Prescription for confusion
New plans have advantages, side effects
The first part was easy - getting low and moderate-income people without health insurance to sign up for free coverage from the state.
Now comes the challenge: getting uninsured people who make just enough to be ineligible for the free stuff to buy individual coverage at hundreds of dollars in monthly premiums. They're also supposed to make an informed choice of insurance coverage by July 1.
At informational health care forums being held around the state, small-business owners are expressing everything from confusion to frustration over the law's complexities. Information has been coming out in increments from the Commonwealth Connector, the state body that administers the plan. As benefits managers strive to help their clients get a handle on the new law, health care advocates are saying it's a work in progress - give it time. Meanwhile, the clock is ticking.
On March 8, the state approved seven providers to offer individual insurance products under its "Commonwealth Choice" program, set to launch this coming May 1. The plans are age rated (see charts); the older you are, the more you'll pay. If you could only choose to be 19 again.
But a closer look at the offerings reveals the potential for savings, even for the higher rate bracket people over 50. An example: self-employed people who now pay a hefty price for individual, or non-group insurance. Many of them have a chance to pay less under one of the state plans.
And despite news reports warning that low premiums mean high deductibles, one of the basic plans being offered carries no deductible at all (see chart). While consumers should also take into account copays and co-insurance (the percentage of a total bill for which the consumer, not the insurer, is responsible), the offerings do have some variability.
Benefits managers expect it to take 18 months to two years for insurers to gather enough experience in the new system to establish workable rates.
You'd better shop around
As of March 1, the fully-subsidized segment of the state program, Commonwealth Care, had signed up more than a third of the 150,000 people eligible. It covers people without other insurance who earn up to $29,412, or 300 percent of the federal poverty level.
Commonwealth Choice targets the estimated 160,000 to 200,000 uninsured residents who make above 300 percent of the federal poverty guidelines. They're the self-employed who don't currently have insurance. They're also the people who work for companies with between 11 and 50 employees, companies that don't offer health insurance or a Section 125 plan (which allows employees to buy insurance with pretax dollars). Commonwealth Choice consumers will pay monthly premiums that rise with the individual's age (see charts).
That's a significant difference from the rates employers get. When companies buy group insurance, they get a composite rate based on age of all their insured employees.
Matt Hollister, president of Clinton-based Hollister Insurance Brokerage Inc., said, "People are going to have more choices. It's up to them to get the best rate for themselves."
A plan is one thing - delivery is another
Benefits managers, as well as health care policy experts and industry onlookers also question how the plans will be delivered.
Neighborhood Health Plan's status as the lowest bidder is the result of its reliance on community health clinics. But that may not be effective for people who live in areas that don't have community clinics, or for those who need urgent care in the off-hours when all the community clinics are closed.
"We don't know what those plan designs are, so we're just in a holding pattern," said Chris Powers, senior vice president at Worcester-based Benefit Development Group. The premiums may be more affordable than they were on the first round of bidding last January, he said, but for the average person working paycheck to paycheck, "is a $2,000 to $4,000 family deductible affordable? No, it's not."
At its March 20 meeting, the Connector Authority will address how to define the minimum level of health insurance that will be acceptable under the state's plan. It will also address the assignment of waivers to the individual mandate.
According to information on the Commonwealth Connector's Web site, those who can't show proof of insurance by Dec. 31, 2007, will lose their personal income tax exemption when they file their 2007 income taxes. The exemption now results in an average tax saving of about $204 for the year.
In 2008, the penalty goes up - uninsured people will face a fine for each month they're not covered. The fine will equal 50 percent of the least costly insurance premium that meets the needs for standard creditable coverage.
Now for the good news
Employees buying insurance through their company's Section 125 plans can save 25 to 40 percent of the premium cost, depending on their tax bracket. And employers save 7.65 percent of the Social Security and unemployment taxes on the pre-tax wages spent on insurance, Hollister noted.
Some baby-boomers who buy individual health insurance could actually catch a break from Commonwealth Choice. As high as the 56-plus premiums are, some are lower than private market individual policies.
When the individual and small group markets merge, effective July 1, those who had been paying high premiums for individual coverage will indeed have a choice of a state-backed product that's expected to cost about 15 percent less per month than their current insurance.
"It will be fascinating to observe how Commonwealth Choice changes or does not change the functioning of the small/individual insurance market," noted John McDonough, head of Boston-based Health Care for All (www.hcfa.org), in a blog posting March 3. "Will this become the center of gravity or a sideshow? Will business and individuals with coverage now gravitate to this new market?"
Perfect shouldn't get in the way of good
Benefit managers say the pricing submitted to the state and the final prices to many insureds will vary from what we're seeing right now (and will inevitably rise with experience ratings, they add), and until we see the products in use and get experience ratings, going forward, we won't know if they're working.
Bill Vernon, president of the Massachusetts chapter of the National Federation of Independent Businesses, noted that 93 percent of Bay State residents already have some form of health insurance, a high number compared to the rest of the country. He's concerned about talk of providing state help for those earning more than 300 percent of the federal poverty level, a measure he said would be costly to taxpayers. He called for common sense marketing.
"What is your market of uninsured, and what do they need?' he asked. While a 30-year-old single male may not need prescription drug coverage, he said, a 55-year-old individual wouldn't want to be without it. The new law is a product of political compromise, he said.
"We're not going to insure everybody immediately. If we could get 97 or 98 percent insured, that would be good. Let's not let perfect get in the way of good."
Christina P. O'Neill can be reached at chrisponeill@msn.com.
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