Sunday, June 08, 2008

Employee Benefits group proposed setting up several large but "private" health insurance brokers


The Employee Benefits Research Institute in Washington DC, researches public policy positions on employee benefits. They have expressed concerns about the future viability of an employer-based health system, as in this paper, “The Future of Employment-Based Health Benefits? Have Employers Reached a Tipping Point?”, by Paul Fronstin, link here, which challenges the idea that employers want to throw in the towel in providing health insurance. In what is apparently a supplementary and somewhat more forward-looking effort organized by many major private employers who actually give the benefits, an (employer-associated) committee called the ERISA Industry Committee, or "ERIC" has floated a "New Benefit Platform for Life Security", link here. The Committee represents the interests of private employers. A list of other ERIC policy statements is here. The acronym ERISA refers to the federal law regulating employee benefits, the Employment Retirement Income Security Act of 1974, text here on Find US Law.

The Business Section of The Washington Post today (June 8, page F1) has a story by Jane Byrant Quinn, “Business Leaders Envision a New RX,” link here, , describing the proposal.

The "Lifetime Security Plan" ("LSP") strategy would be to establish several large and private third party benefits administrators, in addition to the whole of the private owned health insurance industry today (including the supposedly “not for profit” Blue Cross and Blue Shield plans). These new entities would focus particularly on pooling “risks” and underwriting benefits for small employers and perhaps even individuals and self-employed people. The plans would also provide portability for those who change jobs, whether by choice or forced to do so by layoffs. The concept accepts the idea that federal law might strictly limit the exclusion of people for various pre-existing conditions, like genetic diseases, HIV status, or diabetes. Both EBRI and ERIC would admit that it is not healthful that private insurers (or particularly their employees and management) perceive an incentive to deny claims in order to build the bottom line. There would be a good question as to how such entities should be capitalized, in order to counter the normal fiduciary responsibility to shareholders to maximize the bottom line at subscribers’ expense. From a political point of view, this sounds to me like an incentive to consolidate Blue Plans, which tried to consolidate their information technology for Medicare intermediary processing with a failed project in Dallas in 1979-1981 which employed me as a systems analyst (the Combined Medicare Project or CABCO) . This could be perceived as a call to set up a “CABCO II” for all health care information processing, with the aim of lowering costs. (I wonder where this would happen. In Dallas again, with the Texas Plan as sponsor? Read it and weep!)

The general idea of this (LSP) plan is that is effective offers almost universal coverage while retaining more patient control and choice (and probably greater medical procedure availability and shorter waiting lines) than in the collectivized British and even the Canadian health insurance systems. It is probably helpful, in most reform proposals, to make employee (and retiree) health premiums be treated as pre-tax, just as employer-paid premiums are now (generally a point made by conservatives).

EBRI (the first paper) admits concerns that fewer employees offer health insurance to retirees, especially those not retired yet. And the insurance that is available is expensive (as is COBRA) and often has large deductibles and copays. Employers may believe that have a bottom-line incentive to protect those actually still working for them. But strategies like LSP would include developing a competitively priced and flexible health insurance program for retirees not yet eligible for Medicare.

Lewin's HBSM (compare)

Visitors may want to compare all of this to the January 2007 writeup of the Health Benefits Simulation Model (HBSM) of the Lewin Group (where I actually worked in 1988-1989). The model predicts the results of various universal and partial coverage models, including single payer models as well as employer-related models ("take-up" situations).

Another useful comparison would come from "New America Foundation" which does argue for shifting the management to the individual with tax policy and efficiencies. This group argues that employer benefits drive down wages, effectively making American workers pay anyway. This idea can be challenged. The proposal, by Len Nichols and Sarah Axeen, is titled, "Increasing Employer Health Costs, Lowering U.S. Competitiveness," link here. This proposal was published in the DC Examiner June 4, and attracted reader letters June 9 on p 14.

3 comments:

Anonymous said...

"The Employee Benefits Research Institute in Washington DC runs a subcommittee called the ERISA Industry Committee, or ERIC."

WRONG. No relationship.

Bill Boushka said...

True, the article doesn't really say that there is one if read carefully. The two groups appear to express similar views and appear to be run by some of the same people. Story was adjusted, and separate link for ERIC's paper was given.

Bill Boushka said...

The ERIC organization apparently was organized by employers and providers of benefits. It is separate from EBRI and may need to remain so for legal and tax reasons. Both groups express concerns about the performance of employer provided heath insurance benefits. EBRI challenges the idea that employers don't want to provide insurance any more; it says that they really do because it still can help the bottom line. ERIC seems to taking the idea further into progressive reform: LSP, with some building of economies of scale with third party provides that can work with small businesses, provide portability to workers, and do a better job of insuring retirees than many employers can do on their own.