While vacationing in Hawaii, conservative radio talk show host Rush Limbaugh had chest pains and as a result had a stay at the Queens Medical Center--which is the hospital where Barack Obama was born (as was my wife as well.) But that's not the only irony.
At a press conference talking about his stay, he made comments which were widely interpreted to take a dig at efforts to reform the health care system, saying he was availed of "the best health care the world has to offer." Limbaugh continued, "Based on what happened here to me, I don’t think there’s one thing wrong with the American health care system. It is working just fine, just dandy.”
My post takes a look at some of the new research about the Hawaii Pre-Paid Health Care Act of 1974, and its central requirement for employers to provide health coverage to their workers: it shows positive results in improving access with no measurable impact on jobs. If Rush Limbaugh is endorsing an employer mandate, the House and Senate leadership may want to take another look at beefing up its requirements.
One lesson from Hawaii beyond Limbaugh's visit and unintended endorsement of reform I want to spotlight:
* Beyond the level of the assessment, the structure of the employer assessment is key, so there aren't broad loopholes that allow employers to avoid any contribution whatsoever. In this regard, the Senate's complicated "free rider" provision needs to be fixed. The House version has a simple test of whether an employer is providing adequate coverage, and the assessment for those that don't is a percentage of payroll, based on a sliding scale capped at 8%. The Senate is more convoluted, and the most problematic part is that employers could avoid much of the penalty by shifting workers to part-time status.
As Elise Gould and Ken Jacobs writing for the Economic Policy Institute indicate, "Studies of Hawaii’s health insurance mandate have found that the state has a disproportionate number of employees working slightly under 20 hours a week, the number of hours at which that requirement becomes effective. The 30-hour cut-off in the Senate Finance bill is more likely to encourage reductions in work time, since it is easier to restructure work to fewer than 30 hours a week than to fewer than 20 hours a week." As the researchers note, work shifts in this range are common in the restaurant, retail, and nursing home industries--the very ones that are less likely to provide coverage and leave their workers uninsured. The experience from Hawaii is strong evidence that the final employer responsibility provisions should be closer to the House than the Senate.
This issue of the structure of an employer requirement---and especially how to cover and pay for part-time workers---was a crucial unresolved issue in the California debate around health reform in 2007. The House bill gets this right--and better than what we had in the final Schwarzenegger-Nunez negotiated bill, partially because we didn't have the constraints of ERISA. The Senate version, however, needs to be fixed in order for it to work as intended.
The report, by the consumer health organization Families USA and co-released by the statewide health consumer coalition Health Access California, states that the subsidies – which were started last March by the American Recovery and Reinvestment Act (ARRA), but were made available for only nine months – have enabled millions of laid-off workers and dependents to afford so-called “COBRA” premiums needed to continue health coverage from their previous employer.
Under the ARRA, the federal subsidies pay 65 percent of the cost of COBRA premiums. In California, the federal subsidies for COBRA family coverage average $720 per month.
Without subsidies, the report finds, COBRA premiums for family health coverage will cost laid-off California workers, on average, $1,107 per month – 82.1 percent of the average ($1,349) monthly Unemployment Insurance checks they receive.
For the first recipients, who began receiving subsidies in March, the subsidies will expire on November 30. For those who started receiving subsidies after March, the expiration will be nine months after their start-up date.
For millions of laid-off workers and their families, the federal COBRA subsidies have been described as a health-coverage lifeline. Health advocates are arguing that new jobs legislation extends those subsidies.
Health and consumer advocates noted that pending health reform legislation would provide a permanent source of help to laid off workers. The health reform bills pending in Congress would enable laid-off workers and their families to obtain health coverage through a newly created marketplace, called an “exchange,” and families with low incomes would receive tax-credit subsidies to help pay the premiums.
Health advocates are urging Congress to extend the COBRA subsidy as a much-needed measure in the present to protect recently laid-off workers and their families. But, they say, this issue shows the dire need for health reform moving forward, so nobody loses health coverage when he or she switches jobs or becomes unemployed looking for work.
The Congressional Budget Office and Joint Tax Committee estimated that approximately 7 million adults and dependent children would receive the COBRA subsidy in 2009. The Treasury Department is compiling data about how many workers received the subsidy, but a count of the people benefiting from the subsidy is not yet available.
The data for the Families USA report were derived from federal sources in the Departments of Labor and Health and Human Services. A more detailed description of the sources of the data is set forth in the report’s methodology section.
We knew that the opponents of health reform will attempt to manufacture research findings against the pending proposals. Ken Jacobs at UC-Berkeley earlier offered here a point-by-point takedown about some citations made on the House floor about the supposed negative economic impacts of health reform--statistics that were not just inflated, but basically made up.
Now Michael Schear at the Washington Post has obvious evidence of this, as it has obtained an E-mail from the Chamber of Commerce's senior health policy manager soliciting funds from business lobbies for a study about the jobs impact of health reform. The E-mail states: "We are seeking 4-5 other groups to contribute $5k so that we can move forward as soon as possible, especially considering that Leader Reid has filed a rule 14 to begin debate as early as Tuesday.. The longer we wait, the less chance we have of influencing the debate... If you know of any other trade associations we should approach, please let me know."
They plan to use the money to hire a "respected economist" to produce a study. Then, "The economist will then circulate a sign-on letter to hundreds of other economists saying that the bill will kill jobs and hurt the economy. We will then be able to use this open letter to produce advertisements, and as a powerful lobbying and grass-roots document."
We suspected as much from the opposition, but never had the process of manufacturing data laid out before us so clearly.
Even with this evidence, the Post article tries to be even-handed: "The proposed economic study by the Chamber is the latest example of attempts by advocates and opponents of health-care reform to influence the debate with economic studies whose authenticity is later questioned by their adversaries." But what if one side is just much, much more willing to make stuff up?
Those who oppose an employer requirement, and health reform in general, have been making wild claims about the supposed negative impact. To fact-check these claims, here's a guest commentary by Ken Jacobs, Chair of the UC-Berkeley Center for Labor Research and Education:
Over the last few months, we have heard any number of outrageous claims about the potential impacts of the proposed health care bills (death panels, end to private insurance, etc.). Still, the claim made by Republican speaker after speaker during Saturdays House debate that the bill would result in a loss of 5.5 million jobs stands out. They even go so far as to say (see House Republican Leader John Boehner’s website), that the research was based on a methodology developed by Dr. Christina Romer, Chair of the Council of Economic Advisors, and Jared Bernstein, the Vice President’s Chief Economist. What’s going on here?
The Economic Policies Institute’s Josh Bevans pointed me to Politifact, which does a good job of debunking the claim. It turns out that the number comes from Republican staff of the House Weighs and Means Committee.
They started with an estimated tax increase on employers from the play or pay provision of $300 billion. It is not clear where this number comes from; the CBO estimate is $163 billion over ten years. They treat that number as though it is a direct reduction in GDP for a single year, thereby increasing the projected impact tenfold. To get the total impact on GDP they use a multiplier from a 2007 paper by Christina Romer which explicitly states that the analysis in the paper pertains to tax increases or cuts that change the total spending in the economy. This would be the case, for example, for a tax increase to fund the deficit where there is no corresponding increase in government spending, or for a tax cut to stimulate the economy that was not balanced by a reduction in spending. The paper is very clear that the analysis would not apply to a social insurance program where the increased tax is balanced by an equal increase in output—as with the healthcare act. Finally, the minority committee staff applied a ratio of changes in GDP to job losses or gains from the stimulus analysis by Romer and Bernstein to reach a number of lost jobs.
