Oregon Can’t Afford to Pass Health Insurance Exchange

Instead, lawmakers should structure a single marketplace that can wield consumer power over insurance companies to transform public health and healthcare delivery
The Lund Report
OPINION May 17, 2011 -- Oregon lawmakers are debating SB99, a bill that would create an insurance marketplace or “exchange” in 2014. Healthcare.gov promotes this market reform as “a simple, easy-to-navigate experience that benefits consumers rather than insurance companies.” Lower costs. One-stop shop. Greater benefits and protection…
 
So why will most Oregonians do their shopping elsewhere if this bill is passed?
 
SB 99 preserves the complex maze we currently have by keeping an “external” or “dual” marketplace. Insurance companies will use “free” market tactics to weaken the exchange’s purchasing power so they can peddle their lemons to cherry-picked consumers. This bill offers no advantages over the state’s fallback plan, which is to defer to the federal government to design and implement the exchange. Rather than codify this insurance giveaway, lawmakers should use the intersession to rewrite the bill.
 
Since corporate and industry lobbyists write most laws, populist ideas are always taken off the legislative table. In Congress, that was true of single payer financing and the public option. Last year Oregon healthcare advocates proclaimed the public option was going to be the main course. That legislative concept became scraps for Senator Alan Bates who suggests, “Medicaid could evolve into a public option.”
 
Starting in 2014, Oregon Health Plan (OHP or Oregon’s Medicaid), will be expanded to include individuals or families who make 33 percent more than the federal poverty level (FPL). The Oregon Health Authority uses “Gruber Econometric Modeling” (conceived by MIT economist Jonathan Gruber PhD) to project that 140,000 uninsured Oregonians (Table 1) will benefit from this OHP expansion.
 
Table 1: Coverage Status Under Federal Reform by Year
Coverage (Thousands)
2013†
2015
2019
Medicaid (OHP)
370
510
560
Exchange
‐0‐
190
360
Individual
180
150
130
Group (Employer)
2,180
2,180
2,080
Uninsured
600
320
290
Total *
3,330
3,360
3,420
 
† Some small shifts have already occurred in 2013. Primarily, 30,000 uninsured <26 have moved into employer coverage.
 
* Projected population totals exclude people 65 or older and people under 65 who have only Medicare or only military coverage. Coverage estimates based on the Census Bureau’s Current Population Survey (CPS), not actual program enrollment where applicable. Totals may not add due to rounding.
 
Over 240,000 uninsured Oregonians1 earn between 133-400% of the FPL. Yet in 2014, the OHA projects that only 140,000 of these Oregonians will (presumably) purchase insurance on the exchange, where they can benefit from government subsidies.
 
Since only 190,000 Oregonians in total are anticipated to purchase health insurance on the exchange the first year, just 50,000 insured Oregonians will see the benefit of this “simple, easy-to-navigate experience.” And yet, the exchange will be open to over 450,000 insured Oregonians2 (individual, portability, small group and OMIP markets) who already purchase state-regulated insurance. In other words, 8 out of 9 insured Oregonians who will have access to purchase insurance from the exchange won’t do so in 2014.
 
Why?
 
Sicker and more costly Oregonians will cluster in the exchange. Healthcare wonk Timothy Stoltzfus Jost, says, “adverse selection3” is "the single most important reason why most exchanges have not succeeded in the past.”
 
Indeed, by 2019, the OHP may be the remains of a poorly designed exchange. Healthier and wealthier Oregonians will be discouraged by additional out-of-pocket costs4 and buy cheaper, more comprehensive plans sold off the exchange. That’s because the common thread tying the OHP and any commercial insurance is “essential benefits.”
 
The Affordable Care Act defines essential benefits in ten broad categories, but states have not yet been told what must be covered by any “qualified health plan” that is sold on the exchange. Congress kicked this can of worms to Health and Human Services, which has kicked the can to the Institute of Medicine. A final report is not expected until late 2011.
 
