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now for the hard part. With headlines fading from the passage in April of landmark health care legislation aimed at extending insurance to nearly every Massachusetts resident, the challenge is translating the mammoth bill into actual health care coverage, a task that could prove even trickier than the bipartisan brokering of the bill itself. The key challenge now is cost-of new health insurance products, and of health care itself.
Gov. Romney signed the bill.
Photo by AP Wide World.
The new law combines a broad expansion of state subsidies to cover lower-income residents with a requirement that higher-income uninsured residents obtain coverage on their own by July 1, 2007. Larger employers that don’t provide health coverage will be hit with an annual assessment of up to $295 per worker, and they are required to at least make available savings plans that let workers set aside pre-tax earnings to buy their own health insurance.
Under that framework, most of the 500,000 to 600,000 uninsured Massachusetts residents are supposed to obtain coverage by next July. But the success of the whole enterprise rests on the availability of quality health insurance plans that people at various income levels are able to pay for.
“Can we come up with affordable products? That really is the linchpin of the whole bill,” says Richard Lord, president of Associated Industries of Massachusetts.
A new state-appointed board, the Commonwealth Health Insurance Connector, is charged with determining how much the state will subsidize the cost of coverage for residents earning between 100 percent and 300 percent of the federal poverty level ($9,800 to $29,400 for an individual; $20,000 to $60,000 for a family of four), and with reviewing the coverage options insurers come up with for this group and those with higher incomes, who must pay premiums on their own. (Those with earnings below the federal poverty level will have the full cost paid by the state.)
“I think those will be spirited discussions,” says Lord, a member of the 10-person Connector board. “Some people will want us to be as generous as possible; others may be concerned with [the plan’s financial] sustainability.”
Under the law, those who don’t buy coverage will be subject to penalties: the loss of the personal exemption on their state income taxes for 2007, and, in subsequent years, an assessment equal to half the monthly cost of the lowest priced premium available. The Connector board could, however, grant exemptions from the mandate if they deem there to be no affordable, quality coverage available for those at certain income levels. Some advocates are already saying that, without more funding for subsidies, there’s no way the state will come up with plans that people can reasonably be forced to buy.
“We’re not expecting the individual mandate to be imposed on everybody,” says John McDonough, director of the advocacy group Health Care for All. “If you really want universal coverage, you’re going to have to dig deeper to find the financing to pay for it.”
Among the products that insurers are likely to offer through the Connector, which will act as a clearinghouse for residents to obtain health coverage, are higher-deductible plans that have lower premiums but require substantial out-of-pocket spending before coverage kicks in. Another likely approach will be plans offering lower premiums in return for receiving care from a restricted network of health care providers. That managed care model has been out of favor since the mid-1990s backlash against HMOs. But a decade of soaring health care costs, in which even those with employment-based coverage are paying much more for insurance, may have changed attitudes toward such plans.
Jon Kingsdale, the veteran health insurance executive tapped by the state to run the new Connector, says creative approaches to bringing down costs—to both the state and individuals—will be crucial to the success of the sweeping reform effort. “It will be a bust, I believe, if it does not change the nature of the plans that are offered,” says Kingsdale. “All of us in state government have to be concerned about the affordability of these products.”
The affordability of new health insurance plans is not the only way cost figures into the new law’s eventual success or failure. The legislation calls for expanded reporting on the costs of health care services and on providers’ record of outcomes in treating conditions, with that information made available to consumers on a state-run Web site. It also gets the state on the “pay for performance” bandwagon by requiring that, beginning in the second year, providers meet certain cost and efficiency standards in order to receive the higher Medicaid rates the legislation provides for. New plans offered to the uninsured through the Connector could also find their way into the offerings of employers who already provide health coverage, which could extend new, lower-cost options much more broadly.
“This law could, I think, really unleash a whole new era of cost containment,” says Nancy Turnbull, head of the Blue Cross Blue Shield of Massachusetts Foundation, which funded a 2004 study of the uninsured in Massachusetts that helped set the health care reform effort in motion.
Others say it will do exactly the opposite. Adding more people to the insurance rolls will be like throwing “gasoline on the fire of Massachusetts health care costs,” says Alan Sager, a Boston University researcher and longtime critic of medical spending in the Bay State.
Even if it doesn’t deal with it directly, the new law may well force the issue of health-care inflation. An analysis by the legislative conference committee that hammered out the reform law projects that state financing of the plan will run into the red by some $160 million by the third year. If that funding gap grows, the debate could come down to spending more money to maintain coverage levels, pulling back on the extent or quality of coverage—or getting serious about reining in costs.
“For this to work in the long-term, we really have to turn to cost containment,” says Melissa Shannon, a policy analyst at Health Care for All. “The legislation is intended to cover everyone, and we can’t do that if we keep seeing the kinds of cost increases we’ve seen in recent years.”
