Politicians, Voters Grapple With Plans To Cover Uninsured

There is no appetite among voters or politicians for a revolution in health care, a radical solution to provide health insurance to all U.S. residents.

The debate has been shaped by former President Bill Clinton’s (D) failure to bring his proposals fro a major expansion of health coverage to a final up-or-down vote in a Democrat-controlled Congress in 1993. No magic bullets can be expected from either Democrats or Republicans.

“Cover the Uninsured Week,” which ran from May 10 to May 16, featured more than 2,000 events across the country to publicize the situation of the uninsured. But finding a way to expand coverage will be a long and persistent campaign, with no assurance of success.

The politicians won’t do anything dramatic because the voters have no overwhelming preference among policy choices. Instead, a Kaiser Family Foundation survey detailed the extent to which U.S. residents are divided and uncertain about health insurance options: 24% favor a national health insurance program run by the federal government and covering everyone; 22% want an expansion of state programs for coverage of low-income people and the uninsured; 18% favor tax incentives to businesses to provide insurance voluntarily; 13% want state laws requiring businesses to offer coverage; 12% want tax credits to prompt individuals to buy their own insurance; and 8% want Medicare expanded to cover people under 65 who lack insurance.

Without a strong consensus among potential voters, providing health insurance in the immediate future to some people who currently are uninsured will rely on the expansion of some public safety net programs and provisions of some private sector initiatives. Democrats want more government activity, while Republicans prefer a private sector solution focused on individual choices and responsibility.

Bush, Kerry Proposals

President Bush wants Congress to create tax credits for individuals to help pay for health insurance policies and a change in the law to permit small businesses to align across state lines to form association health plans (AHPs) to provide health coverage. His plan would cost about $90 billion over 10 years and bring coverage to about 2.5 million of the 44 million uninsured.

Small businesses support Bush in his call for association health plans (AHPs), which would be created by federal legislation to bypass the traditional state regulation of insurance products. Advocates say AHPs would offer health coverage through trade associations and other business groups at lower costs than coverage obtained through traditional insurers like the BlueCross and BlueShield companies or firms like Kaiser Permanente, Aetna and Cigna. Opponents say AHPs could fail because they wouldn’t be required to maintain the financial reserves mandated by state insurance regulators.

Bush also favors providing tax credits to help individuals without employer-sponsored health coverage purchase health insurance policies for their families. The proposed credit — up to $1,000 for an individual and $3,000 for a family — would be deducted directly from the individual’s federal taxable income. Full credits would be available for individuals with annual incomes of as much as $11,000 a year and to families with annual incomes of as much as $15,000. The credit would be reduced as income rises and would end at $30,000 for an individual and $60,000 for a two-parent family.

The credit could pay for as much as 90% of the cost of health insurance and would be refundable: if the family’s income is not high enough to require them to pay federal income tax, they would receive the credit as a cash payment from the U.S. Treasury.

Presumptive Democratic nominee Sen. John Kerry (Mass.) has a more ambitious blueprint that would cost $653 billion over 10 years and extend coverage to 27 million people. Kerry has proposed that the government become an insurer of last resort, paying the bills when a family’s annual health expenses exceed $50,000 and providing additional incentives for small businesses and individuals.

Kerry wants to transform the health insurance market by placing a 6% cap on the share of family income spent for health care. Above that level, the government would pay all additional bills. He would establish a reinsurance pool, with the federal government paying for claims above $50,000 in a single year. This applies to only 4/10 of 1% of all claims but accounts for 20% of all health spending, according to a report by Robert Laszewski, a health insurance industry consultant. The Kerry campaign estimates this pool of government money “would save employers and individuals 10% per year on their health insurance costs,” Laszewski wrote in a recent bulletin.

Kerry also would create a separate federal health benefit program, in which individuals and small companies could purchase health coverage. This would be a major expansion of the current Federal Employees Health Benefit Program (FEHBP), the insurance system for federal workers, retirees and their families. However, the insurance industry would fight hard against any proposal of this type as a challenge to the private health insurance system.

Cost estimates of the Bush and Kerry proposals were prepared by Kenneth Thorpe, a health economist at Emory University, and a former official in the Clinton administration. He is not affiliated with either campaign.

California as Bellwether?

While the campaigns for the White House and Congress will focus on policy proposals to address the uninsured, California will be an electoral battleground for something more dramatic. Voters will decide whether to repeal a law (SB 2) signed by former Gov. Gray Davis (D) in 2003 just before he was recalled that would require some employers to “pay or play” by providing health insurance to employees or paying an amount equal to 7% of payroll costs into a state fund that would provide such coverage.

Under SB 2, which will take effect in Jan. 1, 2006, companies with more than 200 employees will be required to provide health insurance to their workers and the worker’s dependents, with the company paying 80% of the premium. Employers with 50 to 199 employees will have to provide health insurance only to workers by 2007. The law will exempt employers with fewer than 20 employees. The law also will exempt employers with 20 to 49 employees unless the state provides them with tax credits to subsidize the cost of health insurance for workers.

A measure to repeal SB 2 has qualified for the Nov. 2 statewide ballot. If the voters repeal it, SB 2 becomes only a footnote to history, another quixotic, discarded policy idea. But if the initiative fails, then the way is cleared for the new health insurance mandate to take effect. California as the most populous state and one with one of the highest rates of uninsured, would immediately become the example and bellwether for drives in other states to require employers to provide health coverage.

SB 2 is an effort to deal with the insoluble reality of health insurance: finding a way to bring coverage to workers whose companies feel they can’t afford to provide insurance. “The problem California small-business owners consistently ranked at the top for nearly two decades never really went away,” said Martyn Hopper, state director for the politically influential National Federation of Independent Business. “It was temporarily subsumed by an energy crisis, a state budget crisis, and a workers’ compensation crisis.”

Mandates like SB 2 are anathema to Hopper and the small business community. Small business owners, operating on tight margins and uncertain of future revenues and profits, regard any imposition of rules forcing them to provide health coverage as a threat to their economic security. They will be working hard to repeal SB 2.

While the politicians debate the proposals and the voters ponder them, the problem for small businesses and their employees gets worse. Health insurance premiums for small firms rose by 15.5% from 2002 to 2003, compared with price hikes averaging 13.2% for companies with more than 200 workers.

“If we want to reverse the trend of growing numbers of uninsured Americans, we should be making it easier, not more difficult for small businesses to provide health coverage for their employees, who make up the largest proportion of uninsured individuals, ” Commonwealth Fund President Karen Davis wrote in a recent report. The document’s title was an eloquent description of the challenge: “Risky Business: When Mom and Pop Buy Health Insurance for Their Employees.”

More on the Web

Covertheuninsuredweek.org provides information about the problem of the uninsured and proposed solutions online.

A health care issue brief for Bush is available online. Kerry’s health care issue brief also is available online.

The California HealthCare Foundation maintains a resource page providing additional information about SB 2.

The Commonwealth Fund study of the cost of insurance for small businesses is available online. Note: You must have Adobe Acrobat Reader to access the report.

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