This entry is for my Dad.
I haven't actually seen him for quite awhile. Our 26-year-old son was three months old when we learned my Dad's doctors found cancer in one of his kidneys.
As with most families, first we panicked, then we cried, then we went to work, helped by the assurance that Dad would do everything in his power to fight his disease.
This was in my COSE days. We ran a pretty big health plan even then, so I was on good terms with the CEO of Dad's insurance company, and also knew the head of the Cleveland Clinic. We got him the best of care. And after his surgery, he enrolled in an early clinical trial focused on immunotherapy as a weapon against cancer. The researchers injected a vaccine made from his tumor into his body, in hopes that the procedure would kick his immune system into overdrive and fight the spread of his disease.
He had a couple pretty good years. But then he began to have trouble remembering things, and once experienced a terrifying August afternoon at a family reunion, when for a few hours, he had no idea where he was or who his family members were.
An exam a couple days later confirmed that the cancer had spread to his brain. He was scheduled for radiation therapy the next week. It was Labor Day weekend, and he was to receive his first treatment the Tuesday after Labor Day.
Our entire family...Mom and Dad, their seven kids (a couple of whom were still teenagers) plus spouses and grandchildren...got together as we always did, at my sister's country cabin, for a Labor Day clambake. Spirits were high, if a little forced. And that day, I had my last conversation with my Dad.
We found ourselves sitting quietly on the front porch. I wanted to make sure he was okay; we knew his prognosis wasn't good. But that wasn't what he wanted to talk about. He wanted to talk about me. It was brief, but it was the single most powerful conversation I've had in my life.
My Dad said, "I've been thinking I've been pretty lucky with my medical treatment. The Clinic certainly bought me more time than somebody with my kind of cancer has any right to expect.
"But in the last couple weeks I've been thinking about what happens to those poor S.O.B's who get sick and DON'T have a son in the health care business, the people who don't have special knowledge, special connections, or a special family. Who fights for THEM?
"Either I'll get better or I won't. That's not in my hands. And I know my kids will take care of their mother, and vice versa. What I hope is that you'll keep those folks in mind. Somebody has to stand up for the people who need the kind of help you've given to me. Remember, Jesus said, 'Whatever you do for these, the least of my brethren, you do for me'."
What was I supposed to say, except what I always said to my Dad?
"Yes, sir. I'll do my best."
Three days later, during his radiation treatment, the cancer exploded in his brain. When he came home to hospice, he was conscious but found it very hard to communicate. Six weeks later, he was gone.
My mission at COSE had always been to provide our members with a good deal on health insurance coverage. But after that conversation, I had a broader mission: to fight for access to affordable health coverage for people who need it.
We fought with insurance companies, to make them work more efficiently, hold them accountable, and qualify sole proprietors for group coverage through COSE. We fought with hospitals to force them to be more transparent and keep their costs under control. We fought in the marketplace. We fought in the state legislature for the right to bring managed care plans to small businesses, and to keep special interests from enacting benefits mandates which would raise the cost of our members' health coverage. And we fought in Washington, to keep Congress and regulatory agencies from messing with small businesses' health coverage.
I figured we couldn't help everybody. But small business owners, and the people who work for them, were among those to whom health coverage was generally not available at affordable prices, and many of those who work but don't have health coverage work in small businesses which couldn't buy coverage.
We experienced some pretty good results. For seven years straight, we were able to keep our members' rate increases below ten percent per year; in a couple years, rates increased by less than five percent.
Because we offered an unbelievably good deal, COSE enjoyed phenomenal membership growth. Year after year, COSE membership and participation in our health plans grew by 1000 companies and 6000 employees per year, net of losses.
And in the early '90's, a regional research organization conducted a study of the working uninsured in Ohio. They concluded that, despite having the highest health care costs in the state, the percentage per capita of working people in Cleveland who lacked health coverage was half that of other metropolitan areas. The reason? Empirical researchers couldn't say conclusively, but the existence of the COSE health plan was certainly a factor.
So I felt that I was doing my best to keep the promise I made to my Dad.
