Transcript Health Care

The Big Blow-up:
Is this the Future of the Employer-Based Health
Insurance System?
by Susan Dentzer
The NewsHour with Jim Lehrer on PBS
Dorsey Hughes Symposium
Beaver Creek, Colorado
July 27, 2007
How Americans get their
primary health coverage
Total covered by some type of health insurance during the year:
249 million
Covered by private insurance: 201.2 million
Covered by employment-based coverage: 176.9 million
Covered by “own” employment-based (self-employed): 92.6
million
Covered by direct-purchase (individual) insurance: 27 million
Covered by government plan: 80.2 million
Uninsured for entire year: 44.8 million
Source: Annual Demographic Survey, Bureau of Labor Statistics and Bureau of the Census
The employer-based health insurance system
is…
The primary source of private health coverage in America
The system that covers about 3 in 5 Americans
Arguably the primary source of innovation in health insurance
in the U.S.
At the same time, the employer- based health
insurance system is also…
Clearly under strain in part due to rising costs
Premiums for employer-based family coverage have risen 87
percent since 2000*
Employer-based coverage is shrinking – from covering 63.6
percent of Americans in 2000 to 59.5 percent in 2005*
sources: Kaiser/HRET 2006 Employer Health Benefits Annual Survey; Census Bureau
Red Alert?
I recently asked two top
health insurance executives
– Ed Hanway, chairman and
CEO of Cigna, and Robert
Sheehy of United Health
Plans – to draw analogy
between
the state of health insurance
at present and the Threat
Alert System
Ed Hanway, Cigna
Threat Alert in Health Insurance
Their answer: We’re on
Red – Severe Crisis
The Big Churn: Out of Private Coverage and
Into Public Coverage
As private coverage declines, enrollment in governmentsponsored health insurance is growing
The percentage and number of people covered by
government health insurance programs (mainly Medicare,
Medicaid, military and S-CHIP) has increased
27.3% in 2005 versus
27.2% in 2004 versus
25.5% in 2003
80.2 million in 2005 versus
79.1 million in 2004 versus
76.8 million in 2003
Source: Census Bureau,
Current Population Survey,
August 2006
Ye Olde Butter Churn
The Rising Tide of Uninsurance



An estimated 45 million
people were without health
insurance coverage, up
from 45.3 million people in
2004
The percentage of people
without health insurance
coverage increased from
15.6 percent in 2004 to 15.9
percent in 2005.
Source: Census Bureau
The emerging menu of options on employerbased coverage
Tear it down; its era has passed.
Replace it with something more geared to
individuals’ shifting needs and in step with flexible
and competitive global economy
Shore it up; it’s worked well and can work better.
It’s last bulwark against all-public health insurance
Take Hippocratic Oath approach: First, do no harm!
Who’s Ordering What on the
Menu of Options?
A) Tear it down or at least modify it to enable move
to a more individually-based, non-employmentlinked system: President Bush, Heritage Foundation,
Sen. Ron Wyden (D-Oregon), Rudy Giuliani
B) Shore it up: Require employers to get into or stay
in the game via mandates or mandatory fees:
various state health reforms as in Massachusetts
and California; Democratic presidential candidates
Barack Obama and John Edwards
President Bush’s FY 2008
health insurance proposals
Major change in tax
incentives for health
insurance
Would eliminate most
current tax deductions and
exclusions for health
insurance premiums and
out-of-pocket costs
Employer contributions to
health coverage would be
included as taxable income
President Bush’s FY 2008 health proposals
A new standard deduction
for health insurance against
federal income and payroll
taxes for all who obtain
qualifying health coverage
$15,000 for families, $7,500
for individuals
In effect, turns existing
subsidy for health
insurance, worth
approximately $240 billion
annually, into a kind of
voucher
President Bush’s FY 2008 health proposals
Questions: Who benefits?
Like most tax breaks, new
standard deduction would
be of greatest value to
people with highest incomes
Low-income people with no
federal income tax liability
would get little help
Source: “The President’s
Proposed Standard Deduction for
Health Insurance: An Evaluation.” by Leonard E. Burman,
Jason Furman, Greg Leiserson and Roberton Williams,
Urban Institute-Brookings Tax Policy Center, February 15,
2007
Economist Leonard Burman, Urban Institute
President Bush’s FY 2008 health proposals
What would effect be on
employment-based
coverage?
“Removing tax advantage
for employment-based plans
would probably lead some
employers, especially small
and medium-sized, to stop
offering health insurance.”
Source: “The President’s Proposed Standard
Deduction for Health Insurance: An Evaluation.”
by Leonard E. Burman, Jason Furman, Greg
Leiserson and Roberton Williams, Urban
Institute-Brookings Tax Policy Center, February
15, 2007
“A foolish consistency is the hobgoblin
of little minds.”
