Statement of Healthcare Leadership Council

The Uninsured: Background

Estimates on the number of those lacking health insurance in the U.S. ranged from 42 million to 47million in 2000. This number has increased over the past decade, from 34.3 million in 1989.

As the number of uninsured increases, so too does the number of failed attempts to address this problem. From market-based efforts that would provide incentives to purchase insurance, to government-based efforts that would create a single health coverage system for all – abruptly or gradually – solutions for reducing the rolls of the uninsured have not been realized.

Major Efforts. The most notable efforts in the past decade to increase coverage for the uninsured include President Clinton’s Health Security Act of 1994, the Health Insurance Portability and Accountability Act signed into law in 1996, the State Children’s Health Insurance Program signed into law in 1997, and the access provisions of the Patients’ Bill of Rights passed in the House of Representatives in 1999. Most of these proposals were rejected, and the ones that have passed have not resulted in significant reductions in the uninsured.

The Health Security Act of 1994, which would have created regional health alliances and required employers to purchase health insurance for their employees through these alliances, was roundly rejected by the public and Congress as being too far-reaching and overly invasive by the government. Since this comprehensive reform effort collapsed, most lawmakers and policy experts have agreed that future efforts to solve the problem of the uninsured must proceed in an incremental, voluntary fashion.

In 1996, Congress passed and the President signed the Health Insurance Portability and Accountability Act (HIPAA), which attempted to solve the problem of uninsurance known as "job lock" for people with pre-existing conditions. While HIPAA has helped some individuals with pre-existing conditions who change employment and move from one insurance group to another group, it has not helped to make insurance attainable for those with pre-existing conditions who must move from group coverage to individual coverage – as the law had originally intended. HIPAA also included two other provisions to try to increase health coverage: medical savings accounts and increased deductibility for the self-employed. Enrollment in medical savings accounts has been limited, mostly attributed to design problems resulting from political controversy as MSAs were developed. Deductibility for health insurance purchased by the self-employed would have increased to 80 percent by 2006 and that has since been increased to 100 percent deductibility by 2003 in subsequent legislation.

The State Children’s Health Insurance Program (S-CHIP), signed into law in 1997, was a revolutionary new public program that was anticipated to cover 10 million uninsured children. Unfortunately, though, the program has enrolled less than one third that many. Overall, the number of uninsured children has increased in a booming economy. The S-CHIP’s failure has been largely attributed to the difficulty in educating and physically signing up the targeted population for this program.

Access to health insurance provisions in the patients’ rights legislation passed in the House of Representatives in 1999 included several provisions believed to make insurance more accessible. However, this bill failed in conference with its companion Senate bill late in 2000, mainly because of the controversial liability and regulatory provisions also contained in that bill.

Barriers to Legislative Solutions. The main barriers to a legislative solution for the uninsured continue to be financing, disparate political ideology, and superceding health care priorities such as preserving Medicare and regulating managed care. Financing coverage for the nation’s uninsured has been considered prohibitive until the emergence of recent federal surpluses. Proposals range anywhere from $5 billion to $80 billion a year. Even President Clinton’s Health Security Act, which would have cost $400 billion over five years, included a plan to fund this proposal through Medicare, Medicaid, and other federal program reductions, a tobacco tax, a corporate assessment, and other taxes. But recently, with an anticipated non-Social Security surplus of almost $850 billion through 2005, greater willingness has been demonstrated by the Congress and President Bush to spend some of the nation’s prosperity on solving the problem of the uninsured.

Traditionally, finding solutions to the uninsured has been politically divisive because Republicans have preferred methods centering around tax credits and deductions and Democrats have advocated expanding existing public programs including Medicare, Medicaid and S-CHIP. More recently, however, there have been encouraging signs of more common ground. Over the past year tax credit proposals have been sponsored by members of Congress on both sides of the aisle.

But increasing access to health coverage will require a strong commitment by lawmakers to make this issue a priority on the legislative calendar. Over the past several years, Congress and the former President dedicated a great deal of time and debate to improving insurance for those who already have it. Managed care regulation has received an inordinate amount of attention over the last three years without any resolution. And Medicare reform, including prescription drugs for Medicare, has and will continue to require thoughtful deliberation to ensure this program is preserved and improved for the future. But the uninsured is an equally important population that needs and deserves to be a top priority item on the 2001 agenda.

The Uninsured: The Future Envisioned by HLC

The members of the Healthcare Leadership Council (HLC) have made accessible health care coverage for uninsured Americans its highest priority. We have commissioned in-depth studies to understand the makeup of the uninsured population, so as to better understand how to target effective policy solutions. We have surveyed the nation’s small business owners – particularly those who do not currently offer health insurance coverage to their employees – to understand the reforms they need in order to make health insurance a viable option. And we have examined dozens of programs across the country, innovative initiatives striving to make coverage accessible.

