When given free choice of an individual plan, many employees choose health savings accounts and the qualified health plans that accompany them, because the premiums are usually 35 percent to 40 percent lower than traditional plans. Employers and employees may both contribute to the health savings account, providing more tax advantages for both parties. These funds grow with interest, and employees may use them to pay health care expenses for the entire family — even save it for retirement, if not used.

The article in the Post-Dispatch puts it best when it states, “health savings accounts aren’t a use-it-lose-it proposition.”

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The ink is barely dry on HB 818, an innovative free-market health care reform bill that encourages individual responsibility and employer participation. Other states, including Kansas, are hoping to emulate it. A new plan proposed last week, however, takes a significant step in the wrong direction. “Insure Missouri” is designed to fund policies for low-income adults, but does not continue on the path to market-based reform that put Missouri on the map.

“Insure Missouri” is modeled after “Healthy New York,” a connector-type program that amounts to central bureaucratic planning for health insurance. It’s a state program with a health plan designed by the state, offered through providers contracted by the state, at rates controlled by the state. What happened to the free-market approach?

The plan as announced will be implemented in three phases over a 15-month period:

Phase 1 offers coverage to some 54,500 working parents and caregivers with children in the home, with income at or below the poverty level. The children in these families are already covered by MO HealthNet.

Phase 2 subsidizes coverage to an estimated 77,000 adults, with income up to 185 percent of poverty level — about $18,900 for an individual. Participant costs will not exceed $145 monthly.

Phase 3 is small business reinsurance. This won’t take effect until 2009, and few details are available. If it follows the “Healthy New York” model, employers would be required to pay 50 percent of premiums and have at least 50 percent of employees participating.

Approximately 189,000 adults would be covered through “Insure Missouri” by 2010, at an estimated price tag of $600 million. According to Rep. Doug Ervin, HB 818’s sponsor, this will rise to $900 million by 2012. There are many unknowns, including the estimated cost per participant, the actual funding sources, and whether employers will be forced to contribute.

“Healthy New York” was initiated because state insurance mandates had drastically inflated premium costs — nearly $700 for an individual and $2,000 for a family. Missouri, on the other hand, has an average monthly rate of $192 for an individual and $332 for family.

In fact, thanks to HB 818, a healthy 25-year-old could pay as little as $37 per month for a plan that includes a free annual physical. His employer can also contribute to the premium and put money in his pretax health savings account (HSA) — which grows with interest. In other words, we already have a new system of incentives designed to increase the ranks of the insured. We should let it take effect before adding new layers of bureaucracy and centralized control.

The goals of any health care reform should include an emphasis on wellness, individual accountability for a healthy lifestyle, and wise consumption of health care. Subsidies should be reserved for the truly needy, with a system in place for smooth transition away from the program.

A simple step toward reaching these goals would be to convert subsidies for all health welfare programs, such as MO HealthNet and SCHIP, into income-based vouchers that can be used to purchase private policies or to join an employer’s plan. For those who feel Missouri must expand subsidies to low-income adults immediately, a pilot program could extend these vouchers to the adults that would be eligible for Phase 1 of “Insure Missouri.”

The advantages would be many. Voucher recipients would be free to add their own funds to buy a more expensive traditional plan, or purchase a lower-premium plan and put the balance of their vouchers into an HSA or health opportunity account (HOA). Those funds can be used for routine health expenses, such as pain relievers. This encourages consumerism, and promotes wellness and responsibility.

Subsidizing this primarily healthy, young group (820,000 on MO HealthNet and SCHIP alone) would add their premiums to the coffers, reduce overall risk for the general public pool, and lower rates for everyone.

Since many providers no longer accept Medicaid/SCHIP patients because reimbursement rates have been lowered, private plans would provide health welfare recipients with a wider choice of providers, decreased wait times, and shorter driving distances. Vouchers would also allow families to take advantage of discounts for private family plans or add the family to an employer’s plan.

Greg Scandlen of Consumers for Health Care Choices wrote, “Missouri’s (HB 818) is so good and such a model for other states that it should change its motto from ‘The Show Me State’ to ‘The Show Us (How to do it) State.’”

Rather than veering off on this path that leads to government-controlled health care, Missouri should forge ahead on the road to personal responsibility and free-market health care reform

Beverly Gossage is a consumer-based health care expert and research fellow with the Show-Me Institute.

