The Issues

New Health Insurer Fee
Insurance Reforms
Helping Individuals and Small Businesses Obtain Coverage
Creation of a New Government-Run Health Plan
Delivery System Reforms: Rewarding High-Quality, Well-Coordinated Care

The Blue Cross and Blue Shield Association (BCBSA) and our 39 locally based, community-operated Plans provide coverage to more than 100 million Americans.  As members of the Blue family, we all have a stake in healthcare reform and share a commitment to expanding coverage.  Please join us in urging Congress, the Administration and all healthcare stakeholders to rein in costs, strengthen quality and extend coverage.

BCBSA has been at the forefront of healthcare reform efforts, releasing a five-point proposal - The Pathway to Covering America: Ensuring Quality Value and Access - nearly two years ago that would build on the current employer-based healthcare system.  We are also committed to ensuring that all Americans have guaranteed coverage regardless of their health status as part of a shared commitment that everyone joins the insurance pool.

More information about our positions on key issues appears below.  We are asking you to join us in communicating with Congress and the Administration about these issues as healthcare reform enters its final stages.

New Health Insurer Fee
Under the reform legislation approved by the Senate on Christmas Eve, health insurers would face new fees that run counter to the goal of assuring affordable premiums.  The bill includes an aggregate annual tax on health insurers that increases from $2 billion in 2011 to $10 billion in 2017.  It is estimated that these fees will result in premium increases of hundreds of dollars per family per year when fully phased in.  Worse yet, fees will cause premiums to start rising several years before other reforms – including subsidies to help people afford coverage – take effect. 

These premium increases are likely to grow as larger employers increasingly “self-fund” their employee health benefit programs rather than purchasing coverage from a health insurer that would be subject to the fee.  This trend would leave fewer families to shoulder this burden, which would fall hardest on individuals and small businesses that do not have the resources to set up a self-funded health benefits plan.

Some believe insurers could absorb these fees.  However, if the fees are not passed on to customers in the form of higher premiums, the effective tax rates for health insurers will be significantly higher than the current top 35 percent marginal corporate tax rate.  In some circumstances, insurers’ effective tax rates will actually exceed 100 percent, which for many Plans would result in diminishing reserves that would compromise their long-term ability to meet obligations to policyholders.

Read More: New Health Insurer Fee Will Make Coverage Less Affordable (updated 12/4/09)

Insurance Reforms
BCBSA supports reforms to assure everyone has access to affordable coverage, regardless of preexisting conditions or health status.  However, insurance reforms – if not done right – will significantly raise premiums for people who now have coverage, as well as make it even harder for the currently uninsured to afford insurance.  To ensure that premiums are affordable, these reforms must:

• Include an effective individual responsibility requirement for everyone to obtain and maintain coverage, with subsidies to help those with low and moderate incomes.  This will assure that people do not wait until they are sick to purchase coverage, driving up costs for everyone.
  
  
• Allow adequate age-based discounts so that younger people can afford to purchase coverage.  This is critical to keeping everyone’s premiums as affordable as possible because young and healthy enrollees help to offset the high costs of caring for older and sicker people.
  

Personal responsibility requirement

Although having everyone in the insurance pool is critical to keeping premiums affordable, proposed healthcare reform bills include insufficient personal responsibility requirements.  In particular, the Senate bill essentially guts the personal responsibility requirement by exempting many individuals entirely (if premiums are 8% or more of their income).  For others, the penalty is so weak – starting at $95 or 0.5% of income in 2014 – that many will likely forgo coverage altogether.  BCBSA believes it is imperative that the personal responsibility requirement be strengthened if insurance reforms are to work properly.

According to a recent study by the actuarial firm Oliver Wyman, Inc., the Senate bill’s approach would drive up health insurance costs because people could wait until they are sick to purchase coverage.  Based on a comprehensive model including claims data for 6 million people, Oliver Wyman, Inc., projected that the cost of individual insurance, on average, would be 54 percent higher five years after reform than under the current system.  That means health insurance premiums for new purchasers, on average, would be $1,576 higher for individual coverage and $3,341 more for family coverage (excluding inflation).

Read More:  An Effective Personal Responsibility Requirement is Critical to Ensure Everyone Participates in the System to Keep Coverage Affordable (updated 12/4/09)

Adequate age-based discounts

To ensure that young people can afford to purchase coverage, it is crucial that they be allowed to receive adequate age-based discounts on their health insurance premiums.  The Senate bill would allow insurers to offer age discounts of “3 to 1,” meaning that younger people could be charged one-third of an older person’s premium.  The House bill includes a much more restrictive policy of “2 to 1.”

The actuarial firm Oliver Wyman, Inc., estimates that, under the “2 to 1” policy approved by the House, premiums for the youngest one-third of the population would increase by 69 percent.  This would result in a significant increase in the number of uninsured younger people (even with a personal responsibility requirement) and less affordable coverage for older, sicker individuals.

As a result, BCBSA believes the final bill should adopt the Senate’s more workable “3 to 1” policy.

Read More:  Age Discounts “A Must” to Encourage Young Adults to Purchase Coverage (updated 12/7/09)

Helping Individuals and Small Businesses Obtain Coverage
To address the challenges individuals and small businesses face when purchasing health coverage, BCBSA supports the creation of State Insurance Marts (SIMs) - an online “marketplace” for each state that would enable individuals and small groups to compare coverage options and apply for policies and subsidies. In addition to simplifying the coverage selection process, SIMs would:

• Provide a less expensive, simpler and faster alternative to a proposed new federal bureaucracy and enable states to continue their longstanding role as regulators of health insurance markets; and
  
• Encourage transparency and competition by enabling consumers and small businesses to compare all plans in a state on price and other important factors and immediately buy the coverage that suits them.

