The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

President Obama Endorses Earlier State Opt-Out of PPACA

Posted by Alan on February 28, 2011


The ongoing debate over the Patient Protection and Affordable Care Act is about more than whether this provision or that provision is beneficial or damaging to the nation’s economy and health care system. The debate is also about the appropriate role of the federal government compared to that of state governments and individuals. Health insurance, and consequently much of health care, has long been the purview of the states. The PPACA changes that balance considerably.

Enter Senators Ron Wyden and Scott Brown – the former a Democrat the latter a Republican. They are co-sponsoring a bill allowing states to opt-out of many of the more controversial provisions of President Barack Obama’s health care plan as early as 2014 if they meet certain eligibility requirements. (The health care reform law already provides for this opt-out in 2017, but by then states will have invested heavily in implementing the PPACA).

This legislation, one of the few bi-partisan health care reform-related measures put forward in the past few years, just received a politically important boost. Speaking before the National Governor’s Association meeting in Washington, DC today, President Obama endorsed the Wyden-Brown proposal. Were the bill to pass, states could replace the individual and employer mandate, health insurance exchanges and whatever the federal government comes up with as “essential benefits” all health insurance policies must cover. Yet the states would still receive the insurance subsidies and administrative funding they’d be eligible for under the PPACA.

Gaining this privilege to go their own way, however, is no easy task. As described by Kate Pickert in Time’s the Swampland blog, states would need to show their own health care reform approach would:

  • not increase the federal deficit
  • provide insurance to as many people as would the PPACA
  • provide insurance as least as comprehensive as that called for in the PPACA
  • provide insurance that’s just as affordable

Avik Roy at Forbes’ The Apothecary blog has an excellent presentation of the pros-and-cons of the Wyden-Brown legislation. For example, he sites Ben Domenech as observing that “states would have to prove a greater number of people will purchase a product under their alternate plan than would do so under a law requiring them to purchase that product!” However, this may be easier than Mr. Domenech apparently believes. As I’ve pointed out previously, there are other ways to encourage consumers to obtain coverage than a government imposed mandate. The Waiver for State Innovation, as the Wyden-Brown proposal is referred to, doesn’t allow states to return to the status quo. On the contrary, states would still need to put forward comprehensive health care reform. They can just go about it in a different way than that taken by the Obama Administration in the PPACA.

As President Obama said to the Governors when describing the value of moving the state opt-out opportunity to 2014, “It will give you flexibility more quickly while still guaranteeing the American people reform.”

For example, states could set up a system in which consumers are given health insurance vouchers to purchase coverage. Carriers could be required to issue policies to all who apply. To protect their pools from the adverse selection of people waiting until they’re on their way to the hospital to obtain insurance, carriers could be permitted to exclude coverage for pre-existing conditions for as long as a consumer has been without coverage. This kind of approach would do away with exchanges and the PPACA’s approach to the individual mandate. Of course, so would the single-payer approach being considered in Vermont.

A wise man once told me, “You never solve problems, you just replace old problems with new ones.” President Obama is giving states the opportunity to solve – and create – their own problems. Whether any will be able, or willing, to seize this opportunity remains to be seen.

10 Responses to “President Obama Endorses Earlier State Opt-Out of PPACA”

  1. Curt Cella said

    I love it! I hope this bill gets passed and quick! There is nothing I’d like better than for the CA Dems and Jerry Brown to tie this rope and anchor around their necks as they use it to further bankrupt this “State of Hopelessness” we live in – a little place I like to call: California.

    Frankly it is only through measures like this that we will all stop fooling ourselves that there is anything about CA that is fixable and we can finally just throw in the towel and start fresh. And that will only happen when this state government has done everything possible to drive us beyond the point of fiscal insanity.

    This is a total – TOTAL! – sucker’s play: Right now neither Feds or the States have any money. The biggest legislative challenge the Feds have is figuring out every conceivable way they can to foist more fiscal burden on the States – idiots that we are, CA legislators will be more than happy to “bite” on proposals like this so they can speed the process of getting further involved in something they know nothing about and further speed the pace of our rush towards insolvency.

    Good grief: They nothing about governing in Sacramento but suddenly they know something about the insurance industry?! Not only am I working diligently to leave the insurance business I am working diligently to move out of this state.

  2. Ed H said

    If only they would have read the bill before passing it, we might have avoided a lot of this mess.

  3. Mark Cohen said

    Good post, Alan!

    Not increasing the federal deficit would work if the amount of money that would have been spent is taken out of the law. However, this may balloon the deficit for the states that adopt the law.

    Providing insurance to as many people as the federal law would is good, as long as it is optional. That would save both the individual and the taxpayer money.

    Providing insurance as least as comprehensive as that called for in the PPACA is a good idea if you are going to have a government plan. I’m just worried about any government intrustion into business practices that may put companies in a tough fdinancial spot.