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A long-awaited free-market step on the path to cover those without health insurance came out of Jefferson City on Friday. Gov. Matt Blunt signed HB 818, making Missouri the first state to permit pretax contributions from small business owners to their employees’ individually selected policies. Unlike other health care reform “solutions” that require more government intervention and bureaucracy?third-party or one-payer systems, employer mandates, tax hikes, and cost shifting?this law offers a common sense approach to health care reform.

The media has focused on a controversial midwife provision that was inserted into the bill at the last minute. But the real news here is the bill’s revolutionary approach to health insurance reform — and the fact that the bill won such overwhelming bipartisan support in both chambers of the Legislature. There’s a lot to be excited about in HB 818, so here’s a primer you won’t find in the press.

Every newspaper article I’ve seen about Friday’s HB 818 signing frames it in terms of the midwife provision. It’s easy to focus on that because the fact that Sen. John Loudon managed to sneak the measure into the larger bill without anybody noticing is simply interesting. It’s a juicy story of political controversy and legislative dysfunction that illustrates several public choice insights. And besides, legalizing the practice of midwifery is also a great idea, as Sarah Brodsky has reminded us in this blog. At heart, it’s as much an issue of economic freedom and consumer choice as any other occupational licensure restriction.

But HB 818 is exciting for many other reasons. The health care crisis of today is largely a government-created problem, stemming from state licensure and financing of the medical profession, and from World War II-era wage freezes and price controls that gave employers an incentive to provide health insurance benefits instead of paying higher wages. This ultimately led to employer-based benefits becoming cemented as the norm for insurance coverage in the United States, a system that leaves out a tremendous number of people.

When government officials see problems they themselves created, their usual response is ever-spiraling regulation. More top-down control. Instead, the insurance bill signed into law on Friday takes a significant step in the right direction — allowing more individual choice and decentralized control.

Read more in Beverly Gossage’s primer on HB 818 and her Friday op-ed about why it’s so important.

The post Missouri Revolutionizes Health Insurance appeared first on Show-Me Institute.

The media has focused on a controversial midwife provision that was inserted into the bill at the last minute. But the real news here is the bill’s revolutionary approach to health insurance reform and the fact that the bill won such overwhelming bipartisan support in both chambers of the Legislature. There’s a lot to be excited about in HB 818, so here’s a primer you won’t find in the press.

The standard employer-based model for health insurance coverage leaves a remarkable number of people out. Nationwide, about 30 percent of workers in firms with fewer than 25 employees are uninsured, and 88 percent of Missouri businesses have fewer than 25 employees. Many small companies no longer offer group health insurance. According to a study by America’s Health Insurance Plans (AHIP), only 42 percent of Missouri small businesses offer health insurance. These employers reasons include: the hassle of selecting a plan each year; employer contribution and employee participation requirements; lack of retention among employees; and the high cost of group premiums. The uninsured mention affordability and portability as barriers to health insurance.

HB 818 addresses these concerns:

The annual insurance renewal hassle. Shopping to determine which single carrier’s one or two plans (if any) an employer will offer each year to attempt to meet the needs of all employees is every small business owner’s nightmare. Employers would generally rather run their companies than be in the health insurance business. Since employees under HB 818 are allowed to select their own individual plans, they can choose from a marketplace of carriers and plan designs for the one that best meets their personal preference. The employee becomes the consumer and purchaser of insurance; the employer merely contributes a defined amount. HB 818 also allows the employer to continue to offer a small group plan and contribute to employees individual policies.

Employer contribution requirements. Most small group carriers require that the employer contribute at least 50 percent of the premium for the individual employee. Many employers would like to contribute to their employees health insurance, but would like to have the flexibility to determine their contribution amount. By allowing a defined contribution, HB 818 gives employers this option. Business owners may discover that individual policies can be less expensive than group plans, so their contribution, even at 50 percent, may be less than it was with a group plan.

Lack of employee participation and small group participation requirements. Most small group carriers require that at least 50 percent of employees participate in a plan. Although part-time employees are not counted in this participation requirement, and are frequently left without coverage, small business owners have found it difficult to maintain this standard. Employers can now contribute to premiums without this constraint. Previously uninsured employees are more likely to purchase individual plans if their employers are picking up some of the cost and they can pay for it through pretax payroll deductions.