When a few COSE representatives were invited to The White House to brief the first President Bush on how Cleveland was succeeding where other communities were not, I knew my Dad was there with us. And when the President came to Cleveland to tell the country about COSE's success (my Mom was in the audience), I knew my Dad would have been proud.
And when we were invited to the Clinton White House to talk with Hillary and Ira Magaziner about health care reform, and they blithely accused us about not caring about helping people get insurance, we had the data to suggest otherwise, and told them our objections to HillaryCare weren't based on politics, but on our knowledge that their approach couldn't possibly work. My Dad, who loved a good fact-based argument, was patting me on the back.
Of course, a story this good couldn't possibly end happily. COSE's parent organization got a new CEO, who thought our aggressive advocacy on behalf of small businesses was "disruptive" to the corporate agenda. COSE's lead insurer got a new CEO, a CPA, who decided that, despite the fact that COSE was their most profitable customer in real dollars, the insurer's profit margin per group wasn't high enough. Some of the community's larger employers got all huffy because COSE, with its 12,000 companies and 80,000 employees in the health plan, was getting a better deal on health coverage for small businesses than they could get for their employees. And some area hospitals (including our friends at the Cleveland Clinic) began to be concerned that COSE was getting big enough that we could begin to have an effect on their pricing.
So I was shown the door, in favor of a new staff leadership who looked at the health plan not as a responsibility we owed our members, but as an opportunity to generate a lot of revenue without doing a lot of work. They made a new deal, which traded the organization's role as an aggressive negotiator on behalf of its members for the best possible prices for an agency role, selling plans on behalf of its insurer in exchange for a piece of the action...about 2 percent of collective premium (1.8 percent actually, in case the COSE folks decide to call me a liar). COSE no longer says how big the health plan is, but it was closing in on $500 million in 2004, and premiums have reportedly doubled since then. So by making the transition from members' advocate to marketing channel, COSE's picking up quite a chunk of its members' money.
Membership has declined. Participation in the health plans has stagnated, but COSE's doing just fine...and the Executive Director is making about $400,000 a year and driving a new Jaguar.
I was reminded of all this yesterday, when I had a business meeting with a friend and long-time COSE member, who has a small law practice. He showed me his COSE renewal letter. His rates are scheduled to increase 26%...to over $1500 per month per employee, despite very little utilization. He told me that his premiums have more than doubled in the past five years, and he's not sure how he can afford to continue to cover the cost. COSE tried to sell him a HDHP, but he thinks they're a scam (I tend to agree), and a HSA plan, but, he said "If I could afford the HSA contribution, I'd just pay the frickin' premium for my current health plan."
The guy wants to continue to do right by his family and his employees, and he asked me, "What should I do?"
I didn't have a good answer. Because I'm still working on an alternative. I owe it to all those small companies out there who need somebody to stand up for them.
And I owe it to my Dad...
Anybody out there feel like helping?...
Showing posts with label COSE. Show all posts
Showing posts with label COSE. Show all posts
Saturday, June 18, 2011
Monday, August 24, 2009
Let A Thousand Co-ops Bloom...With A Little Careful Congressional Cultivation
Might "co-operatives" be a tool for increasing access to more affordable health coverage for small businesses and individuals?
That's a relatively new component of the health care reform debate, particularly as ideas regarding a "public option" health plan have begun to lose their luster due to fears of enhanced government involvement and the threat of significant costs.
Keeping in mind once again that very few details regarding any element of health insurance reform legislation are at all clear, here's what we know about the deliberations regarding co-operatives.
Essentially, proponents see co-ops as non-profit, member-owned organizations which would self-insure for the health coverage provided to members, and which would have the ability to negotiate reimbursement rates directly with providers. The government would somehow assist start-up co-ops with some initial capital to enable them to establish necessary reserves. After that, they'd supposedly be required to satnd on their own through their premium income.
