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Has Vermont carved a path toward single payer health care or caved into powerful insurance company lobbies?

Maybe just a little bit of both.

Has Vermont drawn a new line in the sand for health care reform or outlined a sketchy drawing towards the future?

Yes to that as well.

On May 27^th, 2011 Governor Peter Shumlin fulfilled a campaign promise to move the state toward a single payer health care system when he signed H-202.

As the saying goes, you can’t make an omelet without breaking a few eggs.  In this case, the analogy works pretty well.

H-202 outlines a path that takes features from current state and federal realities and blends it with recipes offered by the federal health care reform to take Vermont where previous federal and state lawmakers have feared to tread.

Should we be surprised that the descendents of the Vermont Republic break several cherished taboos in their legislative approach to health care reform?  Should we be upset that so many details need to be filled in along the way?

The Vermont law declares health as a right, not a privilege.  This is significant.  While I have challenged the notion of a health care as a right, the people who organized grass roots support for this quantum leap forward have used that rallying cry as a reminder of our obligation to provide for those in need.

If I were to characterize the Vermont process it would be – design; build; and remodel.  It is an incremental journey toward a revolutionary change; an evolutionary approach to species change.

Design

A friend use to say, “plan your work and work your plan.”  Likewise, measure twice and cut once.  Carefully plotting out a design change as profound as this is critical to success and Vermonters were careful to not over prescribe in the legislation.  Vermont must create a five member board, nominated by the governor and approved by the legislature.  That Board must wrestle with a broad range of issues that would lie outside the scope of most health plans in today’s market.  They include:

• Designing a benefit package
• Setting payment rates and methodologies
• Addressing adequacy of health workforce issues
• Hospital budgets and capital expenditures
• System performance and quality
• Health information technology.
• Approving rate requests.

That’s a tall order and time will tell whether it is best left to a single entity.

Build

The build phase uses the structure outlined in the Patient Protection and Affordable Care Act.

It will build the insurance exchange that will allow individuals and small businesses to shop for health insurance.  The number of insurers will be limited and will include a “public option”, the Green Mountain Health Plan.  Benefit design options will be limited as well and will be prescribed by the Green Mountain Board.

It will offer comprehensive, affordable, high quality health care coverage for all Vermonters, regardless of income, health status or availability of other coverage.

As required by ACA, there will be a ban on pre-existing conditions and all Vermonters will be eligible regardless of employment status.

Remodel

The remodel phase may be the most challenging phase as the Green Mountain Board will need federal waivers allowed under the ACA to create a single payer health plan.  That plan will combine the people currently enrolled in Medicare and Medicaid with a broad swath of the Vermont population, including public employees, individuals and small groups.

To Vermont’s credit, they added a feature near to my own experience.  They also included workers’ compensation in the Green Mountain Health Plan.  I have seen too many people delay treatment while lawyers argue whether a specific treatment is the responsibility of the health plan or workers’ compensation, an utter waste of both financial and human resources.

A late Senate amendment requires that the Green Mountain Board determine that certain legislative goals will be met with the implementation of the single payer system before the transition to a single payer system.

With the federal waivers, the program will be funded by

• Federal Medicaid funds
• Federal Medicare funds
• State Medicaid funds
• State contributions for its employer plans
• Employer contributions for small group plans
• Individual payments for individual insurance.
• Employer payments for the medical portion of workers’ compensation (normally 50% of workers compensation premiums)

Critics are quick to question how the program will be funded; yet it is hard to image how the program would need substantial supplemental funding.  In fact, I could image a scenario where the state could reduce certain taxes and replace them with a revenue neutral dedicated income tax that would highlight the total cost of health care in Vermont, much of which is obscured under current financing methods.

The Vermont law lays out an ambitious program that goes far beyond the roles assumed by most health care purchasers, including even Medicare.

Like Medicare, the Green Mountain Board will promote provider payments reforms with some of the same models proposed in the ACA, Accountable Care Organizations, and Medical Homes.

The Green Mountain Board also folds in powers traditionally assumed by states such as certificate of need (approval of capital expenditures) and hospital budgets, approval of health insurance rates, approval of a Health Information Technology Plan, development and maintenance of an adequate health care work force, as well as developing and maintaining a system to evaluate overall system performance and quality.  That is a pretty tall order.

Vermonters have pushed the envelope on health care reform. What was once off the table is now being served up as the main course.