While the Senate bill follows SIMs’ state-by-state approach, the House bill would create a national Exchange that represents a costly federal takeover of many functions currently performed by states.  BCBSA is working with Congress to ensure that the Senate’s state-based approach is included in the final bill.  We are also urging Members to adopt a less regulatory approach to establishing Exchanges that gives states the flexibility they need to address unique market conditions, build on existing state capabilities and minimize the need for new resources and administrative costs.

Read More: BCBSA One-Pager: State-Based Exchanges (updated 12/30/09)

Creation of a New Government-Run Health Plan
BCBSA strongly supports healthcare reform that builds on the employer-based system to rein in costs, improve quality and extend coverage to all.  However, BCBSA opposes creating a new government-run health plan in any form because it is unnecessary and would unravel the employer-based system that is working for more than 160 million Americans today.  For example, a government-run plan would:

• Cause millions of Americans to lose the employer-sponsored coverage they enjoy today. A new government-run health plan would underpay providers and force them to make up these losses by shifting costs to consumers, employers and private plans.  The annual cost of a family health insurance plan is already $1,788 higher than it would otherwise be because of existing underpayments by Medicare and Medicaid.  This cost-shift would be exacerbated under a government-run plan, giving employers no choice but to move their employees into it.
  
  
• Underpay healthcare providers, creating major problems with access to care.  Even if a government plan initially “negotiated” rates with providers – as the House bill stipulates – cost pressures would inevitably lead to Medicare-like price setting.  Given that Medicare sets reimbursement levels at 20 to 30 percent below what private plans pay, these low reimbursements would serve as a disincentive for providers and create long wait times and provider shortages.  Medicare itself faces these challenges, with 29 percent of Medicare beneficiaries saying they have problems finding a doctor to care for them (Medicare Payment Advisory Commission, 2008).
  
  
• Undermine much-needed delivery system reforms that are critical to controlling costs.  History has shown the government can be slow to innovate and implement changes due to the complexity of the legislative and regulatory process.  On the other hand, the private sector is free to innovate and is having excellent results with programs such as centers of excellence, pay-for-quality and chronic care management.

While the House bill includes a problematic government-run plan that would “negotiate” rates with providers, the Senate version does not include a government-run plan.  Instead, the Senate bill directs the federal Office of Personnel Management – the same agency that administers health benefits for federal employees – to contract with at least two private plans available to consumers nationwide.  These national plans would be offered alongside state-based options in each state’s Exchange, and at least one would have to be non-profit.

Read More:  Healthcare Reform Should Not Create a New Government Plan (updated 12/7/09)

Delivery System Reforms: Rewarding High-Quality, Well-Coordinated Care
To promote the best care for patients, our 39 Blue Cross and Blue Shield Plans are committed to changing the incentives that drive our healthcare delivery system.  Today, providers are generally paid based on the number of services they provide - even if these services are ineffective, redundant or harmful.

Rather than encouraging patients to visit multiple specialists and have multiple tests and procedures with little or no coordination of care, we support efforts to reward providers for delivering high-quality, well-coordinated care, especially for the increasing number of Americans with chronic illnesses.  Our commitment to helping Americans lead longer, healthier lives has resulted in numerous innovative programs, including:

• Blue Distinction Centers for Specialty Care® - an innovative program that assesses hospitals based on objective, evidence-based criteria developed in collaboration with expert physicians and medical organizations.  Blue Cross and Blue Shield Plans have awarded more than 800 Blue Distinction® designations across 45 states and the District of Columbia.  The designation gives Blue Plan members a credible, easily identifiable means of selecting quality facilities that meet their specialty care needs in four critical areas:  transplants, cardiac care, bariatric surgery, and complex and rare cancers;
  
  
• Patient-Centered Medical Homes encourage evidence-based and well-coordinated care and provide incentives for high-quality outcomes and chronic disease management.  BCBSA and Blue Plans are working with the American Academy of Family Physicians, the American Academy of Pediatrics, the American College of Physicians and the American Osteopathic Association to pilot “patient-centered medical homes” that will encourage a more “hands-on” physician approach and more active patient involvement in preventing and managing chronic conditions. The goal is to develop reimbursement mechanisms that strengthen the physician-patient relationship and assure better coordination and management of chronic care;
  
  
• Pay-for-Quality Programs, initiated by many Blue Plans, reimburse providers based on outcomes and quality instead of simply paying for more services.  Most Blue Plans offer some kind of Quality-Based Incentive Program (QBIP), which modifies reimbursements to hospitals and physicians based on consensus quality standards designed by third party experts such as the National Quality Forum and the Hospital Quality Alliance; and
  
  
• Prevention/Care Coordination Initiatives for Chronic Illnesses improve care through better coordination and management, as well as consumer education and outreach.

Many Plans are working with their employer accounts on innovative programs that are improving the health of their employees, making them more productive and saving on healthcare costs.  As these programs demonstrate, the Blues and other private health plans can quickly innovate to provide high-quality care, benefits and service.  To learn more about innovative Blue programs nationwide, visit our Blue Plan Innovations website.