June 8, 2009

National Healthcare Reform: If it’s Not on Your Radar Screen – It Should Be

By Scott Goldstein

The impending battle in Washington over healthcare reform could end with a radical change to the way Americans receive health insurance and healthcare. And the issue, picking up steam on Capitol Hill, is barely on New Jersey employers’ radar screens even though they pay for the bulk of insurance for residents. Draft bills are circulating, President Obama wants a final product on his desk before Congress’s August recess and he wants to sign it by October.

This may sound like welcome news to businesses owners, saddled with skyrocketing premiums for more than a decade; and to the estimated 45 million Americans – 1.3 million in New Jersey – who don’t have health insurance.

But those in the healthcare industry – particularly, insurers and healthcare providers – are concerned that some extreme changes are being considered too swiftly and may actually lead to higher costs.

Everyone agrees the healthcare system is overly complicated and in need of reform, said Larry Lewis, director of government affairs in New Jersey for Aetna. “Congress is moving quickly to address a decades-old issue,” he said. Aetna has been working closely with the Obama administration and Congress to reach a public-private reform option.

Robert Wise, president and CEO of Hunterdon Healthcare, which runs the Hunterdon Medical Center in Flemington, is watching with great interest at what is transpiring in the nation’s capitol. “I think Congress is swallowing an indigestible mouthful,” Wise said. “And the bite they take out of the healthcare delivery system can be fatal to hospitals.”

The challenging question: How do lawmakers control the spiraling cost of healthcare and insurance premiums without reducing the quality of care?

Members of the New Jersey Chamber of Commerce – insurers, brokers, hospital executives and employers – discussed ideas bouncing around Capitol Hill.

One particularly controversial proposal is the establishment of a government-sponsored insurance plan to compete with private insurers. The government-sponsored plan, often referred to as “a public option,” has been described by some as an expansion of Medicare, the government-run health program for older Americans, that would be open to anybody to buy in. Proponents say it would be a good choice for those that don’t have access to employer-provided insurance.

But insurers and hospitals are staunchly opposed. They say a low-cost government-run plan – with its access to federal subsidies and the potential for exemption from government regulations – would attract tens of millions of Americans, put private insurers out of business and lead to a fully government-run, single-payer healthcare system. Here’s the resulting problem, critics say: The government-sponsored option would underfund hospitals and physicians, like Medicare already does, and lead to both delays in care and the rationing of care.

“If a government plan leads to a total government-run system, people and businesses will pay for health care through taxes rather than premiums,” said Thomas W. Rubino, director, public affairs and advertising at Horizon Blue Cross Blue Shield of New Jersey. “It’s just a shift in costs – and Americans will lose the ability to choose their own health plan.” He said reform is needed but that turning to government to insure more people will lead to “fewer choices for health plans and doctors; and rationing and delays in care as seen in Canada and Great Britain."

Wise of Hunterdon Healthcare said, “Government has been notorious for overspending and underfunding since Medicare began. And the thought that insurance will be based on the rise and fall of our economy is scary, especially considering what we see today.”

Also opposing the government-run option is the Washington, D.C.-based U.S Chamber of Commerce. “We don’t think a public plan can be crafted in a way that can compete fairly,” said Bruce Josten of the U.S. Chamber of Commerce.

Josten said his organization instead supports reform that includes corporate wellness programs that financially reward workers that lead healthy lifestyles; encouraging physicians to prescribe treatments that are scientifically proven to work; and loosening regulations in the individual and small group markets where the cost of premiums are currently 20 percent higher than what large employers pay.

Added Jim Leonard, senior vice president, government relations, New Jersey Chamber of Commerce, “Employer healthcare costs continue to skyrocket and this needs to change no matter what reform takes place.”

There are other reform ideas being floated in Washington that might also end up in a final bill, besides the public option. One major measure being considered is mandating all Americans to buy health insurance – much like motorists in New Jersey are required to buy car insurance. Those who can’t afford insurance would be subsidized by Uncle Sam.