So to reiterate—they: * use a methodology that is clearly inappropriate for the case at hand * start with a cost to employers that is nearly double that of the CBO projections * inexplicably multiply the results by ten.
Then they claim that the analysis was done with a methodology from the Counsel of Economic Advisors—one Congressman actually directly attributed the estimates to the CEA—even as it directly contradicts what Romer wrote in the paper they cite. Amazing.
So, what does the academic literature tell us about pay or play provisions and job losses? Studies on Hawaii and San Francisco, which both have employer requirements, have found no measurable impacts on employment. Most economists believe that for workers above the minimum wage the costs of health insurance are passed on to workers over time in the form of lower compensation. The impact of a health requirement of the size under consideration would be equivalent to a modest increase in the minimum wage. Drawing on the minimum wage and health mandate literature, Philip Cryan found that the job impacts of an employer requirement of 8 percent of payroll, with no exemptions or subsidies for small businesses, would be in the range of 166,000 jobs lost to 55,000 jobs gained.
This is before taking into account the many positive impacts of health reform on jobs, small businesses and the economy as a whole. The biggest “job-killer” would be a failure to act.
If employers avoid their responsibility, taxpayers pay...
Wednesday, October 21, 2009
More on the lack of employer responsibility and the "free rider" provision of the Senate Finance Committee proposal...
As employers restructure work for low- and moderate-income employees to avoid paying the free rider penalty, the taxpayer ends up footing the bill for health benefits for employees of some very large employers that rely on low and moderate income workforces.
CBO in its analysis assumes that every dollar not spent on health benefits by an employer will translate into wages. Is this really true for low and moderate wage employees? By definition, these employees lack bargaining power in the labor market: their wages are below the median wage. Will it be possible for employers to avoid paying the credit and fail to increase wages? For employers with workforces that are predominantly below the median wage, the answer could be a resounding yes.
Widespread restructuring of employment by employers with predominantly low and moderate income employees could blow up CBO’s conclusion that Social Security and income taxes will increase because wages will increase if health benefits are not paid by employers. CBO may be right about this in the aggregate and certainly for higher wage employees and even higher wage workforces but is this correct for low/moderate wage workforces? Or will employers with predominantly low/moderate wage workforces simply restructure work so that the employer avoids the free rider provision? Is the free rider provision a free pass for employers?
Contrast this with HR3200 which requires employers to provide benefits or pay 8% of payroll per hour worker for each employee. Here there is no incentive to restructure work to be less than a certain number of hours per week. If the nature of the work requires part-time employment (a school bus driver, a restaurant that is only open at lunch) or part-year employment (residential construction, the Christmas season in retail), the employer is only on the hook for the hours worked. But there is no incentive to restructure the work so that low and moderate wage workers work less than 30 hours per week.
Even the Senate HELP bill is better than Senate Finance: at least it requires a modest payment for part-time workers as well as a proportional payment for part-year employees.
The evidence from Hawaii is somewhat mixed—but there the threshold was 20 hours per week. While it is relatively easy to restructure employment from 40 hours per week to 30 hours per week for an employer with 50 or more employees, it is tougher to restructure work to be less than 20 hours per week. Shifts of seven hours or six hours four days per week are easy to arrange: getting under 20 hours per week is tougher.
The free rider provision is easily evaded by precisely those employers who are most likely to have employees using the exchange, to wit, employers with workforces that are disproportionately low and moderate income.
Here’s why: the free rider provision only applies to employees who work more than 30 hours per week. It is entirely possible for employers to restructure work so that most low and moderate wage jobs are less than 30 hours per week while supervisors, managers, professional and even long-time employees work more than 30 hours per week. Indeed, this is already the structure of employment in large segments of retail and fast food.
And employers will figure out pretty quickly that the way to avoid paying the credit is to restructure work to be less than 30 hours per week. They will have a considerable incentive to do so: the first employee that goes into the exchange will cost them $5000 for that employee---or $400 for every employee. That is a considerable marginal increment, as the economists say, or a pretty big whack as the rest of us would say.
Is it bad for the employees? They will be eligible for the credit or perhaps Medicaid, even if they work multiple jobs, none of which provide benefits. The credit is not as generous as good employee health benefits provided by employers with high wage workforces but still the credit or Medicaid are substantially better than nothing which is all that too many low and moderate income employees have now.
But what about the taxpayer? The taxpayer will end up footing the bill for the lack of employer-paid benefits. Employers who systematically restructure low and moderate income jobs to be less than 30 hours per week will shift the costs to Medicaid and the exchange—to the taxpayer.
TWO burning questions are at the center of America’s health care debate. First, should employers be required to pay for their employees’ health insurance? And second, should there be a “public option” that competes with private insurance?
Answers might be found in San Francisco, where ambitious health care legislation went into effect early last year...
The early results are in. Today, almost all residents in the city have affordable access to a comprehensive health care delivery system through the Healthy San Francisco program...
Although not formally insurance, the program is tantamount to a public option of comprehensive health insurance, with the caveat that services are covered only in the city of San Francisco. Enrollees with incomes under 300 percent of the federal poverty level have heavily subsidized access, and those with higher incomes may buy into the public program at rates substantially lower than what they would pay for an individual policy in the private-insurance market.
To pay for this, San Francisco put into effect an employer-health-spending requirement, akin to the “pay or play” employer insurance mandates being considered in Congress. Businesses with 100 or more employees must spend $1.85 an hour toward health care for each employee. Businesses with 20 to 99 employees pay $1.23 an hour, and businesses with 19 or fewer employees are exempt. These are much higher spending levels than mandated in Massachusetts, and more stringent than any of the plans currently under consideration in Congress. Businesses can meet the requirement by paying for private insurance, by paying into medical-reimbursement accounts or by paying into the city’s Healthy San Francisco public option.
There has been great demand for this plan. Thus far, around 45,000 adults have enrolled, compared to an estimated 60,000 who were previously uninsured. Among covered businesses, roughly 20 percent have chosen to use the city’s public option for at least some of their employees. But interestingly, in a recent survey of the city’s businesses, very few (less than 5 percent) of the employers who chose the public option are thinking about dropping existing (private market) insurance coverage. The public option has been used largely to cover previously uninsured workers and to supplement private-coverage options.
Through our experience working on health-care-reform efforts in California and Washington (one of us worked for President George W. Bush’s Council of Economic Advisers), we have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco’s example should put some of those fears to rest. Many businesses there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.
As of December 2008, there was no indication that San Francisco’s employment grew more slowly after the enactment of the employer-spending requirement than did employment in surrounding areas in San Mateo and Alameda counties. If anything, employment trends were slightly better in San Francisco. This is true whether you consider overall employment or employment in sectors most affected by the employer mandate, like retail businesses and restaurants...
The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.
We need to ensure that the California delegation takes these lessons from San Francisco back into the debate in DC.
Making sense and cents of the employer role in reform...