For every disease, there’s a constituency demanding coverage ranging from transplants to expanded mental health services. Benefits that are “too rich” could undercut goals to decrease uninsured Oregonians because individuals who must pay more than 8 percent of their income on the lowest cost premiums are exempt from the individual mandate. Conversely, patients whose essential healthcare needs are not covered by the essential benefits package may ignore the mandate and just pay the fine.
 
Kathleen Nolan, Health Division Director for the National Governors Association, says essential benefits will be the “linchpin” for several governors who are deciding whether to create a state exchange. "If they can't make it fit their needs and their environment and their programs, then they're just signing up for something they're not going to be able to sustain."
 
There’s no doubt insurance companies love this uncertainty. That makes the messy, expensive existing market relatively attractive for states that are pressured to write fill-in-the-blank legislation while balancing precarious budgets.
 
But it will be a nightmare for the consumer who will be faced with information overload5 in 2014. Insurance companies undoubtedly know that we make bad choices under those circumstances. All to their advantage since insurance companies can “help” us make bad decisions with advertisements, brokers and agents.
 
It shouldn’t be surprising that brokers and agents are lobbying Congress to classify their commission-based services as non-administrative through HR 1206. The Medical Loss Ratio (MLR) refers to the percentage of each premium dollar that insurers spend on healthcare, rather than expenses that do not directly benefit policyholders, such as salaries, advertising, agent commissions, overhead and profits.
 
Starting this year, healthcare reform sets a floor on administrative costs. For small group and individual plans the minimum MLR will be 80 and for large group health plans the minimum MLR will be 85.
By excluding commissions from medical loss ratio (MLR) calculations, insurance companies can cook their books. Insurance companies can increase their MLR without compromising commissions for those indispensable brokers and agents who push their product… and continue to drive up the cost of care… creating even more administrative hassles and denials at the doctor’s office… more cost-shifting… and more rationed care.
 
Adverse selection segregates the most vulnerable and creates a weak exchange without power to wield influence. Liberals should not buy into any argument that an external market is necessary for undocumented Oregonians who can’t buy insurance on the exchange. Tables 3 and 4 demonstrate these residents will remain uninsured, despite the presence of an external market.
 
Table 3: Remaining Uninsured Under Reform by Income (FPL), 2019
Category (Thousands)
<200%
200%‐
400%
>400%
Total*
Pct
Exempt from Mandate
1
25
43
69
24%
Ignoring Mandate
84
24
11
120
42%
Undocumented
83
14
3
99
34%
Total
168
63
57
288
100%
Percent
58%
22%
20%
100%
 
  • Detail does not add to total due to rounding. 
 
Table 4: Remaining Uninsured Under Reform, by Age, 2019
Category (Thousands)
< 19
19‐34
35‐49
50‐64
Total*
Exempt from Mandate
16
8
19
26
69
Ignoring Mandate
33
42
28
17
120
Undocumented
12
63
23
0
99
Total
61
113
70
43
288
Percent
21%
39%
24%
15%
100%
 
Indeed, Oregon lawmakers should look to Vermont for their moral compass. Recently the Vermont Senate negotiators dropped an amendment to bar illegal immigrants from coverage under their new state healthcare program. If Oregon business sectors depend on these workers to sell their goods and services, we should make sure they are healthy on the job.
 
We cannot afford to pass SB 99 in Oregon now. We must wait for the federal government to fill in the blanks on essential benefits. But most importantly we need to structure a single marketplace that can wield consumer power over insurance companies to transform public health and healthcare delivery in Oregon.
 
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Dr. Mike Siegel is a Portland radiologist. His wife, Dr. Kris Alman, retired from healthcare to become a citizen activist for a healthier democracy. She advocates for fair taxation to invest in our common goods – prioritizing education, renewable energy, campaign finance and healthcare policies and laws.

 

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Comments

Exchange planning is underway in several states. What kinds of real-world questions are states considering? http://www.healthcaretownhall.com/?p=4008

again we are talking about insurance instead of health care. uncouple primary care from insurance. we spend 80% of the money on 20% of the population. Mandating MLR--? will only make the insurance companies "give away" the money and will not prove any quality outcome measures. access to primary care providers is both the problem and the solution