For those who have brought the state this far, their work is just beginning.  Not only must they wrestle with the devilish details that confound any change, they will also confront those evil demons who will make every effort to thwart and reverse this initiative.

Like many, I have questions and I hope Vermonters and others will join a dialogue and offer their own thoughts and perspectives on how this process will unfold over the next five years.

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Mitt Romney not backing away from the health care reform law that he pushed forward in Massachusetts.

In a speech he delivered in Ann Arbor, Michigan, the state where his father had been governor, the presidential aspirant went on to say that what was right for Massachusetts is not necessarily right for the rest of the country.

He then proceeded to trot out the tired Republican formulas for health care reform:  block grants to states, selling insurance across state borders, medical liability reform, and shifting more costs onto individuals.

I would have offered a different response for Mr. Romney.

The federal law on employee benefits, ERISA, ties the hands of states who want to expand health care coverage.  It’s called the ERISA preemption.  We came up with a solution that ducks the federal preemption.  It works in Massachusetts because Massachusetts has a high rate of unionization, a high rate of income and a very low rate of uninsured.  That is not a solution that could work in states like Texas or Mississippi that have none of those.

The federal government has the power to ignore ERISA and to design a system that would be simpler and affordable for all.  Because it would eliminate the convoluted eligibility requirements under the current system, because it would eliminate the Byzantine and arcane payment rules under the current system, because it would standardize rules, it would be a much simpler system.

That simplicity would save the system billions and billions, more than enough to pay for the expanded coverage.

Our next door neighbor, Vermont, is attempting something like that.

That is a state example that Congress could emulate.

I can dream, can’t I.

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The current health care system does not make life easy for lots of people and organizations.

Churches, for example.

The current issue of The Lutheran discusses the prospects for matching new pastors with congregations.   They do not specifically mention health care. They should.   The Lutherans are not unique.  They face the same challenges as other Protestant churches.

Congregations face declining worship attendance and, with that, declining offerings in the collection plate.  Senior pastors who saw their retirement savings seriously diminished during the recent recession, are staying on the job longer, reducing the number of vacancies.

Graduating seminarians, on the other hand, are graduating with larger debts.  They want and need more in a market of shrinking opportunites.

What does this have to do with health care?

How can a congregation save money?  Hire a minister who is married to a spouse with health insurance for the family.

Is that fair?

No.  Emphatically, no.

It limits the candidate pool for churches and it limits the opportunities for aspiring ministers.

Eleven faith organizations have endorsed a single payer solution to the health care crisis.  Most all offer theological reasons for their positions.  But churches should not shrink from their economic motives.

After all, they are in the exact same position as many small businesses and other non-profits.  Only 49% of private sector employees get their health care coverage from their employees.  Another 20%, of private sector employees get their coverage from their spouse.

The inability of too many employers to offer both competitive benefits and competitive salaries limits their candidate pool and restricts the opportunities of people who might otherwise be willing to work for those employers.

The Evangelical Lutheran Church in America should join with the other eleven faith organizations to support single payer.  It is not just the right thing to do theologically.  It is not just a social justice issue.  It is an economic issue that they share along with many other smaller organizations fighting for survival.

Photo credit     Truus, Bob & Jan, too

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Judge Roger Vinson, ruling for the US District Court for the Northern District of Florida, struck down the entire Patient Protection and Affordable Health Care Act (PPACA) as unconstitutional

He didn’t just strike down the individual mandate, he struck down the entire law.  He struck down the provision that allows young adults to stay on their parents’ health plan.  He struck down the provision that abolishes lifetime maximums.  He struck down the provision that allows sick people to buy health insurance.

From Judge Vinson’s ruling:

If, however, the statute is viewed as a carefully-balanced and clockwork-like statutory arrangement comprised of pieces that all work toward one primary legislative goal, and if that goal would be undermined if a central part of the legislation is found to be unconstitutional, then severability is not appropriate. As will be seen, the facts of this case lean heavily toward a finding that the Act is properly viewed as the latter, and not the former.

It has been the contention of the law’s supporters that the individual mandate is the lynchpin of the entire law.  Provisions regarding expansion of coverage to those with pre-exisitng medical conditions are not economically feasible in private competitive markets if the cost is not shared among both sick and health individuals.

The judge conceded  the centrality of the individual mandate and ruled that, therefore, the entire law must be struck down.

