The following is an excerpt from the study Understanding the Uninsured and What to Do About Them, by the Council for Affordable Health Insurance, March 2007–the second of a two-part series.
The “uninsured” are not a homogenous population, so a one-size-fits-all solution likely won’t address everyone’s needs. Some well-intended state reforms actually make the problem worse.
States play an important, often negative, role in determining whether residents have access to a wide range of health policies at affordable prices.
For example, a few states have passed guaranteed issue and community rating laws, which require insurers to accept any applicant regardless of health status, and to charge everyone the same price, respectively. Together, these government mandates dramatically drive up health insurance premiums within just a few years of implementation.
If states with guaranteed issue and community rating did nothing more than repeal those laws, allowing health insurers to underwrite again, premiums would begin to fall and competition would return.
Addressing the Problem
Many states have passed or are considering ways to address the problem of the uninsured, but refuse to first undo the bad reforms of the past.
- Massachusetts has passed comprehensive reform, mandating the purchase of insurance and creating a new health insurance market called the “Connector.”
- Maine passed a government-run insurance plan meant to provide lower-cost insurance. Of course, the state taxed those with private insurance to pay for it, further exacerbating the problem.
- Cynical California legislators passed a single-payer health plan without any funding, daring the campaigning governor to veto it.
Offering Options
States have several reforms at their disposal that can increase access to affordable coverage without fundamentally restructuring the health care system, imposing significant new costs, or creating new distortions in the health insurance market.
- High-risk pools. High-risk pools provide coverage to those who are medically uninsurable, often the chronically ill. About 1 million uninsured Americans fall into this category. While 34 states currently have high-risk pools, many are underfunded. This is an area where additional federal subsidies could go a long way toward ensuring those with chronic conditions have access to affordable coverage.
- Individual tax credits. Republicans and some Democrats support tax credits for employees without access to employer-provided coverage. These tax credits would help lower-income workers afford coverage.
- Health Savings Accounts (HSAs). While not a panacea, HSAs have been enormously successful in attracting the uninsured. More than 30 percent of businesses and individuals choosing HSAs were previously uninsured, according to industry sources. However, a few states still do not provide a tax deduction for contributions to accounts, and a few states still have barriers that make it difficult for HSA plans to be sold.
- Allow the private market to participate in the State Children’s Health Insurance Plan (SCHIP) and Medicaid. Many workers eligible for employer-provided insurance may not be able to pay for their portion of the premium. If Medicaid and SCHIP subsidized the employee and dependent premiums, these employees might be able to afford private coverage.
- List billing. List billing allows an employer who is not contributing to premiums to help employees purchase individual health insurance. Individuals sign up for their own policies and agree to have premiums deducted from their wages. The employer receives a monthly bill for all employees (hence, a “list bill”) and remits premiums to the insurer.
- Limited-benefit plans. Many of the invincibles–the uninsured who are young and healthy–would get coverage if they had access to affordable policies. Limited-benefit plans limit an insured person’s reimbursement for medical care either in aggregate (e.g., a $50,000 annual limit) or with a schedule of benefits (e.g., $3,000 per day of hospital confinement).
- Medical waivers. An exclusionary waiver, or rider, provides an applicant with a minor chronic medical condition an additional coverage option. In exchange for waiving coverage for the condition, the applicant receives coverage at standard prices for all other medical conditions.
- Mandate-lite policies. By eliminating some (or all) mandated benefits, health insurers are able to offer more affordable health insurance products.
- Out-of-state insurance. The fact that states regulate individual and small group health insurance means access to affordable coverage can vary significantly from state to state. For example, community rating and guaranteed issue have made policies unaffordable for all but the wealthiest residents of Maine, Massachusetts, New Jersey, and New York. If residents trapped in states with unaffordable health insurance could purchase policies sold in other states, they too would have access to affordable health insurance products.
- Short-term medical insurance. Short-term medical insurance is an affordable option for those seeking coverage for a limited time, as when they are between jobs.
- Employer and individual subsidies. Several states have started programs that subsidize coverage for small employers who do not offer health insurance. These programs have proven to be very popular. Other states are providing subsidies directly or indirectly to uninsured individuals.
- Leveling the playing field for individual purchasers. Those workers who pay for health insurance out of their own pockets (not including the self-employed, who already get a 100 percent deduction) should be granted the same pretax treatment of premium payments afforded to employers and their employees.
- Wellness. We have come to understand that a healthier population will have lower overall health care costs and, as a result, lower health insurance premiums. The market is increasingly experimenting with wellness programs to see whether, and to what extent, they improve health and lower costs.
Our approach focuses on reducing government interference in the private market. Instead of forcing individuals and employers to provide coverage, we support policies that encourage them to buy it.
J.P. Wieske ([email protected]) is director of state affairs for the Council for Affordable Health Insurance. Merrill Matthews, Ph.D. ([email protected]) is director of the Council for Affordable Health Insurance.
