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Running for coverage.

State legislators scramble for health care plans as budgets crumble and the uninsured find a voice.

When Minnesota Governor Arne H. Carlson signed a new law last spring that will result in nearly 400,000 state-subsidized health insurance policies for otherwise uninsured Minnesotans, he lauded the measure as proof that his state could" deal with the gridlock" that has kept politicians from resolving the nation's health care crisis. Minnesota is one of more than two dozen states were lawmakers have been pusshed and shoved--by raw numbers and the threat of voter backlash--to make health care accessible.

According to the U.S. Census Bureau, an average 14 percent of the population nationwide--about 39 million people--have no helath insurance, and another 7 million are considered to be inadequately insured. The problems is most devastating in southern and western states, with roughly one in five people uninsured in Texas, New Mexico, California and Florida. In addition, despite outdated perceptions to the contrary, the numbers of uninsured reach beyond the poverty line; while most have below-average incomes, 26 million--two thirds--of the uninsured are employed. The health care crunch has been newly billed by economists as part of the "middle class squeeze," making it a campaign issue among the voting middle class and the "working poor," and consequently giving a political voice to uninsured Americans.

A June 1991 Gallup Poll showed that 85 percent of Americans believe the health care system must be reformed, and 51 percent believe the federal government bears the bulk of responsibility for doing so; but some experts are convinced that major reform will begin in the states. Congress has made a stab at health care reform, and although presidential hopefuls talk about it, many statehouse leaders contend that national consensus--if it is ever achieved--will have to be shaped by state initiatives.

"No governor can afford to wait for national consensus before taking action," says Catherine Dunham, a special adviser to the Robert Wood Johnson Foundation and former health policy adviser to former Massachusetts Governor Michael Dukakis. Dunham says the writing is on the wall in state budget offices: "State legislatures are forced to do everything in their power now about health care because the costs are eating away at their budgets."

California Assemblywoman Bev Hansen agrees. "Now that we finally have general agreement that the health care crisis has to be solved, we have to take some steps, implement some state-based initiatives that will start to make a difference." Hansen authored a 1992 California bill offering relief to small employers by guaranteering that insurers will offer health policies with stable premiums. "The first step for states is a very practical one. We have to make health insurance more accessible, and we have to make it more affordable. If we can make some intial progress in those respects, then we're at least headed in the right direction," she says.

Elected officials like Hansen in budget-beleaguered states like California are all too familiar with the costs of health care. In 1991, total national health care expenditures exceeded $700 billion--12.8 percent of the gross national product, and more than double the 6 percent of the GNP spent on health care in 1960. State and federal Medicaid expenditures for 1991 were about $75 billion, a staggering 20 percent surge over Medicaid figures for 1990. And according to an NCSL survey of legislative fiscal officers, state Medicaid expenditures overall (now 12 percent of state general fund spending) have grown faster than any other component of state budgets over the past two years.

More money is buying medical care for fewer people. Medicaid costs are rising, yet only 42 percent of the poor are eligible for Medicaid services. And while 65 percent of the country's under-65 population obtain health insurance through their jobs, the cost has tripled. From 1965 to 1987, health care increased from 2 percent to 6 percen of the average company's payroll expenses. In a 1991 national poll conducted by Louis Harris and Associates, 62 percent of corporate executives surveyed and 86 percent of labor union leaders surveyed said that they favored federal legislation that would reform the health care system to hold down costs.

In that same poll, 58 percent of the labor leaders but only 27 percent of the corporate executives favored an all-government national health plan. These results indicate what some analysts contend: that the economic pressures of the health care crisis have just about voided any lingering welfare-state stigma attached to the idea of national health care. As increasing numbers of middle-class voters are at risk of having to medical insurance or paying a bigger share of their health care expenses, bosses, labor organizers and politicians are looking at solutions to the health care crisis that they had previously dismissed.

"National health care proposals that were once feared as a way to spend more money on health care have now evolved as alternatives for controlling costs," says Paul Starr, a national health care expert and author. According to Starr, the emergence of health care as an issue for middle class Americans makes for all kinds of legislatives possibilities because "the political floodgates have opened, and everyone is searching for an answer." Only one state--Hawaii--has solidly concluded that the answer to high health costs lies in mandatory coverage: Since 1974, the state has required employers to pay at least half the health insurance premium for employees who work more than 19 hours a week. As a result of the law and a generous Medicaid program, an estimated 95 percent of Hawaii residents have health care coverage. (Good timing played a key role in Hawaii's success; the Legislature passed its Prepaid Health Care Act of 1974 just before Congress enacted the Employee Retirement and Income Security Act, which would have otherwise pre-empted Hawaii's law and has subsequently prevented other states from requiring employers to offer health coverage.)

