Despite Some Opposition, Consumer-Driven Tsunami Rolls On

Published July 1, 2008

On May 12, 1992, The New York Times breathlessly reported Vermont’s governor, Howard Dean (D), had “signed a law here today that sets in motion a plan to give Vermont universal health care by 1995.” It was part of a whole movement, the article said: “Oregon, Minnesota and Florida have also passed comprehensive health insurance plans, as states have begun to act in the absence of Federal initiatives.”

The bill had bipartisan support along with the backing of the state medical society and the Blue Cross Blue Shield plan. Dean was quoted at the signing ceremony as saying, “This is an incredibly exciting moment that should make all Vermonters proud.”

Boy, ain’t it swell that Vermont solved its uninsured problems 16 years ago?

Changes at OPM

Speaking of insurance problems, the federal Office of Personnel Management (OPM) has reversed its previous support for consumerism in health care in the Federal Employees Health Benefit Program (FEHBP).

For 2008, OPM decided the government (employer) contribution to an HSA should not exceed 50 percent of the deductible or 25 percent of the plan premium. One of the carriers in FEHBP had to reduce its HSA contribution 33 percent in 2008, according to the Washington Post, and another had to cut its contributions from $104 to $68 per month for individuals and from $208 to $120 for families.

Steve Davis of Inside Consumer Directed Care called the change “one key reason for this year’s low enrollment growth.”

OPM’s errors don’t stop there. It is also “asking” participating carriers to add coverage for adult hearing aids and related tests and services for 2009. This amounts to another mandated benefit that will surely reverberate with state legislatures around the country.

OPM’s rationale was that the “carriers were able to add hearing benefits for children last year with little or no cost to federal employees,” according to the Federal Times. Note to OPM: Hearing loss is a tad more common in older adults than in kids. This new mandate will cost a fortune.

But that’s okay … it’s always fun to spend other people’s money.

‘Slacker Mandates’

Speaking of mandates, the states have gone crazy with their latest surge. These are known as slacker mandates because they require insurers to offer coverage to non-student “children” living at home up to the age of 25 or higher.

New Jersey took the age up to 30, and Florida Gov. Charlie Crist (R) is matching that by proposing age 30 in his state as well. We can’t let New Jersey Gov. Jon Corzine, a Democrat, be more “enlightened” than a Republican, can we?

These mandates will add only modestly to costs since youngsters don’t cost much to cover, the Business Insurance Web site editorialized. But they miss the obvious. There are at least two problems with these laws.

First, healthy young people can get less-expensive coverage on the individual market than by staying on their parents’ group plan. So only the sicker ones will choose to stay with their parents, raising costs for the whole group.

Second, employers–especially the smaller ones most affected by these mandates–will likely respond by reducing their contribution for dependent coverage. That will add considerable costs to a family that wants coverage for the whole gang, even if they don’t have any slackers at home, and will end up increasing the numbers of uninsured even further.

COBRA Disaster Looms

Business Insurance also reports congressional Republicans are pushing another new mandate on employers, and this one is a whopper. It would require unlimited coverage under the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA.

COBRA currently allows terminated employees to retain employer-based coverage for 18 months, or 36 months for dependents in the case of death, divorce, or marital separation. A worker who has exhausted COBRA eligibility can transition to guaranteed-issue individual coverage under the Health Insurance Portability and Accountability Act (HIPAA).

Employers have managed to live with COBRA, though it clearly has raised their costs considerably. As with the slacker mandate, people who can get more affordable coverage in the individual market will do so, leaving only those who cannot to opt for COBRA.

But there are considerable administrative costs in keeping track of former employees and their dependents for 18 to 36 months beyond their date of termination. Just imagine the cost of providing coverage for every single employee who ever worked for your company for the rest of their lives! That’s what this new mandate being pushed by Republicans would do.

Consumer-Driven Tsunami Rolls On

Meanwhile, some good news: HSAs and other forms of consumer-driven health care continue to make tidal waves in the market.

CHCC member Jan Ozga had an article published in SMB Human Resources that starts out with the headline, “Health Savings Accounts Growing Among Small Firms”–always a good thing to see. Businesses are delighted with their HSA programs, and more are being offered all the time. We are on the cusp of a consumer-driven revolution, as those who are getting on board recognize.

It’s a good time to be in the consumer-driven health care business!

Greg Scandlen ([email protected]) directs Consumers for Health Care Choices at The Heartland Institute.