Georgia’s landmark consumer-directed health care reform law has come under fire in a study conducted by the Center on Budget and Policy Priorities (CBPP), a liberal activist group that claims the reform will help only Georgians who are already insured.
Experts disagree, saying the Georgia law, signed by Gov. Sonny Perdue (R) on May 10, should serve as a model for other states’ attempts at reform.
The law was passed to make health insurance more available and affordable by removing premium taxes from high-deductible plans, giving tax breaks to individuals and small employers, and allowing insurance companies to provide financial incentives for beneficiaries who live healthier lifestyles.
‘Next Generation Insurance’
“CBPP fails to understand the movement to next-generation insurance products with rewards and incentives for wellness, prevention, and compliance with physician-established treatment plans,” said Ron Bachman, president of Healthcare Visions, Inc. “The new Georgia laws eliminate state government taxes that only increase costs and the number of uninsured.”
CBPP claims the incentives will reward those who already have coverage instead of helping the uninsured. “The incentives are too small to encourage people and companies to buy additional or new health care,” said Judith Solomon, a senior fellow at CBPP and author of the report. “It’s not to say that there won’t be anybody that gets the benefit of this–but it’s going to be very modest.”
“To argue that legislation that lowers the cost of health insurance will not encourage more people to purchase health insurance ignores the fundamental laws of economics,” Bachman responded.
“Roughly three-quarters of all health care spending in Georgia is related to individuals with chronic disease,” Bachman continued. “Providing financial incentives and rewards for healthy behavior will not only lower the cost of health insurance for those individuals but will hopefully reduce the number of Georgians developing chronic disease in the future.”
Ignoring Major Accomplishments
Kelly McCutchen, vice president of the Georgia Public Policy Foundation, disagreed with Solomon’s research methods and conclusions.
“The study completely ignores two major accomplishments of the legislation: eliminating tax discrimination at the state level for those who do not have access to employer-provided insurance, but instead purchase health insurance themselves, and the elimination of Georgia’s prohibition on rewards and incentives for healthy behavior and compliance with disease management plans,” McCutchen said.
Among their many benefits, the new laws exempt insurers who provide high-deductible health plans that include health savings accounts from having to pay state and local taxes on the premiums charged for those policies. (See “Ga. Consumers Get More Control over Health Insurance, Care,” Health Care News, July 2008.)
The laws also allow people to deduct from their state income taxes the amount paid in premiums–exemptions and deductions that are expected to save insurers and consumers nearly $150 million per year.
Consumer Choice, Protection
“The Georgia legislation retains all existing state mandates and consumer protections,” said Bachman. “The direction Georgia has taken is to ensure the uninsured an affordable, comprehensive insurance plan.
“The definition of affordability is changed,” Bachman noted. “It is no longer the amount of money one pays in premiums; now it includes the financial rewards and incentives to offset premiums and deductibles, and to provide additions to increase health savings accounts.
“For the first time, HSA-eligible plans can have any deductible gap filled in by good health behaviors and health treatment compliance,” Bachman added. “HSA-eligible plans can no longer be criticized as only for the young, healthy, and wealthy. A new generation of products is on the way, and Georgia is leading the way.”
“Both parts of the new Georgia law are good for consumers and taxpayers, because they put money back in the pockets of individuals, giving them the power to make choices about how they spend or save it,” said Sharon Harris, founder of Advocates for Self-Government.
More Reforms Expected
“One of the primary critiques [in the CBPP] study is that there are no subsidies for low-income Georgians,” said McCutchen. “Although this is an important segment of the uninsured, due to the expense of addressing this part of the population it will likely require cooperation with the federal government.
“This plan was clearly designed to address the large and growing number of Georgians who have recently been priced out of the market, those with chronic disease, individuals without access to employer-provided insurance, and the young and healthy who choose not to purchase insurance,” McCutchen explained.
“Our next challenge will be those who cannot afford health insurance without some form of subsidy and those who are uninsurable,” McCutchen said.
There are options available to lawmakers seeking to reduce the number of uninsured and to reduce the cost of health coverage, Harris said: “First, allow consumers to shop for insurance across state lines. By creating a more competitive environment, we would very quickly lower the cost of premiums. Second, give tax credits to employers and consumers equal to the cost of their premiums.
“The more we get government out of the industry, and the more choice we give consumers, the better off everyone will be. Free-market solutions always work better to solve problems than the tiny ‘band-aid’ approaches of bureaucrats and politicians,” Harris concluded.
Jeff Emanuel ([email protected]) is The Heartland Institute’s research fellow for health care policy and managing editor of Health Care News. Krystle Russin ([email protected]) writes from Texas.
For more information …
“New Georgia and Florida Health Plans Unlikely to Reduce Ranks of Uninsured,” by Judith Solomon, Center on Budget and Policy Priorities; July 1, 2008: http://www.cbpp.org/7-1-08health.htm
“Ga. Consumers Get More Control over Health Insurance, Care,” by Jeff Emanuel, Health Care News, July 1, 2008: http://heartland.org/Article.cfm?artId=23245