Thursday, February 3, 2011

HELP Act

I made the case in an earlier piece that health care costs obey the fundamental economic law of supply and demand. See http://randyhuntcpa.blogspot.com/2010/12/you-cant-fool-human-nature.html.

One of the cost drivers in Massachusetts is the mandate to not just purchase insurance, but to purchase a “blue ribbon” policy. The standard for a qualifying plan is spelled out in the Minimum Creditable Coverage requirement. If the health insurance plan you purchase (or perhaps “rent” might be a better term) falls short of the MCC definition, you will be subjected to a $1,212 fine in 2011.

Here are the minimum requirements to meet the MCC standard (from http://mahealthconnector.org/):

  • Ambulatory patient services, including outpatient day surgery and related anesthesia
  • Diagnostic imaging and screening procedures, including x-rays
  • Emergency services
  • Hospitalization, including at a minimum, inpatient acute care services which are generally provided by an acute care hospital for covered benefits in accordance with the member's subscriber certificate or plan description
  • Maternity and newborn care
  • Medical/surgical care, including preventative and primary care
  • Mental health and substance abuse services
  • Prescription drugs
  • Radiation therapy and chemotherapy
  • Doctor visits for preventive care, without a deductible
  • A cap on annual deductibles of $2,000 for an individual and $4,000 for a family for services received in-network
  • For plans with up-front deductibles or co-insurance on core services, an annual maximum on out-of-pocket spending of no more than $5,000 for an individual and $10,000 for a family for services received in-network
  • No caps on total benefits for a particular illness or for a single year
  • No policy that covers only fixed dollar amount per day or stay in the hospital, with the patient responsible for all other charges
  • For policies that have a separate prescription drug deductible, it cannot exceed $250 for an individual or $500 for a family for services received in-network
  • No fixed-dollar cap on prescription drug benefits
  • Core medical services and a broad range of medical services for any dependents, if dependents are covered

Imagine the cost of automobiles if our state government enacted a one-size-fits-all set of standards for the Minimum Creditable Car.

The bottom line is that we worked on the coverage side of this health insurance equation and did little to work on the expense side. We’re flailing around in the middle of a swarm of “cost” hornets trying to figure out how to get our runaway premiums back under control.

What the people need is a little breathing room while the brain trust in the Statehouse sorts out this mess. The Healthcare Expense Lowering Plan (HELP) does exactly that. Without removing the mandate to purchase health insurance, it provides immediate relief by suspending MCC until January 1, 2014, the day most of the national health insurance reform laws kick in.

How would it help?

Take the example of a married couple with no kids; mid-30s; in good health. They can purchase a policy today that provides for catastrophic coverage for $350/month. Though it doesn’t provide coverage for maternity, mental health issues, and prescription drugs, they don’t need these coverages. They can pay cash for broken bones and office visits for strep throat, but they want to know that they’ll be covered if one of them contracts cancer.

In Massachusetts, they will pay a $2,424 penalty on their 2011 tax return ($1,212 each). Their other option is to purchase a plan through the Connector for $1,000/month, the cheapest they were able to find for a high deductable plan ($2,000 out-of-pocket).

They choose to pay $4,200/year for their catastrophic coverage plan plus the penalty, a total of $6,624, rather than $12,000 for the MCC-qualified plan, a savings of over $5,000.

With the HELP Act in place, they would save the additional $2,424 while still retaining coverage that they can afford and complying with the individual mandate.

For those people who are currently without health insurance coverage—and I submit to you that those numbers have increased significantly during this recession; we just don’t know it yet—there would be affordable policies available that would encourage more people to comply with the health coverage mandate.

Do the numbers. $4,200/year to have a plan versus a penalty of $2,424 for not having a plan. That’s a difference of $1,776 (almost seems patriotic, doesn’t it?), or $148/month. That’s doable for anyone who earns too much to qualify for subsidized health insurance.

The bigger picture

I wrote the HELP Act to provide immediate relief for people who are being buried by their health insurance premiums and to give us time to look at the bigger picture. Payment reform (which will become a buzz phrase soon) might be the right way to go, but the proponents of this new paradigm plan to run controlled pilot studies to ensure that the results meet their expectations before rolling out a full program. That makes sense, but it also takes time. The HELP Act will tide us over until the big picture solutions are ready for prime time.

What you can do

If you believe we need a hiatus from ever-increasing insurance premiums, let your state legislator know about the HELP Act. It is House Docket number HD02965.

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