Opponents say that co-ops would be highly unlikely to make much of a difference in reducing or controlling health care costs for many years. It would take a long time for co-ops to develop the market power to be able to negotiate with providers from a position of strength, unless they're able to offer reimbursement rates roughly equivalent to Medicare (and idea hospitals and doctors hate). And unless they're exempted from many of the regulations which make small group and individual health insurance inefficient and costly to administer (an idea insurers hate), they'd have to operate just as inefficiently as insurance companies do, so they'd probably be unable to compete based on administrative efficiency.
There are also concerns that there aren't many good examples of successful health care co-ops to serve as role models of good performance over the long haul.
At the same time, organizations ranging from mutual insurance companies to chambers of commerce to health systems are jockeying for definitions of what a co-op is that will suit their current operations, and enable them to conduct business as usual.
What should a co-op look like? Let's take a look back to s simpler time...
Health insurance companies didn't exist in any form till the 1930's, when the first Blue Cross Blue Shield plans were established. Before then, most people's "health coverage" was either paid for directly, or was covered through "benevolent organizations." These groups were organized around affinity groups: whether by church groups, ethnic organizations, or community service organizations, they were membership organizations consisting of people with some degree of common interest. Every member would pay a small amount of money in monthly assessments, and the societies would help to cover the health expenses of any members, should they require help.
Blue Cross Blue Shield plans had their roots in such organizations. They consolidated these efforts by providing administrative services to individuals and employers who wished to establish a "pool" of funds to help pay the hospital and physician bills of their members, and often operated as not-for-profit "mutuals," owned by their members, who voted to elect the plans' leadership and make other important decisions.
For quite awhile, my COSE alma mater was one of the largest and most successful health insurance purchasing co-operatives in the country. At one time it covered over 200,000 small business owners, employees, and family members throughout Northern Ohio. The COSE health plan was run by an independent Board, made up of members, which negotiated directly with insurers to develop plans which would operate in the members' best interests. COSE accepted no revenue from its insurers; costs were paid through member dues, and through fees paid by members who participated in the health plans. Because the group was so large, the fees charged to members were extremely modest: $12 per company and $1 per employee per month.
Our results over many years were impressive. For 15 years straight, participation in COSE grew by a net of 1000 member companies (6000 employees) per year. Members participating in the COSE health plan saved an average of 30% on their health insurance premiums. And for more than 10 consecutive years, members rates of increase in health premiums were less than 10% per year; in some years, members' rates didn't increase at all.
And this was in the small group and individual market. The average COSE member company had 6 employees, and many groups had 2 employees or fewer.
Unfortunately, COSE's recent history hasn't been so rosy. Bad management and governance is one reason. Another is that the organization decided a number of years ago to use the health plan as a source of revenue, which removed any incentive to keep prices low for members.
But another reason for the COSE health plan's failure to grow, or contain costs, is that, in the last round of federal health insurance reform legislation, insurers were successful in developing regulations which severely undercut the ability of membership organizations to negotiate volume discounts on rates or administrative costs with insurers. In addition, many states codified rules which established "group coverage" as applying only to employer groups, not to large purchasing groups. These same rules specifically disqualified sole proprietorships from eligibility for group coverage.
Properly designed, co-ops can be a powerful tool in increasing the availability of affordable health coverage, AND in increasing competition among health insurers. But it'd have to be done right. Here's what Congress would need to do:
1)Specifically state that the formation of group purchasing arrangements is a matter of public interest;
2)Permit the formation of purchasing groups by non-profit affinity groups a) formed for purposes other than that of purchasing health coverage,and b) consisting of at least 5,000 insured lives (though 10,000 would be better, for the purposes of actuarial credibility);
3) Require that such groups' health plans be governed by a separate fiduciary Board of Trustees, not as a revenue source for the sponsoring organization;
4) Specifically enable co-ops to negotiate volume discounts on rates and administrative costs with insurers and providers on behalf of their members;
5) Specifically prohibit the formation of co-ops by insurers or by provider organizations, and;
6) Support the creation of a limited number of pilot projects at the federal, state and local levels to demonstrate how such groups might use the combination of large numbers, administrative efficiencies, and negotiating power to control the rise of health insurance premiums.
Developing co-ops could be a relatively simple matter, if Congress would remove the obstacles to the formation of such groups which it itself has imposed, with the encouragement of the insurance industry.
