By Jim Holman of Gresham, Oregon. For 21 years, Jim worked as a hospital data analyst - most recently at OHSU.
There are a number of problems health insurance in the U.S., even for those with insurance or those who can afford insurance. If you change jobs you might not be able to go to your primary physician any more if the new job has a different health plan If you’re self-employed you might not be able to purchase health insurance because it’s too expensive. If you work for a company that doesn’t offer a health benefit then you’re also out of luck. Many people with existing health problems can’t purchase private health insurance even if then can afford it.
Specific health insurance reform is difficult even to talk about. Many proposals for health insurance reform are met with a charge of “socialized medicine,” an accusation which in itself can be fatal to the proposal. But “private” approaches to health insurance reform are often little more than new ways to distribute the current unfairness.
The system I propose contains both socialized and private elements. It socializes the opportunity for health insurance while retaining private funding and private choice. It retains the link between employment and heath insurance even as it widens the opportunity for health insurance to those whose employment status does not now afford them the opportunity for health insurance.
The proposal is very simple. All health insurance plans offered in the State would be available to all people who are residents in the geographic areas served by the plans. The State of Oregon would contract with one or more firms to coordinate health benefits for all people in the state. These firms would administer regulations governing open enrollment periods and other life events through which people could change insurance plans. It would also collect and distribute insurance payments and notify insurance companies of who is covered. In other words, these firms would function very much like existing companies that administer COBRA benefits.
Since all plans would have to be offered to all residents of the service area, the risk pool for each plan would be potentially the entire population of the service area.
How would this work? Let’s examine several scenarios:
1. You are employed by Acme Industrial. Acme Industrial offers up to $400 as a health insurance benefit to all employees. With that $400 you can select any plan operating within that service area; you are no longer limited to one or two plans offered by the employer. If your selected plan costs more than $400, you make up the difference with pre-tax dollars.
2. Several years later you change jobs, and you now work for Cool Products. Cool Products offers a $425 health benefit. You choose to retain your existing insurance, but now the Cool Products benefit money pays for your insurance, and you make up with difference.
3. Several months later you are laid off. There is no need for a COBRA program, since your health insurance does not depend on your employment. You decide to continue with your existing health plan, although since you were laid off you could have chosen to switch to a different plan.
4. Finally you become self-employed. As part of the larger risk pool, and having retained continuous health insurance, you continue to pay for health insurance out of your own pocket, but with pre-tax dollars.
In other words, throughout the various modes of employment you retain the same insurance, and pay the same rate that everyone else pays. When you are unemployed or self-employed, you continue to enjoy the same health insurance tax benefits that people who work for regular employers enjoy. Companies can continue to fund health insurance benefits, but in the form of money rather than in the form of specific plans.
One obvious objection to this proposal is that it would require firms to administer benefit plans, and there would be a cost for this service. In the case of companies that currently administer COBRA benefits, this is about two percent on top of insurance costs. But we need to look at this in the context of the total system. Under the current system of health insurance, thousands of companies in the state employ thousands of people as health benefit coordinators. In addition, insurers have to craft plans for individual companies and have to track clients by company. The new system simplifies health insurance procedures and reduces process cost across the state, and this offsets the new cost of the firms coordinating insurance benefits. Going from decentralized to centralized insurance benefit administration gives us the opportunity to streamline and automate the total process of benefit administration throughout the state.
People are no longer limited to insurance plans selected by individual employers. Instead, you can choose from any plan serving your geographic area. This means that insurers and contracted health systems and services would have to compete for individuals through balancing benefits and plan cost, and through better service. Since all residents of the service area are potential clients, insurers would have an incentive to develop plans that would appeal to people in various income brackets.
While insurance plans would have to compete for clients, the up side is that the potential market for each plan would be greatly expanded. For example, right now Kaiser Permanente competes for clients whose employers provide Kaiser as an option. Under the proposal the potential Kaiser client base would include potentially every person who lives in an area served by Kaiser.
Under this proposal, it is possible that health insurance costs might go up slightly, since we would be covering people who currently are not insured. But again, we have to look at costs in the total system. People without insurance still end up getting treated, and hospitals pass on the cost of uncompensated care to paying customers and their insurers. In a sense you either pay on the front end or on the back end.
But in exchange for possibly slightly higher insurance costs, people would end up with much greater choice and portability. And in the event that one were to become a sicker, more expensive client, one would still be able to obtain insurance through being a member of the expanded risk pool.
Currently many employers cannot afford to provide a health benefit to their employees. But under the proposal, employers could still contribute something toward health insurance. For example, if the company cannot afford a monthly $400 benefit, could it provide a $100 monthly benefit? If so, then perhaps the employee could kick in some additional pre-tax dollars in order to purchase at least some catastrophic insurance. This is obviously not an ideal solution, but I think that most people would find that something is better than nothing.
In addition, this proposal would broaden the opportunity for health insurance coverage. Parents could pay for health insurance for adult children, or vice versa. Rather than running its own Medicaid insurance plan, the State could simply fund all or part of the costs of insurance for people who are eligible for Medicaid.
This proposal would obviously constitute a major change in how health insurance is provided. Thus it would have to be implemented over a period of some years. Otherwise some insurers might find themselves overwhelmed with new clients; they would need some time to gear up for the additional workload. This would involve contracting with additional physician practices, and could even involve additional capital construction.
This proposal obviously does not solve all problems with health insurance, nor does it address many of the cost drivers in the medical system. But within certain limitations it does bring more people under the health insurance umbrella. It gives those people far more choice and portability than they currently have. It simplifies and streamlines the system of health insurance even as it creates more opportunities. It provides a greater incentive for health insurers to improve benefits and control client cost, even as it offers to those companies a greatly expanded potential client base. It spreads the risk, socializes the opportunities, and yet retains private funding and choice.