Today’s Globe story regarding Insurance companies’ unwillingness to participate in the Connector’s new program “Business Express” is interesting but incomplete. The reporters should pay attention to bloggers’ comments about why the program may not be working and about how this option doesn’t really offer more affordable options for businesses. I do not know why the Connector and the Globe keep touting lower premiums. The Connector failed in its mission to serve small businesses by not offering a defined contribution model. Are they really going to sue the insurers for not offering this product through the Connector? That sounds desperate to me. I’m keeping my fingers crossed that the feds don’t follow suit when they promulgate regulations for state-level exchanges.
The Wall Street Journal reports today that the recently passed health care bill will soon negatively hit brokers’ bottom lines. This is due to regulation of insurers’ medical loss ratio (the amount of the health care premium dollar that goes to paying claims). I don’t personally like the MLR requirements in the bill as I think they can be easily gamed and they don’t really get at the heart of growing health care costs. That being said, if this requirement encourages insurers to pay brokers a fixed dollar amount (as opposed to a % on the premium) then it’s one of the unintended consequences I’m happy about. Don’t get me wrong, there are some brokers who are doing really good work out there but I don’t believe commissions should grow at the rate of health care inflation. In fact, I’d like to really turn this one on its head and have employers pay the broker fee if they use a broker and if they prefer to enroll online without the help of a broker, they should see a discounted premium….let’s shine a light on this cost and move towards a “travel agency model.”
Crying won’t help you, praying won’t do you no good
When the levee breaks, mama, you got to go
That’s how I feel about the piece Amy Lischko and I had in the Globe today on the health care reform of 2006 and how it’s failed to do much of anything to respond to small business needs. Key paras:
First, the Connector focused all its energy on providing nearly free products to the indigent. In contrast, the Connector’s board seemed almost uninterested in market-rate products for small business employees…
The Connector took three years to make information about provider networks and participating primary care providers for small businesses available on its website. It took over two years to launch a small employer pilot program; in more than a year it attracted just 65 businesses and has now been replaced by a new program that offers only seven plans.
Implementation also fell short when the Connector chose to build a top-down bureaucracy rather than leverage the broker and private market community. The quasi-governmental Connector has a $40 million annual budget and 45 employees earning annual salaries that average $100,000. Its board is heavily weighted toward government officials and unions.
Yes, of course, the title of this blog refers to the unstoppable, rising tide of health care costs that is flooding small businesses. But I am also, ahem, seeking redemption for the closing line in the piece, where there is a huge no-no misspelling.
And unless Massachusetts does the hard work of getting costs under control, Patrick could be remembered as the guy who tried to prop up the levy as the floodwaters surged in.
I understand this could be passed off as a double-entendre, but it was just bad editing on my part. In recognition of my failing and to correct my errant ways, this morning I have subjected myself, and the entire Pioneer staff, to a deluge of Zep.
Although the MA reform was considered bi-partisan. There were a few elements that Governor Romney vetoed when the bill was signed. The employer “fee” was one important one. Employer requirements or fees don’t make sense for a number of reasons. There is an on-going myth that the employer’s money and the employee’s money are two separate things. And, by requiring an employer to offer insurance or pay a fee will result in added benefits to the employee. In reality, there’s really no evidence that this occurs. Instead, employers respond by reducing their full-time workforce, or increasing the price of their goods (if that’s possible) both having a potentially negative impact on the economy.
How do MA and the Federal Bill differ with respect to these features? First Massachusetts:
Under the legislation, employers with more than 11 full-time equivalent employees must facilitate pre-tax availability of health insurance coverage to their employees. That’s the innovative part of the mandate that makes sense. It doesn’t cost the employer anything (well, maybe some paperwork) and it encourages employees to purchase insurance. In addition, the law requires employers with 11 or more full time equivalent employees that do not make a “fair and reasonable” contribution toward employee health insurance premiums to pay an annual per employee fee of $295 (or $73.75 quarterly). An employer is considered offering a “fair and reasonable contribution” if 25% of his full-time employees are enrolled in the employer’s group plan or he contributes at least 33% of the individual premium. Employers with 50 or more employees must fulfill both tests unless 75% of employees are enrolled, then the 33% contribution level does not apply (fulfilling both tests was added by the Patrick Administration).
And, the Federal requirement?