This would keep health insurance reform in the private sector, but give purchaser the ability to consolidate purchasing power as a response to the consolidation of power which has taken place among insurers and providers over the past decade.
That's a relatively new component of the health care reform debate, particularly as ideas regarding a "public option" health plan have begun to lose their luster due to fears of enhanced government involvement and the threat of significant costs.
Keeping in mind once again that very few details regarding any element of health insurance reform legislation are at all clear, here's what we know about the deliberations regarding co-operatives.
Essentially, proponents see co-ops as non-profit, member-owned organizations which would self-insure for the health coverage provided to members, and which would have the ability to negotiate reimbursement rates directly with providers. The government would somehow assist start-up co-ops with some initial capital to enable them to establish necessary reserves. After that, they'd supposedly be required to satnd on their own through their premium income.
Opponents say that co-ops would be highly unlikely to make much of a difference in reducing or controlling health care costs for many years. It would take a long time for co-ops to develop the market power to be able to negotiate with providers from a position of strength, unless they're able to offer reimbursement rates roughly equivalent to Medicare (and idea hospitals and doctors hate). And unless they're exempted from many of the regulations which make small group and individual health insurance inefficient and costly to administer (an idea insurers hate), they'd have to operate just as inefficiently as insurance companies do, so they'd probably be unable to compete based on administrative efficiency.
There are also concerns that there aren't many good examples of successful health care co-ops to serve as role models of good performance over the long haul.
At the same time, organizations ranging from mutual insurance companies to chambers of commerce to health systems are jockeying for definitions of what a co-op is that will suit their current operations, and enable them to conduct business as usual.
What should a co-op look like? Let's take a look back to s simpler time...
Health insurance companies didn't exist in any form till the 1930's, when the first Blue Cross Blue Shield plans were established. Before then, most people's "health coverage" was either paid for directly, or was covered through "benevolent organizations." These groups were organized around affinity groups: whether by church groups, ethnic organizations, or community service organizations, they were membership organizations consisting of people with some degree of common interest. Every member would pay a small amount of money in monthly assessments, and the societies would help to cover the health expenses of any members, should they require help.
Blue Cross Blue Shield plans had their roots in such organizations. They consolidated these efforts by providing administrative services to individuals and employers who wished to establish a "pool" of funds to help pay the hospital and physician bills of their members, and often operated as not-for-profit "mutuals," owned by their members, who voted to elect the plans' leadership and make other important decisions.
For quite awhile, my COSE alma mater was one of the largest and most successful health insurance purchasing co-operatives in the country. At one time it covered over 200,000 small business owners, employees, and family members throughout Northern Ohio. The COSE health plan was run by an independent Board, made up of members, which negotiated directly with insurers to develop plans which would operate in the members' best interests. COSE accepted no revenue from its insurers; costs were paid through member dues, and through fees paid by members who participated in the health plans. Because the group was so large, the fees charged to members were extremely modest: $12 per company and $1 per employee per month.
Our results over many years were impressive. For 15 years straight, participation in COSE grew by a net of 1000 member companies (6000 employees) per year. Members participating in the COSE health plan saved an average of 30% on their health insurance premiums. And for more than 10 consecutive years, members rates of increase in health premiums were less than 10% per year; in some years, members' rates didn't increase at all.
And this was in the small group and individual market. The average COSE member company had 6 employees, and many groups had 2 employees or fewer.
Unfortunately, COSE's recent history hasn't been so rosy. Bad management and governance is one reason. Another is that the organization decided a number of years ago to use the health plan as a source of revenue, which removed any incentive to keep prices low for members.
But another reason for the COSE health plan's failure to grow, or contain costs, is that, in the last round of federal health insurance reform legislation, insurers were successful in developing regulations which severely undercut the ability of membership organizations to negotiate volume discounts on rates or administrative costs with insurers. In addition, many states codified rules which established "group coverage" as applying only to employer groups, not to large purchasing groups. These same rules specifically disqualified sole proprietorships from eligibility for group coverage.
