefit for preventative care. It could also have a supplemental benefit for accidents that would not have a deductible, but would have co-insurance.
Although at first brush it seems that such a policy would only be slightly better than no policy at all, but in fact it accomplishes many things.
First and foremost, it gives the provider discounts referred to above. This could mean thousands of dollars in savings. It would also protect against cost shifting from the most costly treatments. Also for homeowners, a $25,000 deductible is difficult, but it is not the financial death blow that a $100,000 treatment would pose.
Second, it is easy and affordable to buy supplemental plans to pick up parts of the deductible, or give allowances for specific medical treatments. Moreover, if a person covered by a Necessary Benefit plan changes to a more comprehensive plan (for whatever reason) there would be a takeover of any pre-existing conditions. (HIPAA portability)
It also is a reasonable benefit plan for a “young immortal”. They would find the lower premium attractive and it would cover them for what they perceive that they need most; preventive care to keep them healthy, coverage for unexpected accidents and a catastrophic protection for the unthinkable. These are the policies that could entice this key demographic cohort.
It could also be a reasonable benefit for Veterans and for residents from other countries. Our association membership notices that many of these folks don’t believe they are at much risk in going without insurance. (This occurs despite the fact that an employer’s generous contribution and pretax arrangement makes the cost quite reasonable to the employee. The Department of Health estimates that 80,400 uninsured people turned down coverage offered at work in 2005.)
Since these folks have the option of getting free care elsewhere, it is reasonable for them to believe that if they develop a major health care need, they would qualify for free treatment, either at the VA Hospital or in their birth country. A Necessary Benefit plan would protect them for accidents and help them maintain their good health so they don’t need to go to the VA or to their home national health plan. It would also offer some protection when the reality of a sudden heart attack finds them in a private Utah hospital. Cost shifting due to uninsured claims would be minimized.
Finally, it works quite well with the Consumerism model. Since Consumerism facilitates the creation of global fees and chronic treatment plans, it would be reasonable for someone to use the Necessary Benefit plan for catastrophic claims and use private family & chronic treatment “episode of care” pricing to cover their ongoing needs. Paying the specialty clinic “X” dollars a year to handle your normal claims and having a Necessary Benefit plan to cover the rest is sound financial planning for many.
4) Focus Efforts on Enrolling Certain Classes of Uninsured
There are many faces to the uninsured. According to the Department of Health, in 2005 79,800 uninsured Utahans believed it was “safe to go without insurance”. There were 37,900 people uninsured even though they have incomes of over $65,000. This indicates that they can afford it, but choose not to buy.
Although this area of tax subsidy policy is outside of our expertise, we do offer some suggestions based on the statistics, common sense and our own observations:
a) There are 25,000 uninsured full time college students in Utah. Why not require and include a Necessary Benefit Plan in the tuition of those not covered elsewhere?
b) There are many thousands of children in Utah that are eligible for free coverage under Medicaid and CHIP. In the case of Medicaid, they are eligible for retroactive coverage. We should focus effort on getting these children covered. There is no reason to waive coverage because the taxpayers are footing the bill. It is simply a matter of paperwork.
The Members of the Utah Association of Health Underwriters stand ready to help in this enrollment effort. We currently are helping people apply for HIP, UPP, CHIP, COBRA, Mini-COBRA, and Conversion. Using the Matrix as a field assessment tool, we will have an increased capacity to quickly direct people to the government subsidy program or insurance product that best serves their needs.
c) The most troubling aspects of uninsured statistics are an apparent growing disconnect between the insurance industry and the Hispanic community. Within every income category, Hispanics are 2 to 3 times more likely to be uninsured than others. Since the Hispanic community is the fastest growing demographic in Utah, this trend must be reversed. If not, we will be “swimming upstream” in our battle to lower the uninsured rate.
The UAHU would volunteer to serve on a committee that would help identify the problems with the delivery of current health insurance products to the Hispanic community. We would be willing educate this community regarding insurance needs and products, and to encourage new agents from this community.
5) Remedies to Modernize Health Insurance Practices
a) Transform State health care subsidy programs into “Subsidy Premium Credits” (SPCs). This would include the UPP and CHIP. A paper or electronic SPC could be provided to employers for their employees that qualify for these programs. Those SPCs would be used by employers to pay some of the premiums. This could be either group coverage or individual policies on a payroll deduction.
b) Rule that new eligibility for UPP would be a “life event” causing an open enrollment opportunity. This would facilitate the enrollment process. (Carriers are federally prohibited from allowing enrollment to occur other than on open enrollment. This creates an unnecessary and problematic enrollment problem with UPP.)
c) Rule that individual policies are legitimate forms of other coverage and must be excluded from group participation requirements. This would require carriers to treat this “other coverage” the same has being covered through a spouse’s plan and make it easier to qualify for group coverage.
d) Require “take over” of deductibles and coinsurance maximums or out-of-pocket maximums when a person transfers from one insurance policy to another. While this is common practice when a group moves from Carrier A to Carrier B, this courtesy is not granted to individuals changing plans. This means that a person who met their $500 deductible in March, but changes employers and gets a new plan in June, must start over on their deductible. This is true even if the new plan is issued by the same carrier and has identical benefits as the old employer’s plan.
e) Extend the Utah mini-COBRA benefit period from 6 months to 18 months – matching federal COBRA guidelines. This will triple portability in small group policies.
f) Require carriers to accept premiums from businesses for individual policies, if and only if, the business is certified to have appropriate Section 125 plan documents. Require businesses to offer Section 125 plans for any employee that requests to pay for health insurance using pre-tax income.