As the federal government prepares the Patient Protection and
Affordable Care Act (PPACA) for enforcement, millions of Americans
may realize that “federal” certainly doesn’t mean “universal.”
According to The Washington Times, the Affordable Care
Act will
force approximately 7 million people from their
employer-provided coverage, twice the CBO’s original estimate.
Even for those with employer-provided coverage, its high expense
affects the lives of dependents. Dependents are actually exempt
from the insurance mandate if their head of household pays
below 9.5 percent of income for his premiums, making these
family members ineligible for exchange subsidies.
Even if one can purchase insurance through a “health insurance
marketplace,” choosing a plan is very complicated for the
average person. States will have to hire thousands of
“navigators” to consult the 30 million citizens signing up for
health insurance across the country; California alone will have to
certify 21,000 advisors for 700,000 people.
Out of this expensive and complex malaise rises Gov. Greg
Herbert of Utah. Speaking at an American Enterprise Institute event
on Wednesday, the governor emphasized health reform on the state
level.
Gov. Herbert is currently negotiating with the Obama
Administration for a certification of Utah’s Avenue H model, formerly labeled the
“Utah Exchange.”
Herbert demands that Utah 1) operates its own exchange with
state financing, 2) that it functions without the mandate, 3) that
it distributes Medicaid funds outside of its own exchange, and 4)
that it does not offer a premium tax credit through Avenue H.
Utah’s exchange is based upon three components: consumer choice,
the free market, and a compassionate safety net.
The online exchange
utilizes a defined-contribution plan in which employers grant a
fixed tax-free contribution to their employees on a monthly basis.
This can range up to $2,000.
The worker then chooses from a variety of insurance plans
offered online through Avenue H, paying the rest of the premium
himself.
Currently, 318 employer groups are
enrolled in the exchange with over 7,500 covered employees.
Private insurance companies primarily operate the marketplace,
as the responsible government department, the Office
of Consumer Health Services, only employs five people with an
annual budget of $600,000.
For Herbert, cost produces an acute issue for most citizens.
“Obamacare doesn’t solve the problem of rising costs,” stated
Herbert. For a state where
45.9 percent of the uninsured are aged from 18 to 34, the
problem of expense can be severe.
The governor reasoned that because insurance covers most health
expenses, people are not as conscientious of price; this encourages
them to consume more services, thus increasing overall costs.
Avenue H attempts to force prices down by prohibiting insurance
carriers from requiring employers to pay
at least 50 percent of premiums, which currently happens in the
state’s small business market.
“This debate is about people and their health care,” Herbert
explained.
The state collaborates with private insurers to institute three
different mechanisms to promote access, portability and further
cost control: a premium aggregator function, a risk adjustment
system, and sales commissions for brokers who work with both
employers and individuals to select cost-effective plans.
Premium aggregation allows Utah citizens to pay premiums with
combined contributions from multiple employers, while the “risk
adjustment system” compensates companies for adverse selection.
Similar to
Switzerland’s policy, insurers with lower-than-average payouts
transfer revenues to those with higher-than-average care costs.
Since 2010, low enrollment in the exchange has concerned some;
according to an Avenue H survey of employers, most do not enroll
because of both higher premiums within the exchange and the
complexity of both the application process and the health
questionnaire.
While 2010 reforms attempted to equalize prices inside and
outside Avenue H, premiums were still
$60-150 more expensive (page 9) in the exchange according to
one small group purchaser, possibly because of underwriting group
rates according to the health status of each employee.
Enrollment has increased, but the state still has not invited
large businesses to enroll. As of November 2012, the government is
attempting to appeal to more groups by providing more education and
decision support while improving the user interface of the Avenue H
website.
The Affordable Care Act prohibits ratings based upon health
status, beginning in 2014.
Even with these challenges, Utah provides an inspiring model of
reform in a nation of
“sorcerer’s apprentices,” reminding us that while the feds
dictate, the states act.