Wednesday, July 08, 2009
Last week the U.S. Senate Health, Education, Labor and Pension (HELP) Committee released a new version of its part of health reform. In the Senate, the HELP committee shares the health reform jurisdiction with the Senate Finance Committee, which has jurisdiction over Medicare and Medicaid. So some important components, like a Medicaid expansion, are absent from the HELP draft.
On the House side, the three committees have produced a joint discussion draft, called the Tri-Committees draft. It provides an interesting contrast to the two Senate versions: the employer obligation is more effective while the individual obligation is more affordable than either of the proposed Senate versions.
Employer responsibility and individual responsibility are linked: employers that provide better coverage make it easier for individuals to meet the individual mandate. If the employer requirement is low, then public programs or the exchange picks up the difference between what the employer does and what the individual can afford.
In the Senate HELP version, the employer obligation is modest while the individual obligation is substantial.
Unlike most of the reform proposals in California, but similar to Massachusetts, the HELP proposal imposes an employer “responsibility” assessment of $750 per year per full-time worker and $375 for each part-time worker unless the employer pays 60% of the premium for qualifying coverage.
The HELP proposal entirely exempts employers with fewer than 25 full-time employees (with no limit on part-timers). And it creates a small business tax credit for employers with 50 or fewer full-time employees with wages averaging $50,000 or less.
What a bonanza for restaurants and retail---especially for fast food and smaller retailers. And these are precisely the industries where employees are least likely to be offered coverage.
Why? Because the definition of full-time employee is 35 hours per week.
An employer could have literally 200 employees but so long as only 25 of them worked more than 35 hours per week, the employer would be exempt from the employer obligation—but eligible for the “small business” tax credit. Who would have a workforce that looks like this? A restaurant, a fast food place, smaller retailers.
Do WalMart and Macy’s win, too? For every employee that works less than 35 hours per week, and that is a lot of people in retail, the obligation is only $375 for the entire year. That is $31.25 per month. That is far less than the cost of private health insurance, it is even less than what California spends on Medi-Cal for working moms. Is it more than big retailers like Macy’s and WalMart do today?
The HELP version applies this requirement to every month worked: that means that the waiting periods for coverage that are common in both restaurants and retail, notoriously stretching to over a year in some instances. That will cost Wal-Mart and Macy’s something.
The CBO modeling does not appear to us to take into account the likely labor market dynamics—a fancy way of saying that lots of jobs without benefits that are full-time will become part-time if the HELP bill gets enacted.
Maybe such an approach made sense in Massachusetts where 68.3% of the under-65 population got their insurance on the job and very few purchase individual coverage. But it never made sense to us in California where only 54.7% of those under 65 get their coverage through employment—much less in LA County where only 48.8% gets coverage through the job.
In contrast, the House version includes both a more substantial employer contribution and one less likely to create labor market distortions. The House version requires large employers to contribute at least 72.5% of individual coverage or 65% of family coverage for each employee with a pro-rata share for part-timers or to contribute 8% of payroll for each employee.
The House version’s scaling of the contribution means that there is no incentive to create part-time jobs to avoid the obligation. The House version also says that it will exempt small business but does not yet define that exemption. It provides a tax credit to small businesses, with 25 or fewer employees making average wages under $20,000. The House version counts any employee who makes more than $5,000 annually, plainly including part-timers.
The House version minimizes labor market distortions in terms of part-time/full-time work. If a restaurant needs part-time employees because of the lunch rush or a retailer needs to staff up during the holiday season, that business can hire the part-time workers it needs and pay 8% of payroll into the exchange which will provide coverage for these part-time or part-year workers.
We are still waiting for CBO scoring on the House version but the 8% of payroll will create a meaningful employer responsibility contribution, especially in those industries such as retail and restaurants with substantial shares of low-wage and part-time workers.
They had a follow-up editorial today correctly citing the need to pay for reform. National health reform is going to need up-front investments. But we disagree with the second part of the statement that "Insuring more people might be good policy, but it will not save money." Bringing everybody into the health system not only allows for cost-saving preventative care, but gives policymakers the tools to drive payment and system changes to encourage the best quality and low-cost care. It is a result of our fragmented non-system that our level of spending does not have any correlation to the quality of care. And health reform includes key components, from the public health insurance option to comparative effectiveness research, that can have an impact to.
The Los Angeles Times had a long editorial as well on health reform, with several key points we agree with mostly, but not entirely. Here are snippets of interest:
Access to affordable healthcare in the United States is an entitlement, a perquisite or a fantasy, depending on a seemingly arbitrary matrix of factors. Government insurance programs are available for the elderly, the permanently disabled, people with failing kidneys, the impoverished and children from low-income families. But how poor one has to be to qualify varies from state to state and from year to year. Employees at most large companies and many small ones can take advantage of group insurance plans negotiated by their employers. But millions of people who work in low-paying service, retail or contracting jobs have to seek individual insurance policies, which may be unaffordable or unavailable because of their medical histories. Others obtain insurance with deductibles so high or coverage limits so low that one bad accident or illness could bankrupt them.
It's an irrational system with inhumane and costly results that extend beyond the 47 million uninsured. According to the Kaiser Family Foundation, more than half of the adults without insurance have "no regular source of healthcare" other than an emergency room. They are more than four times as likely as the insured to delay a trip to the doctor, and six to eight times as likely not to get treatment because of the cost. The consequences for the uninsured include more serious ailments and a higher premature death rate; for everyone else, the consequences include the loss of productivity attributable to worker illness, a higher risk of infectious disease and about $50 billion in medical bills passed along by those who couldn't pay them.
Most important, the large and growing number of uninsured Americans make it well-nigh impossible to overhaul the healthcare system to improve quality and control cost. Bringing those people in from the fringes is crucial to changing the system's incentives, shifting from a model that relies on sickness to one that promotes prevention and wellness, increases the supply of primary care and improves coordination among its many elements...
Washington can't order people to buy insurance without helping millions of them pay for policies they couldn't otherwise afford. Kaiser estimates that almost 40% of the uninsured in 2007 had family incomes at or below the federal poverty level, and another 29% had incomes less than twice the poverty level. Typical group policies cost $12,200 on average for a family of four in 2007 -- more than a full-time minimum-wage worker earned that year. Even at twice the poverty level, the average premium for a group policy would devour 20% or more of the family's income. Any individual mandate would have to be accompanied by subsidies for those who make too much to qualify for Medicaid but too little to afford a standard insurance plan...
It's legitimate to ask why some employers -- or more accurately, their workers -- shoulder the cost of the healthcare system when others do not. That's why a limited mandate, scaled to the size of the business and its payroll, may be in order. If a company can't afford the extra cost, it could opt out by paying a tax based on the size of its payroll.
Bringing the uninsured and underinsured completely into the system will set the table for reforms that improve care and save money for everyone. The Commonwealth Fund recently estimated that the cumulative savings from these reforms could be $1.2 trillion to $3 trillion by 2020. But those savings don't represent actual reductions in the cost of healthcare; they represent how much less those costs are expected to increase. Similarly, providing insurance for millions of low-income Americans should drive down inefficiency and cost-shifting within the system; instead of getting much of their treatment in expensive emergency rooms and passing the costs on to people with private insurance, they can get more routine and preventive care paid for by their own policies. But taxpayers will have to bear much of the cost of providing that coverage, which the Congressional Budget Office has estimated to be at least $1 trillion over the next decade.