The Musket Mandate of 1792 and Health Care

The flaw in the law

The individual mandate is not the flaw in the law.  The flaw is the idea that the individual should be required to bear the full cost of insurance.

What is missing in this health reform law is the principle that of paying for health insurance when we are earning income and healthy so that we can be covered while we are sick and/or unable to earn income.  We should be required to pay for health insurance according to our ability to pay so that we can be covered when we are sick and not working.  The same principle of pegging premiums to income should apply to people on Medicare.  It is more often the case that serious illness is accompanied with serious income loss.  Health risk is not just shared between the healthy and the sick, but also between income earners and those without income.

Call to action

Single payer advocates should be goaded into action by this ruling for two reasons.

First, there is the real possibility that the either the Supreme Court or Congress could overturn health reform.  As bad as the law is, repealing it would be far worse.  Millions of young people and sick people would be thrown to the wolves of the individual insurance markets.

Second, the public needs and wants to hear about a real alternative, an alternative that is simple in concept and simple in execution.  The public is listening for an alternative from the Republicans but hearing nothing but vacuous sound bites, platitudes that may have passed the focus group test, but flunk the reality test.

There could well be a lesson for single payer advocates in the events in Egypt and Tunesia and elsewhere in norther Africa.  When chaos reigns, the organized have the advantage.

Comments from the Blogoshpere:

From Marshall Auerback at Naked Capitalism

If the Roberts court does force us back to square one, shouldn’t we try to get it right this time?

From Stateline, a state policy web site sponsored by Pew Charitable Trust

STRIKE TWO: Republican governors roundly applauded the Florida federal court decision Monday, Jan. 31, finding the Obama administration’s health care reform law unconstitutional. “Never before has Congress required that everyone buy a product from a private company,” U.S. District Judge Roger Vinson wrote in the Florida-led lawsuit, The Miami Herald reported. It was the second ruling against health care reform’s individual mandate, with a Virginia judge calling it unconstitutional in December. Two other federal judges have upheld the law, which pits 26 states against the federal government.

From David Axelrod, Senior Advisor to President Obama, in the Huffington Post

“I’m not a lawyer,” said Axelrod, from a makeshift office in the West Wing. “But I will tell you that I think that many lawyers are very dubious about that. The role of the courts is not to look for expansive opportunities to invalidate an act of Congress — it is to rule narrowly as possible and leave intact the intent of the legislation.

From Ezra Klein in the Washington Post

The individual mandate could’ve been called the “personal responsibility tax.” If you can show the IRS proof of insurance coverage, you then get a “personal responsibility tax credit” for exactly the same amount. This implies that what makes the mandate unconstitutional in the eyes of some conservatives is its wording: It’s called a “penalty” rather than a “tax.”

From Alan Katz in the Alan Katz Health Care Reform Blog

Judge Vinson’s declaration that the PPACA is unconstitutional is an interesting chapter in the history of reforming health care and health care coverage in America, but it’s only a chapter in a very long book.

From Healthcare for America NOW

The American people will not allow the courts or the Congress to bring us back to the time when insurance companies could exclude people because of pre-existing conditions, drop people for getting sick, or let benefit caps force people with serious diseases into bankruptcy.

From Jack M. Balkin, Yale Law School Professor, who compared the mandate to purchase health insurance with a 1792 law to require that men purchase muskets.

The assault on the individual mandate is really an assault on the public duty to assist other Americans in need, and in particular, an assault on the legal obligation to pay taxes to contribute to the general welfare. The assault on the health care bill is not a defense of liberty. It is a defense of selfishness.

And from TWITTER

@RepWiener: We know this: the public option is constitutional. #stillpissedwegaveuponthat

@Jimmy1920 @RepWeiner The public option was a flawed starting point. Stick with #singlepayer. It too is constitutional.

Photo Credit:      Alex Europa

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Can one have too much health care coverage?

Much of the debate for expanded health care coverage and for a single payer financing and delivery system arises out of concern for people without access to the traditional portals into the health care system: employment, old age, or poverty.

Abundance

But some people can have a whole lot of a good thing and still their medical bills fall through the cracks.

Take Dinah for example.

Consider the ways she had access to health care.

She was employed and had access to employer sponsored health insurance.

She was married and had access to health insurance as a dependent on her husband’s plan.

Her husband died and she became eligible for coverage as a survivor through her husband’s plan.

Her husband also had a retirement from a previous employer and she had access to coverage as a survivor on that plan.

