PNHP

BC of California loses 68% of premiums to health care

BC of California loses 68% of premiums to health care

Health Plan Costs Come Under Fire
At a hearing in L.A., Garamendi grills insurance company executives about why premiums have soared 60% in four years.
By Lisa Girion
Los Angeles Times
December 2, 2005

(California Insurance Commissioner John) Garamendi singled out Blue Cross of California for criticism, noting that its profit margins on certain insurance plans rose from about 15% to 24% in recent years. The company’s trend on healthcare spending, he noted, was just the opposite – declining from 80% of premiums in 2000 to 68% last year.

“It’s unconscionable,” Garamendi said.

… some of the company’s fastest growing – and most profitable – plans are new ones that offer low premiums in exchange for high deductibles or limited benefits.

The most controversial among them is a plan called Tonik. Aimed at young adults who are generally healthy, Tonik does not cover maternity benefits. Garamendi said such plans amounted to “cherry-picking,” or orienting coverage to attract healthy members, who are cheaper to underwrite.

“They are looking to find individuals that do not get sick,” Garamendi said in an interview. The plans “are all designed to appeal to people who don’t need medical services. That increases their bottom-line profit.”

Officials with Blue Cross parent WellPoint Inc. denied the charge. Tonik is designed to serve young people who might otherwise have no insurance at all, they said.

Blue Cross regional Vice President Ann-Louise Kuhns told Garamendi at the hearing that Tonik and some of the other new plans were aimed at people who hadn’t previously bought health insurance because they couldn’t afford it or viewed it as too expensive.

The plans’ popularity, Kuhns said, showed that they were meeting a need. “If we were offering a product that people didn’t like, they don’t have to buy it,” she said.

http://www.latimes.com/business/la-fi-profits2dec02,1,630081.story?coll=la-headlines-business

Comment: This is great news for Wall Street. The best insurance stock investments are in those companies that have the lowest medical loss ratios – the companies that spend the lowest percentage of their premium income on health care services for their beneficiaries. The medical loss ratio for for-profit Blue Cross of California, a major subsidiary of WellPoint Inc., is only 68%. They keep one-third of the premium dollar!

Blue Cross of California has been an innovative leader in setting health insurance trends throughout the nation. For those who still believe that private health plans must be a major player in any future model of health care reform, just imagine what it would be like if Blue Cross’ innovations were to dominate the scene. In 2006, we’ll be spending $2 trillion on health care. Under these latest Blue Cross policies, insurers would keep $640 billion of that.

So you say that we would never allow that. But what are we allowing now? We are permitting Blue Cross of California to use nefarious chicanery to segregate out the most healthy sector of our society and sell them a profoundly inadequate product that merely masquerades as health insurance. Again, those of you who have believed that we should keep this industry in charge of health care spending should realize that it’s now time for an epiphany.

We will never get it right until we agree that we need a universal, publicly-funded and publicly-administered national health insurance program. The plundering pirates of the insurance industry will never do it right for us.

Our health-care system is not what the best minds woulddevise

Editorial: Fractured system hurts everyone
By Register Editorial Board
The Des Moines Register
December 4, 2005

If the best minds in the world gathered to devise a health-care system for the United States, it would look nothing like what we have today.

No one would create a fragmented system that provides taxpayer-funded care for some and not for others. A system that leaves 45 million people, about 15 percent of the population, uninsured. That wastes billions on administrative costs. That burdens business. That relegates the United States behind other industrialized countries in life expectancy, infant mortality and immunization rates.

No one would intentionally create a model of health care that was unfair, inefficient and nearly impossible for an average person to navigate.

Yet that is exactly what the United States has. And it hurts everyone.

Reforming (the U.S. health-care system) will take leadership in Washington, pressure from individuals and businesses across the nation and a hard look at what other countries are doing better.

America’s hodgepodge of health care isn’t the best system for this country. It’s not what the brightest minds would choose now. Americans don’t have to accept it just because it’s the only thing they know.

http://desmoinesregister.com/apps/pbcs.dll/article?AID=/20051204/OPINION03/512040307/1001/NEWS

Today’s edition of The Des Moines Register has a several articles on “Condition Critical,” focusing on “worries about soaring health care costs.”
http://desmoinesregister.com/apps/pbcs.dll/section?Category=NEWS&theme=condition_critical&template=theme

We're almost there with three single payer bills

H.R.676, H.R.1200, and SB 840

Do not waste your time studying these bill summaries, but merely skim through them rapidly. You will see how a fairly simple concept, single payer reform, can become quite complex when reduced to legislative language. The summaries of H.R.676 and H.R.1200 were prepared by the Congressional Research Service, and the summary of SB 840 was prepared by the California Legislative Counsel.

H.R.676
Title: To provide for comprehensive health insurance coverage for all United States residents, and for other purposes.
Sponsor: Rep Conyers, John, Jr.

SUMMARY AS OF:
2/8/2005–Introduced.

United States National Health Insurance Act (or the Expanded and Improved Medicare for All Act) – Establishes the United States National Health Insurance Program (the Program) to provide all individuals residing in the United States and in U.S. territories with free health care that includes all medically necessary care, such as primary care and prevention, prescription drugs, emergency care, and mental health services.

Prohibits an institution from participating in the Program unless it is a public or nonprofit institution. Allows nonprofit health maintenance organizations (HMOs) that actually deliver care in their own facilities to participate in the Program.

Gives patients the freedom to choose from participating physicians and institutions.

Prohibits a private health insurer from selling health insurance coverage that duplicates the benefits provided under this Act. Allows such insurers to sell benefits that are not medically necessary, such as cosmetic surgery benefits.

Sets forth methods to pay hospitals and health professionals for services. Prohibits financial incentives between HMOs and physicians based on utilization.

Authorizes appropriations and provides for appropriated sums to be paid for: (1) by vastly reducing paperwork; (2) by requiring a rational bulk procurement of medications; (3) from existing sources of Government revenues for health care; (4) by increasing personal income taxes on the top five percent income earners; (5) by instituting a modest payroll tax; and (6) by instituting a small tax on stock and bond transactions.

Requires the Program to give first priority in retraining and job placement to individuals whose jobs are eliminated due to reduced administration.