The retention and portability issue. Small business owners understand that in a global society, employees come and go. With each new hire and termination, group dynamics change and insurance premiums can be drastically affected, making it difficult to budget costs and meet participation requirements. When health insurance is employer-based, a constantly transitional workforce will have a high percentage of temporarily uninsured workers. The federal government reports that 45 percent of those without health insurance are uninsured for only six months or less. Portability is important in helping to cover this group, and most employees would rather keep their selected benefits when changing employers and have a consistent health plan.

HB 818 affects both issues by authorizing employees to plug their individual policies into their new employers cafeteria plans, and permitting those new employers to contribute to the premiums. This is an easier transition for newly hired employees, often eliminating doctor and benefit changes, or a waiting period to access new health insurance. When employees are terminated, they take their plans with them no need to offer state continuance or COBRA. Changing jobs or being terminated will not be a cause for panic about health insurance loss.

The affordability issue. One-size-fits-all small group health plans, with their accompanying mandates, are often more expensive than individual plans. According to the AHIP, last year in Missouri the average small group single employee premium was $292, and family rates averaged $765. By contrast, the average premium was $192 for an individual, $332 for a family. The Council on Affordable Health Insurance (CAHI) reports that young “invincibles,” age 19 to 34, represent 56 percent of the uninsured. Their premiums can be especially inexpensive on an individual policy. For example, a 25-year-old healthy, nonsmoking male could have an individual policy with a premium as low as $65, which includes a free annual physical. This is about the cost of an average monthly cell phone bill.

Competition. There are 18 million individual policies nationwide, and Humana expects that number to grow by 5 to 8 percent over the next five years. Other carriers known for being large group providers, such as Coventry and United, recognize this trend and have entered the individual market in recent years. This makes the rates even more competitive. Many carriers already offer convenient list bill options, which permit employers to payroll-deduct premiums for individual policies and pay one check or bank draft for all the employees who have policies with that carrier.

Family Discounts. With small group plans, often husband and wife are on separate plans with different employers, and the children may have individual policies. The family can be with as many as three different carriers. With HB 818, if both spouses work for small employers, the family can have one policy purchased independently and each spouses employer can contribute to the premium. Families can stay together on the same plan. This is nice for several reasons: rates are often lower, because most carriers give a discount if the family is on one policy; there are fewer benefit rules and health cards to keep straight; and doctors can be chosen from one network. Health savings account plans are also growing in popularity, and because they have one family deductible, having the family together is a plus.

Tax incentives. As the popularity of individual plans has increased, the injustice of insurance taxes has become more pronounced. Until now, premiums were only tax-advantaged if purchased through an employer group plan. However, HB 818 permits funneling individual premiums through the Cafeteria 125, making the employees portion pretax. This equalizes the tax discrimination. Since the employers portion of the premium is also pretax, this will give an incentive for both employers and employees to contribute to health insurance, covering more uninsured. HB 818 also allows self-employed business owners a state tax credit for personal health premiums, since these cannot be funneled through the Cafeteria plan.

HSAs and Consumerism. When given free choice of an individual plan, many employees choose health savings accounts and the qualified health plans that accompany them, because the premiums are usually 35 percent to 40 percent lower than traditional plans. Employers and employees may both contribute to the health savings account, providing more tax advantages for both parties. These funds grow with interest, and employees may use them to pay health care expenses for the entire family even save it for retirement, if not used. HB 818 also adds an HSA plan to the state risk pool and Missouri state employees health benefit package. This provision will give a tax-advantaged, affordable option with a defined out-of-pocket expense for those who do not qualify for an individual plan from a private carrier, and for those who work for the state. This option exposes employees to the actual cost of their health care.

Employees with individual policies, particularly HSA plans, are not insulated from the true cost of the premiums, as well as the cost of care. They recognize that this is their portable plan, not the employers plan. They are aware that their lifestyles affect premiums. This realization can affect unhealthy, sedentary choices. For example, when told that his premium could be 30 percent lower if he was not a tobacco user, an individual said that was the incentive he needed to stop smoking. This self-ownership provides for more judicious utilization of insurance benefits, and promotes wellness.