Properly designed, co-ops can be a powerful tool in increasing the availability of affordable health coverage, AND in increasing competition among health insurers. But it'd have to be done right. Here's what Congress would need to do:
1)Specifically state that the formation of group purchasing arrangements is a matter of public interest;
2)Permit the formation of purchasing groups by non-profit affinity groups a) formed for purposes other than that of purchasing health coverage,and b) consisting of at least 5,000 insured lives (though 10,000 would be better, for the purposes of actuarial credibility);
3) Require that such groups' health plans be governed by a separate fiduciary Board of Trustees, not as a revenue source for the sponsoring organization;
4) Specifically enable co-ops to negotiate volume discounts on rates and administrative costs with insurers and providers on behalf of their members;
5) Specifically prohibit the formation of co-ops by insurers or by provider organizations, and;
6) Support the creation of a limited number of pilot projects at the federal, state and local levels to demonstrate how such groups might use the combination of large numbers, administrative efficiencies, and negotiating power to control the rise of health insurance premiums.
Developing co-ops could be a relatively simple matter, if Congress would remove the obstacles to the formation of such groups which it itself has imposed, with the encouragement of the insurance industry.
This would keep health insurance reform in the private sector, but give purchaser the ability to consolidate purchasing power as a response to the consolidation of power which has taken place among insurers and providers over the past decade.
Thursday, August 20, 2009
NFIB Nails Small Group Health Reform Priorities In Short Words And Simple Sentences
The National Federation Of Independent Business (NFIB) is the nation's largest small business advocacy organization, with over 600,000 member companies throughout the U.S.
The organization's politics has usually run toward the conservative side. NFIB was one of the organizations often prominently mentioned when talking about the failure of the Clinton Administration's health reform plan.
But this year, NFIB deserves recognition for the clearest and most actionable small group market reform agenda out there in the political process. And the organization has taken to the Net to spread its gospel.
Here's a link to their cover page:http://nfib.matrixgroup.net/tabid/565/Default.aspx?cmsid=49240&v=1 (If the link doesn't work, please copy and paste in to your browser)
NFIB is selling their agenda under three important principles. They're the 3 C's: Cost, Choice and Competition. Here's a summary:
"Cost...We must bring down the cost of health insurance for small businesses and their employees. Currently, they pay 18% more for health care than big businesses. Creating an equal playing field starts with improving the small group insurance markets.
"Choice...Small business owners and employees need more choice when shopping for insurance plans. Health care reform needs to expand the number of providers and affordable plans available to small businesses and their employees.
"Competition...Lack of competition makes it easy for providers and insurers to raise their prices. In many states, small business owners have only one or two choices of insurance providers. A recent study shows that in most states the five largest insurers control 90 percent of the market. We need more competition in the marketplace and access to larger purchasing pools to help lower the cost of insurance for small businesses."
This is a reform agenda to salute. It's concise, well-documented, and recommends action steps which, if enacted, would actually help small businesses control their health care costs. Contrast it to the fuzzy, murky rhetoric coming from other national groups, like the US Chamber of Commerce, The National Small Business Association, and even my COSE alma mater.
But NFIB is in for a fight.
For several years, NFIB has been thinking about the evolution of health insurance toward a national market. They're making a big bet that with their 600,000 member companies, they would be an early favorite to meet the criteria to form a non-profit health insurance exchange or co-operative that could cast a big shadow in the marketplace, and easily move their membership past the one million mark. The organization has developed a health plan for small employers administered by a big broker specializing in association health plans.
The principal impediments: Big local or regional health plan, like Blue Cross Blue Shield plans, who are already the largest insurers of small groups at the local level; and local or statewide Chambers of Commerce and other associations which have used exclusive relationships with these insurers to build their memberships and generate a ton of revenue from sales commissions and other fees.
These groups fear the emergence of national competitors, especially big ones which could negotiate very favorable rates with insurers and providers.
That's why you'll hear them say that, if such co-ops are to be formed, they should be subject to the same rules as insurers, including rules that protect insurers from having to negotiate with associations as big customers on behalf of their members. In effect, they'll demand that any national co-op should be required to be as inefficient as they are.
