Bettin’ on SCOTUS and Healthcare Reform

April 14th, 2012 | Healthcare Reform

I have been studying the transcripts of the oral arguments before the U.S. Supreme Court on the federal Reform legislation in preparation for an upcoming national webinar on the topic of possible outcomes when the Court announces it decision in June.  The most critical issue, of course, is the individual mandate and its impact on the balance of the legislation if it is found unconstitutional.  Arguing against the government, Paul D. Clement’s opening statement was: “If the individual mandate is unconstitutional, then the rest of the Act cannot stand. As Congress found and the Federal Government concedes, the community-rating and guaranteed-issue provisions of the Act cannot stand without the individual mandate. Congress found that the individual mandate was essential to their operation.”  An attempt, it becomes clear, to convince the Court that overturning the mandate would invalidate the insurance reforms at the heart of the legislation automatically, and therefore the Court should not attempt to sever the mandate from the balance.

A later exchange between Mr. Clement and Justice Sotomayor about how failure to uphold the mandate would lead to skyrocketing costs brought this comment from the Justice, which is the subject of the balance of today’s post:  “That’s all it said it was essential to. I mean, I’m looking at it. The exchanges. The State exchanges are information­gathering facilities that tell insurers [I believe she meant consumers] what the various policies actually mean. And that has proven to be a cost saver in many of the States who have tried it.”

Now, having written a book on this subject that involved some 500 hours, including spending the better part of a day on the Massachusetts Insurance Exchange trying unsuccessfully to first decipher and then acquirer health insurance that would cost less than the 64% increase Blue Cross had just handed me, I was quite surprised to hear that the state Exchanges have been a cost-saver.  I believe that when the legislation passed, only two states – Massachusetts and Utah – had exchanges.  Some have since been established in response to the legislation’s mandate on the states to do so, of course, but it is far too early to assess whether they have saved any cost – if, in fact, any are really functional.

Let’s look at Massachusetts yet again, the model for the individual mandate and the required Exchanges.  Here is what the Center for Studying Health System Change (HSC) had to say about the Massachusetts Health Connector (Exchange) in October of 2010:

“When the Health Connector, the state’s insurance exchange, was established as part of health reform, some observers predicted that the role of brokers would be much diminished, if not eliminated, since small groups would be able to purchase coverage directly through the Connector. However, small employers have continued to purchase coverage almost entirely through brokers, and the Commonwealth Choice Contributory Plan, aimed at employers with 50 or fewer employees, has enrolled few people. Respondents observed that the model was premised on the notion that small employers would value offering a choice of products from different health plans, when what employers value most are convenience and administrative ease, which they receive from brokers. Clearly, price is also a top priority for small employers, but purchasing within the Connector confers no price advantage.” State Reform Dominates Boston Health Care Market Dynamics [As a Massachusetts small business employer, I agree with the last statement above based upon my personal use of the Health Connector.]
Read it yourself here:

Here is what Massachusetts Health Reform: A Five-Year Progress Report, sponsored by the Massachusetts Blue Cross/Blue Shield Foundation, said in November, 2011:

“The Connector is a quasi-public entity with a board of directors that includes four ex-officio representatives from state government and seven non-government members representing various interests and areas of expertise. It was financed initially through a $25 million appropriation from the state’s general fund and is now self-sustaining, funded through an administrative fee it levees on participating health plans. The Connector’s current annual operating budget is approximately $32.5 million and it has a staff of 45 full-time employees.”

“In addition to administering subsidized public coverage through the Commonwealth Care program, the Connector acts as a vehicle for individuals and small businesses to purchase non-subsidized products through a program called Commonwealth Choice. … As of August 2011, there were 39,767 members enrolled in Commonwealth Choice, comprising 27,319 subscribers and 12,448 dependents”
Read it yourself here:

There are about 6.6 million residents in Massachusetts, so that means a little more than .5% (that’s one-half of one percent) of the population gets its insurance from the Connector.  Based on the budget, the cost of the connector is $817 per person insured and $1190 per policy. What a deal.  Now, there are 158,000 other insureds – who for the most part are covered by the state’s expansive Medicaid (Mass Health) program, supported by a federal waiver – thus the Health Connector budget includes some costs shifted off the Medicaid program.

The Health Connector has been such a smashing success and cost saver, that hardly anyone has used it!

The Five Year Progress Report concludes by stating:

“So what lies ahead? To a large extent, the future of Massachusetts health reform will be shaped by two major questions: Can the state’s high rate of health care spending be moderated? And what will be the impact of the national Patient Protection and Affordable Care Act (ACA)?”

More on the state’s high rate of health care spending and its implications for the ACA in a future post …

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