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.