HB 818s provisions allowing for small employer contributions to individual plans with pretax advantages can turn uninsured employees into insured consumers. This benefits all of Missouri.

Beverly Gossage is a consumer-based health care expert and research fellow with the Show-Me Institute, which sponsored Gossages March 5 presentation to the Missouri Legislature on HSAs and free-market approaches to health insurance reform. HB 818 incorporates many of the ideas Gossage presented.

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Missouri residents may soon have the chance to take control of their health insurance. Although the standard employer-based model for health insurance coverage leaves a remarkable number of people out, an overwhelmingly bipartisan bill recently passed by the Legislature, HB 818, would allow a flexible, portable system of insurance coverage that employees can depend on even in a turbulent economy where jobs are increasingly transitory. Scheduled to be signed by the governor this afternoon, the bill offers a common-sense approach to health care reform — not more government intervention and bureaucracy.

Most of the nation’s uninsured work for small companies, and only 42 percent of Missouri small businesses offer health insurance. Those who don’t provide plans to their employees have several reasons: the hassle of selecting a plan each year; employer contribution and employee participation requirements; lack of retention among employees; and the high cost of group premiums. These concerns are addressed by HB 818.

Shopping for an affordable health insurance plan to meet employees’ diverse needs is every employer’s nightmare. Under HB 818 the employee would become the consumer and the purchaser of insurance, selecting a personal plan from a marketplace of carriers and plan designs. Employers would merely contribute to their employees’ premiums.

Small group plans require 50 percent of the employees to participate and 50 percent of the premium be paid by the employer. Part-time employees are not counted in this participation requirement, and are frequently left without coverage. Since HB 818 gives employers the option of how much to contribute to the premium and does not regulate employee participation, employers would be more likely to assist with the cost of health premiums

Under the current employer-based health care system, a constantly transitional workforce poses two problems. It makes it difficult for small businesses to budget health insurance costs, because each new hire and termination affects the group dynamic. It also produces a high percentage of temporarily uninsured workers, who make up 45 percent of the uninsured. HB 818 would make it easier for employers to budget costs, and provides insurance portability for workers moving between jobs.

One-size-fits-all small group health plans are often more expensive than individual plans. For example, last year in Missouri the average small group premiums for single employee and family coverage were $292 and $765 respectively. By comparison, the average individual policy premiums for single and family were $192 and $332.

Recognizing the trend toward individual policies, carriers known for being large group providers have entered the individual market in recent years. Many already offer convenient “list bill” options, which permit employers to payroll-deduct for individual policies and pay one check for all the employees’ premiums.

Family discounts can be substantial if a family is on one plan, but some small group plans may splinter a family’s carriers. With HB 818, a family could have one employer-independent policy, and each spouse’s employer could contribute to the premium.

HB 818 would permit funneling individual premiums through the Cafeteria 125, which allows pretax contributions for both employers and employees, giving them both an incentive to contribute. This would equalize the tax discrimination that has favored those purchasing health insurance through group plans. HB 818 would also allow self-employed business owners a state tax credit for personal health premiums.

When given free choice, many consumers choose health savings accounts with a qualified health plan. The premiums are usually 35 percent to 40 percent lower than traditional plans, out-of-pocket expenses are pre-defined, employers and employees both reap tax advantages, and funds in these accounts grow with interest and may be used to pay health care expenses for the entire family. They can even be saved for retirement, if not used.

HB 818 also adds an HSA plan to the state risk pool and Missouri state employees’ health benefit package. This provides the popular tax-advantaged option for those who do not qualify for an individual plan from a private carrier, and for those who work for the state.

Individual policies can provide an incentive for healthier lifestyles. Because employees with these plans are not insulated from the true cost of their premiums, or the cost of care, they can see how unhealthy, sedentary choices can directly affect the cost of their premiums. This could well have the effect of promoting wellness and providing for more judicious utilization of insurance benefits.

This bill’s provisions allowing for small employer contributions to individual plans with pretax advantages can turn uninsured employees into insured consumers. This benefits all of Missouri.

Beverly Gossage is a consumer-based health care expert and research fellow with the Show-Me Institute, which sponsored Gossage’s March 5 presentation to the Missouri Legislature on HSAs and free-market approaches to health insurance reform. HB 818 incorporates many of the ideas Gossage presented.

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