Saturday, June 02, 2007

Having Connecticut provide medical insurance is unrealistic

Connecticut's General Assembly is considering two medical insurance proposals for which there is no obvious reason to implement. One bill specifies all municipal organization employees will receive “the same coverage provided to state employees”. Some observations:

• If the idea is – establishing a large self insured group will save lots of money the assumption is wrong. Medical insurance costs have little to do with size of a group. Costs come from the claims of enrolled employees and are driven by the groups demographics and the benefits provided. Municipal employees are older, which means more costs, and required benefits are much richer than most commercial plans thus, savings, if any, will be small.

Note also: Research tells us the reasons larger employers have lower administrative costs would not be achieved by such a pool. It would still have to deal with diverse individuals and all the many municipal organizations on an individual basis.

• If the idea is – Connecticut's Office of the Comptroller can select coverage, hire an administrative organization, and do a better job than medical insurance companies the assumption is wrong. There is much more to medical insurance today than paying claims.

• If the idea is – to help towns lower their tax rates why not just provide funds instead of returning one third of the premium they pay?

Note: The last available analysis of this bill indicates this expensive overhead organization and inefficient system could cost $400, 000, 000. What value will that provide?

The bill also creates a pilot program to evaluate whether non-profit’s and small employers can participate. What value would these employers gain from more expensive coverage?

The second bill specifies the Office of the Comptroller will contract for health insurance policies for individuals “not covered by employer sponsored insurance” and deem, “each employee - - whose employer offers – health insurance - - to be insured under such insurance.” This is a very complex proposal, which creates an inefficient approach. In addition, it encompasses the Medicaid and Husky program. However, it does not address the real issue of costs in the medical treatment and payment system. Some facts to consider:

• Connecticut has the third highest number of mandates in the US thus the benefits required in this coverage, including guaranteed coverage, will result in a higher premium than the New England average used to determine the “benchmark policy” and employee contributions.

• The last available analysis of this bill indicates annual administration costs in various state agencies to do things such as run the program; “educate state residents”; and “establish health consumer assistance” could range from $150, 000, 000 to $660,000,000. What value will that provide?

• Having costly administrators decide the benefit options means people “not covered by employer sponsored insurance” would no longer be able to select coverage that meets their needs from the many, much less expensive, choices available in the individual medical insurance market.

The problem many uninsured people face is not a place to buy coverage – it’s affordability. Consequently, a much better and significantly more economical approach is to provide subsidies, based on income for coverage individuals select in the private market.

A couple more points about these two proposals:

• Experience in other states tells us government managed health insurance systems are ineffective. There are many reasons they do not work but the common one is there is never enough money for coverage.

• There is no example where a employer mandate to provide medical insurance has worked. In fact evidence tells us mandates like this are often determined to be illegal because of ERISA regulations.

Bottom line - both propsoals take away the right of employers to select coverage for their employees; expend significant funds; and do nothing to address the real issue, which is cost’s in the medical treatment and payment system.

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