The Healthcare Reform Being Filibustered in the Senate, Part 1 (What it is)
Last week, the Senate voted to continue a filibuster against the Health Insurance Marketplace Modernization and Affordability Act of 2005. Here’s what the bill would do if passed.
Like all significant legislation relating to health insurance in America, this act relates to one of the most incomprehensible laws on the books — the Employment Retirement Income Security Act of 1974 (ERISA). ERISA effectively divides health insurance into 3 regulatory classes…
- Employee sponsored plans, purchased through an insurance company,
- “Self-insured” plans, where a large company or labor union directly administers a health insurance plan, and
- Everything else.
A key provision of ERISA prohibits states from regulating ERISA-qualified plans (list items 1 and 2) any more strictly than the Federal government does. ERISA bars states from imposing any conditions on “self-insured” plans at all. However, ERISA also expressly reserves to the states certain powers to regulate insurance companies. Thus, although states cannot mandate the breadth of coverage provided by an employer, they are allowed to mandate the minimum coverage that must be provided by the insurance companies operating within their borders.
The final result is that big corporations and labor unions — entities with enough people to support a go-it-alone self-insurance program — can do whatever they want. Everyone else is strictly regulated by the government, via direct regulation of the insurance business.
What the Health Insurance Marketplace Modernization and Affordability Act would do is add a new class of plans to the ERISA regime. Trade associations and other commercially-oriented non-profits would be allowed to pool their employees for the purposes of purchasing “Small Business Health Plans” (SBHPs). SBHPs would be granted an exemption from state mandates similar to the exemption that self-insured plans already have (though the current version of the bill prohibits organizations qualified to offer SBHPs from self-insuring; I suspect this measure was added to the bill to placate the insurance industry, who would lose a great deal of business if trade associations were allowed to self-insure).
Since many trade associations have a national scope, this bill would give small businesses the opportunity to “cross state lines” to find a mixture of health insurance costs and coverage suiting their employees when available state-regulated insurance is too expensive. The law would not create a new category of “special rights” for SBHPs — it would simply give SBHPs the special rights that big-entity self-insured plans already enjoy.
The Health Insurance Marketplace Modernization Act is a baby step in the right direction. But it’s only baby step, because much of the healthcare “crisis” in America, and especially the crisis of healthcare “portability”, is an artificial one, created by the unintended consequences of government regulation and ERISA in particular.
Why hasn’t somebody asked Charlie Fogarty and Elizabeth Roberts — who both claim to be health insurance policy experts — what they think about this bill? I’m sure they’ll oppose it, but I think the reasons they give will be extremely revealing. The brutal truth is that small businesses and independent contractors who purchase insurance from Blue Cross RI are getting crushed by rapidly rising health insurance costs. As a result, they’re either not hiring, moving to other states or closing down. Of course, Blue Cross will legitimately point out that their pricing has to be so high because (a) a substantial portion of the younger and healthier risk pool is diverted into Rite Care, and (b) the remainder of the risk pool is getting older and sicker, because Rhode Island’s population of small businesses and independent contractors isn’t growing. In truth, they have a good point. But in the short term, this legislation promises some desperately needed relief for a lot of Rhode Islanders. The readers of this blog should make every effort to get Charlie Fogarty’s and Elizabeth Roberts to publicly state their opposition to it.