-- Ralph Waldo Emerson
Previous Bush administration proposals aimed
at shoring up employer-based coverage among
small businesses:
Association Health Plans
Group health insurance plans sponsored by business and
professional associations
Exempt from state regulation and consumer protection laws,
including solvency standards and state mandated benefits
President supports; House has previously passed AHP
legislation; Senate has never done so
Association Health Plans
Proponents like National Federation of Independent Business:
AHP’s will benefit small firms with low-wage workers that can’t
now afford to offer health insurance
Opponents like National Association of Insurance
Commissioners, National Governors Association, Blue Cross
Blue Shield Association: AHP’s as recipe for cratering of group
health insurance
Association Health Plans
Congressional Budget Office study: Premiums would rise for
80% of workers in small firms and 10,000 of the sickest would
lose coverage
Urban Institute study: AHP’s would increase the number of
uninsured by 1 percent, or 250,000 people
Expanded Health Savings Accounts and
High-Deductible Health Insurance Plans
HSA’s created in Medicare Modernization Act
Bush proposed further expansion in 2006, with above-the-line
deduction for 100 percent of premiums on high-deductible
health plans
2.7 million workers – about 4 percent of those covered through
employment-based insurance – are enrolled in high-deductible
health plans with a savings option, such as Hans's
Mercer survey: 73% of firms likely to add HSA’s to coverage
options by 2006
By contrast, in Kaiser/HRET survey, only 4% of firms said
“very likely” to adopt high-deductible plans that qualify for an
HSA
“Healthy Americans Act”
Sen. Ron Wyden, Democratic of Oregon
Employers now offering
health coverage would lose
ability to deduct premiums;
must convert health
insurance premiums into
higher wages
Employers who don’t now
offer coverage would begin
making Employer
Responsibility Payments;
after 2 years all employers
must make them
Individual mandate to obtain
Employers may continue to
offer wellness, prevention
benefits and long-term care
insurance
one = BCBS plan in FEHBP
Premium subsidies to individuals
and families up to $80K for
family of 4
coverage through new state
Health Help Agencies (2 in
each state)
HHA’s must offer at least 2 plans,
Republican Presidential Candidates:
Rudy Giuliani
Plan would move millions
out of employment-based
coverage into an
individually-purchased
coverage market roughly 3
times the size of current one
Like Bush, would nix federal
tax exclusion for health
insurance
Would nullify state
insurance laws and
regulations on mandated
benefits
Republican Presidential Candidates:
Rudy Giuliani
No individual mandate, so no
apparent attempt to make
coverage universal
Would nullify state insurance
laws and regulations on
mandated benefits
People would pay out of pocket
for many expenses; health
coverage would move toward
the catastrophic
“It’s your health; you should
own your own insurance.”
Silence so far within much of the rest of the
Republican field?
Former Mass. Gov. Mitt Romney
helped engineer passage of
Massachusetts universal
coverage plan but has not
played this up yet to date on
campaign trail
“Cancer caucus” of survivors
Sen. John McCain and former
Sen. Fred Thompson: no
announced positions to date
Newt Gingrich: likely to
announce and to make health
care reform the mainstay of his
campaign?
The Democratic Presidential Candidates and
the Drumbeat for Universal Coverage
All announced Democratic
candidates for president
have endorsed universal
coverage
Core issue for “base”
voters
Kaiser/Harvard poll: 57%
favor a new health plan
“that would make a major
effort to provide insurance
for nearly all of the
uninsured and would
involve a substantial
increase in spending”
73% of Democrats, 55% of
Independents, 37% of
Republicans
John Edwards: The increasingly standard “a la
carte” menu for health reform
Employer mandate to
contribute to coverage
(amount unspecified at
moment)
Individual mandate
“Health markets” or
purchasing pools for new
private health insurance
products
Tax credits to some
businesses and individuals
to defray costs of
purchasing insurance
Expansions of SCHIP and
Medicaid
Massachusetts and California
health reform plans:
Themes and Variations
Massachusetts health reform plan
Roughly 500,000 in state
uninsured
“Shared responsibility” plan
to get 95% of population
insured
Employers with 11 or more
workers must provide
coverage or contribute
modest fee of $295 per
employee per year
Employers with 11 or more
employees must offer
Section 125 plan to allow
workers to buy insurance
with pretax dollars
Individual mandate to
“affordable” coverage; those
who don’t have coverage
face loss of state tax
benefits and other penalties
Health Insurance
“Connector” – I.e.,
purchasing pool for new
products
Expansions of SCHIP and
Medicaid plus other
subsidies for low to
moderate income
California: The Governor’s
health reform plan
Roughly 6.5 million in state
uninsured
“Shared responsibility”
Employers with 10 or more
employees must contribute
to coverage or tax = 4% of
payroll
Employers must establish
Section 125 plans so
workers can purchase health
insurance on pretax basis
California: The Governor’s
health reform plan
Individual mandate to
minimum coverage ($5K
deductible, $10K limit on out
of pocket costs per family
Public insurance expansions
to serve all kids in families
below 3x poverty level
($61,950 for family of 4)
Counties and UC health care
systems to offer
coverage/care to
undocumented
What’s ahead in health reform for 2007-2008?
More state action – at least a dozen states actively
implementing or considering major reforms, most of which
involve an expanded role for employers
At federal level, renewal of State Children’s Health Insurance
Program – unless President vetoes, as he’s threatened
The key test case of SCHIP: stepping stone to universal
coverage or more limited reauthorization?
How does outcome of SCHIP debate fit with notions of more
individual and more private health insurance, versus greater
employer role and more public insurance?
The Verdict on National Health Reform?
“Somebody has to do something, and it’s just incredibly
pathetic that it has to be us.”
--the late Jerry Garcia
Our Presenters Today
Jon Gabel, Senior Fellow, National Opinion Research
Center
Brian R. Vogt, Former Director, Office of Economic
Development & International Trade, State of
Colorado
Linda Dillman, Executive Vice President, Risk
Management, Benefits & Sustainability, Wal-Mart
Stores, Inc.