She retired and had access to retiree health insurance from her employer.

She remarried and access to her second husband’s health insurance as a dependent.

She also had Medicare.

And still she could not get her bills paid.

There were mix ups in signing her up for some of those programs and the ones she was enrolled in could not decide which paid first, which was her primary insurance.  She came to us in tears, wanting to discard the insurance she had been paying for because it was “no good,” convinced her only option was to go on Medicaid.

Confusion reigns.

And even when people and systems have it right, confusion reigns.  Each year we get calls from people during Medicare Part D open enrollment?  They are confused and some of the vendors seem to offer extremely misleading and inaccurate information.  Why does it need to be so complicated.

Take Frank for example.

Frank was taking care of his older sister’s affairs.  She was in a nursing home and had access to Medicaid, Medicare Parts A and B and D and her retiree insurance with our plan.  Yet she could not get her prescriptions paid for.  Why?  It seems that the private pharmacy used by the nursing home did not know how to submit claims to any other payer than Medicaid.  That was straightened out.

But Frank made an astute observation.  He said each time he called one of these “pieces of the pie” as he called them, he would get a little bit more information.  He complained that each of the pieces barely understood their own role and no one understood how all of these pieces fit together.  “If they can’t see the whole picture, how do they expect an ordinary person like me to figure this out?”

Or the members who battle workers’ compensation in part to pay the medical bills for their work related injury and also to have income to pay the insurance premiums that pays for the medical bills for their non-work related medical bills.

Single payer is needed not just to provide for the have-nots, but also to bring order into a chaotic system for the haves.

Photo credit:    Stijn

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This past week two gatherings addressed health care reform.

Liberty Bell in Philadelphia

The International Federation of Employee Benefit Plan (IFEBP) hosted its Annual Conference in Honolulu, HI.  Approximately 5,000 representatives from employer sponsored benefit plans and from benefit trust funds, as well as the professionals and vendors that serve them gathered to hear speakers address the changing world of health and pension benefits.

A major topic of discussion was the short and longer term implications of the Patient Protection and Affordable Care Act (ACA).  What do employee benefit plans need to do this month or this year?  What will the ACA mean for the longer term viability of employer sponsored health care?

The other gathering was much smaller. About 135 activists, most of them unpaid, met for the Healthcare-NOW! Strategy Conference in Philadelphia to discuss how to organize and build for another, very different, future for health care – single payer.

Anxiety about the future

The wonderful Hawaiian weather could not mask the anxiety felt by many plan sponsors over the future of employer sponsored health care.  Speakers tried to compare the ACA with ERISA, the landmark 70’s law that reshaped the landscape for pension plans adding stability and some legal protections to employer pension plans.  Yet thirty five years ago pension plan sponsors were very nervous about ERISA.

But not all attendees were buying it.  I sat next to one Trustee of a Taft-Hartley plan while we listened to a speaker explain grandfathering and who was not included in the age 26 coverage requirement.  He asked, “Was all of this worth it?”  I asked what he had in mind.  “Wouldn’t it be a lot simpler if we had a   Canadian style system?” he replied.

Speakers privately confessed to concerns about what will happen to employer sponsored plans when the exchanges go live in 2014.  Many answered questions from the audience about whether a single payer alternative would be better.

The anxiety is also reflected in a recent study released by the Employee Benefits Research Institute (EBRI). The percentage of respondents who were extremely or very confident health benefits will continue to be offered fell from 59 percent in 2009 to 52 percent in 2010. It had been as high as 68 percent in 2000.

The alternative vision

But if the long tradition of employers as the backbone of health care financing may be waning.  But what will the transition look like?

Will employers abandon the hubris that allows them to think that they can actually control health care costs?  Not control their own health care costs; that is easy, cut benefits or shift the costs to the employees; but actually control the cost of a $2.3 trillion industry.

Will they come to the realization that the current system undermines the US economy by draining resources that could be put to more productive use?  Will they suddenly realize that employer financing of health care distorts the labor market for themselves and their employees?  Will small businesses drop their ideological blinders and recognize that a uniform system of health financing and access could be a huge boon to entrepreneurism?

Not without some help.

And that is what the single payer activists at the Healthcare-NOW conference are trying to provide.

A small and dedicated group of volunteers is attempting to build a movement for a more rational health care system – one that will not only benefit patients and patient care, but also benefit the biggest  obstacles to change – corporate sponsors of health care plans.

