The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Senator Invites Carriers to Help with Health Care Reform

Posted by Alan on March 12, 2008


A coalition of Senators is waiting to help the next president forge a bi-partisan coalition on health care reform. A leader of the group, Senator Ron Wyden of Oregon, spoke before the America’s Health Insurance Plans 2008 National Policy Forum on March 5th and urged health plans to join the effort, not to fight it.

The 12 Senators, six Democrats and six Republicans, have their own health care reform proposal before Congress, the Healthy Americans Act. None of the Senators support every element of the package. But the mere existence of a bi-partisan coalition surrounding health care reform will give the next president a boost in developing a compromise plan.

In Senator Wyden’s address to AHIP, he said the “success of health care reform hinges to a great extent on how your profession responds to the efforts of a new president and a new Congress.” He warned, however, that if medical carriers spend “millions of dollars fighting to preserve the status quo, you may delay reform for awhile but you will increase the likelihood of a government run health system with no role for the private sector.”

In urging the insurance industry to become a part of fashioning a solution, Senator Wyden noted that in a market in which 20 percent of Americans are uninsured, carriers need to be good avoiding risk. As Senator Wyden put it, “If you don’t excel at shedding risk, you are going to enroll too many people who need too much care.  Enrolling too many people who need too much care means that your costs are going to go through the roof.  When your costs soar this way, the healthy people that you do business with are going to start looking for another insurer whose costs aren’t going through the stratosphere.  In other words they’re going to look for another insurer who does a better job of shedding risk.”

This, according to Senator Wyden, is part of the reason the current health care system is broken. Another reason is that health care in the United States is tied to the employer/employee relationship, which the Senator noted hasn’t changed much since 1948. “But economic challenges for business and workers today are very different then they were in 1948,” he noted.  “Sixty years ago employers weren’t operating in a global marketplace and employees who went to work at twenty stuck around long enough to get a gold watch and a steak dinner for retirement.  Employers need cost-containment and workers need quality health care within a system that is portable – where they can truly take their insurance from job to job.”

As an alternative, Senator Wyden suggested carriers consider a new approach in which “everyone who’s not in the military or on Medicare, has a basic private health insurance policy. Private insurance companies are on the same footing – each must take all comers. Competition would be based on price, benefit and quality.”

This is the underlying approach established by the Healthy Americans Act. In asking his audience to consider supporting the legislation, he cited six reasons why health plans would benefit from this alternative system:

  1. Bringing the 47 million uninsured into the system would greatly expand the private insurance market.
  2. There would be “no competitive disadvantage for carriers doing the right thing” and, with a risk sharing mechanism as part of the package, there would be no need to specialize in risk avoidance.
  3. The legislation supports increased information and transparency in the health marketplace.
  4. By focusing on wellness and preventive programs, carriers would be selling a product people want more of.
  5. Carriers “wouldn’t be the political football any longer.”
  6. More attention could be given to cost containment issues such as reducing needless medical errors.

He concluded his speech with a plea to carriers to be a part of the solution. “I want to ask you to become a part of the Senate’s bipartisan effort to fix American health care. Both Democrats and Republicans in the Senate want to work with you to get health care right in 2009.”

My take on all this is that the stars may be aligning for a health care reform effort that is more consultative than adversarial. Senator Barack Obama has certainly spoken of the need to have everyone, including carriers at the table. Senator Hillary Clinton has also spoken of leading a more open process than she did during her husband’s Administration. Significantly, Senator John Edwards, who promised to exclude the health insurance industry from participating in the health care reform debate, is out of the race.

I also think a move away from employer-provided coverage is likely to be a strong current in future health care reform discussions. Senator John McCain favors this approach as does the bi-partisan coalition of Senators backing the Healthy Americans Act. The business community would love to be relieved of the burden of shouldering the nation’s health care system. In speeches I began giving in 2006 I predicted that health care coverage might follow the path of pensions. Instead of companies running pension plans they moved to simply administering — and contributing to — their employee’s individual retirement plans. Similarly, employers could administer — and contribute to — employee’s individual health plans. Even though the Democratic presidential candidates still embrace an employer-centric system, the support fora more individual-centric model is gaining momentum..

For health plans this could be good news. They would remain a core part of the nation’s health care system. While the nature of their competition would change, it would still likely be a vibrant, primarily private, market.

The role of health insurance agents could change far more dramatically. If consumers are pushed into exchanges, connectors or purchasing pools, the system administrators might assume they can play the role of agents. It will be important for agents to make sure Americans continue to have access to independent advocates and consultants — in other words, to professional insurance agents. That won’t be easy. Many lawmakers — and even more of their staffs — have never worked with an agent and don’t understand the value we bring to the system.

Senator Wyden and others, however, have expressed a willingness to listen to others. That’s an opportunity agents need to seize. Fortunately agents have a compelling story to tell. 

One Response to “Senator Invites Carriers to Help with Health Care Reform”

  1. Dave Schmitt said

    Healthcare indeed is broken. I have been an benefit insurance broker in California for 12 years.

    70% of the cost of health care that is spent on 5 chronic conditions, diabetes, congestive heart failure, coronary artery disease, asthma and depression. Most people are treated by more than one doctor, these doctors have no means of knowing factually what has been diagnosed and what treatments the patient is under. Our health care system doesn’t compensate physicians for curing conditions, it compensates them for treatment of conditions with no regard for their effectiveness. Any insurance reform needs to address these issues as well.

    Health care payers (employers and government) should collaborate to require providers to adopt and use an Electronic Medical Records system that allows individuals to control their records and give access to providers who have a need to access them. These records need to be accessible in a HIPAA scrubbed format so that providers can research diagnosis and treatment approaches so that best practices approaches can learned and disseminated. This same system can be used to document which providers use best practices and what providers are accepting as payment for services.

    A national risk pool needs to be established that all people contribute to and that everyone who is diagnosed with the chronic conditions is moved into. Since these are chronic conditions, best practices will retard the progression of the conditions provided that patients participate in treatment plans and receive prescribed preventive care services. If a patient doesn’t participate, then their deductible, copayments, and max out of pockets should be significantly increased. Everyone should equally contribute to the cost of this pool, and the risks of these conditions should be removed from the health care risk for all other groups. This contribution should be based on the actual cost to treat these conditions a previous 12 month period. Costs for treatment should be inline with medicare reimbursement rates and physicians who particiapte also would be required to participate in the EMR system that has been developed.

    A national law should be implemented requiring health insurance for each person in the country. This insurance could be paid as part of the payment of income tax. Persons below a certain income level should have a reduced premium or have their premium paid by a social service like medical. If an individual can document insurance provided by an employer that is credible, then they would not have to pay the tax. (Employers who provide group insurance will be able to recruit employee much more effectively than those who don’t and employees will recognize the true value a benefit package provided by the employer has to them.) Employers who provide insurance would continue to deduct the cost of insurance as a business expense and the cost would not be taxable to the employee as income just as it is today.

    Preventive care should not have a charge attached to in to the member. Prevention will save the system billions.

    The advantages of this idea is that everyone has insurance, the cost of treatment for the worse cases is shared nationwide and is driven down, there is very little disruption in the health delivery methods that are in place today, it addresses the problems of delivering healthcare as a means of reducing cost and improving treatment.

    Dave Schmitt

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