Establishes a National Board of Universal Quality and Access to advise the Secretary and the Director to ensure quality, access, and affordability.

Provides for the eventual integration of the health programs of the Department of Veterans’ Affairs and the Indian Health Service into the Program.

http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR00676:@@@D&summ2=m&

H.R.1200
Title: To provide for health care for every American and to control the cost and enhance the quality of the health care system.
Sponsor: Rep McDermott, Jim

SUMMARY AS OF:
3/9/2005–Introduced.

American Health Security Act of 2005 – Establishes the State-Based American Health Security Program to provide every U.S. resident who is a U.S. citizen, national, or lawful resident alien with health care services. Requires each participating State to establish a State health security program.

Eliminates benefits under: (1) titles XVIII (Medicare), XIX (Medicaid), and XXI (State Children’s Health Insurance) (SCHIP) of the Social Security Act; (2) the Federal Employees Health Benefits Program; and (3) the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS).

Requires each State health security program to prohibit the sale of health insurance in that State that duplicates benefits provided under the program.

Establishes the American Health Security Standards Board to: (1) develop policies, procedures, guidelines and requirements to carry out this Act; (2) establish uniform reporting requirements; (3) provide for an American Health Security Advisory Council and an Advisory Committee on Health Professional Education; and (4) establish a national health security budget specifying the total Federal and State expenditures to be made for covered health care services.

Establishes the American Health Security Quality Council to: (1) review and evaluate practice guidelines, standards of quality, performance measures, and medical review criteria; and (2) develop minimum competence criteria.

Establishes the Office of Primary Care and Prevention Research within the Office of the Director of the National Institutes of Health (NIH).

Amends the Internal Revenue Code to create the American Health Security Trust Fund and appropriates to the Fund specified tax liabilities and current health program receipts.

http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR01200:@@@D&summ2=m&

SB 840
Single-payer health care coverage.
Introduced by Sen. Sheila Kuehl

Existing law does not provide a system of universal health care coverage for California residents. Existing law provides for the creation of various programs to provide health care services to persons who have limited incomes and meet various eligibility requirements. These programs include the Healthy Families Program administered by the Managed Risk Medical Insurance Board, and the Medi-Cal program administered by the State Department of Health Services. Existing law provides for the regulation of health care service plans by the Department of Managed Health Care and health insurers by the Department of Insurance.

This bill would establish the California Health Insurance System to be administered by the newly created California Health Insurance Agency under the control of an elected Health Insurance Commissioner. The bill would make all California residents eligible for specified health care benefits under the California Health Insurance System, which would, on a single-payer basis, negotiate for or set fees for health care services provided through the system and pay claims for those services. The bill would require the health care system to be operational within 2 years of enactment, and would enact various transition provisions. The bill would require the commissioner to seek all necessary waivers, exemptions, agreements, or legislation to allow various existing federal, state, and local health care payments to be paid to the California Health Insurance System, which would then assume responsibility for all benefits and services previously paid for with those funds.

The bill would create a health insurance policy board to establish policy on medical issues and various other matters relating to the health care system. The bill would create the Office of Consumer Advocacy within the agency to represent the interests of health care consumers relative to the health care system. The bill would create within the agency the Office of Health Planning to plan for the health care needs of the population, and the Office of Health Care Quality, headed by the chief medical officer, to support the delivery of high quality care and promote provider and patient satisfaction.

The bill would create the Office of Inspector General for the California Health Insurance System within the Attorney General’s office, which would have various oversight powers. The bill would prohibit health care service plan contracts or health insurance policies from being issued for services covered by the California Health Insurance System. The bill would create the Health Insurance Fund and the Payments Board to administer the finances of the California Health Insurance System. The bill would extend the application of certain insurance fraud laws to providers of services and products under the health care system, thereby imposing a state-mandated local program by revising the definition of a crime. The bill would enact other related provisions relative to budgeting, regional entities, federal preemption, subrogation, collective bargaining agreements, compensation of health care providers, conflict of interest, patient grievances, independent medical review,and associated matters.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

http://info.sen.ca.gov/pub/bill/sen/sb_0801-0850/sb_840_bill_20050712_amended_asm.html

(If you are interested in the details of the bills, they can be downloaded at http://thomas.loc.gov/ and
http://info.sen.ca.gov/cgi-bin/pagequery?type=sen_bilinfo&site=sen&title=Bill+Information.)

Comment: We are truly at a transition in the health care reform movement. Everyone understands that we can no longer accept a system that is failing to deliver high-quality comprehensive care to everyone when we are already spending more than enough to have such a system. It is clear that incremental tweaking has increased costs while providing only modest gains that are more than offset by the large losses. The consumer-directed health care movement will soon fizzle as more people realize that you cannot control costs by making health care less affordable for those with significant needs.

All policymakers now understand the single payer model. They understand that it does have the power to fund comprehensive care for everyone while controlling health care costs. Although uncaring, anti-government ideologues will always remain opposed, those who really do care about the health of our people are ready to look at fleshed-out legislative proposals. We are now at that stage of the process.

The process will require the participation of legislators and their staffs on both the federal and state levels. Even if a state established its own single payer system, federal legislation would be required to transfer the funding of federal programs such as Medicare and Medicaid to the state(s). Although federal funding is essential, the federal government is too unwieldy to administer the program as one mega-bureaucracy, so administration needs to be established on a state or regional level.

It is time for federal and state legislators to unify the process. Participants should include those who believe that our health care system must be universal, equitable, accessible, and affordable, while providing high-quality services. The only special interests that should be represented are the patients and those who provide their care. Special interests with other agendas should be dismissed from the process. This is not a time to compromise with powerful, moneyed interests. Rather it is the time to craft single-payer proposals that best serve the health care needs of the people of each of our states and the nation as a whole.

We already understand the policies that would be effective. We don’t need any more study commissions. It is time for federal and state legislators and their health policy staff members to join together to draft the American Health Care Act. Congressmen Conyers and McDermott and Senator Kuehl, amongst others, have given us a great start towards that goal.

Okay. Who is going to convene this unified effort? (I’m serious!)