New measures in Florida and Vermonts stop short of the type of mandate imposed in Hawaii, but nonetheless aim to pressure insurers and employers into providing health care coverage for all workers. Both laws create statewide health care agencies to oversee all health care efforts, and charge them with conducting short-term studies of funding, mechanisms. The Vermont statute's goal is to provide universal access to health care by 1995, implementing a still-to-be-decided plan under which private insurance companies will be closely regulated by the state. The Florida law imposes a December 1994 deadline for employers and insurers to "voluntarily" provide an "affordable, basic health care benefits package" for employees.

Although the Vermont statute is in some ways modeled after Florida's measure (passed earlier in 1992), the Florida law provides for more contingencies. If the voluntary first phase of Florida's plan fails to result by the 1994 deadline in the widespread health care coverage intended, certain provisions would allow the government to impose a mandatory phase of enforcement whereby employers would have to either offer insurance or pay into a general fund for the uninsured. Other provisions make Medicaid benefits more readily available to the state's unemployed and part-time workers not covered by employers. In addition, the statute makes health insurance plans more accessible to small businesses by prohibiting insurance companies from rejecting certain high-risk employees. Currently, 60 percent of Florida workers employed by companies with fewer than five employees have no medical coverage.

Jim McClellan, a spokemans for Florida Governor Lawton Chiles, says major business groups were interested in expanding coverage for small businesses and prventing "job lock," in which employees with known or feared health problems are afraid to change jobs because they might lose their health coverage. "This bill is a commitment that employers and businesses and the insurance industry will step in and institute some basic reforms on their own," says McClellan, who adds that "at the same time, the state is committed to doing everything it can to cover" the state's uninsured.

In contrast, Minnesota's 1992 law doesn't court the cooperation of private businesses so much as it taxes them. The program's quick October start-up, with an estimated $315 million invoice, will be paid for with a new cigarette tax of 5 cents per pack, and the ongoing $200 million annual costs of the program will be covered by a 2 percent tax on hospitals beginning in 1993, a 2 percent tax on physicians, dentists and other health care providers beginning in 1994 and a 1 percent premium tax on insurers and health maintenance organizations beginning in 1996. According to Minnesota Representative Paul Anders Ogren, chief sponsor of the law, the financing mechanism "should not only work, it should set an example for other states who aren't willing to wait for the federal government to act."

Maine Representative Charlene Rydell agrees that states must lead the way to insuring more people, but they can't carry the financial burdern themselves. "States can do a lot to level the playing field," says Rydell," and by that I mean measures that give small businesses equal access to insurance. They can also see that public health services are delivered more cost effectively." Rydell agrees with moderate economists who conclude that the answer to health care reform won't be found in bigger state budgets, but rather in a better regulated, more accessible insurance market. "Leaving the market alone certainly isn't the answer," says Rydell. "That has gotten us nowhere. What we need now are some practical changes."

Rydell backed 1990 legislation in Maine aimed at improving the fairness of health insurance rating regulations in the small group insurance market and increasing the availability of insurance for small businesses. Connecticut passed a similar reform package (to help the state's 272,000 medically uninsured) in 1990. It included a special health plan for low income people, subsidized insurance for pregnant women, children and the disabled, and a "small employer plan." The plan requires insurers to guarantee coverage to any firm with 25 or fewer full-time employees, regardless of the type of business or industry involved, or the health of any individual employee.

Fifteen states attempted to reform the small group health insurance market in 1991 by making insurance more affordable for small employers--California, Colorado, Delaware, Florida, Iowa, Kansas, Nebraska, New Mexico, North Carolina, Oregon, Rhode Island, South Carolina, Vermont, West Virginia and Wisconsin. Twenty-six states established high-risk insurance pools for people previously deemed "uninsurable" by private insurance companies because of pre-existing illnesses and other medical conditions.

State-subsidized employer insurance plans have provided an answer in some states. Minnesota provides low-cost health care to 2,500 low income, uninsured employees in the northeastern region of the state. New York has its Employer Incentive Subsidy Program, directed at employers of 20 or fewer people and providing 50 percent of group coverage premiums. Maine offers "Mainecare," which allows the state to contract with an HMO to provide a comprehensive health benefit plan to small businesses and self-employed individual, and subsidizes premiums for employees below the poverty line. Florida's Health Care Access Corporation pools small employers into a single group that negotiates with employers as if it were one large company.

