Testimony to the Health & Human Services Committee

Testimony to the Health & Human Services Committee
By: Luke McDermott, President of UAHU
Date Presented: Wednesday, September 19 9:00 a.m.

Good morning ladies & gentlemen, Representatives & Senators. Thank you for allowing me a few moments this morning to offer a few remarks regarding the very important subject of financing Health Care, purchasing Health Insurance, and health care reform proposals. My name is Luke McDermott, owner founder in 1988 of McDermott Company & Assoc. an Employee Benefit Insurance Agency and Consulting Firm. I have been in the insurance industry since August of 1983 after receiving a BA in Accounting. I worked as an underwriter and Sales rep for a couple of different Insurance companies before starting my own insurance agency. Currently I serve as the President of the Utah Association of Health Underwriters which is the State Chapter of the National Association of Health Underwriters of which I have been a member since 11-01-87. I represent the membership in Utah comprised of Insurance Agents, consultants, and various Insurance Company personnel.

As members of our Association we believe all Utahans deserve a health care system that delivers both world-class medical care and financial security. Utahans deserve a system that is responsible, accessible and affordable. This system should boost the health of our people and of our State’s economy. Utahans also deserve a system that is realistic. We believe that a solution that helps control medical spending (the cost drivers of care) and that will reduce the number of uninsured can be accomplished without limiting the people’s ability to choose the health plan that best fits their needs with many price and coverage options and ensures them continued access to the dedicated services of independent State-licensed counselors and advocates such as agents and consultants.

1. We (UAHU) are opposed in principal to mandates as they drive up health insurance rates. We are opposed to socialized health care and any law or measure that would be a step towards socialized health care in Utah and America.

2. We (UAHU) supports any proposal that will:

A. Reduce the cost of insurance

B. Reduce the number of uninsured

C. Maintain the role of the Agent in the education, distribution, and servicing of health insurance products in the private free market place.

D. Stand up to the analysis and scrutiny of all stake holders; employees, employers, municipalities, brokers/agents, carriers, physicians, specialty care centers, hospitals, and tax payers.

E. Have the State legislature insure that any restructuring of the insurance markets in Utah would be based on sound fiscal financial principals with a strong foundation to support the burden of financing health care for the citizens of Utah that are uninsured and truly cannot afford to pay health insurance premiums, but by subsidy of the State.

3. We (UAHU) maintain that the best way to accomplish the above objectives is through the empowerment of free market principals and the encouragement of competition.

4. In Utah the small group and individual (non-group) markets are vibrant and robust due to this competition. In 2007 we have had two new carriers enter the small group Market (2-50 employees) Aetna (Feb. 2007) and Humana (July 2007). Humana also entered the individual or non-group market as well in 2007. We have the strongest small group market and individual market that I have seen in the last 25 years, and It might just be the strongest insurance market in the whole USA. As a result of this competition a couple of the carriers in this market have lowered their base rates, and the renewals in 2007 have had lower rate increases than in prior years, thus benefiting the consumer. We are also seeing more innovation in product design only limited to what the insurance laws will allow and we are seeing web based tools regarding wellness, fitness, education and transparency information to help individuals choose more informed and wisely. This has come about because of competition in a private free market environment.

A. In Tuesday’s Deseret news (09-18-07) it was reported that “Staying healthy costs a lot in the United States. But in Utah, a lot amounts to a lot less”. Residents in the District of Columbia, for example, spend the most per year, per capita - $8,295 according to a study appearing in today’s issue of the journal of Health Affairs. Utahans spend $3,972 – the lowest per person health-care spending in the country. (data gathered by CMS for 2004 and includes totals of all spending in individual health care from all sources: private insurance, personal expenses, Medicare and Medicaid, the joint state/federal insurance program for the poor) Massachusetts, by the way is the 2^nd highest.

B. I ask this question, “Do we really want to do “just something” in Utah that by so doing would change that lowest ranking?” Worth thinking about I believe.

C. Earlier this past summer Dr. Elliott Fisher from Dartmouth Medical School told Utah’s leaders and presented data that showed Utah as one of the top states giving high quality care for less money. Again, do we really want to do something here in Utah that would change that?

5. Utah is a “Guarantee Issue” State. This means if someone wants to buy health insurance there is a plan that they can buy if they are willing to pay the premium for it. In the private free market insurance area there are hundreds and hundreds, if not thousands of different plan designs with a wide range of premium costs. Please refer to the Utah Health Care Options Matrix or www.coverageforall.org (This matrix was organized and put together by the Foundation for Health Coverage Education)

A. Every day licensed insurance professionals are working ardently and diligently educating and connecting individuals and employees to their health care benefit and insurance options. We are committed to continue to do just that and to help more people become insured as they become educated to the options available.

B. Because of the passage of the Health Insurance Portability & Accountability Act (HIPAA) in August 1996 by the federal government the Utah State Legislature passed laws in Utah of May 1997 in accordance to HIPAA requirements for Guarantee Issue and rating practices and created the Utah uninsurable risk pool or HIP. Thanks and commendation to the legislature, because the HIP has protected the individual (non-group) market and has kept rates low and more affordable than otherwise would have been for that segment of the market year after year since that time. By protecting the Individual or non-group market it then protects the small group market as well keeping the small group rates among the lowest in our nation on a comparative basis.

