Special Commission to Make Investigation and Study …

| December 10, 2010

THE SPECIAL COMMISSION TO MAKE INVESTIGATION AND STUDY RELATIVE TO THE IMPACT OF REDUCING THE NUMBER OF HEALTH BENEFIT PLANS THAT A HEALTH PAYER MAY MAINTAIN AND OFFER TO INDIVIDUALS AND EMPLOYERS

The Massachusetts Association of Health Underwriters (MassAHU) is a state association and chapter of the National Association of Health Underwriters (NAHU).  MassAHU’s membership is comprised of independent, licensed insurance professionals who specialize primarily in health insurance and employee benefits for thousands of businesses and hundreds of thousands of families and individuals across the Commonwealth.  Our association and members have been and continue to be active participants in healthcare reform both on the state and federal levels.     It is our understanding that this Special Commission has been tasked with examining the following:

  • Determining the administrative costs associated with paying claims and submitting claims for multiple health benefit plans on health payers and providers;
  • Determining the costs associated with reducing the number of health benefit plans on consumer and employer choices;
  • Determining the impact of limiting the number of health benefit plans on competition between and among insurance payers, including but not limited to, tiered products, limited network products and products with a range of cost sharing options; and
  • Determining the potential for disruption to the market resulting from closing a health care payer’s existing health benefit plans.

The law does not require that the commission recommend that the number of health benefit plans be reduced, but to report their findings on the potential impact a reduction of health plans might have.

As the association that represents thousands of employers and consumers in the Commonwealth of Massachusetts – with the primary responsibility for understanding their unique needs, goals, objectives and challenges – we have significant concerns with the thought process behind this provision of Chapter 288.  Why?  Because we believe in the principles of free markets, choice and competition drive down cost and improve quality – limiting the number of health plan options doesn’t support those principles.

According to world-renowned economist Milton Friedman, basic economic theory suggests  that free markets, choice and competition spur innovation, improve quality and drives down costs.  If you look outside of healthcare – in almost every other area of our lives, this premise  holds true – so why is healthcare different?

MassAHU believes the lack of transparency in provider to health plan contracting (unit cost) and responsibility for living a healthy lifestyle and making informed healthcare choices (units of service) is ultimately what contributes to the rising costs of health insurance.  Health insurance is expensive because healthcare is expensive.  To suggest limiting free markets, choice and competition will drive down the cost of health insurance ignores this basic economic theory.

MassAHU’s position on rising healthcare costs  can be framed around three fundamental principles:

1. Transparency of cost and quality

Notwithstanding important provisions of contract law, information about provider price and performance is essential and a significant driver of rising healthcare costs.  Without transparency, it is next to impossible to ask consumers to make informed healthcare choices when they do not have the access to information to help them make those choices.    MassAHU recommends making ALL provider contracts with health plans transparent – and while quality measures are also important to those decisions, we do not believe the absence of that information should prohibit the disclosure of those prices.  Similar to the thought process of MA Healthcare Reform – provide universal access to health insurance first, then address cost – we believe provider costs need to be transparent to the consumer and then allow the provider community to support their prices with quality information.

2. Reduce the variation in the rates charged by providers

While payment reform may result in better integration of care by rewarding quality over quantity, its full benefit will not be realized unless we address the market clout of certain providers.  Differences in prices between and among providers should be based on the quality, acuity and complexity of the patients served, not brand or market clout.  Expansions by academic medical centers into suburban communities have increased prices by steering patients away from community hospitals despite research that community hospitals offer comparable, if not superior, care in a more cost-effective setting.  The January 29, 2010 report from the Attorney General pinpoints this issue as a major driver of rising healthcare costs and MassAHU believes it is a significant driver of rising costs.

3. Restrict and/or eliminate  new costs on small businesses

Shifting state costs onto health plans and employers through new fees, assessments, or surcharges to fund state programs or mandating new benefits will make it more difficult for employers to find affordable coverage options and will do nothing to address the underlying factors driving health care costs.  Providing businesses with a range of coverage options and price points is essential to meeting the unique needs of employers and consumers dealing with the rising cost of healthcare.  Reducing the number of health plan product options restricts free markets and limits competition and choice.  The state should re-examine its standards for minimum creditable coverage (MCC) to provide more flexibility in benefit plan design and ensure that the standards concerning deductibles and out-of-pocket maximums are indexed with the rising cost of health care.  Finally, the state should work to ensure that implementation of Federal Health Care Reform does not impose new costs on employers who are complying with state standards.

The above principles are the basis for a meaningful discussion on reducing healthcare cost increases.  To suggest that limiting free markets, competition and choice will reduce costs in a meaningful way is akin to focusing on the symptoms rather than the underlying disease.

MassAHU does not support the supposition that there are too many products in the market and that they are too complex.  Basic economic theory and the demand from our clients for choice and competition are the tenets of our thought process.  We need to provide small businesses a range of coverage options and price points in order to match their needs with comprehensive, affordable health plan product coverage.  Higher quality and lower cost health benefit plans are what our clients want  – not restricted choice and limited competition.

Category: Featured, Legislative Updates

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