There is little debate that affordability is the number one obstacle preventing more families from buying their own health insurance. In an October 2007 Civitas DecisionMaker Poll, 43 percent of voters cited affordability as their top concern. The second most frequent response (cited by 31 percent) was “the number of poor without insurance.” Affordability and the number of uninsured poor are two sides of the same coin. Both problems can be solved by giving families and individuals more control over their healthcare options.
Create “flexible benefits” insurance – i.e., customized plans that offer families coverage that best suits their needs
Imagine if a new Cadillac was the only car the state allowed you to buy for your family. Sounds good … until you realize that you can’t afford a new Cadillac – and don’t need one anyway. As crazy as it sounds, that’s how the insurance market in North Carolina operates. Families simply aren’t allowed to purchase more affordable insurance plans that aren’t stocked with expensive, and often unnecessary, coverage mandates. Thus you either have to buy a “Cadillac” plan or go without. A better option is to deregulate the insurance market so that families can purchase insurance tailored to their individual needs. Such “flexible benefits” plans will provide options for families who would otherwise be unable to buy insurance.
At least a dozen other states (including Virginia, Florida, Georgia, Kentucky, and Texas) already offer “flexible benefits” or even “mandate-free” options to their citizens. Until such legislation passes in North Carolina, lawmakers can bring transparency to the current system by implementing the following reforms:
– Authorize a legislative study charged with assessing how much the state’s current coverage mandates have increased the cost of insurance.
– Require a financial analysis of the impact of proposed mandates on private insurance premiums. (Currently, at least 30 states require such scrutiny.)
– Create a statutory maximum for the percentage of a premium dedicated to funding the cost of mandates.
Permit families to purchase less expensive, out-of-state health insurance plans
Another reason health insurance is so expensive in North Carolina is because the state does not permit families and individuals to purchase out-of-state health insurance. Allowing access to out-of-state plans will not only enable more North Carolinians to purchase insurance, but also lead to lower prices for in-state plans by breaking the state’s insurance monopoly.
Enable small business employees to use pretax income to purchase private health insurance
In 30 other states, including Florida, Texas, West Virginia and Illinois, small business employees are able to use pretax income to purchase their own health insurance. Known as “list billing,” this arrangement allows each worker to purchase an individual insurance plan with pretax money; the employer then uses the wage deduction to reimburse the premium to the insurance provider. This plan benefits both employers and workers by reducing their respective tax burdens.
Encourage alternatives to employer-based insurance
Thanks largely to federal tax incentives, health insurance in the United States is generally provided through employers. Health savings accounts (HSAs) and corresponding high-deductible health plans (HDHPs) may provide a better alternative to traditional insurance coverage. Contributions to these accounts are not subject to income tax. In return, the accounts can only be used to pay for qualified medical expenses. North Carolina can encourage the use of HSAs and HDHPs by exempting such plans from the state’s insurance premium tax and offering a tax deduction for HDHP premiums. Similar legislation was recently introduced in Georgia.
Allow private, prepaid agreements between doctors and consumers
Hundreds of physicians in several states (such as Texas, New Jersey and West Virginia) are currently enrolling patients in affordable prepaid service agreements. A flat fee for unlimited basic primary and urgent care, as well as generic drugs, helps to drastically cut down on administrative costs for providers. Supplementing such agreements with a low-premium, medium-to-high deductible insurance plan will enable consumers to save even more in healthcare expenses.
Encourage greater transparency regarding employer-based healthcare costs
Encourage employers to include information on employee pay stubs information stating how much the employer pays into its health insurance plan – similar to the tax deduction items on the pay stub. This will educate employees as to the true cost of their health insurance.
Pool risk in the individual and small group markets
Creating small business health plans (SBHPs) and association health plans (AHPs) will provide more affordable alternatives, particularly for small businesses. In February 2008, South Carolina enacted such legislation – allowing a group of at least 10 businesses to join together to purchase insurance. The law will enable small businesses to negotiate lower rates than they could obtain as individual companies. Any such legislation should specify that small business health plans do not require business groups to be involved in the same industry.
Coverage Mandates Drive up Costs, Hurt Businesses and Individuals
North Carolina has 47 private insurance mandates, nine more than the national average and tied for 14th highest nationally. The additional cost of these 47 mandates has been estimated to increase the price of health insurance by more than 41 percent. Some mandates that North Carolina consumers are currently paying for include: marriage therapists, pastoral counselors, birthing centers/midwives and contraceptives. According to a 2007 brief by the National Center for Policy Analysis, “Nationwide, as many as one-quarter of the uninsured may have been priced out of the market by costly mandates.” On average, states with fewer mandates enjoy lower insurance premiums. For example, Iowa imposes 25 mandates, and the state’s average family policy runs $2,544 per year. By contrast, the average family policy in North Carolina runs $4,104.
Prepaid Agreements Offer Hope in West Virginia
As profiled in an October 2007 Wall Street Journal article, Dr. Vic Wood of Wheeling, West Virginia, is pioneering a new way of delivering healthcare. In order to combat rising administrative costs and flat insurance-reimbursement rates, Wood began offering private, prepaid agreements to his patients – cutting insurance out of the loop for most services. For a flat monthly fee Wood’s clinic provides unlimited primary and urgent care, as well as generic drugs. According to Wood, such an arrangement “cuts down on administrative hassles and costs, compels more office visits – and delivers better profits than one that relies on insurance dollars.” Confessed Wood, “I can’t see my practice surviving the next 10 years without this model.” Prepaid agreements like that offered by Dr. Wood’s clinic not only benefit providers, but can save money for consumers. An area medical billing and management company of roughly 20 workers enrolled its employees in Dr. Wood’s treatment agreement and supplemented it with a high- deductible plan. The company subsequently saved $48,000 annually and also saw its premiums fall by 3.4 percent.