Photo Credit:        Wally Gobetz

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Some recent bright spots did shine through among the depressing election results this past week.

In Massachusetts, voters and docs expressed support for a single payer solution to the continuing health care crisis.

Fall in New England

Massachusetts is the state that gave us the Connector – the model for the Affordable Care Act that is now the target of the anti-incumbent horde that is invading Washington DC.

I have noted here before that the Massachusetts model might have been an acceptable state model given the restrictions that federal law imposes on the ability of states to be truly innovative with health care reform.

An individual mandate might even work in a state with a high level of income and a low rate of uninsured.

Voters are also patients

As a model for federal reform, it is flawed.  To think it might work in Mississippi or Texas is disastrous.

Some Massachusetts voters had the opportunity to express a view in their own state.  A non-binding question appeared on the ballot in 14 Massachusetts state representative districts.

The question:

“Shall the representative from this district be instructed to support legislation that would establish health care as a human right regardless of age, state of health or employment status, by creating a single payer health insurance system like Medicare that is comprehensive, cost effective, and publicly provided to all residents of Massachusetts?“

The question received overwhelming support, passing in all fourteen districts by an average of 63%.  Five of those districts voted for Scott Brown, whose election supposedly signaled an anti health care reform sentiment.  Even together with the ten districts that approved a similar measure in 2008 in Massachusetts, the measure has a long road to travel.

Docs too

Meanwhile doctors in Massachusetts were also asked their opinions about the state’s health care reform.  In their annual Workforce Survey the Massachusetts Medical Society asked physicians to choose among four health reform options.

The largest number, 34%, chose a single payer option; followed closely, 32%, by those who prefer a public-private mix with a “public option.

Two thirds of doctors in Massachusetts chose a health reform option that went beyond that proposed by the Affordable Care Act.  Only 14% chose their own state’s model, with the balance, 17%, opting for the status quo.

Those who criticize the President and the Democrats for not listening to their public are right.  These voices represent patients and doctors – the two constituencies that a health care system is supposed to serve.  When not encumbered by media distortions funded by the profit making centers of the health care industry – insurance companies and pharmaceutical manufacturers at the top of the list – patients and even doctors come down on the side of a rational and pragmatic approach to funding and delivering health care –single payer.

Physicians for a National Health Plan explored this distortion and misrepresentation of survey data in much more depth in a series of article on their web site.

And in Vermont

Another encouraging development on the healthcare front is the election of Peter Shumlin as governor of Vermont.  A single payer system in Vermont was one of the top issues in that gubernatorial campaign.  Curiously the debate focused more on the practicalities of implementing a single payer system in Vermont rather that the ideological bent that characterizes those discussions elsewhere.

Sanity can prevail.

Is Washington listening?

Photo Credit: FLICKR – Maggie-Me

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Happy Halloween

It’s the Price Stupid is the title of a seminal paper in Health Affairs that concluded that the United States pays more for health care and receives less than in other developed countries.

It is also a theme resurrected by Alec MacGillis in a Washington Post article last week.

The argument goes like this.   The United States pays more for health care than anywhere else on the planet, as much as 50% more than the average for other developed countries.

Yet we get fewer services;  fewer physician visits, fewer hospital admissions, fewer days in the hospitals.     It doesn’t take a Ph.D. statistician to conclude that we are paying too much per unit of care.

But does health care reform fix it?

To MacGillis cost controls means price control.

It is not clear to me that the higher unit cost in the United States translates into higher physician incomes.   How much of that higher unit cost is siphoned off by high administrative costs in terms of provider billing costs and insurance company overhead?  Someone needs to answer that question.

The Patient Protection and Affordable Care Act (ACA) does address cost control, but not in the way that MacGillis and others would prefer.    According to its critics, the ACA attempts to control costs by controlling the volume side of the equation; curbing the total costs by limiting the number of services that are performed.

Actually, what the ACA does is offer incentives to redefine the nature of the “service”.   Under the fee for service model, providers bill and are reimbursed for every single thing they do:   each lab test, each image, each physician office visit, each item of surgical or medical supply.

But just what is a health care good?

Is it the individual pieces, or is it a larger, more global, good:  an image, a surgery, an illness or injury, or the health of a population?

Providers will counter that each patient presents a unique set of symptoms and pre-existing conditions and that setting a fixed price for a specific episode of care, may encourage physicians to skimp on care.

