Co-Ops, Triggers, Mandates...Where Will Health Reform Legislation End Up?

Several weeks ago, I wrote about a few elements of health care reform legislation which, if enacted, might actually help small business owners and self-employed individuals get and maintain access to health care coverage at a more affordable cost. Those elements are:
-undoing federal and state regulations which impede the formation of large purchasing groups, or co-operatives, which would enable small businesses and the self-employed to combine their purchasing power for lower costs and a greater variety of choices in health coverage;
-expressly making it clear that self-employed individuals purchasing coverage through such co-ops will be able to obtain group coverage at group rates (since the "group" would be the co-operative, not the individual companies which are members);
-establishing a series of pilot projects or demonstration projects aimed at using information technology to make it easier and more cost-effective to shop for and purchase health coverage, and;
-establishing a five-year window for these initiatives to take effect, and for the insurance industry to demonstrate that they "get it," before considering the enactment of either a "public option" health plan, or a mandate of any kind.

My rationale for those initiatives were first, that mandating either employers or individuals to purchase health care coverage makes sense only if the marketplace is working as well as it can, and that coverage is generally available at reasonable prices to anybody who wants to buy it (today, that's not the case); and second, that the establishment of co-operative purchasing groups makes sense only if they are not subject to the same crippling, anti-consumer pricing and underwriting practices which have made health insurance more expensive and harder to obtain for small businesses and the self-employed.

As the President prepares to speak to the nation this evening, and as Congress re-convenes and begins efforts to "re-boot" health care reform legislation, I'm more confident than ever that these elements will be a part of the outcome of whatever health care reform legislation emerges from the Congressional sausage-maker. Here's why:

1) There's already broad consensus that the individual health insurance market needs to get fixed. It's a very safe bet that, at the very least, the legislation will prohibit insurers from rejecting applications from individuals with health conditions, and curb some of the industry's more egregious practices, such as recision (the practice of canceling coverage for individuals who develop health conditions after purchasing coverage), or dramatically increasing premium rates for individuals who are less than perfectly healthy;

2) Whether they're called exchanges, co-operatives, or something else, there's broad agreement that cost and access relief for the small group and individual markets will come from creating larger "risk pools," taking advantage of the actuarial laws of large numbers, as well as collective purchasing power, to enable participating companies to negotiate more effectively on pricing, and reducing the cost of administration, which can be six times higher for small businesses than for large ones;

3) The bill being reported out of the Senate Finance Committee will, at the very least, enable states to experiment with various mechanisms for pooling risks, whether via state-sponsored "public options" or co-operatives, and providing some Federal resources to encourage such experimentation.

That leaves the debate over the so-called public option. The House leadership has made it quite clear that House members probably can't pass without the inclusion of a public option. The Senate leadership says that a bill which contains a public option won't muster the votes necessary to pass, and the Senate Finance Committee does not contain a public option, settling for a "trigger" for a possible public option if, after three years, the insurance industry hasn't gotten its act together.

I expect that House members will get what they want: a bill which contains some sort of public option provision. But the Senate bill will not contain a public option, and MAY include a provision for some sort of medical malpractice reform as an olive branch to win some wavering Republiicans.

In conference committee, where the House and Senate bills will be reconciled, the parties will agree to hold off on a public option for three to (probably) five years, giving private market reforms a chance to work.

This would give the House the chance to say they supported a public option, and the President to say that a public option is a part of the bill. It would also give the market time to adjust to whatever regulations come out of the legislative process after the legislation passes (the regulatory process itself could take a couple years), and put the insurance industry on notice that, unless it plays a major role in reducing the number of uninsured people and reducing administrative costs, it could face competition with a robust public option.

And by the way, it would also give the geniuses in Washington the chance to decide exactly what a public option might look like, and how it might work. Because, as I've said several times in the past, currently there's almost NOTHING about the health care reform plan which has been specifically spelled out in legislation. So until that happens, both proponents and opponents are contending with shadows.