C. According to the Utah’s D.O.H. there are 306,500 uninsured Utahans, which is 11.9% of our population. Since we are a Guarantee Issue State this means that 217, 000 adults have chosen not to buy insurance because they say they cannot afford it, or they can afford it and choose not to buy it. There are 89,500 children under the age of 19 that are affected by those decisions.

6. Insurance Exchange Mechanisms maintain that a “Personal Responsibility Mandate” or “individual Mandate” will be required to mandate that every Utahan must purchase health insurance and that the Exchange be used exclusively to purchase that insurance for non-group individuals and employees of small group employers (2-50 employees) on a guarantee issue basis.

A. The result is a mandate to Small employers as they will have to offer the exchange to their employees, deduct premiums, and remit monies to the exchange.

B. Hawaii has had a personal mandate since 1974 when their uninsured rate was 17%. Now it is estimated to be at 10%. (Star Bulletin Article) Hawaii employers are hiring more part-time workers that work below the required hours so that they do not have to offer benefits to their employees. In Utah we have less than 2% unemployment, do we want to jeopardize that figure or have more employees that are hired part-time?

C. If you factor out the uninsured children that should be enrolled in Medicaid and CHIP Utah’s uninsured rate would be less than Hawaii’s under our private free market system!

D. In the Massachusetts exchange model only a small percentage of available benefit plans in the state are offered through the Exchange. Many of the National carriers have left the State, their premiums have not decreased but have increased and they are way over budget. The healthy individuals have not purchased insurance through the exchange but choose to remain uninsured and pay the $295 per year fine. Only the sickest have purchased coverage through the exchange which does not bode well for them in the future. Do we want to chase out of our State the new carriers that have just entered it? Or any others for that matter?

E. In Utah we have a mandate to carry car insurance, yet according to the Insurance Research Council it is estimated that 14-30% of motorists do not cover their vehicles with insurance. The penalty for doing so in Utah if you are caught is a fine of $400 to $1,000 and you may loose your license. What would be the penalty for non-compliance for health insurance? Fine them? this would make it more difficult to purchase the coverage.

F. Having non-group coverage (individual coverage) guarantee issued in the Exchange Mechanism would mean that the HIP becomes part of the Exchange. Remember that HIPAA mandates guarantee issue and the HIP protects the individual market. Under the Exchange and personal mandate all the individuals in the HIP would now have health care options in the exchange and the rates would go up for everyone else currently covered by non-group policies making it more expensive for them. Just the very fact alone that non-group would be guarantee issue will raise the premiums for those already covered by non-group policies and including the HIP enrollees will only exacerbate the increased premiums even more for all enrollees!

G. Employer contribution requirements? If there are no employer contribution requirements then I don’t see how more uninsured employees would purchase coverage if they couldn’t afford it before. Furthermore, the exchange would be opening the door for employers, who currently pay a substantial part of the premium, to reduce what they pay or not pay anything at all and let the employee be subsidized by the State. This result would be catastrophic by taking millions of employers’ dollars every month off the table and shifting it to the employee who then would seek the State for help! Can we afford that type of result!

H. The rearrangement of the way health insurance is sold & purchased will have no affect on the cost of health insurance as it will not affect the “cost drivers of care” which are the prices charged by hospitals, doctors, pharmaceuticals, medical supplies, etc.

I. The bottom line is that people will continue to choose not to buy the insurance coverage and the questions are: How do we get people who can afford it (therefore we must define affordability) to buy the coverage and for those that can’t afford to buy the coverage how do we finance the purchase of the coverage for them? State Subsidy? What would be the fiscal note?

7. The Utah Association of Health Underwriters is working on a proposal and solutions that will help the uninsured issues and have an affect on the cost drivers of care which in turn can affect lower insurance premiums and/or increases over time. Our intent is to have consensus of our membership next month in October and the full details of our proposal ready for presentation. Some of the components are as follows:

A. Utah Insurance Connector optimizing the Utah Health Care Options Matrix mentioned earlier.

B. Payroll deduct non-group policies on a pre-tax or after-tax basis allowing employer payments for HIP premiums and/or individual policies while protecting carriers from federally chartered rules.

C. Introduce more consumerism into the market

1. With Cost Transparency and measures outcomes

2. Episodic pricing for Non-Emergency care

D. Remove State Mandates on Product Design.

1. Allow insurers to create mandate free policies thus having lowered priced plans.

E. Modify the UPP program by making approval in to the UPP Program a life event so employees can obtain coverage during the year.

F. Health and Wellness incentives. Healthy Lifestyles initiatives.

G. Make individual coverage qualified coverage for group participation requirements.

H. Focus special efforts towards Specific Classes of Uninsured.

1. Children that should be covered by Medicaid or CHIP

2. Student Coverage requirement

3. Hispanic community health insurance education outreach.

The UAHU is committed to the robust and vibrant Utah private free enterprise insurance market and to the people of Utah and stand ready to help educate the uninsured on their insurance matrix options in the great State of Utah and to promote ideas and programs that will help reduce the cost drivers of delivering health care to all of us now and in the years to come. We welcome your comments and questions.

Thank you very much.