And that's why I'm cheering for NFIB to win.
The organization's politics has usually run toward the conservative side. NFIB was one of the organizations often prominently mentioned when talking about the failure of the Clinton Administration's health reform plan.
But this year, NFIB deserves recognition for the clearest and most actionable small group market reform agenda out there in the political process. And the organization has taken to the Net to spread its gospel.
Here's a link to their cover page:http://nfib.matrixgroup.net/tabid/565/Default.aspx?cmsid=49240&v=1 (If the link doesn't work, please copy and paste in to your browser)
NFIB is selling their agenda under three important principles. They're the 3 C's: Cost, Choice and Competition. Here's a summary:
"Cost...We must bring down the cost of health insurance for small businesses and their employees. Currently, they pay 18% more for health care than big businesses. Creating an equal playing field starts with improving the small group insurance markets.
"Choice...Small business owners and employees need more choice when shopping for insurance plans. Health care reform needs to expand the number of providers and affordable plans available to small businesses and their employees.
"Competition...Lack of competition makes it easy for providers and insurers to raise their prices. In many states, small business owners have only one or two choices of insurance providers. A recent study shows that in most states the five largest insurers control 90 percent of the market. We need more competition in the marketplace and access to larger purchasing pools to help lower the cost of insurance for small businesses."
This is a reform agenda to salute. It's concise, well-documented, and recommends action steps which, if enacted, would actually help small businesses control their health care costs. Contrast it to the fuzzy, murky rhetoric coming from other national groups, like the US Chamber of Commerce, The National Small Business Association, and even my COSE alma mater.
But NFIB is in for a fight.
For several years, NFIB has been thinking about the evolution of health insurance toward a national market. They're making a big bet that with their 600,000 member companies, they would be an early favorite to meet the criteria to form a non-profit health insurance exchange or co-operative that could cast a big shadow in the marketplace, and easily move their membership past the one million mark. The organization has developed a health plan for small employers administered by a big broker specializing in association health plans.
The principal impediments: Big local or regional health plan, like Blue Cross Blue Shield plans, who are already the largest insurers of small groups at the local level; and local or statewide Chambers of Commerce and other associations which have used exclusive relationships with these insurers to build their memberships and generate a ton of revenue from sales commissions and other fees.
These groups fear the emergence of national competitors, especially big ones which could negotiate very favorable rates with insurers and providers.
That's why you'll hear them say that, if such co-ops are to be formed, they should be subject to the same rules as insurers, including rules that protect insurers from having to negotiate with associations as big customers on behalf of their members. In effect, they'll demand that any national co-op should be required to be as inefficient as they are.
And that's why I'm cheering for NFIB to win.
Friday, July 31, 2009
What's Wrong With Taxing Health Plans?
The New York Times reported on Wednesday that the Senate Finance Committee "has become intrigued by a version of a health care tax being pushed by Massachusetts Democrat John Kerry that comes dressed in a whole lot of lipstick. It doesn't fall on workers. It doesn't even fall on employers. It falls on everyone's favorite villain: health insurance companies."
The tax would be levied against health plans costing more than a certain amount. The NYT example is plans costing more than $25,000 per year. Insurers offering plans costing more than that would be taxed, and the proceeds would be used to cover the cost of the uninsured. Insurers would presumably pass the cost onto their customers, who would then have an incentive to offer less generous health plans.
There are a whole bunch of things wrong with this idea. But here are just two of them.
Keep in mind that, for small employers and individuals, insurance administrative costs can run as high as 25-40 percent of the premium dollar.
What kind of "silver plated" health plan costs $25,000?
Late last year, our family lost its health coverage when My Charming Wife was laid off from her job. We couldn't afford COBRA continuation coverage under her plan, which would have cost us $1300 per month (that would've been $15,600 per year that we didn't have).
She worked for a large employer, and her benefit plan was very generous. So I went shopping. We raised the deductibles by a factor of ten, dropped the dental and vision coverage, and priced a plan through Cleveland's Council Of Smaller Enterprises (COSE), which makes a big deal about saving small businesspeople money on their health care coverage.