These examinations have led us to fundamental conclusions about this issue and how it should be addressed:

HLC believes the following ten principles provide the framework necessary to develop a sound set of policies to increase access to health coverage for the uninsured:

1. Emphasize Flexible, Targeted, Pluralistic Solutions.

The nearly 43 million uninsured are not a monolithic population and there is no one-size-fits-all solution for the uninsured. Such a solution would be both too costly and ineffective given the varied nature of the uninsured. Obstacles to coverage vary among disparate populations of the uninsured, and solutions must be tailored accordingly. For example, an individual who is offered employer coverage but declines because he finds the premiums unaffordable merits a separate solution from one who is chronically unemployed with no hope of an employer subsidized insurance offer. HLC believes in an eclectic mix of market-based approaches to address effectively the problem of the uninsured including tax credits, insurance market reforms, more effective use of existing public program resources, and educational efforts about the value and importance of health insurance.

2. Promote Competition, Innovation, and Research.

Some public policies to cover the uninsured such as a single payer health system and government price controls would severely limit the incentives for research and development inherent in our current health care system. There is a noticeable deficiency in the development of cutting edge health care technology in countries with health systems not based on free market principles. HLC advocates a health care system that supports competition, innovation, and research in the financing and delivery of health care services so Americans can continue to have access to the best and latest technologies, health care services, and products.

3. Respect Consumer Preferences for Employment-Based Coverage Where and When Possible and Help Increase Access to This Preferred Coverage.

Two recently published surveys strongly indicated that the public prefers its health care coverage to be provided through an employer, even if those individuals received equal tax treatment. The Commonwealth Foundation commissioned a survey of 5,000 people, 49 percent of whom chose employers as their preferred source of coverage, while 23 percent preferred to purchase individually, and only 18 percent chose the government as their preferred source. Another recent survey, commissioned by Harvard University, found similar results: three out of four people would rather have their insurance provided through their employer over receiving an equivalent amount in wages so they could buy it for themselves.

This consumer preference is not surprising. The employer-based coverage system in the U.S. is serving the nation well. Not only are employers uniquely effective in pooling varied risks, but they also are a driving force in negotiating fair prices and quality improvement measures. Individuals negotiating on their own behalf would have far less influence in driving these variables.

Currently, 54 percent of Americans receive health coverage through their private employers. We believe this number could be greatly increased with the help of targeted tax incentives to small employers or to employees who cannot afford to purchase their employer’s coverage. Our research shows that seven of ten of the uninsured are in families with at least one person connected to the workforce, mostly through small employers. By leveraging the employer and employee contributions with tax credits, small employers can become more formidable players in the insurance market, and insurers will begin competing for them on the basis of cost, quality, and ease of administration.

The employer-based insurance system is already in place. HLC strongly believes that the urgent nature of the growing uninsured population precludes the option to build a substantially new and different insurance system based on a different purchasing structure, as some are suggesting. Political and financial obstacles associated with such massive reform would severely delay the resolution of the problem of the uninsured.

4. Take Advantage of Experience by Building Upon Successful State and Local Private-Public Partnerships.

A number of regionally based public-private partnerships have succeeded in finding ways to make health coverage more affordable and accessible for employers and individuals. Not only are these programs filling coverage gaps in small areas around the country, they can also serve as excellent laboratories of experimentation that provide crucial information on what is necessary to encourage small employers and individuals to participate in coverage programs.

For example, an insurance program developed in Wayne County, Michigan, for small businesses found that it was difficult to entice these businesses to participate by subsidizing less than one-third of the premium. The premium formula that eventually got this program off the ground was one-third paid by the employer, one-third paid by the employee, and one-third subsidized by the county. HLC believes these local successes should be pinpointed and examined for their potential application to other areas and populations.

5. Limit the Government's Role to the FINANCING of Insurance Coverage.

Governments (federal, state, and local) can play a constructive role in assisting poor families in gaining access to health care services and coverage, but should do so in fiscally responsible ways that do not impair, but instead encourage and build upon the effective functioning of the private market. State grants for low-income people, as well as targeted tax credits, block grants, Medicaid and S-CHIP funds, and other public health service programs should be free of mandates, regulations, administrative and other requirements that impede the provision of high-quality, affordable insurance and effective functioning of the private market.