    Providing insurance that’s just as affordable as the federal law is difficult when some of the cost cutting measures involve physician pay.

    Mark Cohen
    mark.cohen580@gmail.com
    markdanielcohen.wordpress.com

  4. Peter A. Friedman said

    The issue is the State is bankrupt. A single payer package would cost a fortune to administer and set up in California, with a tremendous loss of revenue from premium taxes, jobs lost, corporate tax loss, and the loss of income taxes paid by the thousands of employees employed by the insurance industry and the people employed in hospitals and physicians offices.

    All these private employees would need to be replaced by public employees. By doing this you have a lower tax base supporting more employees. Thus the State would be bankrupt within a short period of time. I do not think Governor Brown is the same person as the last time.

    I believe due to the current politial climate, to increase the cost of government would be against everything that is going on in the country.

    On the other hand, the Health Care Bill (OBAMACARE) will increase insurance costs so dramatically in the next few years, it may get untenable for regular consumers to be able to afford insurance premiums. I have families that are paying health insurance premiums, that are almost the costs of leasing a Mercedes 500.

  5. Anthony W. Halby said

    So, If California goes Single Payer, and can justify everything else, then Federal Dollars will pay for it and we are all on the way out?

    • Al Canton said

      We’re not ON the way out… are are ALREADY out!

      I’m going to guess that a few of the readers here are really interested in how health care should/will be delivered and paid for. However, I think most are more concerned about what the broker role and broker comp will be in whatever… will be.

      If you believe that broker/agent comp will be raised back to sustainable levels, I’d sure like you or someone to explain how and when that will happen.

      The only way I can see it happening in the short term (before 2014) is IF the carriers don’t get enough business from their own salespeople and (what’s left of) the broker sector. They might be “forced” to cut their costs to increase sales comp. However, it’s a long shot.

      I’m only writing IFP on 100% clean cases I get on referral. No more prospecting for it. Thus my production will be down 70% if not more.

      And my guess is that all group comp will go to a PM/PM payout in six months or less… like how Kaiser (in CA) paid brokers up to about 3 years ago. (As I remember their PM/PM comp penciled out to about 2.5%… a long way from the 7% everyone else paid.)

      And agents who switch to group will build up a nice book… and see it all melt into the exchanges in a couple of years… landing them right back where they are now… “holding the bag.”

      No matter if it is single-payor, state-plans, exchanges, or the current private-sector system, I don’t see a role for agents with comp levels that will enable them to support their families and grow their businesses.

      Selling health (especially IFP) will be like selling accident insurance… an add-on and “found” money… not a product one devotes a career (or a lot of time/effort) to.

      We’re ALREADY out of it.

      I’ve moved on.

  6. Malcolm Cutler said

    Alan,

    As a broker in our very Blue state and having faced that legistlator’s annual attempt to pass a “single payer” package for all state residents and no longer having Arnold Swarzenegger or the insurance commissioner to put a stop to such a plan; and the new arrival of Jerry Brown and David Jones as insurance commissioner, I am more concerned about the place for the broker and our business, if the Wyden/Brown concenpt were to be adopted.

    As a California resident, I would like to get your thoughts.

    • Alan said

      Malcom: good question. Yes, California lawmakers have passed a signle payer bill in the past, but they knew it would never get signed. And it’s one thing to pass a bill you know will be vetoed. It’s another to pass a bill that would become law. As a result, I don’t think we’ll see a single payer system in Californnia anytime soon.

      Look at the outcry against the increased government involvement in health care resulting from passage of the PPACA. This would be nothing as compared to what would happen in response to an explicit, undenaiable and intentional takeover of health care tha would result from a single payer system

      Also, lawmakers know the depth of California’s financial crisis. Even liberal lawmakers are unlikely to want to go forward with a huge increase to government spending durinng this time. Centrists certainly won’t. And California lawmakers know that with the open primary and independent reapportionment both bearing fruit in 2012, their current comfortable seats could get competitiive next year.

      Finally, Governor Brown understands all of this and, given his circumstances, has the political independence to make “tough” choices. He’s not going to throw the state’s economy into turmoil at this time.

      So I don’t think there will be a single payer system in Caloifornia anytime soon.

      • Malcolm Cutler said

        Alan,

        Thanks. A little bit of my concern stems from the fact tht California, as opposed to Wisconsin and Ohio, is not addressing the State fiscal costs through the pension and benefit entitlements that are killing the State, but proposed tax increases, leaving the heavy and increasing State benefit costs in place.

        Assuming the tax increases and cuts he does make leave the State financially sound, the next logical step, having solved the current fiscal problems, is extending health care coverage to all through a single payer system, bringing the private sector up to the same level of government benefit coverage- coverage for all. Sounds like a real WIN WIN proposition that the Blues in our State can sell: that instead of bringing the State in line with the private sector, as Wisconsin and Ohio, elevates the private sector to the benefit level of the State employees.

        Thanks for your thoughts and I hope that you are right.

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