The Best Hope for the Uninsured (Outside of New England)

by Tim Foley

categories: National Health Exchange, State and Local Efforts, The Uninsured and Underinsured

Published August 10, 2009 @ 11:29PM PT

First there was Massachusetts, with its Connector and universal access set of reforms (now in the process of being followed up with a departure of fee-for-service).  Then, just recently, the Connecticut legislature finally overrode Governor Rell’s veto of “Sustinet” – a Nutmeg State universal coverage plan similar in some respects to a public option.  So it stands to reason that the next great experiment in expanding health care access is in – Utah?

It shouldn’t be that much of a surprise.  After all, the Wyden-Bennett plan which would replace employer-based coverage with a system of state-based exchanges where the individuals and families themselves could purchase comprehensive coverage takes the latter part of its name from Bob Bennett, Utah’s junior Senator.  Utah’s senior Senator, Orrin Hatch, has also made health care one of the focal points of his legislative career.  And Utah is quite different from other states, in ways that make it easier to push for expanded coverage.  For one thing, Utah has much lower unemployment than most – even with the latest economic downturn, it’s hovering around 5%.  For another, nearly a third of the uninsured have full-time jobs, 68% of the uninsured have full- or part-time jobs, and 70% of the uninsured work for small businesses.  But, as is the case anywhere else, those same small businesses are completely and utterly screwed with their lack of bargaining power.  Health insurance premiums have jumped 85% from 2000 to 2007, and employer’s costs grew 6.9% each year – way, way more than the 0.9% wages went up over that same time frame.  Indeed, only 40% of Utah small businesses can afford to offer health insurance to its employees – the main driver of Utah’s 306,000 uninsured.

This plan isn’t a universal health care system.  They’re not trying to insure everybody.  The Salt Lake Tribune today spelled out exactly where they intend to focus the soon-to-be Utah Health Exchange. As Cheryl Smith, who works in Utah’s Office of Consumer Health Services explained, "The folks who are hurting most are the small-group market.  Those guys are hemorrhaging cash and Utah is a small business state, so let's take care of [them] first."  Ergo, the Exchange would allow employers to either offer benefits to their employees as normal, or to sign up for the Exchange and put aside money to cover part of their employees' premiums into a health savings account.  It’s a defined contribution – it doesn’t change based on whose on your payroll (a favorite “individual rating” trick to jack up premiums), and you’re not responsible for the full cost.  The defined contribution is all tax-free.  There’s no more researching or haggling.  It’s targeted for small businesses at first, but will phase in large businesses within two years.

Once the employer signs them up, the employees can then combine the money in the savings account with their own contribution (likewise fixed and predictable, unlike the abusive individual insurance market) and buy whatever plan they want in the Exchange.  If they nothing in the Exchange is affordable to them – generally defined as no plan within 5% of their income level – they can apply for a subsidy from Utah's Premium Partnership for Health Insurance, another state agency.  If a family contains two part-time workers, they can pool contributions from their employers and their own contribution to buy a family plan.  Ditto if you work two part-time jobs yourself.  The “cool” part of the Exchange is the Web portal, allowing individuals and families to compare like to like, and to add on or remove benefits to suit their needs.  An added bonus – and an innovation that can hopefully be added to a National Health Exchange, should such a thing pass – is that applying for the plan and the subsidy allows the program to automatically check to see if you’re eligible for Medicaid or SCHIP.  Conservatives love it because it empowers consumer choice.  Progressives love it because it specifically targets those least likely to be insured.  Small businesses love it because paying for benefits is no longer “all or nothing” or incurring unpredictable costs.  Individuals and families like it because they’ll actually be able to afford coverage.

It’s not without some big question marks.  For one thing, there doesn’t seem to be a guaranteed minimum set of benefits – you can purchase a fairly cheap plan but it’s not clear how covered you really are.  For another, this does nothing for the 32% of uninsured adults who aren’t employed, ranging from college students to everyone else.  And the UPP subsidies hit a very small percentage of the population – by my calculation, up to 167% of the federal poverty line.  I've been unable to tell if there are consumer protections against pre-existing conditions, rescissions and the like (there are in Wyden-Bennett and the Massachusetts Connector).  And, of course, it’s entirely populated by four insurance plans.  Although they’re ultimately expanding to a couple dozen, there’s not even a glint of a publicly-funded competitor on the horizon.

Still, Utah’s experiment – set to go live on August 19 – is only the second Exchange to open in the U.S.  The better it does, and the more we learn from it, the better we’ll be able to structure something like this at the national level.

(Photo credit:  Roadsidepictures on Flickr.)