On January 26, Illinois’ Adequate Health Care Task Force delivered to Gov. Rod Blagojevich (D) and the legislature its final recommendations on how to insure all state residents.
Included in the task force’s recommendations were expansions of Medicaid and the State Children’s Health Insurance Program, and providing insurance subsidies to families earning up to 400 percent of the federal poverty level ($82,600 in 2007 for a family of four). The recommendations could cost taxpayers $3.1 billion to $3.6 billion in the first year of operation.
Steep Price
That’s too steep a price, according to some experts.
“Not only is the plan too expensive for cash-strapped Illinois, but employer assessments are likely to be a legal non-starter,” said Greg Blankenship, director of the Illinois Policy Institute, a nonpartisan state think tank.
“In the famous [2006] Maryland vs. Wal-Mart case, a federal appeals court ruled that under ERISA, states can’t [make a mess of] employee health benefits,” Blankenship continued. “Only the federal government is allowed to do that.”
The task force’s hybrid plan proposal was the outcome of an 18-month process commissioned by the Health Care Justice Act–legislation enacted in 2004, but not funded until 2005, to explore ways to insure all Illinois residents.
Distorted Market
If enacted, health care experts fear, the proposal will distort the insurance market and increase Illinoisans’ state tax burden. Many task force members acknowledged the proposal has shortcomings. Some said the plan, if implemented, would increase health care costs, reduce consumer choice of health care coverage, have a negative effect on the quality of health care, and restrain job growth–the opposite of the intended effect.
Pamela Mitroff, an Illinois-based marketing consultant and task force member, faulted the proposal for not including more consumer-directed health care and failing to take advantage of federal waivers to fine-tune the Medicaid program.
“The hybrid plan proposal is going in the exact opposite direction that Congress is taking and that many employers are adopting–that is, getting consumers more actively involved in becoming health care consumers by giving them a financial stake in their health care decisions,” Mitroff said. “Even some states are implementing innovative Medicaid programs along these lines. This is the direction that Illinois needs to take.”
Dr. Robert Hamilton, an Illinois physician, agreed. Hamilton, who made a presentation to the task force advocating health savings accounts, faulted the proposal as a step in the wrong direction because it does not engage consumers.
“The plan offered by the governor’s task force has about all of the wrong things I can think of [if it is intended] to actually be beneficial to Illinois,” Hamilton said.
Unpopular Regulations
The proposal’s key feature is an individual mandate, under which the state would require all residents to obtain health coverage. It also would force employers to provide health coverage to their workers or pay into a state fund–an idea known as “pay or play.”
The task force also proposed two new regulations, guaranteed issue in the individual market and community rating, that have proven in other states to increase the cost of health insurance and limit the availability of affordable coverage.
Guaranteed issue forces insurers to accept all applicants, regardless of any pre-existing medical conditions they might have, thus encouraging people to go without insurance until they become ill and penalizing everyone else in the pool. Only seven states currently mandate guaranteed issue in the individual market.
Community rating requires insurers to charge a flat rate to all, regardless of their age or health. That prohibits insurers from assessing risk, which is one of the hallmarks of a successful insurance market.
According to a February 2005 Commonwealth Fund study, a healthy 25-year-old male purchasing individual coverage in a state with guaranteed issue and community rating faces premiums three to five times as high as in states without those regulations.
Less Choice, Higher Prices
“Consumers are the ones who will be hurt, not helped, if guaranteed issue and community rating are adopted,” said Laura Trueman, executive director of the Coalition for Affordable Health Coverage, an insurance industry trade group, adding that the regulations will drive insurers out of the state.
“All but one or two insurance companies will stop offering products in the state,” Trueman predicted. “The result? Those who really need affordable health insurance will have less choice and higher prices.”
Devon M. Herrick ([email protected]) is a health economist and senior fellow with the National Center for Policy Analysis.
For more information …
The “Final Report” of the Illinois Adequate Health Care Task Force, released January 10, 2007, is available through PolicyBot™ , The Heartland Institute’s free online research database. Point your Web browser to http://www.policybot.org and search for document #20720.
“Insuring the Healthy or Insuring the Sick? The Dilemma of Regulating the Individual Health Insurance Market,” by Nancy C. Turnbull and Nancy M. Kane, published in February 2005 by The Commonwealth Fund, is also available through PolicyBot™. Search for document #20721.
