For weeks we have been warning that the Massachusetts health reform plan is at a critical point. The second round of health plan bids came out no better than the first. That did nothing to alleviate concerns that Massachusetts will not be able to mandate that its citizens buy the costly coverage.
The first health plan bids averaged $380 per person per month. A family of three would have to pay about $13,000 per year at those rates and would receive no subsidy assistance if their household income exceeded $48,000 per year. That would clearly be a non-starter.
So the Massachusetts regulator––the "Connector"--appealed to Massachusetts insurers to come back with better rates.
The result was that most insurers bid between $222 and $288 per person per month (at the average age of 37) for a health plan in eastern Mass. They got the rates down by adding a whopping annual individual deductible of $2,000 ($4,000 for a family). At $250 per month, that would cost the same family of three about $8,000. Over $48,000 per year in family income, there would be no subsidy.
Since adopting a $2,000 deductible would cause the rates to drop by about 20% to 30% anyway, the reduction in the average monthly premium from $380 to $250 is really not a much better deal for Massachusetts consumers than the first bids.
One plan, the Neighborhood Health Plan, bid $156 for a plan without first dollar drug coverage and $175 per person per month with drug coverage--both have a $2,000 individual deductible. However, Neighborhood is primarily a Medicaid provider serving its clients out of a limited number of community health clinic sites that provide very limited coverage in the state. To get one of the mainstream insurers providing access to a broad range of medical providers, plan on spending the $250 monthly premium if you are the average of 37 years old. If you are over age 56, plan on spending $350 to $461 per person per month for one of the mainstream Mass health plans.
Massachusetts will not be able to implement its mandate that all citizens have health insurance at these prices.
Can you imagine going to a middle class family of three making about $50,000 a year and telling them they have to spend $8,000, or even $6000 for the Neighborhood plan, out of their already taxed budget? To boot, the plan you are requiring them to buy has an annual deducible of $2,000 per person.
Between 100% and 300% of the poverty level, a family will receive premium assistance. However, how will a family making $35,000 per year be able to pay even half of these monthly premiums toward the cost of health insurance--and still have to pay a big deductible before getting any meaningful coverage?
The short answer is that Massachusetts can not force their people to buy a health insurance plan they cannot afford and likely will not want.
In fact, I traveled to Boston yesterday for a meeting. As I was driving down the Mass Pike the local news radio station, WBZ, led a report on the new rates and big deductibles with the line, "In the Commonwealth, a health care curve ball."
That about sums up the reaction the Massachusetts political leaders can expect to get from the people this thing is intended to help.
What are the politicians going to do?
For now, they will let the new health plan go forward. There aren't any big penalties for being uninsured in the first year. So there is no downside to just let it begin and hope for a miracle.
As the more meaningful penalties appear in the second year, they either won't be enforced or they will be repealed.
Massachusetts politicians will eventually declare victory and lift the health insurance mandate on the middle class.
They will point to the Massachusetts Health Plan's success in providing access to "affordable" health insurance plans and simply encourage people to buy it. But even that could be a problem if Massachusetts leaves the new health plans "guarantee issue" and doesn't require everyone to join the pool. The participating insurers could get the worst combination of guarantee issue health insurance and adverse selection if consumers have the option of buying.
The local health plans who have been cooperating with the "Connector" could be walking into an untenable underwriting outcome if the mandate is not enforced and a smaller pool of sick people is the outcome.
When the day is done, Massachusetts will likely have only succeeded in expanding coverage for those near 100% of the poverty line--those who will receive the most comprehensive subsides.
By making it possible for more people to have insurance, Massachusetts will have made some important progress. However, the Mass plan will not be the template for national health care reform its authors had hoped for.
Instead of being a grand plan to insure virtually everyone through a more efficient market and a set of mandates, all the Massachusetts plan will turn out to be is a fancy, but modest, expansion of Medicaid.
In the end, it's all about the cost of health care.
The Massachusetts "Connector" wasn't able to get a cheaper price for health insurance because there isn't a cheaper price for health insurance.
The number of those uninsured is the symptom--and cost is the problem.
Every other health reform plan that pretends the problem is just one of access doesn't know the difference between a symptom and a problem.
Tuesday, March 6, 2007
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