COSE's offer to us: they'd sell us the plan we wanted...for $1880 per month (that's $22,500 per year).
So we shopped further. We raised the family deductible to $3000 per year, and sought coverage through the individual market.
The best cost we could find: through COSE's insurer, Medical Mutual of Ohio, we were quoted $1860 per month (that's $22,300 per year). Assuming we'd have bought that plan (we didn't) and experienced a ten percent rate increase, out hardly silver plated health plan would have cost us nearly $25,000.
The folks in Washington don't get that the price small businesspeople and individuals pay for health insurance is only indirectly related to the cost of health care. On average, small companies pay 18 percent more for health insurance coverage than big companies do.
So taxing a health plan based on its cost would create still more pressure on small business owners...whom I'm told the Government wants to help...and create even more challenges to maintaining a small group health plan.
That's problem #1.
Here's Problem #2. Insurers would readily accept the "responsibility" of taxing those "generous" health plans they offer to small businesses and individuals. As a senior health insurance official said of another recent scam, it'd be "all about shared responsibility, and that's what needs to happen."
But billing for the tax would require effort and expense. So would collecting the tax, accounting for it, and paying it to...whoever. So insurers would insist that it'd be only fair that they be able to recover the administrative costs entailed in collecting, processing, and paying the tax.
That would raise their administrative costs still further, AND enable insurers to treat the new tax as a revenue source. And of course, it all just adds to the cost of health insurance.
Make sense to you?
Me, either...
The tax would be levied against health plans costing more than a certain amount. The NYT example is plans costing more than $25,000 per year. Insurers offering plans costing more than that would be taxed, and the proceeds would be used to cover the cost of the uninsured. Insurers would presumably pass the cost onto their customers, who would then have an incentive to offer less generous health plans.
There are a whole bunch of things wrong with this idea. But here are just two of them.
Keep in mind that, for small employers and individuals, insurance administrative costs can run as high as 25-40 percent of the premium dollar.
What kind of "silver plated" health plan costs $25,000?
Late last year, our family lost its health coverage when My Charming Wife was laid off from her job. We couldn't afford COBRA continuation coverage under her plan, which would have cost us $1300 per month (that would've been $15,600 per year that we didn't have).
She worked for a large employer, and her benefit plan was very generous. So I went shopping. We raised the deductibles by a factor of ten, dropped the dental and vision coverage, and priced a plan through Cleveland's Council Of Smaller Enterprises (COSE), which makes a big deal about saving small businesspeople money on their health care coverage.
COSE's offer to us: they'd sell us the plan we wanted...for $1880 per month (that's $22,500 per year).
So we shopped further. We raised the family deductible to $3000 per year, and sought coverage through the individual market.
The best cost we could find: through COSE's insurer, Medical Mutual of Ohio, we were quoted $1860 per month (that's $22,300 per year). Assuming we'd have bought that plan (we didn't) and experienced a ten percent rate increase, out hardly silver plated health plan would have cost us nearly $25,000.
The folks in Washington don't get that the price small businesspeople and individuals pay for health insurance is only indirectly related to the cost of health care. On average, small companies pay 18 percent more for health insurance coverage than big companies do.
So taxing a health plan based on its cost would create still more pressure on small business owners...whom I'm told the Government wants to help...and create even more challenges to maintaining a small group health plan.
That's problem #1.
Here's Problem #2. Insurers would readily accept the "responsibility" of taxing those "generous" health plans they offer to small businesses and individuals. As a senior health insurance official said of another recent scam, it'd be "all about shared responsibility, and that's what needs to happen."
But billing for the tax would require effort and expense. So would collecting the tax, accounting for it, and paying it to...whoever. So insurers would insist that it'd be only fair that they be able to recover the administrative costs entailed in collecting, processing, and paying the tax.
That would raise their administrative costs still further, AND enable insurers to treat the new tax as a revenue source. And of course, it all just adds to the cost of health insurance.
Make sense to you?
Me, either...
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