Wednesday, December 07, 2005

Health Insurance is Always a Headache

Fixing the cost of health insurance is on the agenda for the 2006 session. Although the policy ideas sketched out by Vilsack and House GOP members have similar goals…

As reported by QC Times.

Iowa Gov. Tom Vilsack said Tuesday that he will seek an 80-cent-per-pack boost in the cigarette tax when the Legislature convenes next month.

He said some of the proceeds from the tax hike would be used to start a program that would help small businesses cover catastrophic health care costs. …

As reported by the WCF Courier

Republicans in the Iowa House say they'll move forward next year with legislation intended to help small businesses owners and Iowans who want to purchase their own health insurance with the cost of premiums. …

… Among the ideas they're pushing:

-- Allowing businesses and organizations to form health care insurance purchasing pools to bring down the cost of insuring employees and members. Iowa law currently prohibits these types of pools in many cases.

-- Forming a fund to help pay for catastrophic health care costs, which would help bring down the cost of insurance for others who are insured.

-- Providing tax credits to small businesses for providing health insurance to their employees, as well as those who are self-employed or unemployed and purchasing their own health care.

…the politics are oh so different.

Vilsack came out of the box three weeks ago with his cigarette tax hike to fund a Wellmark subsidy in the form of a reinsurance pool. The GOP guys jumped into the game Monday with their multi strategy approach, which is still a work in progress.

It’s certain, from Vilsack’s keen interest in reinsurance and House Human Services Committee Chair Linda Uppmeyer’s comments from the WCF Courier story, that the health insurance lobby has been working the last few years to set in motion the political will to create a catastrophic reinsurance system (really, these things very rarely appear out of nowhere). Iowa health insurers, as well as hospitals and specialty providers, would love to see a reinsurance pool, while Iowa taxpayers are probably unaware that their tax dollars might be put to use protecting the health insurance industries bottom line.

Is this the Iowa Legislature’s health care version of corporate welfare?

The bigger surprise is the GOP’s interest in purchasing pools, also called cooperatives or alliances. I know State 29 took a shot at the purchasing pool idea as an effete solution to health insurance premium costs. I disagree. A quick Google search springs a number of papers (here, here) on the efficacy of health insurance purchasing pools or alliances. These health insurance co-ops/alliances have problems, most often associated with the ability to attract enough members to be a viable economic agent in the eyes of a state’s health care insurance providers. But when a health insurance purchasing co-op/alliance does have a critical mass of members, it can lower premium costs, provide a variety of health insurance products and efficiently manage the administration of health care benefits for small employers.

However, I’m not sure how seriously we should consider the GOP proposal on purchasing pools. As I stated in a previous post, the health insurance industry has fought and effectively killed these purchasing pool bills for years, and the GOP guys have been in charge of the legislature for years. Nevertheless, in an interesting move, the GOP hinted that their multi-strategy approach would include some type of reinsurance approach, purchasing pools and a review of the outcomes of the insurance premium sales tax break from a few years ago.

Someone deeply cynical might see some of these moves – Vilsack’s insistence on a tobacco tax increase and the GOP’s interest in purchasing pools combined with a “review” of the industry tax break – as attempts at gaming the issue for the 2006 campaign.

We know that the GOP House leadership will not raise tobacco taxes. We know that Vilsack will not alienate his deep pocket friend at Wellmark. So, look for compromise; no tobacco tax increase and not much in the way of purchasing pools – but we will use existing windfall revenue to build some form of a catastrophic reinsurance system that will make all the players almost happy.


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