While more employers are exempt (<50), the penalties are higher per person (depending on offering status, $2000 or $3000 per person) but the first 30 employees are exempt. I guess the It may be a wash depending on the size of the employer. The Federal law also has this quirky, difficult to implement feature called the “voucher.” Employers must facilitate a voucher system for employees with low incomes when employer coverage is too expensive. In general, I really like the idea of a voucher system but in this context I can’t imagine that this will amount to anything other than an administrative nightmare. Finally, the federal law requires employers to auto-enroll employees if 200+, employees can, of course, opt-out of coverage. This makes sense to me and should not be difficult for employers to implement.
So, what will this mean?
What is not known is how employers will respond to these “incentives.” In Massachusetts, most employers have not dropped coverage. However, I don’t believe Massachusetts is a model for how the nation’s employers will respond for a few reasons. First, the penalties for not offering apply to many fewer employers. Second, the individual mandate is difficult to enforce on a national level. This will dampen the demand for insurance and employers won’t feel the pressure to offer as they do in Massachusetts. In addition, employer offer rates in other states are much lower and there’s no evidence that employers who don’t offer now will begin to offer if given small tax credits (which the bill provides). Finally, there’s no commitment from businesses (as there was in Massachusetts) to making this reform work.
Instead, what I believe will happen is that smaller employers may just drop coverage altogether and send their employees to the state exchanges. If enough employers do this, we might actually gain a functional individual market allowing individuals to purchase the insurance that best meets their fiscal, health, and risk profiles. We might end up with a market-based health care system after all. If state exchanges are established with this possibility in mind, they might actually offer consumers one stop shopping with the needed transparency and administrative functionality akin to purchasing an airline ticket. I know that’s wishful thinking on my part, but I don’t think it’s crazy. Do you?
Uh, no. It’s neither been a flat-out success nor a failure. It’s a mixed bag, and some of the threads at the bottom of the bag are getting bare. Pioneer’s never come out for or against the MA reform. We first believe in state experimentation, and second that empirical data can sometimes surprise you. Given the mandates, credible coverage requirements, the uncompensated care pool, and the fact that we were at around 8% uninsured, for Massachusetts it seemed like an experiment worth trying.
And our series of report cards has shown that in some areas it has worked (1, 2, 3, and 4). Access to insurance products is better but not at all great for the folks who buy cost-sharing insurance products. The costs are unsustainable – at $88M extra per year (after 4 years that makes the cumulative impact around $350M). The take-up for small business is dismally low (again, the Connector’s been good at marketing near-free products). The administrative costs are way too high (cf. Utah’s exchange, etc.), But Jon is auditioning for the national health care gig and so he is in marketing mode, selling the MA’s success hard:
Four years after enactment, Massachusetts has learned about the challenges of implementing near-universal coverage. Here are a few lessons:
1. It’s a campaign: …. We launched this effort with the Red Sox, and held more than 300 educational forums across the state, the equivalent on a national scale of 15,000 outreach meetings. As a result, voter support for reform has remained high, ranging from 59 percent to 75 percent.
Jon & Co did work hard. And they marketed well. Kudos.
2. Adequate resources: The Massachusetts Legislature appropriately funded implementation with $35 million in the first year; the equivalent on a national scale would be $1.65 billion. Never were shortages of time, expertise, or resources allowed to stand in the way of meeting legislated deadlines.
Lots of deadlines were missed. The small business push came 3 years into the effort and fizzled. Transparency of information (cost and quality) is a punt — so no cost containment.
3. Coordination: Somebody has to be on point to drive implementation across federal agencies and the other organizations needed to execute this undertaking. The Health Connector used multiple consultants and outsourcing strategies, while staffing up, to meet deadlines. With 50 states and far broader legislation, the federal effort will require a Herculean coordination effort.
Sounds like Jon wants that job!
4. Experiment and evaluate: This effort is new and not everything will go as planned. For example, running an exchange means offering customers what they want to buy, but that’s neither obvious nor unchanging. Massachusetts’ exchange is a learning organization. Key initiatives were launched as pilots, and we have not been afraid to revise them and try again.
Yes. But the experiments were largely top-down and missed many of the lessons we have learned from Utah in just one year of operation. UT = 2 bureaucrats, 55K small biz employees signed up, and literally dozens and dozens of options. MA = dozens of Connector bureaucrats at big bucks, 1500 small biz employees signed up, and dismally few and disappointingly similar product options.
5. Transparency: The biggest challenge Washington faces in “helping’’ Americans gain access to care is their distrust of government. Transparency is the antidote: making tough decisions in public; meeting endlessly with employers, unions, insurers, clinicians, and citizens; and both talking and listening out there, in at least 15,000 communities. These are essential to building trust.
