Public Policy Detail
Introduction
For over ten years, Vermont Businesses for Social Responsibility has promoted a policy for Vermont to offer universal health care, including cost containment, an integrated system of care, and accessible and affordable coverage for all Vermonters.
Expanding this policy and working towards its implementation has never been more timely or vital for Vermont businesses and citizens. The rising cost of health insurance premiums is one of the most uncontrollable elements of business overhead and is forcing Vermont companies and their employees to make difficult choices. The system is on the verge of collapse as businesses and individuals drop and reduce coverage. More of the costs of health care are thus shifted to families, state programs, or back onto those who are insured and those employers who continue to provide insurance. Economic development in our state is very closely tied to the solution of this worsening problem.
Most Vermont employers have a strong ethic towards contributing to the well-being of their employees and communities. A review published in 2001 of the status of uninsured Vermonters contained a portrayal of the views of employers:
"Employers who offer insurance reported being very happy to be able to do so, while most of those not offering it reported they would like to be able to do so. Employers who do not offer health insurance identified cost as the primary barrier to offering coverage including: premium levels, the unpredictability of costs in the future, and the time required to research and administer plans. However, nearly all participating employers expressed significant frustration with the state of health insurance today. Participants feel that health insurance costs are completely 'out of their control' and believe it is impossible to predict, plan or budget for annual health care expenditures. While most insuring employers plan to continue to offer coverage, many can foresee a time when they will need to significantly change the structure of the benefits they offer, whether by increasing the employee premium contribution, raising co-payments and deductibles, or reducing the benefits covered."1
Since that report, premiums have continued to rise, and employers have continued to be faced with choosing between their company's economic viability and the health care needs of their workforce.
Vermont has a history of using its independent and self-reliant nature to take bold initiatives. By collaboratively designing and instituting a true system of universal health care, Vermont could take a leadership role in business attraction, retention, and success.
Coverage Shrinking—Cost Growing
The latest figures indicate that Vermonters spend over $2.9 billion per year on health care, yet 51,000 Vermonters (8.1%) have no insurance. About 39 percent of health spending in Vermont is covered under private insurance, of which most is employer-sponsored coverage. According to the 2000 Vermont Family Health Insurance Survey conducted by BISHCA, more than three-quarters of the uninsured population of people over the age of 18 are employed. Of these uninsured adults, about 66.5 percent were working full-time, 10.5 percent were working part-time, and 23.1 percent were not working for pay (e.g., homemakers, students, retirees, and the unemployed).
Nationally, employees of small businesses are more likely to be without insurance than employees of larger firms, and Vermont is a state where most people work in small businesses. "People who work for employers who do not provide coverage tend to be in smaller firms. In 2000, the proportion of employees offered health insurance ranged from 26.6 percent in firms with fewer than 5 employees to over 90 percent in firms with over 50 employees. It should be noted, however, that some of the workers in these firms do not take coverage when offered, even if they have no other insurance, largely due to the cost of the coverage to the worker under these plans. Overall, about one-third of all uninsured working adults are employed in a firm with fewer than 5 workers."2
Although more current Vermont numbers are not available, national surveys indicate that the number of insured has been dropping. A poll conducted by the Commonwealth Fund found that the number of employees of firms of 500+ with health insurance dropped from 32% in 1987 to 25% in 2001. Sadly, most workers who do not have access to insurance through employment remain uninsured.3
Even with employer coverage, the trends are disconcerting—with increases in premiums come increases in the amount of out-of-pocket costs to employees. The Kaiser Family Foundation found that, in the face of the third straight year of double-digit premium increases, employers are asking for more cost-sharing and higher premiums for family coverage. This year's survey reports that, despite another year of double-digit premium growth, employers continue to offer health benefits to their workers at the same rate as last year, with few employers reducing benefits. Rather, employers are moderating their burden by having workers make higher premium contributions. Workers generally pay a higher share of costs for family coverage. The survey finds for the first time that a significant percentage of workers face separate cost-sharing for hospital admissions. Looking to the future, many employers, and particularly large employers (200 or more workers), say that they will increase contributions and cost-sharing next year. A small but significant group of employers says that they are very likely to offer a high-deductible plan in the next year.4
Similarly, a report released by Mercer Human Resource Consulting found that employers' costs for their health care benefits rose 10.1 percent per employee in 2003, instead of the 15 percent per employee of general premium increases. While this seems like good news, it is actually due to the fact that employers are shifting more costs onto their employees. The report also said that in 2004 the inflation rate for health care will increase by 13%, with more cost-shifting measures.5
Another factor with significant relevance for the Vermont economy is the disproportionate impact on small business, one of the main economic engines of our state. According to an article from the American Institute of Certified Public Accounts, "In general, 'small companies feel a lot more pain from health-care costs,' says Ed Kaplan, national health practice leader at Segal, a New York-based employee-benefits consulting firm. 'They have higher administration fees and higher premiums, and they are forced to use off-the-shelf plan designs.' He adds that underwriting managers often heap higher margins and loads on premiums for small companies to compensate for high volatility in their claims experiences."6
VBSR believes that it is time for Vermont to implement a comprehensive system of universal health care. The benefits associated with doing so are significant. They include a more stable and productive workforce; greater incentive to create, move, or expand a business in Vermont; improved efficiency and reduced costs throughout the public and private sectors; and a healthier population of Vermonters.