And in the Lake Wobegon world of medical practice, every doctor treats patients that are above average in severity and complexity.

Imagine that cars were priced like medical services.   You might go to the dealer and find that your car is priced $2,000 higher.   Why?  Because while it was coming down the line, there was a breakdown and the extra time on the assembly line cost an additional $2,000.

Manufacturers build those mishaps into their price.   They do that because, unlike medical care, they know their customers will not pay for mistakes.   And by doing so, the pricing strategy is an incentive to the producer to reduce errors in the production process.

Paying for “call backs”

The same logic should apply to medical care.

A more global definition of medical service will offer incentives to deliver more efficient care.   Critics say it will encourage providers to deliver fewer services.

When I was younger and working as an apprentice refrigeration mechanic, the mechanic I worked with used to joke, “Doctors are just like us.   They are meat mechanics.   The only difference is that they get paid for their call backs.”

The idea behind global reimbursement strategies is to reduce the number of “call backs” by reducing the incentives.

The market imbalance

But there is one point to “the price is the problem” argument that is valid.   They all decry the “market imbalance”;  the increasing market power of the price setters and the weak and fragmented market power of the purchasers.   Those of us in the private sector are well aware that when government cuts its reimbursements, providers simply charge their private payers more.

If price is the problem, there can be only one workable solution – coordinated purchaser negotiations with the provider community.   That is sometimes called an all-payer system or, horror of horrors on this Halloween, rate setting.

In his blog post on the topic, Chris Fleming quotes a Feb 2010 on line Health Affairs article,

Berenson, Ginsburg, and Kemper concluded: “Unless market mechanisms can be found to discipline providers’ use of their growing market power, it seems inevitable that policy makers will need to turn to regulatory approaches, such as putting price caps on negotiated private-sector rates and adopting all-payer rate setting.”

I cannot think of a more compelling “market mechanism” than for the purchaser community to say to the provider community, “This is how much money we have to spend on health care.   You figure out how to deliver care efficiently to our population.”

That would be a global reimbursement strategy that just might challenge the role of the insurance company.

Photo credit:  JL McGee

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Can you really trust computers?

The New England Journal of Medicine recently reported on a Rand study that concludes that the Accountable Care Act will result in a large net increase in employer-sponsored insurance offers.  They predict that the number of workers getting insurance from their employers will rise from the current 60% to 86%.

The Rand study was based on computer modeling.  Is there reason to think that the model is based in reality?

Yes and No

The study itself points to the reality of the experience in Massachusetts where employer based coverage increased after passage of a similar health reform initiative.

In addition, there is this little quirk in the recently released Kaiser Family Foundation 2010 Employer Benefit Survey.

Katherine Hobson writes about it on her blog at the Wall Street Journal.

The number of firms offering health insurance increased dramatically from 60% to 69%.  If these numbers are to be believed, the US economy in one year reversed a trend that occurred gradually over the preceding ten years.  The researches speculate that the spike may be because smaller firms that traditionally do not offer insurance were more likely to have gone out of business during the recent recession.

But more credible than the Rand survey is the tenor of comments to Hobson’s article.

We can not afford to pay for the insurance because the cost of the insurance took away more than half of the pay check and the income of our business can not afford to pay half of the cost as larger companies do.

Nothing has changed. Cannot afford decent insurance without HUGE deductibles and co-pays.

Our company has 75 ee’s and we had to discontinue coverage for all. The premiums were out of control

I have a very small family owned business with one other full time employee…he doesn’t have insurance through us…we would have to cut his pay as well as ask him to pay half the cost of the insurance in order to offer it to him.

Is it a good idea anyway?

Even if there may be marginal evidence that the PPACA will increase employer-sponsored health insurance,  would this be a good thing?

The Kaiser study also reports that employers are reducing coverage and increasing employee out-of-pocket expenses.  Is that a good thing?  Will that serve the public goal of increasing access to health care?

Small employers don’t offer health insurance, not just because it is expensive.  They don’t offer health insurance because they don’t have to.

A small business in New York City or Chicago can’t escape paying rent, but rent is an expense that is comparable in the same market place.

A shop owner who pays little more than minimum wage now has zero incentive to take on the costs of health insurance premiums that could represent a 30-40% increase in his labor costs.  He will only do that when there is no competitive disadvantage to doing so.  That will only occur in a system that requires all employers to provide health insurance, as in Hawaii, which does have a mandate.