We’re almost there with three single payer bills

H.R.676, H.R.1200, and SB 840

Do not waste your time studying these bill summaries, but merely skim through them rapidly. You will see how a fairly simple concept, single payer reform, can become quite complex when reduced to legislative language. The summaries of H.R.676 and H.R.1200 were prepared by the Congressional Research Service, and the summary of SB 840 was prepared by the California Legislative Counsel.

H.R.676
Title: To provide for comprehensive health insurance coverage for all United States residents, and for other purposes.
Sponsor: Rep Conyers, John, Jr.

SUMMARY AS OF:
2/8/2005–Introduced.

United States National Health Insurance Act (or the Expanded and Improved Medicare for All Act) – Establishes the United States National Health Insurance Program (the Program) to provide all individuals residing in the United States and in U.S. territories with free health care that includes all medically necessary care, such as primary care and prevention, prescription drugs, emergency care, and mental health services.

Prohibits an institution from participating in the Program unless it is a public or nonprofit institution. Allows nonprofit health maintenance organizations (HMOs) that actually deliver care in their own facilities to participate in the Program.

Gives patients the freedom to choose from participating physicians and institutions.

Prohibits a private health insurer from selling health insurance coverage that duplicates the benefits provided under this Act. Allows such insurers to sell benefits that are not medically necessary, such as cosmetic surgery benefits.

Sets forth methods to pay hospitals and health professionals for services. Prohibits financial incentives between HMOs and physicians based on utilization.

Authorizes appropriations and provides for appropriated sums to be paid for: (1) by vastly reducing paperwork; (2) by requiring a rational bulk procurement of medications; (3) from existing sources of Government revenues for health care; (4) by increasing personal income taxes on the top five percent income earners; (5) by instituting a modest payroll tax; and (6) by instituting a small tax on stock and bond transactions.

Requires the Program to give first priority in retraining and job placement to individuals whose jobs are eliminated due to reduced administration.

Establishes a National Board of Universal Quality and Access to advise the Secretary and the Director to ensure quality, access, and affordability.

Provides for the eventual integration of the health programs of the Department of Veterans’ Affairs and the Indian Health Service into the Program.

http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR00676:@@@D&summ2=m&

H.R.1200
Title: To provide for health care for every American and to control the cost and enhance the quality of the health care system.
Sponsor: Rep McDermott, Jim

SUMMARY AS OF:
3/9/2005–Introduced.

American Health Security Act of 2005 – Establishes the State-Based American Health Security Program to provide every U.S. resident who is a U.S. citizen, national, or lawful resident alien with health care services. Requires each participating State to establish a State health security program.

Eliminates benefits under: (1) titles XVIII (Medicare), XIX (Medicaid), and XXI (State Children’s Health Insurance) (SCHIP) of the Social Security Act; (2) the Federal Employees Health Benefits Program; and (3) the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS).

Requires each State health security program to prohibit the sale of health insurance in that State that duplicates benefits provided under the program.

Establishes the American Health Security Standards Board to: (1) develop policies, procedures, guidelines and requirements to carry out this Act; (2) establish uniform reporting requirements; (3) provide for an American Health Security Advisory Council and an Advisory Committee on Health Professional Education; and (4) establish a national health security budget specifying the total Federal and State expenditures to be made for covered health care services.

Establishes the American Health Security Quality Council to: (1) review and evaluate practice guidelines, standards of quality, performance measures, and medical review criteria; and (2) develop minimum competence criteria.

Establishes the Office of Primary Care and Prevention Research within the Office of the Director of the National Institutes of Health (NIH).

Amends the Internal Revenue Code to create the American Health Security Trust Fund and appropriates to the Fund specified tax liabilities and current health program receipts.

http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR01200:@@@D&summ2=m&

SB 840
Single-payer health care coverage.
Introduced by Sen. Sheila Kuehl

Existing law does not provide a system of universal health care coverage for California residents. Existing law provides for the creation of various programs to provide health care services to persons who have limited incomes and meet various eligibility requirements. These programs include the Healthy Families Program administered by the Managed Risk Medical Insurance Board, and the Medi-Cal program administered by the State Department of Health Services. Existing law provides for the regulation of health care service plans by the Department of Managed Health Care and health insurers by the Department of Insurance.

This bill would establish the California Health Insurance System to be administered by the newly created California Health Insurance Agency under the control of an elected Health Insurance Commissioner. The bill would make all California residents eligible for specified health care benefits under the California Health Insurance System, which would, on a single-payer basis, negotiate for or set fees for health care services provided through the system and pay claims for those services. The bill would require the health care system to be operational within 2 years of enactment, and would enact various transition provisions. The bill would require the commissioner to seek all necessary waivers, exemptions, agreements, or legislation to allow various existing federal, state, and local health care payments to be paid to the California Health Insurance System, which would then assume responsibility for all benefits and services previously paid for with those funds.

The bill would create a health insurance policy board to establish policy on medical issues and various other matters relating to the health care system. The bill would create the Office of Consumer Advocacy within the agency to represent the interests of health care consumers relative to the health care system. The bill would create within the agency the Office of Health Planning to plan for the health care needs of the population, and the Office of Health Care Quality, headed by the chief medical officer, to support the delivery of high quality care and promote provider and patient satisfaction.

The bill would create the Office of Inspector General for the California Health Insurance System within the Attorney General’s office, which would have various oversight powers. The bill would prohibit health care service plan contracts or health insurance policies from being issued for services covered by the California Health Insurance System. The bill would create the Health Insurance Fund and the Payments Board to administer the finances of the California Health Insurance System. The bill would extend the application of certain insurance fraud laws to providers of services and products under the health care system, thereby imposing a state-mandated local program by revising the definition of a crime. The bill would enact other related provisions relative to budgeting, regional entities, federal preemption, subrogation, collective bargaining agreements, compensation of health care providers, conflict of interest, patient grievances, independent medical review,and associated matters.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

http://info.sen.ca.gov/pub/bill/sen/sb_0801-0850/sb_840_bill_20050712_amended_asm.html

(If you are interested in the details of the bills, they can be downloaded at http://thomas.loc.gov/ and
http://info.sen.ca.gov/cgi-bin/pagequery?type=sen_bilinfo&site=sen&title=Bill+Information.)