For example, while Congress and the Clinton Administration allowed states more flexibility in designing their S-CHIP programs than their Medicaid programs, they nonetheless have made it difficult for States to use S-CHIP funds to allow parents of eligible children to purchase employer-offered health insurance. Research supported by HLC demonstrates that 16 million people are in families where an employer insurance product is offered but declined, often for reasons of affordability. Allowing more flexibility to use S-CHIP funds to help pay employee health insurance premiums could help provide an additional, more cost-effective option to those who would otherwise remain uninsured.

6. Encourage, Don't Discourage the Maintenance of Private Insurance Programs.

Occasionally, subsidized health care or health care insurance results in employers or other sponsors of health care coverage believing they have been "let off the hook" for providing what they traditionally have. Public health care subsidies and other programs for expanding coverage or care should be implemented in such a way that current efforts are maintained to the greatest extent possible. Any tax or other subsidy for the uninsured must be carefully targeted to ensure that it be utilized only by the segment currently declining coverage, and not be misdirected toward (or "crowd out") those who are already insured.

Some community programs HLC has studied that have tried to facilitate employer-based coverage in their local areas limit subsidies to employers who have not offered coverage within the past year. Still other models have prevented crowd-out by targeting subsidies to only limited benefit packages that would not be otherwise attractive to the employees of employers already offering a standard employer benefit package. We believe that funds should be targeted toward lower income workers or small businesses with primarily low-income workers.

7. Refrain From Passing Legislation or Implementing Public Policies That Increase the Cost of Health Care.

Government micro management in the provision of health care, such as benefit mandates and liability expansions, increase the cost of health care, making it difficult for small employers to afford providing insurance for their employees. Federal, state, and local governments should resist the passage of laws that will ultimately result in more uninsured. It will be counterproductive for Congress to use a portion of our nation’s budget surplus to make health insurance more affordable, yet at the same time pass legislation that makes health coverage more expensive. Imposing new mandates on insurers and employers, or making employers liable for coverage decisions will create additional barriers and decrease the number of people that can be covered by new solutions for the uninsured.

8. Include Education to Facilitate Awareness.

An important part of the solution to health insurance coverage – often overlooked – is information and education, for both employees and employers. It is not uncommon for small employers to be unaware of the various options they may have for offering affordable coverage. In fact, a recent small business survey by the Employee Benefit Research Institute has shown that many small employers are not even aware that employee insurance is deductible.

There is also some misconception regarding the affordability of health coverage. In a survey by the California Health Institute, many individuals who cited expense as the reason for not purchasing insurance actually agreed that it was affordable once they were informed of the true cost of various policies. More than likely, there are similar misconceptions among individuals and small business owners. This may indicate that some amount of uninsurance could be reduced through broad efforts to increase awareness of options. Clearly, education initiatives could help employees and employers understand the critical value of health insurance, as well as ways to keep their health insurance premiums down once they do have coverage.

Educational efforts should be multifaceted – directed toward small businesses, employees, and individuals not linked to the workforce. Educational efforts must also include efforts to inform those already eligible for public insurance programs of how to access those programs. The State Children’s Health Insurance Program (S-CHIP) is just the most recent example of a program in which too few members of the eligible population are enrolling for program benefits.

9. Include Solutions for Those Who Are Still Uninsurable.

While lawmakers focus on access to insurance coverage for the majority of the uninsured population, it is also necessary to ensure a safety net of non-emergency health care services for those who are, for one reason or another, still uninsurable at any given time.

While reducing the number of uninsured will also reduce the amount of uncompensated care, there will still be a need to maintain federal and state funding for safety net programs including community health centers, rural health clinics, migrant health centers, and health services for the homeless. Additionally, it is very important to ensure that the nation’s hospital system and other providers of charity care retain enough strength to be able to offer care to the uninsured. In 1998, the nation’s hospitals alone provided over $18 billion in uncompensated care. Continued erosion of Medicare and Medicaid disproportionate share payments and other federal payments that have helped them to keep their doors open to the uninsured could seriously jeopardize safety net services in the near future.

10. Encourage Individual Responsibility.

Any plan to increase access to health care coverage should encourage an appropriate level of personal responsibility in gaining access to coverage on the part of individuals, and where children are concerned, on the part of parents or guardians. Government approaches that discourage self-sufficiency and create incentives for long-term dependency on public resources should be avoided.

Conclusion

The Healthcare Leadership Council (HLC) believes that the benefits of the health care system should be available to all Americans by promoting bipartisan solutions to close gaps in access to health care coverage. We believe that these solutions can and should be consistent with HLC’s mission: To advance the market-based health care system, building on the quality and innovation inherent in the private employment-based system, in order to provide all Americans with access to affordable coverage and high-quality health care services.