In short, shifting to universal coverage will generate a mix of costs and benefits, with some segments of the economy taking on more of the burden and others less. The biggest potential winners would be healthcare providers, whose services would be in greater demand from the newly insured, and private insurers, who stand to pick up millions of new, federally subsidized customers.
In fact, the expansion could yield a windfall for insurers or healthcare providers that dominate a market. That's why it's important to promote competition while imposing insurance mandates, starting by creating one-stop shopping exchanges where people can compare and purchase policies that meet a minimum standard for coverage.
Although it's a lightning rod for critics, the idea of the government establishing public insurance plans to vie with private ones for subsidized policies is worth exploring. It's a potential counterweight to the power wielded by a single healthcare provider or insurer in too many communities, a recent Urban Institute study contends.
A good model is L.A. Care Health Plan, one of the county-based plans that California created in the early 1990s to manage the care of Medi-Cal patients. Unlike Medicare or Medicaid, which can dictate prices, it has to negotiate rates with doctors and hospitals just as its private competition does. And it's steered by a board of healthcare providers, patients and county officials with a directive to preserve the safety net, which has encouraged it to pursue the best care at the least cost. The new public plans could take on a similar civic mission: to help develop prevention- and wellness-focused approaches to care.
We can't kid ourselves: Expanding insurance coverage is expensive. It also raises thorny questions about how far to go, including whether to cover illegal immigrants and how to enforce the individual mandate. But the payoff is a real one, with the benefits mounting over the long term in the form of a rational healthcare system that delivers increasing value for the money. It's a price worth paying.
These editorial boards have opposed some previous efforts at health reform in the past, so the fact that there's an endorsement of employer responsibility and a public health insurance option--albeit weaker versions of what we recommend and advocate--it shows a critical consensus is forming.
In comparison, an average employer-based plan for an average worker costs over $4,000 per year, and over $12,000 for a family. In 2003-4, the California legislature, and nearly half its voters, supported a requirement on larger employers to pay 80 percent of premium. You don’t have to support that threshold to think that $750 is low, either to secure or to expand on-the-job benefits.
Health policy experts, like Paul Fronstin at the Employee Benefit Research Institute, and others that I have consulted, seem surprised at the low bar of the HELP Committee bill. The employer assessment is crucial--of similar import to the establishment of the minimum wage a century ago--but the amount is like setting the minimum wage at $2/hour. The proposal to pay 60 percent of premium for a worker, or pay $750--which is around 36 cents an hour, or only 4 percent of payroll a worker making $19,000 a year, and much less for those with higher wages.
Governor Schwarzenegger, a Republican with a near-perfect Chamber of Commerce record, eventually agreed to a sliding scale up to 6.5 percent of payroll. And he brought some of the business community with him in support. An employer requirement at an appropriate level certainly wasn’t his first choice for financing his health reform, but he saw that health reform doesn’t work without it...
As the Senate looks to put together the financing for their bill and paying for the crucially important subsidies that will be needed to ensure affordability and coverage for all Americans, it should look toward the House proposal, which has a minimum employer requirement of 8 percent of payroll.
Today, the Assembly Health Committee considered another bill to help draw down federal money to California.
The federal economic recovery package included a subsidy so laid-off workers can get a 65% subsidy for premiums under COBRA. The bill considered today allows a greater number of Californians to take advantage of those resources.
Right now, the federal COBRA law, which allows workers to keep their groups coverage after they leave an employer, is only available to workers of employers of 20 or more. The new bill extends the COBRA subsidy to the state CalCOBRA law, which covers workers of employers from 2-19 workers. The new law would also give Californians who were laid off late last year or early this year better notice and a second chance to take advantage of COBRA.
This is crucial: Just over half of Californians get coverage from their employer. Losing their employer-based coverage is a big deal, for the sake of continuity of care, for getting the group-negotiated rate, and most of all, for not being denied for "pre-existing conditions," which is possible, even likely, in the individual market. But the problem is losing your job is a tough time to ask to pay full premium for coverage. That's why the subsidy is so important, especially as California reaches a 10.5% unemployment rate.
Earlier today, Health Access was pleased to participate in a press conference with Assemblymembers Dave Jones and Nathan Fletcher, chair and vice-chair of the Assembly Health Committee, respectively, as well as Insurance Commissioner Steve Poizner, and Joe Dunn of the California Medical Association. As that notably bipartisan event indicated, the bill passed later in the day without any "no" votes. That's a good thing, given it is an urgency bill, and thus requires a 2/3 vote.
In the NY Times over the weekend, and in other publications on other days, there is talk in DC about taxing health benefits of employees.
This is not something that comes up in state level reform, even in states like California with a personal income tax, because the level of state income taxes is so much less than the federal income tax.
Tax types seem to think this makes sense because the tax deductibility of health benefits is regressive---that is, it is worth more as you go up the income scale.
There is some truth to this, but it is also true that eliminating the deductibility of health benefits practially impacts the middle class.
Is a single individual making $55,000 a year with health coverage rich? Or an insured family of three living on $90,000? No, certainly not in most of California. They are not poor, but they are watching their budget in our high cost-of-living state. Yet both those instances are people over 500% of federal poverty.
So does it make sense to tax the health benefits of a family living on $90,000 a year?
And what exactly are “gold-plated” benefits? When some talk this way, usually they are referring to low cost-sharing---low deductibles, low copayments---precisely the benefits that are needed by those in the middle to make sure they get routine care. In an era in which lots of Americans are skipping medications, skipping doctor visits, not getting needed lab tests because of health care costs, now there is talk of taxing the kind of health benefits that make prescription and doctor visits affordable for working families.
Good health benefits encourage primary and preventive care. Good health benefits make possible management of chronic conditions like diabetes and heart disease. People with these conditions face a lifetime of drugs, devices, doctor visits, and lab tests. Taxing the benefits that make it possible for people to manage these conditions feels very wrong.
We find it ironic that some of those in the US Senate, sometimes called the millionaires club, think it is wrong to limit income tax deductions that the most affluent taxpayers claim but somehow right to tax the health benefits of the middle class. We might expect this from a Senator who own seven houses, but it is disappointing to hear it from others.
The media loves Julio Osegueda, the famous "last question" at President Obama's Fort Myers town hall last week. In The New Republic's The Treatment today, I suggest we use his example and enthusiasm for the health reform effort:
So, yeah, he's a character. But all the interviewers, from MSNBC or CNN, miss the real story: he has worked hard for over four years at McDonald's but doesn't get health coverage.
We at Health Access California remember that in 2004, McDonald's was the biggest funder in opposition of Proposition 72, which would have required large companies to either provide health coverage to their workers, or pay into a purchasing pool that would do so. It hasn't been a surprise that chain & fast food restaurants have been spearheading the (so far unsuccessful) legal challenge to San Francisco's Health Security Ordinance.
So as a McDonald's employee, Julio is asking a question that strikes deep to the need for health reform. The good news for McDonald's is that while all health reforms in the discussion (from the Baucus plan to AB x1 1 to single-payer) require some employer contribution to health care, they generally offer a good bargain, with the costs less expensive and even subsidized from what health coverage would cost now. And in return, the employer would get a covered workforce that is healthier, more productive, and with less turnover. They should be as enthusiastic as Julio.
