The Rhode Island Small Business Healthcare Plan
In today’s Projo, Felice J. Freyer describes a new small business/individual health insurance blueprint unveiled yesterday by the Rhode Island Office of the Health Insurance Commissioner…
Blue Cross & Blue Shield of Rhode Island and UnitedHealthcare of New England are required, starting in May, to offer a “wellness health benefit plan” to individuals and businesses with 50 or fewer employees. The plan has to meet the state’s criteria and the average premium can’t exceed 10 percent of the average Rhode Island wage….The program’s concepts are stunningly unoriginal, consisting of nothing more than…
The new plan’s deductible will be about $500, with out-of-pocket costs capped at $3,000 — provided the enrollee signs a pledge promising to choose a primary-care physician, undergo a health-risk appraisal, either maintain a healthy weight or participate in weight-management programs, either remain smoke-free or participate in smoking cessation programs, and participate in disease-management programs if applicable. In the first year, subscribers will be asked just to promise these things; in the second year, they will have to prove participation.
Someone who didn’t want to sign such a pledge could still buy the plan but he or she would face a $3,000 deductible and out-of-pocket costs up to $6,000 a year.
- Price controls on the amount insurance companies can charge employees of small businesses, and
- Government regulation of individual behavior that will hopefully lead to individuals consuming less insurance.
Seriously, there are at least 3 problems with the plan…
- A fixed-price formula divorced from actual costs of providing healthcare could eventually drive health insurers out of the state. There is recent precedent for this. An irrational regulatory structure forced most workers’ compensation insurers to pull out of Rhode Island in the early 1990s because they were required to pay out more money than pricing regulations allowed them to collect. There is no reason that the same thing couldn’t eventually happen to health insurance.
- The partcular mechanism for implementing the “wellness” program sets a dangerous precedent. It is wrong for government to use its power to demand that interaction between individuals occur only on the government’s terms. It is not hard to imagine a future where, for example, attendance at the sex-education program of the government’s choice, chosen with as much political input as medical input, is made a pre-requisite of getting lower insurance rates on a family plan. (I chose the sex-education example because liberals, conservatives and everyone in-between should be able to envision a potential problem here.)
- Finally, it will never make sense to pay for “wellness” programs through an insurance-type system. Insurance assumes that many people pay into a pool of money, while only a few take monies out to pay for unexpected emergencies. But usage of “wellness” care will not be occurring on an infrequent, emergency basis. Ideally, the wellness program will be utilized by many people at regular intervals. This means that paying for wellness care through an insurance program will be always be less cost-effective than paying doctors for wellness care directly, sans any middleman. (Of course, if people start paying their doctors directly, they will never develop a sense that their visits to a doctor are a government-provided entitlement, making the government seem a little less powerful, creating an impression that strong-government advocates would prefer to avoid.)
- Implementing some sort of community rating system, ala the Wyden plan, so people can buy insurance independent of their employer,
- Modifying the community rating system so that insurers can modify their rates based on certain types of behavior (participating in a wellness program, not smoking, etc.), and
- Creating health-savings accounts that people can use to pay for their routine and “wellness” care.