Comment: We are truly at a transition in the health care reform movement. Everyone understands that we can no longer accept a system that is failing to deliver high-quality comprehensive care to everyone when we are already spending more than enough to have such a system. It is clear that incremental tweaking has increased costs while providing only modest gains that are more than offset by the large losses. The consumer-directed health care movement will soon fizzle as more people realize that you cannot control costs by making health care less affordable for those with significant needs.

All policymakers now understand the single payer model. They understand that it does have the power to fund comprehensive care for everyone while controlling health care costs. Although uncaring, anti-government ideologues will always remain opposed, those who really do care about the health of our people are ready to look at fleshed-out legislative proposals. We are now at that stage of the process.

The process will require the participation of legislators and their staffs on both the federal and state levels. Even if a state established its own single payer system, federal legislation would be required to transfer the funding of federal programs such as Medicare and Medicaid to the state(s). Although federal funding is essential, the federal government is too unwieldy to administer the program as one mega-bureaucracy, so administration needs to be established on a state or regional level.

It is time for federal and state legislators to unify the process. Participants should include those who believe that our health care system must be universal, equitable, accessible, and affordable, while providing high-quality services. The only special interests that should be represented are the patients and those who provide their care. Special interests with other agendas should be dismissed from the process. This is not a time to compromise with powerful, moneyed interests. Rather it is the time to craft single-payer proposals that best serve the health care needs of the people of each of our states and the nation as a whole.

We already understand the policies that would be effective. We don’t need any more study commissions. It is time for federal and state legislators and their health policy staff members to join together to draft the American Health Care Act. Congressmen Conyers and McDermott and Senator Kuehl, amongst others, have given us a great start towards that goal.

Okay. Who is going to convene this unified effort? (I’m serious!)

No problem – Just set up an insurance purchasing pool

What Health Insurance Pools Can and Can’t Do
By Rick Curtis and Ed Neuschler
California HealthCare Foundation
November 2005

Introduction

Policymakers are often attracted to purchasing pools as a way to make health insurance less expensive for small employers and individual purchasers. The common assumption is that pools could aggregate a large number of small purchasers and thus realize administrative economies of scale and negotiate favorable rates with health plans. For small-firm workers, purchasing pools could also offer something not normally available in the small-employer market – choice of competing health plans. For individual purchasers, who can already choose among health plans, pools could help to simplify comparison shopping.

Unfortunately, establishing a purchasing pool does not automatically produce the same “market clout” as a large employer. RAND studied the three largest small-group health insurance purchasing “alliances” begun in the mid-1990s and found that they did not reduce small-group market health insurance premiums, nor did they raise small-business health insurance offer rates. Other kinds of voluntary pools are more prevalent, but they generally have not functioned as assertive purchasers and have not reduced costs.

For example, The Health Insurance Plan of California (now operated by the Pacific Business Group on Health as “PacAdvantage”) negotiated and offered lower rates than had been available in the outside market at its inception in the early 1990s. Yet by 1998, analysts found no evidence that its rates were still lower than the outside market. Rather, the data suggested that they were slightly higher.

Conclusion

Health insurance pools can be useful as vehicles to help achieve coverage and cost goals. Yet merely establishing or designating pools holds no hope for reducing the number of uninsured or the costs of coverage available to individuals or small employers. Unless a pool has the necessary cohesion to attract and retain a large enrollment base, it will not be in a position to achieve economies of scale and negotiate effectively with health plans.

However, these goals can be achieved if the pool represents a large natural group that health plans can effectively reach only through the pool, making it similar to a very large employer. One way to create such a group would be to channel subsidies for low-income workers and families, or low-wage employer groups, exclusively into coverage through the pool. In turn, a stable pool can efficiently perform a number of administrative roles that meet the needs of both its participants and the state.

http://www.chcf.org/documents/insurance/
WhatHealthInsurancePoolsCanAndCantDo.pdf

Comment: If you want to understand why a health insurance purchasing pool can never deliver on the promise of lower insurance costs through the economies of scale, you really need to read this report to understand the complexities of purchasing pools.

The authors suggest that pools could work if they were truly cohesive and could attract and retain a large enrollment base. But the only mechanism they suggest that would do this would be to “channel subsidies… exclusively into coverage through the pool.” In other words, purchasing pools can compete with other coverage only if employers and/or the government subsidize the pools while prohibiting subsidies for plans outside of the pools. And for this, the purchasing pools add the expense of an additional administrative layer on top of the health plan bureaucracies. So much for the magic of the economies of scale!

Purchasing pools using private health plans only perpetuate the waste and inequities of our current system. Instead of pools of health plans, we need a single pool of our health care funds. Then we could eliminate the administrative excesses, while establishing equitable access and coverage for everyone.

Why do the policymakers keep going back to the drawing boards to keep crafting more flawed proposals? Why don’t they finally give up and admit that we really do need a single-payer system?

Is targeting subsidies to small business the answer?

Is Small Business the Key to Insuring More Californians?
By Richard Kronick
California HealthCare Foundation
November 2005
Coverage Expansion

Introduction

There is substantial interest among policy analysts and politicians in increasing health insurance coverage among Californians who work for small business. Such firms are far less likely to offer health benefits than large companies, leading some to suggest that persuading more small employers to provide health coverage could substantially reduce the number of uninsured people in the state.

This issue brief examines the potential to expand health insurance among California’s uninsured through policies aimed at increasing the number of small employers that offer coverage. It provides information about the insurance status of employees in small businesses, the rate at which small employers offer health benefits, and the expected effect of policies designed to increase coverage within this group. As part of this analysis, it reviews the results of a recent experiment in San Diego in which small employers were offered the opportunity to purchase health insurance from a local HMO at reduced rates, a study designed to test the effectiveness of targeted subsidies.

