There are a lot of good things beginning to happen on health care reform, including the first steps on hospital cost and quality transparency; more movement to save taxpayers hundreds of millions of dollars by having municipalities purchase through the GIC; and finally more media focus on the cost side of the equation as exhibited by the important Globe Spotlight team reports.
It is encouraging that public acknowledgement is growing about the need to fix the cost side of health care in order to save the access side. Yet, although I am pleased with the growing attention health care costs are beginning to get, I remain frustrated that the equally important issue of cost apportionment among payers and consumers remains ignored. Health care providers have long complained that government payers—Medicare and Medicaid—do not adequately reimburse the true costs for procedures, creating cross subsidization from private insurance subscribers. True enough. But what about cross subsidies within the ranks of private payers?
Some questions to ponder: If it is true that the GIC is saving the state and now municipalities hundreds of millions of dollars through their group buying efforts, isn’t it also possible that other payers are picking up the tab for those savings? If it is true that the Connector will be holding the line on rate increases at 2% for their Commonwealth Care plans (taxpayer subsidized), isn’t it possible that others will be paying more in order keep those increases in check? If it is true that the merger of the non-group market with the small group market saved individuals money on their premiums, isn’t it possible that small group employers and their employees are now paying more to compensate for that merger? If it is true that large group rates are not regulated and the rates are not even filed with the Division of Insurance, isn’t it possible that those rates are less than the filed small group rates? If it is true that the health insurance marketplace is now about 40% self-insured with those employers holding significant purchasing efficiencies and the ability to avoid certain state mandates, isn’t it possible that fully insured smaller companies and their employees do not enjoy similar savings and flexibility? If it is true that group buying discounts and insurer negotiation is permitted in health insurance markets other than small group, isn’t it also true that small group buyers are discriminated against under the law and in the marketplace by not having the same rights and abilities? If it is true that Blue Cross Blue Shield reimburses Partners the same amount for the same procedure no matter whether you are a firm of 5 or 5000, shouldn’t the insurance premiums be in the same ballpark? If it is true that everyone under the law must buy health insurance in the Commonwealth, shouldn’t they at least have the opportunity to get similar products and similar pricing as the big business or big government purchaser? And finally, if small groups can’t buy comparable coverage at comparable pricing, are they then unfairly cross subsidizing someone else, thus raising the question whether the current health care mandate is truly sustainable politically and economically?
When I raise these issues with certain opinion leaders, I often hear the answer that “the Connector” is where we are leveling the playing field for the little guy. And therein lies “the disconnect on the Connector.” The Connector was never intended to be a cost saving group buying entity for small businesses and their employees although many assumed it was. In fact, the rates the Connector is beginning to use for their long awaited Commonwealth Choice pilot program are the very same rates the insurance companies file with the Division of Insurance. There is no discount, no negotiation. In fact, there was never any intent to do that. The purchasing pool that was to become the Connector was intended to reduce administrative costs and increase choices for the individual and for the taxpayer subsidized purchaser. The Connector simply does not have the negotiation and bargaining authority for small employers in the small group, non-subsidized marketplace.
Give the Connector staff credit as they roll out the Commonwealth Choice pilot program—they will be making the shopping easier and pricing more transparent within the small group market. That is a very good thing, and can create more competitive pressures within the small group market. They even curbed, but unfortunately didn’t eliminate brokers’ commissions even for those small employers not using a broker.
The bottom line cost and competitive problem for small businesses, small non-profit employers and their employees is that although the small group market is regulated within itself, nothing exists to ensure that those consumers are getting fair rates as compared to those outside small group. So what are the solutions? There are no silver bullets, but here are a few ideas that should be considered. They range from creating more competition and flexibility to more state regulation.
Have the Division of Health Care Finance & Policy immediately implement the insurer transparency section of the health care cost containment bill passed last summer, showing pricing across various types and sizes of health plans. That will provide evidence as to whether the cost disparities exist, and at what cost to the little guy.
Reestablish small business health plans which were repealed in the 90’s as a “reform,” not coincidently just prior to the 8 year run up of double digit small group premium increases. These plans—a norm in other states–allowed group buying through established non-profit organizations such as chambers of commerce and associations, and served to level the playing field with bigger purchases by creating more competition and giving small purchasers negotiating leverage with big insurers.
Require health plans to file rates for large groups, and aggregated costs for self-insured plans. Then if necessary, create bandwidths across all fully insured lines.
Mandate that small group discounts equal to brokers’ commissions are made available to the purchaser when a broker is not used in the Connector.
Small employers and their employees are the backbone of our economy. They need to become the focus of the next phase of health care reform.
Jon B. Hurst is the President of the Retailers Association of Massachusetts
Hi. I am a long time reader. I wanted to say that I like your blog and the layout.
Peter Quinn
You got there a very good point. There are still a lot of polishing to do with the health care reform, and the government often overlook this aspect while putting all eyes on the topmost and lowest levels of the pyramid.
Excellent point. However, nothing will be solved and nothing will be fair until the United States goes to single payer universal healthcare, like the rest of the civilized world.
