Options eyed for high insurance costs;

News Coverage

The Tallahassee Democrat

Options eyed for high insurance costs;

Maine, California provide models for universal coverage

by Diane Hirth; DEMOCRAT CAPITOL BUREAU
October 26, 2003

Sandy Thompson, owner of Artistic Flowers, has more on her mind than selling roses.

Costs of HMO coverage for herself and her 13 employees increased 30 to 50 percent this year, depending on the worker's age and gender.

"It had been creeping up. I never paid it much attention until we got clobbered this year," said Thompson, 56, who has run her Tallahassee enterprise for 10 years.

So far, her small business has absorbed rising health-insurance costs, but she is concerned.

"I don't know how long we can pass it along in the cost of flowers," she said.

Most U.S. workers are employed by small businesses such as Thompson's. And providing help to them is crucial as Florida tries untangling how to make health insurance more affordable and accessible to its 2.8 million uninsured.

While a task force set up by Gov. Jeb Bush and a House select committee currently debate the issue, Maine and California are cutting ambitious pathways toward what could lead to universal health-insurance coverage in their states. Their legislation was approved this year, and signed by their respective governors.

The comprehensive coverage plans of Maine and California are as different as the size of the two states.

Maine's "Dirigo Health," named after its state motto "to lead," will use voluntary participation by employers and subsidies from government and insurers to make health insurance more affordable to those who work for small employers, are self-employed or need individual or family coverage. Its subsidized policies, available to a family of four with an income of $55,000 or less and an individual earning $27,000 or less, will be offered as of July 2004.

California's "State Health Purchasing Program" will require all businesses of 20 or more employees "to pay or play," by either providing health insurance for their employees or contributing to a state fund to be used to subsidize health coverage for those who otherwise would be uninsured. It will be phased in, beginning in January 2006.

What both programs share - and stake much of their potential success on - is the premise that the health-care and insurance costs are pushed upward in part because the uninsured end up sicker and treated in expensive settings such as the emergency room and hospital, because they can't afford to see a doctor regularly.

Everyone from employers to insured workers, health-care providers and the government essentially pays for the inflated, often unpaid, health bills of the uninsured.

Florida is experiencing the same dilemma, with $14.3 billion in uncompensated medical care in 2001. The Maine and California programs are counting on significantly decreased costs for uncompensated care and bad debt.

And Maine and California are proof that waiting for Washington to enact a global program for increasing health coverage is no longer the only option.

"I'd love to know more," Thompson said of Maine and California's efforts. "I'm very concerned about being able to provide (health insurance) next year."

Good ideas?

Eighty-five percent of businesses not offering health benefits would do so if it was affordable and available, according to a 2002 survey by Florida's chapter of the National Federation of Independent Businesses. The group represents 15,000 businesses, most of them small. It found 30 percent of the businesses lacking employee health coverage dropped it within the previous three years.

In that survey, 28 percent of employers providing health insurance experienced premium hikes of more than 30 percent in the past year. And health-insurance costs rose more than 50 percent for almost half the businesses during a five-year period.

"I think there's a sense of desperation out there," said Stephen Birtman, state director of NFIB. "If you want to attract competent and good people, you have to have health insurance. ...And in small and midsize businesses, the owner knows all the people and their kids. There's a sense of responsibility there."

Birtman is more interested in California's experiment than Maine's, because the Golden State is large, ethnically diverse and has a transient population, much like Florida.

"But do I think it will work? No," he said. "Because you're putting in a government-controlled program."

Birtman compares a program such as California's to the federal Medicaid and Medicare programs, where costs are spiraling. "If you're looking to save money, I don't think this will do it. But if you want everyone to have insurance, I think it's a valid goal," he said.

Yet Maine's template for health-insurance change, which lets employers choose whether to participate, intrigues Kelly Dozier, co-owner and general manager of Mad Dog Construction in Tallahassee.

"I'm not for big government, but I think health care is something the government ought to get involved in. Everyone should have access to health care," said Dozier, 43, who has been with the company for 19 years.

Employees of Mad Dog Construction have their current $247 monthly HMO premium paid for by the company, but "rates are going up every year significantly. It used to go up 1 to 5 percent. When it goes up to 20 percent, it's shocking," Dozier said.

She said none of the 20 employees in her company can afford family coverage, which is not covered by the firm.

"Florida needs to find a solution to our health-care crisis," Dozier said. "It sounds like Maine is going in the right direction."

Politics of coverage

It's too early to tell what recommendations will come from the Governor's Task Force on Improving Access to Affordable Health Insurance or the House Select Committee on Affordable Health Care for Floridians. Options could include providing stripped-down health-benefit plans or incentives for healthy lifestyles. Both panels will have their suggestions ready for the 2004 Legislature, which convenes next March.

It seems doubtful though they will ask for major new health funding from the state or a new tax.

Maine and California avoided a general tax on their citizenry to pay for their health-coverage plans.

Maine will subsidize health premiums using a combination of funds, including a 4-percent assessment on health-insurance premium revenues, Medicaid dollars, and employer and employee contributions. California will mandate that all employers, with the exceptions of those with fewer than 20 employees or those providing health benefits, pay into the fund subsidizing premiums.

By keeping private insurers as the ones who will deliver the product in their to-be-expanded market, both states avoid the taint associated in the United States with a publicly controlled, single-payer system.

Nontraditional political coalitions aligned in both states to pass the plans.

The Maine Chamber of Commerce, for instance, testified in favor of Dirigo Health because among small-employer members, "most of them said - based on the premiums - it would be of interest to them," said Kristine Ossenfort, the Chamber's senior government affairs specialist.

In a 2003 survey, 94 percent of Maine Chamber of Commerce members experienced health-premium increases ranging from 10 percent to more than 40 percent than the previous year.

"I don't think anyone is fooling himself that (Dirigo Health) will decrease costs," Ossenfort said. "But if it stabilizes or slows increases, it's certainly going to help. ... It's far from perfect, but it's a place to start."

In California, a coalition of doctors, including the California Medical Association, hospitals, organized labor and major insurers backed the issue.

"It's the biggest thing in health care since Medicare or Medicaid. It requires employers to buy health care for employees," said Jerry Flanagan, an advocate for The Foundation for Taxpayer and Consumer Rights in California. "It will provide health insurance for a million more people."

His group, though, wants additional legislation to control health-care costs, something Maine imposed and which he says is lacking in California's program. "Will the people who really need care be able to afford the premiums and co-pays? It creates access, but it doesn't guarantee affordability," Flanagan said.

California's State Health Purchasing Program passed in September on the last day of its legislative session, was signed by now-recalled Gov. Gray Davis and is in the hands of incoming Gov. Arnold Schwarzenegger to implement.

"An important test of your commitment to stand up to special interests will be whether or not you oppose the (California) Chamber of Commerce's efforts to overturn the state's new landmark health-care expansion legislation," Flanagan recently wrote to Gov.-elect Schwarzenegger.

But others like Michael Shaw of California's National Federation of Independent Businesses will try to convince Schwarzenegger that this is a tax that will shove businesses out-of-state, or prevent them from arriving.

"It takes away the incentive to grow." Shaw said. "It's a payroll tax."

As the Florida governor's task force convened recently in Tallahassee, co-chairman Tom Gallagher, who oversees insurance as the state chief financial officer, reflected on what he views to be the practical and political limits of their mission.

"We (as a group) don't have taxing authority, nor do we have spending authority," he said. "We've tried a lot of things here in Florida. ... We've been on the cutting edge, but we continue to struggle to have the funding for it."
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Contact Capitol reporter Diane Hirth at (850) 222-6729 or [email protected]