Funded by Wellpoint (Blue Cross of California) with advisors like newly-elected Republican Congressman Tom McClintock, the Foundation attempts to minimize the health care crisis, suggesting the problem of the uninsured is simply one of consumer education, rather than one in need of signficant public policy reform. The spokesperson made a couple of swipes at "guaranteed issue" policies in other states, for example.
Also, while it is true that there is a significant population that is eligible but uninsured for public programs, their website wildly inflates the number--on the program today, I felt I needed to make the point that there are many people--even under the poverty level of $10,400 for an individual--who do *not* qualify for Medi-Cal or other public program coverage.
The website also characterizes that you aren't "truly uninsured" if you are a family of four making $50,000, since apparently, a $12,000 family policy should somehow be affordable for you. Or if an insurance company like Wellpoint denies you coverage because you have a "pre-existing conditions," which accounts for some of those "non-poor" uninsured.
I was concerned about some of the advice given this morning. When people leave (or are laid off from) an employer, they should strongly consider COBRA, even given the expensive cost. If you turn down the group coverage available under COBRA, then you are largely left powerless in the individual insurance market, where you can be denied for any or no reason. Many people who consider themselves healthy find themselves denied for a relatively minor "pre-existing conditions." Also, while there might be cheaper premiums in the individual market, they often are not better deals: they typically have very expensive deductibles, cost-sharing, and have limited benefits.
While expensive, group coverage often provides a better value in terms of the actual coverage provided. Typically, the individual insurance market is the most expensive, least efficient method of getting coverage. COBRA can be expensive, but think twice before turning it down.
Either way, the radio program ultimately spotlighted many of the problems with the health system, and the callers to the program clearly recognized a strong need for health reform. So while people struggle with the current, limited options, we need to continue to press for those policy changes to give us additional coverage options and health security.
[UPDATE: I'll be on the radio on this subject, on KQED's Forum, from 9-10am on Tuesday morning.]
With the recession and the expectation that job losses will get worse next year, a growing number of American workers will find themselves not only out of a job, but without access to affordable health coverage. Already, about 46 million Americans have no health insurance....
"Even during good times, employers trimmed and scaled back their coverage. In these tough economic times, we have to be prepared for a dramatic drop in coverage when people are losing their jobs and thus their health insurance," said Anthony Wright, executive director of Health Access California, a coalition of grassroots health care consumer groups.
To make matters worse, traditional safety-net options - public health programs, clinics and other sources of care that receive government funding - are being cut back or threatened by state and national budget crises. Health services face major cuts under proposals made to bridge California's estimated $41.8 billion budget deficit in the next 18 months.
LiveLong Medical Center, a group of nine Bay Area health centers that offer care to the uninsured, saw a 25 percent increase in the numbers of patients from July until the end of October compared with the same period last year.
"The number of uninsured patients knocking on our door is growing. That's not something we budgeted for," she said.
The article has a useful list of the range of (albeit limited) options for people losing their coverage during this economic crisis.
And for policymakers, this is a reminder that this is the exact worst time to make cuts to safety-net programs, like Medi-Cal and Healthy Families, and providers, from community clinics and public hospitals. And that the need for major reform is more urgent now than ever before.
The Wall Street Journal today reports of the twin devastation of abruptly losing a job and health insurance. Not that losing both at once isn't bad enough, but it's especially awful when the company goes bankrupt because employees -- make that "former employees" -- are asked to foot medical bills accrued when they thought they had insurance. (Here is the NY Times story on the same thing)
...A pregnant employee had labor induced before her due date. Another worker bought a $6,000 insulin pump for her diabetic daughter. "I called my doctor at home and said, 'I need to have my gallbladder removed this weekend,'" recalls Janet Esbenshade, a 37-year-old mother of two who lost her job packing cookies.
What employees didn't know was the company was self-insured, meaning that it paid for medical expenses itself, but using a health insurer to administer the program. For employees, that meant once the company declared bankruptcy, announcing to the world it could no longer pay its bills, the medical bills fell back to the employees -- tens of thousands of dollars worth of medical bills.
Some medical services rendered in September -- the month before the company went belly up -- are also becoming the responsibility of employees.
Archway isn't the only company declaring bankruptcy and leaving employees adrift in Dante's world. Bankruptcy filings among companies are surging.
Reading stories like this, you wonder, why the heck do we have an employer-based system anyway?
You know, that one month in the year when you get to swap out the health plan you may have wrongly chosen last year before you knew better?
Sadly, for many workers, the choices are shrinking. As reported in this NYT story a couple days ago a growing number of companies are offering *only* high deductible health plans....take it - or leav it. And that includes big companies, like Nissan and Delta Airlines.
The reason: skyrocketing premiums, and the underlying fast pace of health care inflation is making health coverage unaffordable for businesses to offer as well, according to this WSJ article. So businesses are trying to tamp down their costs by passing it along to their workers.
Some workers may find themselves *completely* without the option of health insurance. In that case, they're at the mercy of the individual insurance market. If they're not turned down for "pre-existing conditions'' like earaches, or something, then workers may be able to find coverage. But there, the average monthly premium for an individual was $158 with a deductible of $1,972, according to a study of 227,000 policies purchased through www.ehealthinsurance.com. For families, the figure is worse -- $366 for a $2,610 deductible.
It wasn't a huge surprise that the Economic Policy Institute reported this week that employer-based coverage is continuing to erode. Since 2000, 3 million fewer workers are insured through work -- the place where 61 percent of Americans get their coverage.
For those Americans who are still lucky enough to get their coverage through work (19 million in California), is it any surprise that you're paying more? A new report released today by Families USA shows health premiums for workers rose five times (5) more quickly than earnings. Here's the Sacramento Bee's story on the report.
These reports, together, tell us that our foundation of employer-based insurance coverage is in trouble. Already, fewer Californians get their coverage through work as contrasted with the rest of the country (52.3% versus 61%). Fast-escalating premiums make it harder for both employer and employee to afford coverage, especially if the insurance products get worse and worse every year.
And if people are finding coverage through work unaffordable, wait until they hit the individual insurance market, where they would be responsible for 100% of the premium costs and not buying as part of a group that can leverage lower rates. Further erosion in job-based coverage just means more uninsured.
Meanwhile, in other health news. The LATimes reports on the United States' abysmal infant mortality rates. I can't seem to find the CDC report that the Times is referencing, but looking at the OECD numbers reflects our same sorry state. We spend the most of any industrialized country on health care (15.3% of our gross domestic product, and $6,700 per person), yet our infant mortality rates are high -- 6.9 deaths per 1,000 infants -- compared to Sweden, which has the lowest infant mortaliy and spends less than half what we do per capita.
All this leads to cheery comments written by the director of the Congressional Budget Office today -- Peter Orszag, a health reform champion.
Many observers have noted that addressing the problems in financial markets and the risks to the economy may displace health care reform on the policy agenda — and that may well be the case for some period of time. ...
Although it may not seem immediately relevant given our current difficulties, it will be crucial to address the nation’s looming fiscal gap — which is driven primarily by rising health care costs — as the economy eventually recovers from this current downturn.
Translation: Failure to keep health care costs in check will make things even worse.
Judging from some surprised E-mails that I have received, there are some needed corrections and clarifications to Dan Walters' recent Sacramento Bee column on health care policies and politics. He mentions "health-access advocates" but has never called anyone at our organization, so perhaps he's reporting third- or fourth-hand.