“We believe a coverage mandate is a good idea,” said Lewis of Aetna. “At the end of the day, every person should have access to high quality, affordable healthcare. It would increase the size of the pool of coverage by getting both healthy and sick people insured.” This wouldn’t only make insurance more affordable, it would encourage personal responsibility and allow insurance companies like Aetna to guarantee coverage to people regardless of their health status, Lewis added.

Forty percent of the 45 million uninsured people in the U.S. are ages 18 to 34 – many of them are healthy, single people who do not opt for coverage simply because of the price, according to the U.S. Chamber of Commerce. They would rather have the spending money in their pockets.

But how to pay for reform, and the subsidies, is another hot potato. Ideas floated have included taxing people who get “Cadillac” health benefits through an employer; excise taxes on liquor and soft drinks with sugar; and fining employers who don’t provide insurance to employees. Another controversial idea is reducing the cost of Medicare and Medicaid by $200 billion to $300 billion over the next 10 years – in part by requiring drug companies to give bigger discounts to state Medicaid programs.

Also on the table is a plan to require businesses to offer insurance to all employees or pay a fine.Business owners see it as another mandate that doesn’t get to the root of the problem. “An employer mandate only works if the business group marketplace is affordable,” said Jeffrey C. Scheininger, chairman of the New Jersey Chamber of Commerce’s Health Care Coalition and president of Flexline/U.S. Brass & Copper Corporation in Linden.

Last year, offering healthcare to employees cost Scheininger’s company nearly a third of its before-tax profits to fully cover 17 employees and their families, he said. Here’s the kicker: his insurance carrier recently notified him that his employees’ premiums will rise by 23 percent next year. Insurance has become so expensive that only 38 percent of small businesses provided health insurance to employees last year, compared to 61 percent in 1993, according to the U.S. Small Business Association.

While all the focus right now is on the auto industry bailout, the healthcare dollars are much greater, State Chamber President Joan Verplanck said. Auto sales represent 3.6 percent of the nation’s GDP, while healthcare costs dwarf that with a whopping 17 percent, or $2.4 trillion, she added. “To fully vet the final bill and its long term impact on the economy is virtually impossible – especially over the course of a single summer,” said Verplanck. “We are looking at dramatic changes affecting a large percentage of Americans. If we’ve learned anything from the flurry of stimulus spending, it’s that outcomes need to be clearly understood and costs analyzed before anything is signed by the President.”

Regardless of the final reform product, one Chamber expert says there is a major problem not being addressed. “Right now we have 50 different states’ departments of insurance regulating what people call a national system,” said James T. O’Connor, managing partner of Egan, Amato & O’Connor, a Manasquan-based employee benefits consulting firm. O’Connor said, “It’s not a national system. It’s a hodgepodge of different state markets. And that contributes to excess regulatory burden, administrative inefficiency and product confusion for everybody.”

He suggests the current system of employer-provided insurance benefits and the individual health insurance market be regulated at the federal level. “You need one set of rules,” he said.

What everyone agrees with is the national healthcare system is broken. “After a decade of close to double-digit increases on annual insurance premiums, you have businesses buckling under the weight,” said Josten of the U.S. Chamber of Commerce. “There is a growing sense we are spending a lot of money on very poor ROI. There is a growing sense we simply cannot continue with the system we’ve had in place for the last 50 years. So something has to change.”

Leonard concluded, “We don’t know what the final product will be in the reform arena, but what we do know is that changes will happen quickly. If it’s not already, this should immediately be on everyone’s radar screen.”

Scott Goldstein is the communications manager for the New Jersey Chamber of Commerce. Scott can be reached at scott@njchamber.com.

Additional Resources

US Chamber Focus on the Issue

US Chamber of Commerce Statement

America's Health Insurance Plans Outlines Plan to Reduce Health Care Costs by $145 B

The Cost and Coverage Impacts of a Public Plan: Alternative Design Options (The Lewin Group)

The Four Health Care Deal-Busters

U.S. Health Industry to Fight Public Insurance Option in Reform Proposals