Health Insurance Reform Options

October of 2009 has been an exciting month for health policy wonks. For those of us who enjoy the study of health policy, it doesn’t get much better than this. In this post we briefly describe some of the key health policy ideas still surviving the legislative process. This is not intended to be a thorough review of each measure. As always with complex legislation, the devil is in the details.

The “Mandate”: All the key bills making their way through the House and Senate include a mandate that everyone be required to have health insurance. A health insurance mandate is going to happen, one way or another. Now, for those of us without health insurance, there are provisions (tax credits or “subsidies”) to make insurance affordable. How much those tax credits will offset the cost of buying insurance for each income bracket is still being debated. Likewise, the size of the penalty for not buying insurance is also still being debated.

The “Public Option”: For all the attention this idea is getting from both inside and outside of the Washington beltway, it’s really less interesting to this student of health policy because it’s not as creative or innovative like the other tools being discussed e.g., health insurance exchanges, state-based high risk pools, payment reform, value-based purchasing initiatives… the list goes on. Yet, because the “public option” strikes at a historical, deep-rooted political ideal (the role of government in the private market), it has received the vast majority of attention from the media and the lay public. The audience should know that the “public option” is so fluid in meaning at this point that no one really knows what the “public option” will mean for healthcare. It could be national or state-based; states may be given the option to choose to participate; it might be tied to Medicare, it might negotiate with providers on its own. The point of having a public option is to make premiums affordable by keeping the insurance industry honest and competitive. Recent attention has been given to a maneuver that would create a pathway for the public option in the future only to be implemented (or “triggered”) if insurance companies fail to cover the desired percentage of the population. Votes are needed either way - look for compromises on this issue, not one extreme or the other.

Health Insurance Exchange(s): This is perhaps the most exciting part of health reform, yet few fully understand how important exchanges will be for this health system. For a whole lot of reasons, individuals purchasing insurance on their own have been at a massive disadvantage to those who receive insurance through their employer. An insurance exchange would create a clearinghouse of insurance plans for individuals and families to choose from. For the insurance industry, it also creates a massive pool of potential customers who otherwise might not seek insurance. Like the public option, the exact structure and functioning of the exchange or exchanges is not yet known, i.e., there could be one big national exchange or many “state-based” exchanges. Regardless of approach, there are a few things likely to be included in an individual market exchange. First, the government (either federal or state) will likely set the rules. For insurance companies to participate, the plans they offer would have to meet specific criteria for quality, cost, and access. Furthermore, the ratios by which they can increase or decrease premiums based on age, smoking status, and family size, will likely be fixed.

Subsidies: Finally, the most expensive piece of reform: premium subsidies. Every proposal creates subsidies to buy insurance – so regardless of plan, we will see subsidies. This is where the biggest chunk of the 800 billion to 1 trillion dollars will be spent. The core goal of every reform proposal is to get everyone insured, and health insurance is expensive. Therefore, based on percent of federal poverty level, individuals and families will receive some form of financial support from the federal government to offset the cost of purchasing insurance. The manner in which this financial support is distributed and the size of the subsidies based on income is still being debated.

The mandate, public option, insurance exchanges, and subsidies are 4 key ideas being debated this fall in Congress. There are many more ideas and changes to the system included within each proposal, however. Needless to say, it’s the golden years for health policy wonks – the months of November and December should be very exciting. Stay tuned.

Rich Toner, MS