As we have worked on the “Interim Report Card” series on the MA health care reform, we’ve frankly been astonished at the lack of data collection and availability on key metrics. We still have a ton to learn – and the Connector has not done its job in seeking to measure its performance and make the info available.
6. Harness the market: State exchanges are essentially stores that sell insurance, combining government’s responsibility to protect consumers with a retailer’s need to serve customers. Brow-beating various industries may be good partisan politics, but the Health Connector has worked diligently at creating solid, long-term working relationships.
Again, UT does a much better job working with its broker community. The MA Connector is way too top-down in its approach, and it has too few products that brokers can sell to the small biz community.
Congress and the president have labored mightily to bring forth national reform, modeled after Massachusetts. Now the executive branch has 3 1/2 years to work with 50 very different states in bolstering popular support and executing effectively. That will require massive amounts of technical expertise and project management, combined with public outreach and creative communications.
The real campaign has just begun.
As a great marketer, Jon has just submitted his resume in a novel way — a Globe op-ed.
Small business insurance has been a mess in this state for a while. The health care reform act of 2006 was supposed to help make it work better. It did not.
Julie Donnelly of the Boston Business Journal notes that Fallon and some other insurers in the state are seeing the small business market as costing them a lot of money. And they could pull up stakes.
That might be the “nuclear” option as Fallon put it, but the sad thing is that the governor could have taken a different approach from his current “wallpaper” policy. Patrick circa 2010 is saying essentially who cares about the cost of health care, let’s set the price. That is akin to someone who has a giant leak in the wall insisting to the building contractor that they leave the hole in the wall alone but keep fixing the wallpaper so no one can see it.
The administration could have done what the MA health care reform law called for: creating options, real options, for small businesses in addition to helping the indigent get care. But not until the Pioneer paper in January called the Connector out for doing nothing on small business did the Connector change its tune.
The Connector, which has held premium rate hikes to under 5 percent for Commonwealth Care, the state’s subsidized plan, has just launched a product for small businesses called Business Express. The agency was tasked with developing such a program when Massachusetts health reform was enacted in 2006. Last year it launched a pilot product called the Contributory Plan, with a goal of signing up 100 small businesses. Sixty-five small businesses did sign up, but the Connector is now suspending the product in favor of the new plan.
This renewed focus on small businesses only occurred after the release of Pioneer’ s report Drawing Lessons, which compared the Connector to Utah’s Health Exchange. In Utah, the focus has been on small businesses and they have provided dozens of options and leveraged the broker community to educate and market insurance products. Instead, the Connector insists on reined in products and competition, and they have failed to meet small business demands.
What’s wrong with a government mandate for health insurance? After all, government mandates auto insurance, right? In any basic conversation about health care — especially in MA where the idea of a mandate started — that is a basic line of argument from pro-mandate folks. My problems with that line of argument are three:
1. The federal government does not mandate auto insurance, and it should not mandate health insurance. (In fact, three states do not have auto insurance mandates.) The point is, states can choose to or not to.
I have no problem with the health mandate in Massachusetts – if the system that is scaffolded on top of it works. States constitutionally have the power to mandate such things, and Pioneer is trying to make the law work here, if it is possible (and empirically speaking, it may not be workable – fact is, we do not know). If other states see what is going on here and adopt something similar, great. If they choose reforms diametrically opposed in structure to a bureaucratic exchange and a mandate, even better, so we can compare the results of our experiment to those in other states.
The problem is that the new federal legislation takes what are state decisions and federalizes them — both a constitutional and a “quality of government” problem for me. The feds are simply not good at delivering local services. That’s why we set up our current local-state-federal governmental system.
2. When we say health mandate, what do we mean? And is the federal mandate at all like the auto insurance mandates currently in place in 47 states? The various state mandates for auto insurance, as far as I know, require coverage for damages to others’ property or persons. The auto mandates do not require insurance for prevention, ongoing care and maintenance, or even your own vehicle. In Washington state, for example, my colleague Bob Williams notes that
3. Coverage for all, through state auto mandates, is never achieved. Another colleague, David Racer, notes that
Even though 47 states mandate auto insurance coverage, the average uninsured rate, according to the Congressional Budget Office, is 14.6 percent.
The uninsurance rate in our mostly voluntary health insurance system has held steady at about 15.5 percent or so for a decade. The point is that Massachusetts started out seeking near-universal insurance from a unique place — the low single digits. In much of the rest of the country, the federal government is going to try and take us from mid-teens or higher to universal coverage.
That’s hubris unless you spend trillions, because there is no real cost-containment in the federal bill.