Conclusion

The evidence from the experiment conducted in San Diego, from earlier demonstration programs in a dozen sites around the country, and from a wide range of observational studies suggests that small employers that do not offer insurance are not very responsive to reductions in the price of coverage. While the evidence from any of these studies can be criticized, and none of the work provides a definitive basis to estimate the likely response to some of the tax credit proposals that have been made by politicians of both parties, the breadth and depth of the evidence is enough to convince most health services researchers that employer response to health insurance subsidies would not be large.

http://www.chcf.org/documents/insurance/
IsSmallBusinessTheKeyToInsuringCalifornians.pdf

Comment: This nine page issue brief provides enough details to demonstrate that the conclusion is clearly warranted. Insurance subsidies targeted to uninsured employees of small businesses would have very little impact on reducing the total percentage of uninsured.

Most targeted programs fall far short of covering 100 percent of the targeted populations. Numerous studies confirm that the Medicaid and SCHIP programs fail to enroll a large portion of those eligible, in spite of the establishment of programs specifically designed to increase enrollment rates.

In sharp contrast, the Medicare Part A program enrolls virtually 100 percent of eligible individuals. What is the difference? Enrollment in Medicare Part A is automatic once eligibility status is achieved. Also, Part A does not require the payment of any premiums as it is funded through the tax system as a program of social insurance. There is no reason for the individual to not accept automatic enrollment. (The flawed policies behind Part B, Part D, and Medicare Advantage are another matter that will not be addressed here. Suffice it to say that they do not result in 100 percent enrollment.)

There is a policy lesson here. If we really do want to provide health care coverage for everyone, we need to establish a properly structured program of universal social insurance. Targeted programs added to our highly flawed, wasteful, fragmented system will never get us there.

Labor's Lost Story

By E. J. Dionne Jr.
Washington Post
Tuesday, November 29, 2005

Decades ago, Walter Reuther, the storied head of the United Auto Workers union, was taken on a tour of an automated factory by a Ford Motor Co. executive.

Somewhat gleefully, the Ford honcho told the legendary union leader: “You know, not one of these machines pays dues to the UAW.”To which Reuther snapped: “And not one of them buys new Ford cars, either.”

The historian William L. O’Neill tells this story in “American High,” his fine and appropriately titled book about the 1950s, a time when “autoworkers were the best-paid production line operatives in the world.” It helps explain why General Motors’ layoffs of 30,000 workers, announced last week, have become a new litmus test in American politics.

Almost everybody right of center sees the job losses as inevitable, the result of the American auto industry’s failure to meet foreign competition and the “excessively” generous wages, health benefits and, especially, retirement programs negotiated by Reuther’s union.

The believers in inevitability inevitably cite the economist Joseph Schumpeter to the effect that capitalism “is by nature a form or method of economic change and not only never is, but never can be, stationary.” It is capitalism’s gift for “creative destruction,” Schumpeter argued, that guaranteed new consumer goods, new methods of production and new forms of organization.

A different story is told left of center, though it will come as no shock that progressives can’t quite agree on a single narrative. The left is united in talking about rising health care costs and the fact that most of our foreign competitors have government-run health insurance systems that take the burden of health care off employers. The iconic number: providing health care for workers and retirees accounts for $1,500 in the cost of each American-made car.

Critics of globalization tell an additional story of how free trade is sending many of our best-paying blue-collar jobs offshore. There is also the decline of union membership, a chicken-and-egg tale, since private-sector unions historically were strongest in the older manufacturing industries such as steel and cars. The UAW’s numbers tell the story: 1,619,000 members in 1970, 1,446,000 in 1980, 952,000 in 1990, 623,000 in 2004. Where have you gone, Walter Reuther?

The contrast between these two accounts explains why economic conservatives currently hold the upper hand in America’s political debate. The conservatives have a single, coherent story and stick to it: Economic change is good for everyone, especially for consumers, who get better stuff at lower prices. The fact that “producer groups” (such as those unions) are losing their “monopolies” and their capacity for “rent seeking” is cheered as progress.

The left’s narrative is less compelling not only because there is no single story but also because few on the left attack the current system with the same gusto the right brings to defending it. Gone, for good reason, is the time when significant parts of the left called for “government ownership of the means of production.” Much of the left accepts a certain amount of creative destruction because, in Margaret Thatcher’s famous phrase, there is no alternative.

But this muddle reflects a default on parts of the left and, especially, within the Democratic Party. Because so many Democrats fear that they might sound like — God forbid! — socialists, they are unwilling to challenge the right’s core story. Capitalism, all by itself, would never have achieved the rising living standards that were the pride of the United States in O’Neill’s 1950s and still are today. The rules enforced by the National Labor Relations Board made it possible for Reuther’s union to organize by protecting workers’ rights. Cheap 30-year mortgages, which became the norm because of Federal Housing Administration guarantees, created a nation of homeowners.

As medical costs rise, more Americans will need government help. More employers will need to offload the costs of medical insurance to avoid bankruptcy. Yes, that’s “socialized medicine,” just like Medicare. But don’t tell anyone. The phrase plays terribly in focus groups.

For 60 years New Dealers and social democrats, liberals and progressives, turned Schumpeter on his head. They insisted that few would embrace capitalism’s innovations if the system’s tendency toward creative destruction was not balanced by public innovations to spread the bounty and protect millions from being injured by change. It’s a compelling story. Walter Reuther knew it well. Too bad it isn’t told very often anymore.

Senate candidates agree that health care system needs change

By Janet Kubat Willette
Agri News staff writer
Tuesday, November 29, 2005

MINNEAPOLIS — Health care costs are out of control, three Democratic Senate candidates agreed.

The nation’s health care system is unsustainable, said Ford Bell, president of the Minneapolis Heart Institute Foundation. There are 46 million uninsured in this country.

People say they don’t want a big government bureaucracy in charge of their health care, Bell said. Instead, the U.S. has a private bureaucracy.

He advocates single-payer universal health care coverage for everyone.

Amy Klobuchar agreed. Klobuchar is Hennepin County Attorney.

Universal health care should start with children, Klobuchar said. The government also needs to crack down on costs by negotiating with prescription drug companies for Medicare recipients. The federal government also needs to evaluate how it does Medicare reimbursements, she said.

Child and family advocate Patty Wetterling said it simply boils down to health care for every man, woman and child in this country.

The trio answered questions from Minnesota Farmers Union members during a panel discussion at the annual meeting Nov. 19.

Rep. Mark Kennedy, R-Watertown, who is also running for the seat Sen. Mark Dayton is vacating in 2006, was unable to attend, according to a MFU spokesman.

