General Business Issues

Health Plans Could Benefit From New State Initiatives to Boost Coverage

Reprinted from the Dec. 18, 2006, issue of HEALTH PLAN WEEK (formerly Managed Care Week), the industry's leading source of business, financial and regulatory news of health plans, PPOs, and POS plans.

Health plans are likely to benefit in 2007 because of new state initiatives to boost the number of residents with health insurance, observers say. Next year, roughly half of the state legislatures are expected to consider proposals that aim to expand coverage — a trend that builds on the momentum started in spring 2006 when Massachusetts enacted its landmark legislation mandating universal coverage.

There is growing interest in universal health coverage, says Richard Cauchi, health program director at the National Conference of State Legislatures (NCSL). At least 20 states have indicated some intent to file or debate proposals in the coming months, he says. Nine states — California, Colorado, Louisiana, Minnesota, Wisconsin, Ohio, North Carolina, Maryland and New Mexico — have established task forces or special commissions that will examine the issue in 2007, he adds.

"State by state, we've heard that there is a good deal of interest in people.filing legislation that would at least look toward broader health coverage," he says of proposals that combine private-market features and public-health programs.

Illinois is one state that will soon take up a universal coverage proposal. Lawmakers are scheduled early next year to start considering the Dec. 7 final recommendations of a state task force, which examined ways of providing affordable coverage to the estimated 1.7 million uninsured Illinoisans. The suggestions would cost the state more than $3 billion, and require individuals and businesses to carry insurance or face financial penalties, according to a report by Copley News Service. Uninsured individuals could purchase private insurance plans that are partially subsidized by the state. The panel, however, rejected a Canadian-style "single-payer" system proposal that would resemble Medicare.

Health plans could find growth possibilities in such a proposal, says Alan Weil, president of the National Academy for State Health Policy. "There may be new opportunities to participate in purchasing pools or subsidized insurance products," he says. "As I understand them, states are not requiring plans to participate, but it is potentially a new or expanding market."

Health Care at Top of Calif. Agenda

California is another state to watch, says Weil. Gov. Arnold Schwarzenegger (R) recently indicated that health care is going to be a priority in 2007, Weil says.

Indeed, Schwarzenegger on Dec. 12 welcomed a proposal by state Senate President Pro Tem Don Perata (D) that would drastically cut the number of uninsured. "The stage is set for comprehensive health care reform — making health care affordable for more Californians, covering more of the uninsured and leading the way to a healthier California," Schwarzenegger said in a prepared statement.

The plan, unveiled Dec. 12, is estimated to cost between $5 billion and $7 billion a year. It includes calls for:

• All California workers and their dependents to be covered, a figure totaling 4.2 million of the 6.6 million who are estimated to be uninsured. All workers would be required to show proof of health coverage in order to claim certain tax credits for themselves and their dependents;
  
  
• Employers to have a choice of either providing health insurance as they do now, or contributing to a state purchasing pool called the "Connector." The Connector would negotiate the best rates and offer employees a choice of plans.
  
  
• Health plans to compete on price and quality, not medical underwriting. To ensure it's an affordable product, the Connector would be authorized to buy coverage through the existing state-run Medi-Cal Medicaid managed care program.
  
  
• Participating health plans to be required to cap administrative costs and profits and implement evidence-based practices that control health care costs. Practices include preventive care, case management for chronic diseases, promotion of health information technology, standardized billing practices, appropriate patient cost sharing and rational use of new technology, Perata said.

Executives of Kaiser Permanente also outlined a proposal for universal coverage in California in a Dec. 12 Health Affairs article. The Kaiser proposal, which borrows from Massachusetts' new law, would use existing systems to create near-universal coverage within two years. It recommends two new dedicated revenue sources for funding: (1) a partial extension of the current statewide California sales tax to include health care services; and (2) an in-lieu payroll tax paid by employers who do not offer coverage for their employees.

Among other things, the Kaiser plan calls coverage of higher-income uninsured people who have chosen not to purchase coverage or who are medically uninsurable. The Kaiser plan also includes an individual health coverage obligation. All Californians would have to certify a defined minimum level of health coverage for themselves and their dependents in their tax forms. "This obligation would be expected to cover many more people than a voluntary program with premium subsidies for low-income people," Kaiser said.

Minnesota is another state in the thick of the universal-coverage discussion. The chief of the state's largest insurer has been championing the issue. Mark Banks, M.D., president and CEO of Blue Cross and Blue Shield of Minnesota (BCBSMN), said in a recent speech before the St. Paul Area Chamber of Commerce that "it's time for Minnesota to commit to a long-term, sustainable strategy to achieve universal heath coverage." The state has 383,000 residents without health insurance.

Banks suggested several plan components that would achieve universal coverage, including:

• A requirement that all individuals have coverage for basic care;
  
  
• An increase in subsidies for low-income people to purchase coverage;
  
  
• A requirement that insurers accept individuals who apply for their products — and not reject people based on pre-existing conditions;
  
  
• New ways for employers to help connect their employees to coverage options, and help collect "fair share" penalties. Employers would not be required to offer coverage for all workers, Banks said;

The plan would cost about $1 billion a year, Banks said, but there would be an economic benefit of $560 million. "This $560 million economic benefit estimate includes the current cost of uncompensated care, cost increases due to delayed care, improvements in work-force productivity and the impact of improved health of Minnesotans on our economy," he said.

Many state proposals, including Minnesota's, incorporate components of the Massachusetts plan, which was enacted in April. That plan was followed soon after by laws enacted in Vermont and Tennessee. Like Massachusetts' plan, Vermont's Catamount Health program imposes an assessment on employers whose workers do not have insurance, and establishes a benefit design that is offered by private insurers. By contrast, Cover Tennessee has no mandatory employer assessment. The program is available to small businesses with 50 or fewer employees that have not offered insurance to workers in the past six months.

Weil acknowledges that it's difficult to handicap the likelihood of other states passing landmark reforms. "There are a lot of states with pretty big ambitions, and you get new governors in office who say they want to do something," he says. "But it is hard to get big reforms done." Where states may focus instead is on providing insurance to children, Weil adds. "Many states are looking at children-only possibilities, if they don't feel like they can take on the entire issue," he says.

For information on state health initiatives, access NCSL at www.ncsl.org/programs/health/publich.htm.

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