1) What a wasted opportunity to get it right. Little learning from existing experiments like MA’s was drawn upon, and there are no real market mechanisms used to contain costs. Top-down cost containment will just lead to cost-shifting.
2) What a wasted opportunity by Republicans in the early 2000s. Why didn’t they do more than pilot programs to address skyrocketing premiums?
3) What a mess this will be going forward. It is going to be super-expensive for the taxpayer, and it will again shift a lot of the burden to people with private insurance.
Never before has the average American been treated to such a live-action view of the sordid politics necessary to push a deeply flawed bill to completion. It was dirty deals, open threats, broken promises and disregard for democracy that pulled ObamaCare to this point, and yesterday the same machinations pushed it across the finish line.
The line about “disregard for democracy” at first blush struck me as over the top, but in fact the Slaughter Solution was seriously considered – and that was truly more than disregard. It was contempt, no matter how much supporters of the health care fix twisted themselves in knots to support it.
It’s probably worth recalling the last major federal legislative fix — welfare reform. That effort involved relatively little sausage making. The final House version passed 256-120, the final Senate version passed 74-24. The Conference Agreement passed 328-99 (5 not voting) and 78-21 (1 not voting). In both cases almost 1/3 of the votes in the House and Senate came from Democrats.
The second analysis on the health care fix worth referencing is a sort of Hear No Evil-See No Evil article from David Leonhardt of the New York Times. Not terribly surprising from David, who is a smart guy but who oddly has been wrong more often than not on the President’s default switch on issues. Way back in August 2008, he wrote, for example,
With Obama, there is vast disagreement about just how liberal he is, especially on the economy.
Another major piece of financing would cut Medicare subsidies for private insurers, ultimately affecting their executives and shareholders.
“Another piece”? Reimbursement cuts to Medicare account for half a billion dollar piece of the so-called savings. David is an applied mathematician by formation, and I often appreciate his work, but on this one he is not adding 2 + 2. Fact: Profits at insurance companies will not be affected. Fact: Insurance companies will raise premiums on private plans to make up for any losses they may incur on the public/Medicare side. That is a sort of “sneak tax” on me and all those who buy private insurance. It won’t come through a tax filing but I will pay more because the insurers will make up the shortfall on the Medicare side by shifting the costs onto all middle class citizens. The government is promising to provide financial help to citizens who earn 400% of the federal poverty rate or lower, but if private market plans get much more expensive because of cost-shifting, that help will not be, well, very helpful. You get the drill.
There is a lot we can do at the state level to address the uninsured. Massachusetts has taken one approach, and Pioneer is doing the hard work of drawing lessons from our 2006 reform. We’ve never taken a position for or against the Massachusetts experiment because it’s simply too early to see all the beauty marks, warts and freckles come through. To date, we’ve published the following reports:
This is the kind of analysis on state experiments that the feds did in the 1990s — then on the number of states that had undertaken welfare reform in the late 80s and 90s. That empirical work led to a strong welfare reform that gained broad backing in Congress and among the American people.
Instead, what we saw last Sunday was that 17 states got increases in federal funding and all the gory details of sausage-making came to light. It was not a pretty sight. Looking over the horizon, expect the majority of people who have private insurance now to pick up the shortfall in funding provided by the federal government for Medicare. Premiums up as far as the eye can see. Not a good outcome, folks.
Health Care is definitely the hot topic around the nation this week. With the federal legislation being signed into law, it is more important than ever to take a closer look at Massachusetts Health Care Reform. This month’s Interim Report Card focuses on Administrative Efficiency.
The report finds that premium rates for individuals were reduced dramatically post-reform through the market merger, but there is only weak evidence that the reform has increased competition in the Massachusetts. In addition, it has added administrative costs overall, and policymakers elsewhere should consider whether the infrastructure costs of a Connector-like structure outweigh the benefits.
State House News Service (subscription required) reports that the Commonwealth Connector, the state authority that oversees the health care exchange envisioned in the 2006 reform, is “launch[ing] a new health insurance product designed for businesses with 50 or fewer employees.”
That’s fast. Pioneer’s report, Drawing Lessons, which compared the Utah and Massachusetts “exchanges” found that, in author Amy Lischko’s words,
“Some decisions made while implementing the exchange model in Massachusetts, for example, have meant that the Connector has not met the needs of small employers in Massachusetts well.”
Small businesses wanting to know more, can go to www.MAhealthconnector.org, or call Connector customer service at 877-623-6765.
And, good on you, Dr. Kingsdale. We’re pleased to see it and will look over the new products!