Klobuchar said it’s time for results and leadership in Washington, D.C. That means Social Security is a guarantee and not a gamble. That means implementing Country of Origin Labeling for beef, not just seafood. It means investing in energy cooperatives in the Midwest instead of oil cartels in the Mid East.

Wetterling said the nation is in a war against competing values. She’s seen the casualties of low prices at any cost. Ways of life disappear if they aren’t defended, she said. How much progress will the nation make if greed is the only guidepost and companies are allowed to pollute and take advantage of striped-down human rights abroad?

Bell said the nation’s farm programs are outdated and need to be refocused for family farmers. He supports a $250,000 subsidy cap, adopting COOL, allowing 1031 dollars to be invested in rural projects that create jobs and supporting rural renewable fuel development.

On the Web: Ford Bell, www.fordbell.com; Amy Klobuchar, www.amyklobuchar.com; Patty Wetterling, www.pattywetterling.com

Salazar, McCain propose health care commission

Group would suggest ways to ‘fix’ system
By Ann Imse
Rocky Mountain News
November 23, 2005

Sen. Ken Salazar, D-Colo., said Tuesday he has partnered with Sen. John McCain, R-Ariz., to push for an independent commission to develop proposals for comprehensive health care reform.

Salazar said they have sponsored a bill to create such a commission because neither individual Americans nor their employers can afford the soaring costs of health insurance.

“Health care is breaking the backs of American business, American families and the American health care delivery system,” Salazar said in a news conference at St. Joseph Hospital in Denver.

He said 15 percent of the U.S. population is without coverage. In Colorado, the figure is 19 percent, he said.

Salazar said he met with McCain about four months ago and they agreed that health care was one of the nation’s most pressing issues. Yet proposed changes pending in Congress are mere “Band-aids” rather than a comprehensive fix, Salazar said.

More recently, they decided that a bipartisan commission modeled on the 9-11 commission would have the best chance of examining all aspects of the issue and presenting solid legislative proposals for Congress and the president to consider, Salazar said.

Salazar said the attempt to create this commission is “a long-term effort” and that he and McCain will be working after the Thanksgiving holiday to gather support from other members of Congress and President Bush.

The senator immediately won kudos for the idea from Jeff Selberg, CEO of the Exempla group, which owns three hospitals in Denver, including St. Joseph.

The current system, he said, has led to more complexity, less access to health care and higher costs.

Selberg believes state and national hospital organizations will back the commission proposal as well.

Labor’s Lost Story

By E. J. Dionne Jr.
Washington Post
Tuesday, November 29, 2005

Decades ago, Walter Reuther, the storied head of the United Auto Workers union, was taken on a tour of an automated factory by a Ford Motor Co. executive.

Somewhat gleefully, the Ford honcho told the legendary union leader: “You know, not one of these machines pays dues to the UAW.”To which Reuther snapped: “And not one of them buys new Ford cars, either.”

The historian William L. O’Neill tells this story in “American High,” his fine and appropriately titled book about the 1950s, a time when “autoworkers were the best-paid production line operatives in the world.” It helps explain why General Motors’ layoffs of 30,000 workers, announced last week, have become a new litmus test in American politics.

Almost everybody right of center sees the job losses as inevitable, the result of the American auto industry’s failure to meet foreign competition and the “excessively” generous wages, health benefits and, especially, retirement programs negotiated by Reuther’s union.

The believers in inevitability inevitably cite the economist Joseph Schumpeter to the effect that capitalism “is by nature a form or method of economic change and not only never is, but never can be, stationary.” It is capitalism’s gift for “creative destruction,” Schumpeter argued, that guaranteed new consumer goods, new methods of production and new forms of organization.

A different story is told left of center, though it will come as no shock that progressives can’t quite agree on a single narrative. The left is united in talking about rising health care costs and the fact that most of our foreign competitors have government-run health insurance systems that take the burden of health care off employers. The iconic number: providing health care for workers and retirees accounts for $1,500 in the cost of each American-made car.

Critics of globalization tell an additional story of how free trade is sending many of our best-paying blue-collar jobs offshore. There is also the decline of union membership, a chicken-and-egg tale, since private-sector unions historically were strongest in the older manufacturing industries such as steel and cars. The UAW’s numbers tell the story: 1,619,000 members in 1970, 1,446,000 in 1980, 952,000 in 1990, 623,000 in 2004. Where have you gone, Walter Reuther?

The contrast between these two accounts explains why economic conservatives currently hold the upper hand in America’s political debate. The conservatives have a single, coherent story and stick to it: Economic change is good for everyone, especially for consumers, who get better stuff at lower prices. The fact that “producer groups” (such as those unions) are losing their “monopolies” and their capacity for “rent seeking” is cheered as progress.

The left’s narrative is less compelling not only because there is no single story but also because few on the left attack the current system with the same gusto the right brings to defending it. Gone, for good reason, is the time when significant parts of the left called for “government ownership of the means of production.” Much of the left accepts a certain amount of creative destruction because, in Margaret Thatcher’s famous phrase, there is no alternative.

But this muddle reflects a default on parts of the left and, especially, within the Democratic Party. Because so many Democrats fear that they might sound like — God forbid! — socialists, they are unwilling to challenge the right’s core story. Capitalism, all by itself, would never have achieved the rising living standards that were the pride of the United States in O’Neill’s 1950s and still are today. The rules enforced by the National Labor Relations Board made it possible for Reuther’s union to organize by protecting workers’ rights. Cheap 30-year mortgages, which became the norm because of Federal Housing Administration guarantees, created a nation of homeowners.

As medical costs rise, more Americans will need government help. More employers will need to offload the costs of medical insurance to avoid bankruptcy. Yes, that’s “socialized medicine,” just like Medicare. But don’t tell anyone. The phrase plays terribly in focus groups.

For 60 years New Dealers and social democrats, liberals and progressives, turned Schumpeter on his head. They insisted that few would embrace capitalism’s innovations if the system’s tendency toward creative destruction was not balanced by public innovations to spread the bounty and protect millions from being injured by change. It’s a compelling story. Walter Reuther knew it well. Too bad it isn’t told very often anymore.

