July 24, 2008

Massachusetts Association of Health Underwriters Board Member Responds to Governor’s Healthcare Proposal

FRAMINGHAM, Mass., July 24 /PRNewswire-USNewswire/ -- Last week, Governor Deval Patrick issued a proposal asking businesses, insurers and hospitals to contribute about $100 million to fund the shortfall resulting from the Massachusetts Healthcare Reform Law. Massachusetts Association of Health Underwriters (MassAHU) board member Mark S. Gaunya issued the following statement in response to the Governor's proposal.

Two years ago, the Massachusetts Healthcare Reform Law went into effect with the admirable goal of insuring the uninsured, and it asks everyone to participate -- the government, insurers, providers, employers and individuals.

Is it working?

According to the latest press release by the Commonwealth Connector, the government authority responsible for administering the new law, there are 340,000 newly insured Massachusetts residents, giving the Commonwealth one of the lowest uninsured rates across the nation. Some say this is a universal healthcare model for the rest of the country.

What's wrong?

With all the newly insured people coming into the system so rapidly, we are having trouble finding enough doctors to treat them, and we are having trouble finding the money to pay for it. In fact, some estimates show that the new law is under-funded by as much as $150-$200 million.

What does the Governor propose?

According to some new polls, consumers are supportive of his idea because they think "others" need to step up and pay "their share," suggesting that recent increases in co-payments and deductibles prove consumers are already doing "their part."

   What are the specifics for the Governor's proposal?   The Governor proposes raising $100 million in three ways:   

1. The law currently states employers with more than 10 employees must pay at least 33% of worker's premiums within their first 90 days "or" have at least 25% of their worker's covered by an employer plan. The Governor is proposing changing the "or" for employers to "and." If employers fail, they must pay a $295 annual assessment for each employee. The change in the law is projected to raise $33 million.

2. The Governor also proposes the taxing of health insurance company reserves, which are used to pay claims. A certain amount must be kept on hand by each insurer to make sure those claims can be paid. This additional tax is projected to raise $33 million.

3. The Governor is seeking to tax hospitals, with the hope of raising another $28 million.

What's wrong with this plan?

The problem with the Governor's plan is that it is a hidden tax on consumers, and it does not fix a thing. Why? The government, insurers, providers, employers and consumers all play an important role in the health care equation.

Massachusetts collects a big check from the federal government every year (last year, almost $4 billion) to pay for Medicare and Medicaid healthcare expenses. The problem is that our state government does not pay its fair share. They pay about $.80 for what costs $1.00 for doctors and hospitals to deliver their care.

The big insurers in Massachusetts (BCBS, Harvard Pilgrim, Tufts and Fallon) are all non-profit. They make about a 1% to 2% profit margin on every premium dollar they collect from employers and employees and put those profits into the bank reserves to pay claims. Insurers negotiate contracts with the government, doctors and hospitals to deliver care to their members. Because the government only pays 80% of what it should, doctors and hospitals charge insurers about $1.20 to make up for the government's shortfall.

The doctors and hospitals also negotiate contracts with the government and insurers. As we already discussed, they charge insurers more than the actual cost of care to make up for what the government is not paying (see estimated figures above).

Employers sponsor health insurance for their employees. Most work with brokers and consultants to find the best plan for the least amount of money and, on average, employers pay about 75% -- 80% of the cost for their workers.

Employees, also known as consumers, pay for about 20% to 25% of the health insurance premium, and when they use their health plan, they pay co-payments and deductibles as well.

How is it a hidden tax when the Governor's plan calls for everyone else to pay?

When you understand who is involved in health care and the role everyone plays, the impact becomes clearer:

1. Insurers -- taxing reserve accounts will lower "money in the bank" and require the insurers to increase health insurance premiums to replace them.

2. Hospitals -- faced with already tight budgets, hospitals will be forced to demand more money from insurers to deliver care. Insurers will have to comply or risk not being able to offer their members access to "my doctor" or "my hospital."

3. Employers -- changing the test from "or" to "and" will increase assessments (fines), which means employers will have less money to hire, give raises, and pay for benefits.

4. Consumers -higher insurance premiums will have to be paid, because employers cannot afford to pay the premium increases insurers will demand.

Where do we go from here?

We need to ask "everyone" to be more prudent with the way they spend their money, and here is how it would look:

1. Government -- we need the government to pay its fair share and manage our money more wisely. It should not be a foreign concept for our government to spend less than they take in, to balance their budget, to fund greater access to care, and to help lower what doctors and hospitals need to ask insurers for.

2. Insurers -- we need insurers to continue to find ways to reduce their administrative expenses (now about $.10 on every $1). They also need to help members get the right care, at the right time, and in the right place. At the same time, they need to teach them how to live a healthier lifestyle so they need less care.

3. Hospitals/Doctors -- we need our providers to also find ways to reduce their administrative expenses (now about $.25 on every $1) and help their patients get the right care, at the right time, and in the right place. They also need to teach their patients how to live a healthier lifestyle so they need less care. This is what a partnership is all about.

4. Consumers -- We need to understand that health care is expensive, and that relative to the rest of the country, we are not paying more. In fact, the Boston area has the best health care in the country, and we really do not pay as much as others do. We need to demand accountability from everyone in this "food chain," as well as ourselves. It simply the right thing to do!

In the end, asking employers, insurers, hospitals and doctors to pay more taxes to pay for our new health care law is just another way of taxing us. It is bad politics and a hidden tax, so hold onto your wallets!

Mark S. Gaunya

CONTACT: Mark S. Gaunya, Principal, Borislow Insurance, Board Member,Massachusetts Association of Health Underwriters, +1-508-663-0239