The biggest misrepresentation is his declaration of an "unspoken consensus is to wait to see what Congress and the next president, whoever he may be, can devise before taking up the Sacramento battle again with a new governor."
It's unspoken because it's untrue. There's lots of conversations about how to proceed at the state level, through bills, budget efforts, or ballot measures, and how to integrate state and federal efforts for reform. The political and policy landscape is changing, and we all need to adapt to it, but the planning is actively going on: the notion that any health stakeholders are in a "wait and see" is simply wrong.
Walters has been wrong before, having written several articles hostile to health reform over the last few years, much of the time declaring that that any health reform was doomed to be pre-empted by the federal ERISA law. He has stated that these reform proposals that included a required employer contribution to health coverage "illegal," that a previous court decision on ERISA was "a potentially fatal blow," and that elected leaders attempting reform were "in denial."
Yet last week, the Ninth Circuit Court of Appeals upheld the Healthy San Francisco plan which included just such a employer contribution component. This was predicted by many health reform supporters, but never fully acknowledged as a possibility by Walters in his reporting, until this article. And he characterizes the unanimous decision as "seemingly daring the Supreme Court to take up health care," rather than just ruling on the merits of the case. He doesn't acknowledge that the Supreme Court already had a chance to weigh in regarding an injunction of the SF law, and Justice Anthony Kennedy declined.
There's a lot of avenues to pursue health reform, at the local level, state, and federal level, and through various venues and strategies. But it's not an either/or proposition.
Big differences between them, and bigger impacts in California
Friday, October 10, 2008
HEALTH ACCESS CALIFORNIA ALERT Friday, October 10, 2008
HEALTH PLANS OF PRESIDENTIAL CANDIDATE WOULD HAVE SIGNIFICANT IMPACTS ON CALIFORNIANS' COVERAGE
* Under McCain Health Plan, Over 2.4 Million Californians Would Lose On-the-Job Health Benefits
* New reports reveal McCain's plan that would strip away consumer protections, raise taxes, and leave many California families to fend for themselves at mercy of insurers * New chart shows Obama’s framework similar to Nunez/Schwarzenegger proposal, with expansion of employer coverage, public programs, and insurer oversight
California, because of its specific demographics and policies, will be more acutely impacted by the health proposals of the two presidential candidates, according to new information released today by Health Access California, the statewide health care consumer advocacy coalition, and Health Care for America Now!, a national campaign to win quality, affordable health care for all Americans.
Risks of the McCain Plan:Health Access California and Health Care for America Now released two new reports from the Center for American Progress Action Fund and the Economic Policy Institute which find that 2.4 million Californians would lose employer-sponsored health insurance under the McCain health care plan. The reports conclude that McCain’s health care plan would accelerate the deterioration of employer-sponsored benefits by both removing current tax incentives and, at the same time, taxing employee benefits as if they were salary.
In California , Senator McCain’s plan would: * Threaten the coverage of over 17 million people in California who receive health benefits through work. The Economic Policy Institute projects as many as 2.4 million could lose their job-based coverage. McCain’s plan eliminates the employer health care tax benefits that enable many businesses, especially small businesses, to provide group insurance to their employees. * Put at special risk coverage for the 6.2 million non-elderly people in California struggling with diseases like cancer and diabetes who are now covered through their jobs. Under McCain’s plan, insurance companies would be free to “cherry pick” only those individuals for coverage who do not have costly health conditions and avoid state regulations that keep health care accessible and affordable. * Raise taxes on the health insurance benefits paid by millions of California families. A typical California family could pay almost $1,300 more in taxes by 2013 if McCain imposes both income and payroll taxes on their health coverage.
At least one in 13 people would lose his/her employer-sponsored health insurance benefits and be forced out into the private insurance market where premiums are more expensive and coverage is less comprehensive. Anyone with a pre-existing condition – as defined by the insurers themselves – could be denied coverage altogether.
Comparison with California Proposals: Some of the provisions of the plans of the two presidential candidates, Senator Barack Obama and Senator John McCain, have been extensively discussed in California . As indicated by a chart prepared by Health Access California, Senator Obama’s plan follows a very similar framework as AB x1 1, a plan negotiated between Speaker Nunez and Governor Schwarzenegger, and the plan’s antecedents in the legislature.
The provisions of Senator McCain’s plan has gotten less state-level attention, except for one bill, SB x1 16 by state Senator Tom McClintock, to allow insurers to sell across state-lines, and thus avoid state oversight and consumer protections.
California Consumer Impacts: In each of the three ways that consumers get coverage, the McCain and Obama plans have radically different strategies, each on with significantly different results:
* On Employer-Based Coverage: Just around half of Californians (nearly 18 million) have employer-based coverage, but Californians are less likely to get job-based benefits than in the rest of the country. · The McCain plan would tax health benefits offered by employers, and offer a tax credit instead for those on the, individual health projects. This would result in the 1.3 to 3.3 million Californians losing their health coverage through work, according to EPI. · Given the lower expectation of on-the-job benefits in California , there is fear that the state is reaching a “tipping point” in some industries, where if more leading employers drop coverage due to different tax incentives, that would force all competitors to follow. · The Obama plan would bolster on-the-job benefits by setting an as-yet-determined minimum requirement for employers to contribute to health care for their workers, and also provide financial assistance to small business, and new purchasing pool options for all employers. * On Public Programs: Under a third of Californians--over 10 million--have public program coverage: over 6.6 million low-income children, parents, seniors and people with disabilities through Medicaid (Medi-Cal in California ), and another remaining 4 million seniors and people with disabilities in Medicare. There is another 800,000 children in SCHIP (Healthy Families in California ). * The McCain campaign recently changed the health plan, saying it would require a $1.3 trillion cut to Medicaid and Medicare. (This was prompted by the McCain’s plan shift, in saying that the plan would eliminate only some, rather than all, of the tax deductions for employer-based care.) * Such a cut to Medicare and Medicaid would mean significant reductions in benefits or access to medical providers for these children, seniors, and people with disabilities. It also would force additional cuts at the state level. California has already made significant cuts to Medicaid due to the current budget crisis, and such a cut at the federal level would compound the budget problem. * The Obama plan would fund and expand programs like Medicaid and SCHIP: California would be first “in line” to take advantage of resources that might be available, especially since our state and county efforts already have more expansive eligibility. In short, public program expansions at the federal level will allow California to claim additional federal marching funds.
* On the Individual Insurance Market: Roughly 2 million Californians-- less than 10 percent—buy coverage as individuals, but it is a bigger share of the population than other states. As a result, Californians are more likely to be denied for “pre-existing conditions.” Unlike some states, California does not have “guaranteed issue” and in fact has had many cases of rescission, where patients are denied for coverage retroactively. For those who are denied, California has a small and underfunded high-risk pool that currently has a waiting list. In terms of benefits and other policies, California has stronger consumer protections compared to other states. * Senator McCain’s health care plan would expand the individual market, and more Californians would be at risk for being denied for “pre-existing conditions.” Senator McCain’s plan would ask patients who are denied to rely on the state’s “high-risk” pool, but the pool is inadequate for the existing population, much less a greatly expanded individual market. * Senator McCain’s plan would also strip away consumer protections by allowing insurers to sell across state lines, avoiding California ’s existing consumer protections. According to CAPAF, insurers could avoid over 40 benefit requirements and other state laws. These laws currently require insurance companies to cover benefits like breast cancer and cervical cancer screenings and to ensure other consumer protections, from fiscal solvency standards, to providing the opportunity for an independent medical review. California consumers who want a second opinion about the denial of a treatment might not be able to go to the California Department of Managed Health Care, as is their right now, but to the insurance commissioner of another state. * Senator Obama’s plan would institute additional insurance oversight and consumer protections, including “guaranteed issue,” and keep existing state protections, like independent medical review.