A health care plan for Vermont should include these elements:
- Universal coverage and access
No Vermonter should be unable to obtain health care because it is unaffordable or not provided by the employer. Every Vermonter should have access to a basic plan of benefits. Patients should be free to seek care from any licensed health care professional and receive the prescribed care. - Cost management to:
- Provide accountability and sustainability
There should be a budget that covers all health care services, that is accountable to the public, that ensures that the health care services are accessible and available, and that is affordable and sustainable. Accountability is a demonstration of responsibility to the public. A universal system must be a transparent process, without hidden costs or deals. Accessible mechanisms should be available to address problems and shortcomings that affect medical care. Education about the goals, methods, and mechanisms of the system should be provided to all. Any solution to the health care crisis must be sustainable for the long term. The model we build should be constructed to serve Vermonters for decades to come. Sustainability begins with recognition that financial resources are finite and that, within these, planning and adjustments must be made to satisfy reasonable needs and demands of patients, taxpayers, the medical community, and businesses. - Eliminate administrative redundancy
Savings can be achieved through elimination of redundant administrative and billing expenses. The cost of administration of the present system has been set at somewhere between 20% and 30% of the health care dollar. - Decrease unnecessary utilization through consumer education and disease management
Extensive education and testing for chronic diseases such as diabetes will result in long-term health care savings. Management of chronic disease will provide better care and cost savings in the long term. Patients also need to be educated about the differences in choices of treatments and drugs. - Reduce prescription drug costs wherever appropriate
Significant savings can be realized by reducing the costs of prescription drugs. The retail price of drugs should be available at point of purchase for all consumers, and reported on all receipts, so that consumers are aware of the actual cost of the drugs and can request generics where appropriate. Re-importation of drugs from Canada and other countries should be allowed so that consumers can purchase drugs at lower costs.
- Provide accountability and sustainability
- An integrated system of care
While it will take a concerted effort by all stakeholders to outline the balance between basic and unlimited services, elements such as wellness, preventive, medical, surgical, emergency, rehabilitative, and behavioral health care must be included. - Promotion of healthy behaviors and prevention
There should be no financial barriers for Vermonters seeking preventive care. - An equitable funding mechanism that takes into account the contributions already made by business
Financing Vermont's universal health care system is perhaps the most challenging aspect to implementing the plan. The current system shifts costs from uninsured patients and under-compensated practitioners to fewer and fewer business-financed insurance plans. VBSR believes that a progressive financing mechanism is essential, using public financing if necessary. There should be no financial barriers for patients to obtain care.
Many models have been proposed to achieve the goals of universal access. The current system that relies on business to be the provider of health insurance results in uneven coverage for employees and an uneven playing field for employers. Any new system should not penalize those employers who have taken on this responsibility, but rather should recognize the value of that contribution.
Ideally, decisions about coverage and affordability of basic insurance are not based on employment or income status. As long as we have an employer-based system, this goal is difficult to attain. If, however, the health care system were independent of employment status, it would provide a number of significant advantages.7 These include reducing the tendency of employers to offer part-time jobs to avoid health coverage costs, the freedom of employees to change employment without concerns over losing health coverage, and eliminating health coverage as a labor-management contract dispute item.8
Conclusion
The benefits to Vermont of implementing a comprehensive system of universal health care are significant. They include a more stable and productive workforce; greater incentive to create, move, or expand a business in Vermont; improved efficiency and reduced costs throughout the public and private sectors, and a healthier population of Vermonters. The time has come to gather the strengths of our citizens, the dedication of the business community, and the political will of our elected leaders to move this policy forward.
Footnotes
1Expansion of Health Insurance Coverage to Uninsured Vermonters, October 29, 2001 HRSA Planning Grant Report to the Secretary
2Expansion of Health Insurance Coverage to Uninsured Vermonters, October 29, 2001 HRSA Planning Grant Report to the Secretary
3The Growing Share of Uninsured Workers Employed by Large Firms, The Commonwealth Fund October 2003
4The Kaiser Family Foundation/Health Research and Educational Trust (Kaiser/HRET) 2003 Annual Employer Health Benefits Survey reports)
5The Business Review 12/8/03, see http://www.mercerHR.com
6CFO.com, March 2003
7A recent New York Times article reports how employer-based health care is an historical accident, "During World War II, federal wage controls prevented employers from wooing workers with higher pay, so companies started offering health insurance as a way around the law. … When the war ended, the practice stuck."
8Most Americans would also prefer a health care system that is not tied to employment. A recent national poll by ABC News-Washington Post found that by almost a 2-1 margin, 62 percent to 32 percent, Americans said they preferred a universal system that would provide coverage to everyone under a government program, as opposed to the current employer-based system. See USA Today, 10/10/03, http://www.usatoday.com/news/health/2003-10-19-health-poll.