BC/BS of Tennessee – a profitable nonprofit

The Best Of Times And The Worst Of Times: A Conversation With Vicky Gregg
Health Affairs
November 29, 2005

The CEO of BlueCross BlueShield of Tennessee describes what it’s like to be a profitable nonprofit in a state with a struggling Medicaid program.

Interviewed by James C. Robinson

Success Of The Blues

Robinson: 2004 was the best year you’ve ever had, according to your annual report. If I could cite some statistics from the Goldman Sachs investment bank, BCBST ranks among the top not-for-profit Blues on every dimension of performance. In particular, between 2003 and 2004 your revenue increased 42 percent, compared with 13 percent for all Blues plans. Your earnings increased 12 percent, compared with 6 percent for the other Blues plans. And your enrollment increased 12 percent, compared with 2 percent for the other Blues. How do you explain your success over these past years?

Gregg: Well, good hard work, for one thing. But I will tell you that we feel the competitiveness day in, day out. There’s no sense on our part that we walk in and it’s a slam-dunk on any employer’s health benefit account that we bid on. We have all of the big insurers here in Tennessee. We have CIGNA, we have United. We still have some strong regional players. We have John Deere; we have some hospital-based programs such as PHP in East Tennessee. There’s no market that we look at and say, “Oh, well, we just own this market.”

This year in particular-2005, year to date-our rate increases to our commercial customers are around 4 percent. We’re very successful, but we’re also today pricing below the medical cost trend. Our medical cost trend was running closer to 10 percent, maybe even ticking up a bit. So we are giving some rate relief in the market. We are trying to make sure that people are able to keep coverage, which we believe is an important part of what we contribute as a company.

Robinson: So you are consciously pricing below your medical cost trend?

Gregg: Yes.

Robinson: That’s possible, due to the fact that you’ve had very high financial reserves-a surplus built up from past years. If my numbers are correct, last year your reserves were at 540 percent of risk-based capital levels, which is way above the National Association of Insurance Commissioners [NAIC] minimum levels and the Blue Cross Blue Shield Association [BCBSA] guidelines.

Gregg: When we look at our company, we have to have capital. And as a not-for-profit, we do not have access to the capital markets in the sense that some of our competitors do. We look at what we need to drive our company and to be successful. And our sense is today, the most that we could say that we’re, quote-unquote, over-reserved, is around $250 million. Well, for a company of our size paying out more than $15 billion in claims this year, is $250 million really, quote-unquote, over-reserved? I think, again, it’s capital that allows us to fuel our business and to be competitive and to do the things that we need to do to be able to deliver affordable health care to our membership.

Consumer-Driven Health Plans?

Robinson: The buzz at the moment in health care is all about consumer-driven product designs. What is the trend in your commercial population in terms of copays, coinsurance, deductibles, and the product mix?

Gregg: We had several years, starting in early 2000s, of high double-digit inflation in medical care costs. And we saw our commercial employer customers begin to ask, “How do we engage our employees?” They did it in a number of ways.

First, we saw them begin pushing some of the premium costs over to employees. This was to wake them up, in terms of what health care really costs. The second element of employer strategies was to put deductibles and coinsurance back into place, after having taken them out during the managed care era. And now it is not unusual to see $500 and $1,000 deductibles and 20 percent coinsurance. That is the primary tool that most of our commercial customers use. It’s very prevalent in the small-group market, maybe a little less among larger groups.

We have also seen a big increase in the HSA products in our individual market. People want to have a little more flexibility there. We have seen some HSA penetration now in our group market.

Robinson: Do you see any potential in new product designs to bring some of the uninsured into insurance coverage-people who are not indigent but who are the working uninsured, who work for small firms?

Gregg: Yes. We have a number of products, and we’ve done a lot of focus groups around what products and price points are attractive to at least some of the uninsured. For the population that we’re talking about-and it tends to be low income but working-we heard a couple things. First, the price point is somewhere around $60 per month for a premium. So what can you buy for $60? The second point, which really made us sit back and say, “Wow, we need to think about this,” is that they indicated that if they’re going to pay $60, they don’t want just catastrophic protection. They’re paying $60, and they want to know what they’re going to get back for that. So in the focus groups they want dental benefits, they want vision benefits, and they want all these different things. So we have designed products. We have one called Simply Blue that’s targeted to that market and provides skinny benefits but does have some front-end first-dollar coverage [for preventive care].

The Price Of Health Care Services

Robinson: Tennessee is, like many other states, evolving toward becoming a very consolidated health care market, on both the hospital side and the insurance side. Blues plans are dominant in each region-and in each region one or a few hospital systems are dominant. So instead of a textbook economic market with lots of buyers and lots of sellers, you have a dominant buyer-that’s you-and then one seller or a few sellers on the hospital side. How does that affect the market-oriented approach to managing cost, to managing choice, and to managing performance?

Gregg: I like to use the term “shared destiny.” Our state is the poor state. We are forty-seventh in overall health status in the country. We have an uninsurance rate now that will be pushing toward 20 percent, from a low of about 6 percent. Another 20 percent are still on Medicaid, and another 15 percent are in Medicare. So you’re looking at 55 percent of the market either unfunded or underfunded, from the perspective of the actual costs of providing and financing care.

I don’t think any one entity, whether it’s Blue Cross or anybody else, can win at the expense of everyone else. Because ultimately all we’re doing is driving more people out of the market. I tell people that our biggest, toughest competitor is “nonconsumption.” It’s people who choose not to buy. And when you’re in a state where the average income is less than the U.S. average, people’s ability to buy health insurance is compromised.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.558v1

Comment: This interview should serve as an awakening for those who believe that nonprofit insurers provide services and coverage that is significantly superior to the for-profits. Although the for-profits may draw off a small percentage of receipts for the investors, the nonprofits are not much better in that they behave the same way as the for-profits within the private insurance marketplace.

