Insurers propose to close gap

Times Staff Writer

WASHINGTON — With Democrats vowing to make healthcare a top priority, the insurance industry Monday unveiled a proposal to extend coverage to nearly 47 million uninsured persons.

The move by America's Health Insurance Plans, which represents companies that provide coverage to more than 200 million people, focused attention on an issue politicians have shied away from for more than a decade.

Ever since President Clinton's attempt at sweeping healthcare reform went down to defeat — thanks in no small measure to aggressive opposition by insurers — the debate has been at an impasse. But the turnover in Congress, coupled with growing pressure from business and labor leaders feeling the pain of rising costs, could open the way for progress.

The proposal by the insurance trade group combines elements favored by Democrats with some that Republicans have backed. It calls for providing coverage within three years to all uninsured children, currently numbering about 8 million, and within 10 years to virtually all adults.

The plan would rely on a mixture of expanded federal and state programs and tax credits for workers and their families to purchase private health insurance and pay medical expenses. It would also provide federal grants to states that are trying to expand coverage for their residents.

But the proposal does not address the key elements that would determine whether it is even workable. For example, there are no details on how to pay its estimated 10-year price tag of $300 billion or how to control healthcare costs over the long run.

It also lacks any kind of requirement that employers or individuals buy health insurance, a mandate many see as essential to reaching the goal of coverage for all. And it fails to deal with the creation of purchasing pools to bargain down the cost of coverage, or with reforms to curtail industry practices that exclude people in poor health.

Still, said John Rother, policy director for AARP, the seniors lobby, "the floor is now open for other people to put down their plans. It's obvious that healthcare is the No. 1 domestic concern."

Labor union interest Labor unions are among those expected to come forward. And Rep. Pete Stark (D-Fremont), incoming chairman of the House Ways and Means health subcommittee, already has introduced a plan that would create a national healthcare system by essentially expanding Medicare to all.

"We can solve one of the biggest problems we're ashamed of in this country … and it's within our reach," said Jay M. Gellert, chief executive of Health Net, a major managed-care insurer based in Woodlands Hills, and chairman of the trade group's policy committee.

Such optimism springs in part from a hope that last week's election returns could begin to break the impasse.

The Bush administration has insisted on placing more responsibility on individuals, with government playing an indirect role.

Democrats historically have been less resistant to direct government action, as well as to the increased government spending such a solution would entail.

And the business community seems interested in seizing the opportunity.

"Since it appeared there would be a Democratic majority, I can't tell you the number of pharmaceutical companies and health plans that have come to me and said we can work together to put together a plan to cover the 47 million uninsured," Rep. Charles B. Rangel (D-N.Y.), incoming chairman of the House Ways and Means Committee, told reporters recently. "It's because they're paying for the healthcare of those people indirectly."

Because the uninsured get free care in emergency rooms, hospitals pass those costs on to paying customers.

Aware of the political sensitivity of the issue, senior Democratic aides sought to downplay expectations.

Though there is a good chance the new Congress will pass some coverage expansions — particularly for children of low-to-middle-income working parents — comprehensive health reform is not likely until after the 2008 presidential election, they said.

"Democrats are not united around a single solution, but health reform is a cyclical topic, and we are definitely on the upside of that conversation," said one aide who asked not to be identified when discussing party strategy.

Insurers are particularly alarmed by the erosion of employer-sponsored medical benefits — the main source of coverage for workers and families and the mainstay of their health plan business. The Kaiser Family Foundation's 2006 healthcare survey found an average cost of almost $11,500 a year for an employer-sponsored family plan. Companies, particularly smaller businesses, have been shedding coverage as costs have risen, and many individuals find it too expensive to buy plans on their own.

Meanwhile, major employers say the high cost of health insurance — widely acknowledged as the main reason for the rising number of uninsured Americans — puts them at a competitive disadvantage in the global marketplace.

GOP favors tax credits Using existing government programs to solve the problem of the uninsured has strong support among Democrats, while Republicans have favored tax credits to help individuals obtain a policy.

Rather than replace the current system, the insurers' plan would build on it.

The insurance group is calling for the expansion of the federally funded State Children's Health Insurance Program to cover all children in families with incomes up to twice the federal poverty level. That would help most children in low-income working families, since a family of four making up to $40,000 would be able to receive benefits.

Similarly, the plan would expand Medicaid eligibility to adults earning up to the federal poverty level, which is $9,800 for a single person.

Universal health accounts

The proposal also calls for two new tax breaks: a $200-per-child tax credit ,or up to $500 per family, that would go to middle-class families who could show their children were covered.

It also calls for the creation of universal health accounts, a kind of tax break that would make it more affordable for the self-employed and those not covered by an employer to buy coverage on their own.

The industry said its plan would cost the federal government $300 billion over 10 years; other estimates of providing coverage for all have been higher — $50 billion to $80 billion a year.

Polls show that Americans strongly back guaranteed coverage for all. But that support melts away if it would mean significantly higher taxes, suggesting the next debate on overhauling healthcare will focus on controlling costs.

"Their thinking is to try to make health insurance more affordable, but that still isn't enough when the cost is going up at more than twice the rate of overall inflation," said economist Paul Fronstin of the Employee Health Benefit Research Institute.

The industry says it can create savings through such internal reforms as converting to electronic health records and better coordination of care for people with chronic illnesses, but others remain skeptical.

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