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.