The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Health Care Reform Safety Valves

Posted by Alan on November 30, 2007

The Health Access blog has an interesting post today (November 30th) concerning whether there should be an “affordability standard” in whatever comprehensive health care reform package California’s lawmakers might enact. Written by the organization’s Executive Director, Anthony Wright, the post takes Governor Arnold Schwarzenegger to task for refusing to accept, at least in public, an affordability exemption to the mandate that all residents have health care coverage.

What the post highlights is the need for safety valves in several areas of the reform package being discussed. Like most complicated bills, there’s an internal logic to the proposals put forth by the Governor and the Democratic Leadership. In the confines of their proposals, everything fits together snugly. An underlying assumption concerning Tab A assures it will fit snugly into Slot B.

External logic, what we all know as the real world, tends to make any assumptions somewhat iffy (to use the technical term). So while there’s a logic to requiring all residents to have coverage (Tab A) and offering subsidies to assure affordability (Slot B), the reality is, at the end of the day, the cost of coverage may still be out of reach for some Californians. In this context, a well fashioned affordability exemption is a reasonable safety valve.

Similarly, a mandate on carriers to sell individual policies to all applicants, regardless of their health (Tab A), makes sense if there’s an enforceable requirement that everyone gets covered before they head for the hospital (Slot B). But if enforcement fails, Californians will wind up with a system much like New York’s, where the average individual health plan costs twice as much as it does here. That’s why the California Association of Health Underwriters’ health care plan, Healthy Solutions, includes a safety valve in connection with the mandate to sell. Until a specified percentage of Californians are in compliance with the mandate, the state’s high risk pool should be the insurer of last resort, not commercial carriers.

The mandate to sell, the requirement to buy, and an affordability exemption are all critical parts of achieving comprehensive reform. And they are all interconnected. As a result, they must be balanced. 

I’ve written several times concerning my belief that the affordability standard in Assembly Bill X1-1 (Nunez), the one Health Access is willing to support, is too broad. By using both premium and out-of-pocket costs in calculating what’s affordable, the legislation undermines the requirement to have coverage and that will drive health insurance costs out of sight. A more appropriate standard would be to consider only the cost of coverage, not the deductibles and co-insurance. After all, without any coverage, an individual risks unlimited out-of-pocket expenses; with coverage those costs are limited.

The Health Access post misreads my position, citing it as criticism of the concept of an affordability standard. They’re wrong. A disagreement over what the standard should be is far different than whether there should be a standard at all.

 In conversations and email, Mr. Wright and I recognize we’re going to differ on a lot of health care reform specifics. However, I’m in full agreement with the final paragraph of his post, “There is a conversation to be had about what is affordable, with regards to premiums, out-of-pocket costs, and benefits, but it’s amazing to me that we are still talking about whether an affordability standard should even exist in the first place.”


2 Responses to “Health Care Reform Safety Valves”

  1. Welcome to the wonderful world of cost shifting or as we like to now call it balance billing. For years the lack of insurance and or the lack of adequately funded public programs has shifted the burden on to insurance companies and premium payers.

    More clinics staffed by NPs to handle the daily runny nose and sore throat and high deductible plans to insulate facilities and physicians from large unproductive receivables would help reduce overall costs.

    A lot of this issue is in the definitions. What needs to be covered, how should it be covered, who makes the decision?

  2. An affordability standard for health care refers to a single standard. A decision must be made regarding what policies would be required to make health care access affordable for those with medical needs. To dismiss the topic of the affordability of health care access and limit the discussion to the affordability of insurance premiums is not a debate over what the standard should be; it is an implicit rejection of establishing a standard for affordability of health care access.

    The distinction is crucial. Policies that establish affordability of health care access are designed to be certain that individuals receive the health care they need without facing financial hardship. Policies that establish affordability of health insurance premiums are designed to keep the private insurers in play by allowing them to continue to shift unaffordable costs to patients by failing to adequately address the problems of adverse selection and inadequate plan benefits.

    Shifting a large portion of health care costs away from insurers and to others (especially the taxpayers through publicly funded programs) relieves the insurers from the responsibility of making health care access affordable. But if the taxpayers are going to foot a large portion of the health care bill anyway, then why would we want to establish policies that would make insurance premiums affordable at the cost of profound administrative waste?

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