Health Care for America Now is a national grassroots campaign currently asking Members of Congress, “Which Side Are You On? – the side of quality, affordable health care for all or the side of leaving us alone to fend for ourselves in the bureaucratic, unregulated insurance market? HCAN’s Statement of Common Purpose includes 10 principles the campaign believes will lay the foundation for effective, comprehensive health care reform in 2009.
Health Access California (www.health-access.org) is the statewide health care consumer advocacy coalition, working for the goal of quality, affordable health care for all. Health Access California was the sponsor of the many HMO consumer protection bills passed in the past decade, including the creation of the Department of Managed Health Care and independent medical review. Health Access has also been actively involved in supporting numerous coverage expansion efforts, through bills and ballot measures. Health Access is a lead partner organization in California for the Health Care for America Now! campaign.
Health Care for America Now is made up of millions of individuals and more than 275 organizations nationwide. It’s steering committee includes ACORN, AFSCME, Americans United for Change, Campaign for America’s Future, Center for American Progress Action Fund, Center for Community Change, MoveOn.org, National Education Association, National Council of La Raza, National Women’s Law Center, Planned Parenthood, SEIU, UFCW, and USAction.
Health Care for America Now and Health Access California are both section 501(c)(4) issue advocacy organizations, HCAN and each of its members conducts and funds only activities appropriate to its tax and election law status. This statement was not funded or endorsed by HCAN’s 501(c)(3) members. ###
Several of the analyses of the Obama plan repeat the old canard that an obligation for employers to pay for health benefits for their employees, either by providing health coverage or by paying into a purchasing pool, are job killers. Joseph Antos, Gail Wilensky and Hanns Kuttner in a recent Health Affairs piece say, “Wages and employment would fall….The pay or play mandate, which is meant to help workers who do not have insurance gain coverage, could instead undermine their chances for economic success.” In a recent piece in the New England Journal of Medicine, Antos opines that the added cost of a pay-or-play mandate “would be covered by lowering wages or benefits or reducing employment.”
This is precisely the same argument that is made against the minimum wage in its various incarnations, including minimum wage increases and living wage ordinances. It is not true for the minimum wage. And it is not true for an employer obligation to pay for health benefits.
Moderate minimum wage increases are now widely recognized to have little or no effect on employment. Economists David Card and Alan Krueger who did the original studies on the impact of the minimum wage (and the further studies when many other economists tried to rip their research apart) found that the minimum wage increases had little or no impact on employment. Why? Low income workers spend what they make. And one of the places they spend that money is at fast food restaurants.
This should not be a surprise. It is why we have unemployment insurance: so when people are unemployed, they have some income so they can keep paying the rent and buying groceries. Unemployment insurance is one of the social insurance mechanisms that prevent recessions from turning into Great Depressions. That is why unemployment insurance was part of the original Social Security Act in 1935.
What about health care? The UC Berkeley Labor Center has done a series of pieces on the impact of employer mandates in various health reform proposals in California. A piece they did in July 2007 found modest positive economic impacts from both the health reform proposal by Governor Schwarzenegger and the competing measure, AB8 by then-Assembly Speaker Nunez and then-Senate President Pro Tem Perata. As economist Michael Reich observes in his foreword,
The authors find that the leading health reform proposals for California have been crafted in a manner that is not likely to generate adverse employment impacts. According to their findings, most firms will experience little or no net change in business operating costs after a short adjustment period. Consistent with the best research on the minimum wage, payroll and cost increases of these magnitudes are unlikely to reduce employment in California, while improving the health status of many Californians. Moreover, both health reform packages analyzed would boost productivity as workers take fewer sick days due to poor health and as workers are more able to work where they are most valuable, with their job mobility less hindered by health insurance concerns.
Just as with the minimum wage, thoughtfully designed employer obligations to pay for health benefits do not cost jobs—and in fact may have positive economic impacts.
We would postulate that the economic benefits go beyond those cited by Michael Reich. In the same way that unemployment insurance, Social Security and Medicare help to underpin economic security for millions of low and moderate income Americans and to contribute to the prosperity of the business community which depends so heavily on consumer spending, an obligation on employers to pay for health benefits may also help to contribute to economic prosperity. This is especially true when we look at low and moderate income working families, precisely those families whose wages have stagnated over the last decade.
Again, it is low and moderate income Californians (and Americans) who are mostly likely to face high health care costs, because they are more likely to be uninsured or underinsured---and providing affordable health benefits will increase their disposable income, helping to revitalize the economy. This is not fanciful: we report here on study after study showing that low and moderate income people suffer most from medical bills and medical debt problems. A recent study by the Commonwealth Fund found that more than half of all low and moderate income Americans (defined as incomes under $40,000 annually) had problems with medical bills or medical debt.
And it is low and moderate income workers that lack power in the labor market, as demonstrated both by the lower compensation they command and wage stagnation over the last decade. (Lower wages usually accompany less generous benefits: this is not perfectly so but generally true.) Providing these lower income workers affordable health benefits and minimizing problems with medical bills and medical debt so that they have adequate access to care, means they would have more money to spend on other things. And live healthier and longer.
Is there a benefit to our economy from providing affordable health benefits to low and moderate income working families? Do reform proposals, like that by Obama or those we supported in California, have an economic impact similar to unemployment insurance, Social Security and Medicare, the social insurance programs which help to underpin our economy? Particularly when we look at lower income working families, we ask whether adequate, affordable health benefits would help them to have a foundation of income security, the kind of income security that helped to power the American economy for so many decades and that today is lacking for so many.
In the long run, this court decision trumps all the unfortunate vetoes made in the past week in importance, in terms of the boost that the decision provides to state health reform around the country. It was a tough week here in California, but the court decisions makes it easier to do reform in Sacramento and around the country, and that's a positive outcome amidst the negativity. So the issue for state health reform refocuses on being able to pass a proposal, rather than to defend it in court.
Why the ERISA Ruling in San Francisco is a Big Deal
Thursday, October 02, 2008
The ruling on the San Francisco health care ordinance is important for several reasons: first, it clearly dismisses the arguments of the fast food industry and the Chamber of Commerce that the employer requirement violates ERISA.
Second, the ruling takes head on the decision by the Second Circuit Court on Maryland (known as RILA after the Retail Industry Leaders Association that filed that case). The Ninth Circuit says that the other court demonstrated that Wal-Mart was the only employer required to change their behavior as a result of that law and that the Maryland law did not give Wal-Mart (or any employer) a genuine alternative for providing health benefits for workers. In contrast, the San Francisco health plan is a real alternative for employers (and their employees). An employer that is not meeting the requirements of the SF ordinance can choose to provide health benefits to more employees—or they can keep doing what they were doing and pay into the City plan which their uninsured employees can access. What is critical here is that the City plan, the Healthy San Francisco Plan, provides a real choice by offering health care for low and moderate income San Franciscans, including basic services such as physician and hospital care with only modest out of pocket costs.