It is still not a good idea

The doctor physician relationship needs to be a long-standing continuous relationship.  Patients need to have a comfort level with their doctor and doctors need to understand the whole patient.  This is behind some of the reform initiatives in the PPACA.

Yet the employment relationship is inherently discontinuous.  It makes absolutely no sense to condition a continuous relationship upon a discontinuous one.

Employers want to hire healthy workers.  Someone who is sick and cannot work, cannot afford health insurance and may not be able to get it anyway.  How does this help employers.

The question is not whether the ACA will expand employment based insurance.  The real question is how quickly can we transition to a single payer system where everyone is covered and pays according to their ability to pay.

Graphic Credit: NEJM

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Last week’s post highlighted encouraging initiatives in several states to implement a single payer system within a single state.

This was always a daunting challenge even before health reform.  The Patient Protection and Affordable Care Act has raised the bar even higher.

Hawaii

ERISA and its preemption

Before PPACA a legal hurdle called the ERISA preemption severely hamstrung state health reform efforts.  For those of us in the employee benefits profession, ERISA, including its preemption clause, is our bible or at least our Deuteronomy.

ERISA was passed by Congress in 1974 to regulate employee benefit plans.  The preemption clause precludes states from regulating employee benefit plans.  There were two exceptions to that preemption and both are instructive.

Insurance and not insurance

Under the McCarran Ferguson Act of 1945 states have the authority to regulate insurance plans.  Under ERISA states still retain the right to regulate insured health plans.

After the law was passed, Congress figured out that the state of Hawaii had already established a law requiring employers to provide health insurance to their employees.  I guess news travels slowly from Hawaii.  Congress passed the first of many subsequent amendments to ERISA making an exception to the general preemption for Hawaii.

One reason for the preemption clause was the belief that Congress would tackle national health care reform soon and they wanted to protect that right at the national level, a theme that would reappear in PPACA.

The consequence of allowing states to only regulate “insured” health plans was the movement by many larger employers to “self-insured” plans.  By taking on the risk of health insurance themselves, employers escaped the mandates imposed by state insurance departments.  Companies operated in multiple states could establish uniform benefit designs for all of their employees.  At least one source estimates about 43% or 53 million people with health care coverage are regulated by ERISA and not by state insurance departments.

Hawaii

When Congress exempted Hawaii from the preemption clause they only exempted the Hawaii law as it existed in 1974.  Employers have since discovered the loopholes in Hawaii law for part time employees and contract employees.  Now, even though Hawaii has always had the lowest rate of uninsured in the country, that number is increasing as more and more employers exploit that loophole.

The ERISA preemption prevents efforts by state to expand coverage by requiring employers to offer health insurance.  Instead they are confined to a hodgepodge of confusing and complicated programs to expand state Medicaid insurance programs or offer subsidies to small employers.

Obama blocks states?

The PPACA does not make it easier for state single payer advocates.  The Obama Administration vigorously opposed bipartisan efforts in the House Education and Labor Committee to give states more latitude as laboratories for reform.

According to the Wonk Room:

During the House Education and Labor Committee’s mark-up, Rep Dennis Kucinich (D-OH) introduced an amendment that would authorize and require “the Secretary of Labor, in consultation with the Secretary of Health and Human Services” to waive the ERISA pre-emption (Sec. 514) for states that have enacted a state single payer system. The committee adopted the amendment, but it was left out of the final House bill.

I heard a participant in that hearing describe the White House lobbying efforts, and it was only the support of some Republicans who supported state’s rights that allowed its passage in committee.  The Kucinich amendment would have required the Department of Labor to grant an ERISA preemption to any state single payer system that met certain requirements.

Wait until 2017?

What did survive was an amendment by Senator Bernie Sanders.

This permits states to develop their own “innovative solution” but not until 2017

But they still have to jump through hoops.  Not only do they have to meet some understandable requirements for coverage and affordability, but they now have to request separate waivers from ERISA from the Department of Labor, and from Hthe Department of Health and Human Services (HHS) for Medicare, Medicaid and SCHIP.  The Kucinich amendment would have made the ERISA waiver automatic under the certain conditions. At least the law seems to require that HHS implement a single waiver process for all of the programs – Medicare, Medicaid, SCHIP, IHS – under its authority.

While none of these issues will deter state single payer advocates, they may give some state legislators pause.

Photo Credit:  Maui-Tropica