Utah’s Consumer Centered Health Reform Plan Could Work for Texas and America
By Dr. Tony Magana
Since 2005 Utah has been developing a novel consumer centered health insurance program which is different then the traditional employer health based insurance held by most American workers. A defined contribution plan like Utah’s could be the solution to finding a cost effective way of providing health insurance to the millions of Texans and Americans working for small businesses.
The deadline set by President Obama and the ruling Democratic party in Congress will likely come and go without the passage of the progressives’ nirvana, a government run single payer health plan. Up to now the liberal mass media has been so driven to support the Pelosi and her crew that the only discussion going on in the public venue has been that there were two options, the Dems way or the highway.
This week the chaos on Capital hill created by the predictable insurrection of moderate and conservative Democrats who mostly, it appears, want to be reelected in 2010 has finally been the vehicle to bring the discussion about reform out of the clouds and onto the ground.
So far most of the plans put forward as either government health care or insurance reform are based on a type of insurance that actuaries call defined benefit. Under this type of insurance, the employer buys insurance for a specific company and set of benefits for a specific premium. The cost of the premium is based upon the risk of payout. Anything over the defined benefits must be paid by the policy holder.
Since World War II, defined benefit plans have been the main type of employer based health insurance used in the United States. Organized labor often used health care benefits obtained by defined benefit plans as a bargaining chip in negotiating for better compensation for their employees. They have generally resisted the concept of defined contribution plans because they would be removing a source of contention in labor negotiations with employers.
Since 2005 the state of Utah has been working on a different paradigm called a defined contribution plan. Under this alternative approach the employer promises to make a specific contribution for the workers which will allow them to purchase a health plan of their personal choice. In a recent review of the Utah plan by Edmund F. Haislmaier , Senior Fellow in Health Policy Studies at the Heritage Foundation, he remarked that there were three key elements:
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Insurance market reforms to create a new “defined contribution” coverage option for businesses and their workers;
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A board to design and manage a companion risk adjustment mechanism; and
- A “virtual” health insurance exchange to coordinate the various administrative functions of a consumer-choice market.
Unlike the rushed government health care animus hastily thrown together by Congessional staffers that so far no Congressman has admitted reading (Yesterday Detroit Congressman John Conyers told the press he never reads bills) the Utah reform has been in progressing in development for three years.
Utah is very similar to Texas and many other states in that the majority of its residents work for small business at modest salaries. The defined contribution Utah plan was created to allow a consumer-centered health insurance market that specifically addresses the needs and concerns of small business and their employees but is also widely applicable for large employers, the self employed, and eventually Medicare or Medicaid enrollees.
The Utah plan gives employers the option to offer a traditional defined benefit plan or participate in the new defined contribution plan. Under this arrangement, the employer pays a defined contribution and the employee does as well (pre-tax under existing Federal tax law).
The system functions as a “virtual” insurance exchange. Transactions and consumer education will be facilitated by the internet rather then creating a costly bricks and mortar administration.
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This month Aaron Mckethan and his group at the Engelberg Center for Health Reform at the Brookings Institute published a report looking a four state initiatives that were focused on helping small business and the self employed obtain insurance. They looked at the design features of the programs for Arkansas, Tennessee, Massachusetts, and Washington. Previous attempts at pooling traditionally uninsurable patients usually resulted in higher costs because higher risk pools landed in the programs and often the numbers enrolled was too small to make a competitive bid on the insurance market.
The Utah model would cut down on administrative costs and make for large pools of enrollees rather just the uninsurable. A board of the interested parties including citizens,providers, and insurers would oversee the process with a new and substantial transparency.
If the Brookings recommendation for creating Federal state partnerships is added to the Utah plan then one problem of creating enough economy of scale to draw competitive pricing from insurance companies could be accomplished. Rather then acting as a supervising authority, the Federal government could bring to bear resources to monitor effectiveness. Over time state health programs would be allowed to evolve in efficiency and cost containment by comparing what works and what does not in the various states.
This type of approach maintains patient choice and provides a scenario to encourage high quality with cost efficiency. Once a year enrollees could have the option to change their insurance. If they wish to change jobs, the plan they have will be portable.
Insurance would not be a one size fits all product. This type of plan allows for deferring levels of benefits as well as financial instruments like medical savings accounts.
Currently the state of Texas leads the nation in the number of uninsured adults and children affecting somewhere between 25 and 40 percent of the population. If enacted the current Democratic proposals before Congress promise to create severe burdens on the state budget by a massive increase in the Medicaid budget.
Our state and Federal lawmakers should take a closer look at the Utah plan because our fellow Westerners have a better idea than the Washington bureaucrats.
Thanks for reading Contempo Magazine blog which discusses issues for McAllen, the Rio Grande Valley, and America from a conservative Hispanic point of view. Tony Magaña grew up in McAllen Texas, attended Texas A&M University, served as an officer in Army Reserve, and holds a doctorate from Harvard University. The co-founder of Contempo Magazine has participated in Valley business for over 20 years. He is a member of the National Association of Hispanic Journalists and also writes for the American Daily Review. Follow him on twitter http://twitter.com/contempomagazin
Copyright 2009, Dr. Tony Magana. Some rights reserved.
To reproduce or distribute, visit: drtonymagana.icopyright.com
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