The health insurance underwriting cycle is a phenomenon in which insurance premiums cyclically swing up and down even though health care costs maintain a relatively stable upward climb. As insurance profits increase, more players and plans enter the market. Competition drives down premiums to below the medical cost trend, and the losers leave the market. The winners then control the market and drive premiums back up well above the cost trend, with a return to significantly higher profits. Although some health care analysts have said that the underwriting cycle is no longer relevant, it is quite obvious that BC/BS of Tennessee (BCBST) is using its reserves (profits) to support its lower-than-market premiums in an attempt to drive out the competition. The underwriting cycle is alive and well and has contributed significantly to the “enviable financial success” of BCBST. The underwriting cycle would disappear if we had a universal, publicly administered insurance system.

The conversation on consumer-driven health plans provides further evidence that nonprofit insurers engage in nefarious activities in the private insurance market. BCBST determined that the insurance market wanted a premium “price point” of about $60 per month. They also determined that consumers wanted to get something back for their premium. So they gave them some front-end services to create the illusion of coverage but stripped the plans down to a package of “skinny benefits.” A publicly funded and administered program would be designed to ensure affordable access to comprehensive services and would never resort to fake plans that provided almost no protection.

When people “choose not to buy” because their “ability to buy health insurance is compromised,” then Blue Cross can’t “win at the expense of everyone else.” Nor should they! Let’s abandon these policies that are designed to make the private insurers the winners. Instead, let’s make the patients the winners by adopting policies that are designed to ensure affordable, comprehensive coverage for everyone.

The crumbling obstacle to universal health care

By Saul Friedman
Family & Relationships
Newsday
November 26, 2005

The unique but irrational foundation of America’s employer-based health insurance system is collapsing. And nothing illustrates this more than the increasing number of companies cutting or ending health benefits they promised employees and retirees.

Yet this may ultimately be good news, for if employer-based health insurance does come to an end (perhaps during another administration), we can get on to the inevitable, joining the rest of the world in publicly financed universal health care. A recent Harris Poll for the Wall Street Journal found that 96 percent of those polled favored Medicare, and 75 percent supported “universal health insurance.”

But the fundamental obstacle is employer-based health insurance, for the millions of workers who have it are reluctant to give it up for universal health care. In an interview with the Boston Globe, Bob Moffit of the conservative Heritage Foundation wondered, “Why is America the only industrialized country that ties health insurance to employment?” “It’s nuts,” he said, that nine of 10 Americans with private health insurance get their coverage through their employers. “Imagine if auto insurance worked the same way. So if you lost your job, you could no longer drive. That would be absurd.”

How did this come about? During World War II, when ceilings were imposed on wages and prices, employers lured workers by offering fringe benefits such as health insurance, the costs of which were (and are) tax deductible for the companies.

All of battered western Europe as well as former enemies Germany and Japan established national health systems. And over here, Harry Truman, too, proposed national health care, but big business cut off that idea by providing private insurance for employees, and labor unions grabbed for it in contracts.

It was generally successful as long as health care costs remained stable and uncomplicated by new technologies and drugs; the workforce remained relatively young and healthy with few retirees; U.S. manufacturers had no competition.

But as that landscape changed, Dr. Marcia Angell, a Harvard lecturer, pointed out the essential flaws in employer-based health insurance: It is cumbersome and costs taxpayers billions in tax breaks. If the business declines in a recession and workers become unemployed, they and their families lose insurance. Even more fundamental, employer-based coverage creates a potential conflict of interest: If the employer’s bottom line is hurt by the rising costs of covering health care, the company will inevitably choose to protect profits over protecting the health of workers and retirees.

General Motors, beset by huge losses due mostly to runaway worker-retiree health care costs and competition from Germany, Japan and Canada (where governments provide health coverage), sharply cut its health benefits with the reluctant permission of the union. (On Monday, GM also announced that it plans to cut up to 30,000 jobs.)

The Medicare legislation set aside $89 billion to pay employers to maintain retiree health coverage. But two companies that lobbied for the subsidy, Lucent Technologies and SBC Communications, announced they’re cutting retiree benefits. Retailer J.C. Penney notified 9,500 retirees it will end some or all benefits when the law takes effect Jan. 1. Wal-Mart is screening out prospective employees who may have health problems. Sears is eliminating retiree benefits for new employees.

Weirton Steel killed health benefits for 10,000 retirees, their dependents and survivors when it was purchased by International Steel Group. United Airlines slashed benefits for 35,000 former workers. Avionics maker Rockwell Collins says it will no longer offer drug benefits for Medicare-eligible retirees after 2007. And Pfizer Corp., which will make billions selling drugs to Part D beneficiaries, is cutting benefits for retirees who had worked at Pharmacia, a drug firm taken over by Pfizer.

Don M., a Colorado reader, writes of a cruel twist for escaping the cost of retiree benefits. His former employer, Texas-based Electronic Data Systems, founded on Medicare business, is raising the cost of its insurance so high that retirees have no choice but to sign up for Part D and leave the company plan.

The trends are obvious. The rate of coverage for employees and retirees has dropped from 64 percent to 59.8 percent in four years. Small companies can no longer afford employee health insurance. Consequently, Washington’s Economic Policy Institute says the number of uninsured Americans rose in four years by 6 million, to 45.8 million men, women and children.

One group has some protection from the trend: older and disabled Americans who are in original Medicare. Despite efforts by Republicans to pick away at its benefits, Medicare remains the most efficient and popular health insurance program in the nation, even among younger people who’d like to have its protection.

As employer health coverage has declined, especially among low-income families and the 550,000 who lost their jobs and insurance in the Gulf Coast hurricanes, enrollment has increased sharply for Medicaid and the State Children’s Health Insurance Program.

So here is another trend, said the Economic Policy Institute: “This is a significant shift from private sector coverage to public sector coverage.” If that continues, perhaps we’ll learn that what’s good enough for former enemies is good enough for us. Article 30, Paragraph 1 of the new Iraqi constitution, which the United States helped write, says, “The state guarantees social and health insurance, the basics for a free and honorable life for the individual and the family. . . .”

Stay tuned.

WRITE TO Saul Friedman, Newsday, 235 Pinelawn Rd., Melville, NY, 11747-4250, or by e-mail at saulfriedman@comcast.net.

Copyright (c) 2005, Newsday, Inc.

This article originally appeared at:
http://www.newsday.com/news/columnists/ny-bzsaul4526008nov26,0,5656919.column?coll=ny-news-columnists