Sunday, July 18, 2010

A delicate balance

Kay Lazar writes in the Boston Globe today about an aspect of the Massachusetts universal health care law that has been developing recently. Under that law, an employer pays a penalty to the state if it choose not to offer health insurance. The lede:

The relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventually weigh heavily on the state’s already-stressed budget.

The article notes,

The state’s landmark 2006 health insurance overhaul included regulations designed to discourage low-wage employees from opting for state health insurance over their companies’ often more pricey coverage. It denied eligibility to any one whose employer had offered him or her coverage in the past six months and paid at least 33 percent toward the individual’s plan.

Most health care advocates and brokers had widely interpreted that to include even workers whose companies had dropped coverage. But recently, some companies that have terminated their group plans have tested those waters and found that their employees were accepted for state-subsidized coverage.

Additionally, company owners say, it has become far cheaper to pay the state penalty for not covering their workers — roughly $295 annually per employee — than to pay thousands more in premiums.

I well remember Jon Kingsdale, the first director of the Health Connector, the agency in charge of all these issues, discussing the delicate balance needed between the penalty to be set, the design of state-subsidized products, and other aspects of the health care market. Too high a penalty, and it is overly punitive to businesses. Too low, and employers would accept the fee to avoid the cost of health benefits and make a run to the state's plans.

The balance seemed about right for the first few years. Now -- if this article is to be believed -- things may have shifted. Politically, it would be very difficult during a recession to start to impose higher penalties on businesses. Likewise, it is would be difficult to make the state plans a less attractive option.

On the other hand, most employers still have an interest in offering an attractive benefit to recruit and retain staff. So maybe the reporter is picking up something happening at the margins that does not have tremendous significance. It is difficult to know, and will bear watching -- both for Massachusetts and for the country, as a similar national plan goes into effect.

5 comments:

Paul Levy said...

From Facebook:

Corey: I think that health insurance is exactly what it is called, a benefit. Forcing employers to pay premiums for their employees is just as wrong as it is to force citizens to purchase health insurance, unconstitutional. Larger companies can afford to provide good benefits, but small businesses cannot, ESPECIALLY these days. I run a small business and I started doing everything myself years ago because having employees just isn't worth the trouble anymore. They kill us enough with the insanely high self employment taxes. The last company I worked for was a smaller company and the owner literally could not afford to provide health insurance, and he should be penalized for that? I don't think so. He had to stay understaffed and overworked so that he would remain under the limit of employees for having to provide it, not because he didn't want to, but because he couldn't.

Dr. D said...

Paul said: On the other hand, most employers still have an interest in offering an attractive benefit to recruit and retain staff. So maybe the reporter is picking up something happening at the margins that does not have tremendous significance. It is difficult to know, and will bear watching -- both for Massachusetts and for the country, as a similar national plan goes into effect.


The "incentive" to attracte emploees only works for high paying jobs. Low paying jobs means the employees qualify for state subsidized care and Medicaid. So, the employer can say I'll pay you 50 cents an hour more because you can get coverage through the state. The employee doesn't care as long as they have coverage for somewhere. I predict most companies will do the math and if it is cheaper and their employees qualify then they will drop coverage. They would foolish not to.

Michael Pahre said...

The article appears to overstate the case a bit. You have to read further down in the article to see:

State officials said they have not seen convincing evidence that there is a trend. There has not been an unusually large spike in enrollment in Commonwealth Care...

In the absence of more compelling data, I think the reporter may be overplaying the story, i.e., in your words, "picking up something happening at the margins that does not have tremendous significance."

Barry Carol said...

I think the issue of health insurance affordability is an increasingly important one nationwide. Just today, there was an article in the New York Times talking about the increasing interest in narrow network and tiered insurance products. These are likely to gain more traction over the next few years, I believe.

I think the people of Massachusetts and its state government would be better served if policymakers directed more attention toward finding ways to safely reduce the utilization of healthcare services. They might consider the following:

1. More aggressive fraud mitigation efforts in Medicaid with special focus on home healthcare and nursing home services. Over 70% of Medicaid spending nationwide is on the aged, blind and disabled (ABD).

2. Tort reform, which I define as robust safe harbor protection from lawsuits for doctors who follow evidence based guidelines where they exist and allowing specialized health courts to resolve disputes instead of juries. Over time, this should reduce defensive medicine, especially expensive diagnostic imaging, as doctors come to perceive that the dispute resolution process is objective and consistent rather than often arbitrary and unpredictable.

3. Price and quality transparency including disclosure of hospital contract reimbursement rates. Couple this with the development of both narrow network and tiered in network co-pay insurance products. People need to start to care more about what services, tests and procedures cost even when insurance is paying most of the bill.

4. A more sensible approach to end of life care would be helpful, especially for those suffering from Alzheimer’s, dementia, cancer and congestive heart failure. People should be encouraged to execute living wills and advanced directives and palliative care consultations that would lay out treatment options, including the quality of life implications of each, should be widely available.

None of these approaches are easy. If they were, we would have done them a long time ago.

Anonymous said...

A couple of clarifications. The state agency in charge of making the policy decisions around the employer assessment (the Fair Share provision of Ch. 58) is actually the Division of Health Care Finance and Policy. And the amount of the assessment was established in law ("not to exceed $295"). So, it would take an act of the legislature to make any changes in the amount of the assessment. The Division sets the standards that govern which employers are ultimtely liable for the assessment.