Similar plans in Michigan and Wisconsin have been discontinued. For almost three years Michigan's One-third Share Plan paid two-thirds of the health insurance premium for any small business employees with incomes below the poverty line. (That state's financial difficulties forced an end to the program in 1991.) Wisconsin in a similar demonstration project subsidized the health insurance premiums of low income employees .

In all, during their 1991 and 1992 legislative sesssions, 24 states have enacted new laws and programs that have made inroads at reforming the insurance market for small employers.

Another legislattive approach is to give a tax credit to business owners if they begin offering health insurance. In Kentucky, for example, since a health care and tax-incentive law was enacted in July 1990, employers who start health insurance plans for their workers have received tax credits worth 20 percent of the employer's contribution to premiums in the first year, then in decreasing 5 percent increments for the next three years. In California, starting in 1993, the state will offer tax incentives to employers with 25 or fewer workers, crediting them $25 a month per employee, or 25 percent of the employer's contribution, whichever is greater, and an additional $5 per month credit if the plan includes well-baby care and mental health benefits.

And in Oregon, lawmakers have designed a tax incetive program that combines tax credits with a "play-or-pay" strategy. The tax credit encourages businesses with 25 or fewer employees to offer health insurance by providing a tax credit (originally set at $25 a month per employee) that decreases each year until 1995, when the "play-or-pay" component of the plan kicks in. Under "play-or-pay" systems, employers either provide health insurance to full-time employees or pay a tax that the state uses to subsidize insurance for people not able to obtain employer-sponsored coverage.

A similar approach is taken by Massachusetts' Health Security Act, which originally mandated a "play-or-pay" program by January of this year. The act was passed in the midst of much economic optimism in April 1988, but the recession hit the state so hard that even proponents of the legislation supported a delay for "play or pay" until 1995. When it goes into effect, companies with six or more workers will have to offer health insurance or pay a tax of up to $1,680 per employee, which will be funneled to a health insurance fund for uninsured workers.

Washington Representative Dennis Braddock says legislators are addressing "a desperate need for reform, which is why you're seeing so many different types of proposals." Something has just got to work, he says, "and everybody's taking a shot at it." Braddock backed a 1992 Washington bill creating a "singlepayer" system modeled after Canada's health care system; during the past two years, more than 20 states have considered such proposals. Under the singlepayer framework, a publicly financed, statewide program provides coverage for all necessary services for all residents. Braddock adds that "at this point, what we decide on is important, but it's probably more important that we do something, whatever that something is."

More of those "something" considered by state legislatures in 1992 include:

* Colorado--Lawmakers passed a bill giving the go-ahead for Governor Roy Romer to seek $1.7 million in federal grant money to study the feasibility of implementing a statewide insurance program. A proposed "ColoradoCare" program calls for the pooling of premiums to provide insurance for 800,000 uninsured or underinsured Coloradans.

* Maryland--Senate Finance Chair Thomas O'Reilly proposed a failed bill that would have imposed fees for specific medical procedures, required the drafting and distribution of practice procedures and started a managed care system for Medicaid recipients.

* Washington--A plan backed by Governor Booth Gardner would form a regulatory commission to set maximum fees in order to control medical costs.

Ironically, the variety of proposed answers, at present, seems only to amplify ther questions. The national debate on health care reform has become contagious by nature and convoluted by definition. For example, John Goodman, president of the Dallas-based National Center for Policy Analysis, says the root of the problem is not inattention by the states but over-regulation and that mandated health insurance benefits have served only to increase premiums and price people out of the insurance market.

But arguments along the lines of Goodman's are getting less and less press as the issue of reform takes on a political life of its own, and as dissatisfaction pervades the middle class and November's election looms. Or, as Maine Representative Rydell puts it, "What we lack in consensus, we make up for in discontent. People just aren't going to wait much longer or some real change."

Susan C. Biemesderfer is an attorney and freelance writer based in Denver, Colo.
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Title Annotation:state liability for health insurance becomes apparent as health care costs eat away at budgets
Author:Biemesderfer, Susan C.
Publication:State Legislatures
Date:Jul 1, 1992
Previous Article:School enrollment will rise in the 1990s, but how much?
Next Article:Feds take a stab at health care reform.

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