Jon Hurst makes very good points with his concerns regarding rights and fairness with regard to the business community.
There is discrimination in the Commonwealth Care program as well. Eligibility and affordability is based on the total income shown on line 22 of Federal Form 1040 which doesn’t take into consideration self-employment tax and/or alimony paid out as part of the equation – monies that a person no longer has – whereas, taxpayers earning more than 300% FPL use line 37 for the Commonwealth Choice plans. MassHealth personnel say that payroll taxes are not taken into consideration for any applicants, however, the self-employed pay at least twice as much so have less “take-home” pay.
Furthermore, self-employed residents applying for Commonwealth Care are required to submit the prior year’s tax return as documention in lieu of current pay stubs which, of course, they don’t have. Chances are income in the current year for a self-employed person is not the same as the prior year, and in many cases has decreased considerably. Also of note, monthly incomes of the self-employed are usually sporadic with next to no income or none at all for a stretch of time, so these taxpayers must spend countless hours on the phone notifying MassHealth of an income change, proving it and switching from plan to plan – a bureaucratic nightmare that takes precious time and energy away from trying to earn a living.
These stipulations must be followed by MA because in order to receive the Federal funding, Commonwealth Care must follow MassHealth regs which also include an estate recovery program although the powers-that-be would like us to think that the new text added to the estate recovery clause – Under current practice, this does not apply to Commonwealth Care – suffices. Unfortunately, residents won’t know if current practice changed 3 days before they’ve signed the MBR or 3 days after – you get my drift. Thus, residents at 300% or less FPL are forced to purchase a policy in which the terms might change, and if the terms do change, said residents probably won’t be notified about any change in terms and don’t have a right to drop the policy anyways. There are also real estate liens which aren’t mentioned on the MBR.
This begs an answer to the question: Are these [Commonwealth Care] health insurance policies or loans? The Connector, MassHealth and some in the Patrick administration continue to dance around this, when, according to CMS, estate recovery is a Federal requirement for government-subsidized health insurance. Whether or not a state regulation must be changed to allow Commonwealth Care to recover assets is not known to me at this point, however, if so, I bet cash-strapped MA is seeking a way to do this.
Commonwealth Care members have little to no choice of doctors, that is, if they can even find a doctor who will see them because the reimbursement rate is so low. In the area where I reside, a privately-funded clinic founded to provide services for the uninsured long before Chapter 58 saw the light of day has temporarily taken up some of the slack with regard to Commonwealth Care members. Of course, this is at no cost to taxpayers because, as mentioned, this clinic is entirely privately supported, and services are provided through volunteer doctors and other health care professionals.
MA politicians should have taken physician availability by region into consideration BEFORE passing this law. Why should residents be forced to purchase a product that doesn’t deliver? In the real world, there are laws and remedies to protect consumers from this. Furthermore, disguising this problem as “the need to train the newly-insured to find a PCP and not use the ER” is unacceptable. If you need a doctor and can’t find one, where else would you go?
Fines for businesses that don’t offer health insurance are considerably less than the individual mandate – $295 per uninsured employee vs up to $912 per individual for 2008, $1,068 for 2009 – and businesses can easily find loopholes and avoid the mandate, leaving employees hung out to dry. It’s always a good idea to tread lightly with regard to the entities that are needed to garner and maintain the support required in order to pull off a scheme such as Chapter 58.
These inequitites and discriminations in the contract that MA has with its residents to purchase health insurance or pay penalties are numerous, and appear to void or exploit our rights. The integrity of the contract also seems questionable in that it forces people to purchase a specific product under duress, circumvents ERISA and HIPAA, creates a graduated income tax in a flat-tax state and violates our Fifth Amendment protections against self incrimination (Form 1099 HC).
As of early 2008, Commonwealth Care membership had a net decrease of 4,097 since inception while the net increase in Commonwealth Choice was 150. As of mid December 2008, at least 72% of the 162,726 enrolled in Commonwealth Care received the insurance for free. Approximately 15% pay a very small premium with 12% paying a substantial amount. These percentages clearly show that the subsidized insurance is not so affordable. Commonwealth Care members are also struggling to continue payments, and many cannot afford the copays which is also a problem for wage-earmers above 300% FPL. Nearly 300,000 residents still remain uninsured including tens of thousands unable to afford the available plans who received temporary offical state permission and about 90,000 who were exempt from the mandate because the Connector had no affordable insurance plan for this income range. Not included in the 300,000 are an approximate 10 to 15% who do not file a tax return and may be uninsured.
There are hundreds of thousands in MA who are currently worse off than they were before this law. Its success is but smoke and mirrors when one takes into consideration the large numbers who are being exploited and those who remain uninsured and cannot afford the penalties. Furthermore, the program is not sustainable, and penalty-payers and businesses cannot continue to prop it up. Many insured residents can’t come up with the cash to upgrade their existing policies to meet official state standards (MCC) and will be penalized in 2009.
Governor Patrick and MA legislators should be taking a serious look at what this law is doing to the hard-working taxpayers of the Commonwealth especially during this extremely difficult time. But, alas, politics is more important than the financial and personal well-being of MA residents and businesses.