Third, the San Francisco ordinance is a per-worker per-hour obligation (now $1.17 per hour or $1.76 per hour, depending on employer size and non-profit or for-profit tax status). This means that the San Francisco ordinance creates the equivalent of a minimum wage for health benefits: employers must spend a specified minimum on health benefits for each worker. (There are of course some exemptions and caveats, as there are for the minimum wage.) It is no surprise that the same elements in the business community that routinely oppose minimum wage increases and living wage ordinances have led the fights, both political and legal, against an obligation for employers to contribute to health benefits.
Yet economic research has demonstrated that moderate increases in the minimum wage actually stimulate the economy because low wage workers spend what they make: indeed the original micro-economic case study by Card and Krueger found that employment in fast food restaurants increased, apparently because low wage workers and their families were able to spend more at fast food restaurants! The same thing applies to health benefits: providing low and moderate income working families affordable health benefits with reasonable out of pocket costs gives those families more disposable income to spend on other things—though as health people, we recommend more fruits and vegetables rather than fast food!
Over the last several years, the UC Berkeley Labor Center has done several research pieces that estimate the impact on businesses and the economy of various reform proposals: these have consistently found that a thoughtfully designed employer obligation is not a job killer. Instead, in analyzing AB8 (Nunez/Perata) and the Governor’s proposal, in July, 2007, Jacobs et al found a net positive economic impact. More on this to follow.
The United States Court of Appeal for the Ninth Circuit ruled today for the City and County of San Francisco, and against the Golden Gate Restaurant Association, which had sued to block the new Healthy San Francisco program, and particularly, the employer contribution provisions.
According to Judges Alfred T. Goodwin, Stephen Reinhardt, and William A. Fletcher: "We hold that ERISA does not preempt the Ordinance."
Many opponents of health reform, including SB2, Prop 72, SB840, AB8, AB x1 1, and other efforts, have cited the ERISA bogeyman. This decision is the highest and most affirmative ruling yet that there are ways for states and localities to address health reform, including employer-based coverage, without being preempted by the federal ERISA law.
Once again, California leads the way. More to come!
Step right up. Get yer knee replacement right here....
Friday, September 19, 2008
The Wall Street Journal recently had a story about employers encouraging their workers to stay in the US for medical care rather than travel abroad.
The upshot is this: Some US companies had been negotiating deals with providers overseas for certain procedures because it's so much cheaper. An example in the story: hip replacements in the US cost about $43,000 versus $9,000 in Singapore.
To keep business in the US, some providers are saying they can match the third-world pricing. These providers are now collected in a nationwide network: Healthplace America. This company wouldn'thealth insurance coverage, which gives workers access to routine medical care where they live. It specializes in a network of certain high-dollar procedures -- heart, spinal, bariatric procedures, cancer treatments, etc. The company is able to extract deep discounts -- as much as 50% from providers -- because they pay for procedures up front, saving providers the headache of billing insurance companies for the procedures and chasing down the payments.
I'm not sure what I think about this policywise. But reading it brought two things to mind.
First, what an elaborate thing for an employer to have to do. It just reinforces what a silly system we have. Healthplace America is a third-party contractor doing most of the work, but for businesses, which are in business to do something entirely different, like produce skateboard wheels, what a headache to have to deal with this as well.
Secondly: a 50% discount to get insurers out of the picture? I'll take that.
In calls with analysts and investors, WellPoint executives have stressed that it is working to keep its more-profitable business and that the customers leaving tend to be costlier ones. "We're keeping good members and healthy lives that we had been concerned about [losing] in the past," Ms. Braly told analysts last month.
Translation: "Awesome. We won't have to spend money paying for sick people.'' (This is how Sarah Palin thinks the market should work?)
The story, however, touches on a familiar trend throughout the insurance industry -- the loss of employer-sponsored plans. Since 2001, the percentage of firms offering coverage has slipped nearly 10% in less than a decade to 59%.
Nevertheless, Wellpoint increased premiums yesterday to placate investors and as a result expects about 150,000 more business members (on top of the 189,000 business members they've already lost this year) to drop coverage.
Sidenote: Of course, we can expect the number of employers that would drop coverage to *increase* if McCain/Palin win office, as their plan allows insurers to run amok and tax businesses for providing this basic benefit to workers, making the individual market (least efficient, most expensive) more attractive.
The National Federation of Independent Business this week unveiled their campaign to promote health reform from a business perspective. What I really liked was their "Faces of the Healthcare Crisis,'' a compilation of stories/testimonials of small businesses struggling with health care costs. The stories, not surprisingly, sound a lot like some of the consumer stories we get.
One guy, whose employees largely receive health care through their spouses, did not have insurance of his own. When he had chest pains, he delayed going to the ER. When the pain became excruciating, he finally relented and found he was having a heart attack, leaving him with $200,000 in hospital bills.(!!) Sounds like something out of our story database: uninsured, delayed care, high hospital bill.
We certainly empathize with many of the small businesses who want, very badly, to provide health care for their workers. It's expensive, and we have bills that can help:
Transparency (a la AB 2967 - Lieber, and which NFIB is supporting) allows health care buyers can gravitate toward providers that are effective and efficient.
Standardizing and organizing the individual market, a la SB 1522 (Steinberg), would cap out-of-pocket costs, ensure that every plan has doctors, hospitals, and preventive care. This would help give small businesses, who are worried about how much their workers can afford, more peace of mind.
Public insurer (SB 973 - Simitian) would allow small businesses to buy coverage from a public system that competes for business with private companies.
Anti-rescission (AB 1945 (De La Torre) and various other bills) would make harder for insurance companies to yank coverage from paying policy holders willy nilly.
Of course, (here's our 'I told you so' moment) what would have *really* helped was the 1993 Clinton Health plan, which was defeated with lots of help from NFIB. Through Clinton's plan, smaller businesses would have only had to pay up to 3.5 percent of payroll costs toward healthcare rather than the 20-plus percent they are now paying in a virtually unregulated market.
American manufacturers pay more than twice as much per hour for health benefits as the manufacturers in countries we regularly trade with, according to a new report by the New America Foundation that found for every $2.38 an hour paid for benefits by US manufacturers, others pay about $0.96. It's a losing proposition all around that:
Makes our products more expensive -- read: less competitive. (ie. an American-made car costs $1,500 more due to health costs versus $900 more by foreign competitors.
Results in American businesses trying to ratchet down what they pay in health care costs, and resulting in crappier coverage for their workers. (for more money, I might add)
The report runs through a litany of interesting stats, including:
In 1960, health benefits were only 1.2% of payroll. Now, it's more like 9.9% (averaged across all businesses, including those that *don't* provide coverage).
Since 2000, fewer employers are offering coverage (from 69% to 60%). But for workers that *do* get coverage on the job, it's costing more -- 102% more (from $135 to $273 monthly premium).
It also acknowledges that not all costs can be shifted to workers, either in higher premiums and out-of-pocket costs or lost wages, because it would affect a business' ability to be competitive in hiring good quality employees -- something all businesses must grapple with in order to stay competitive. And that the cost of health care can't depress wages -- particularly for those already making minimum wage ($5.85 or $8 in CA), or in cases where a labor contract acts as a backstop.