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Lisa Blais: The Governor’s Executive Order and Your Wallet

Thursday, March 14, 2013

 

Lisa Blais argues that Rhode Island needs much more competition in the health insurance market before costs go down.

Anyone who is purchasing health insurance in RI knows all too well about the financial burden that monthly premiums impose on our personal budgets. In some cases, those premiums may extract more of a percentage from our monthly income than is comfortable. That is, if we have income. Some folks may be dipping into what is left of their savings to protect their families from a catastrophic illness. And others might be choosing to forego coverage because premiums are so high in our little state.

Does anyone really care about the toll this takes on ordinary citizens in Rhode Island? Or, is it bureaucracy and politics as usual?

Rising Premiums Hurt Everyone

The strain may be no less for small business in RI. Employees of small and large businesses have typically seen their percentage of cost-share rise with each year when the coverage renews. Why? Because the premiums usually rise. We have witnessed the approval of not one, but two requests to increase premiums in one year from Blue Cross and Blue Shield of RI (BCBSRI). That request averaged 5.1% for small groups and 9.1% for large groups. Instead, approval was granted to increase small group employers by 3.67 percent and large group employers will see an average rate increase of 7.8% in 2013. This latest premium increase is in addition to the 3.98% increase that was granted in September. Let this sink in: an overall approximate average increase of 7.65% to a high of 11.78%!

What’s Missing?

Can anyone really point to innovative, new ideas that have a proven track record of containing or even reducing the cost of health insurance? For at least two generations we have seen the same ideas morph from one insurance plan design to another but yet, at their core, they remain the same. That model includes shifting costs through benefit plans that increase insured’s cost shares, increasing deductibles, and generally reducing benefits. These changes often limit the number of visits to providers who are deemed specialists, and of course, changes to pharmaceutical managers and provider networks.

What we have not seen is vibrant market competition in RI. BCBSRI remains the flagship of insurers. While considered a non-profit, one wonders how their premiums stack up against the for-profit United HealthCare of New England. Are the numbers really so significantly different between the two that they both should be counted as bringing market competition to bear in our state? If we look closer, we find that BCBSRI also has a significant portion of the market niche in the public sector arena, a hefty factor in pricing. We know that Tufts is on the scene but it seems that their piece of the RI market is yet to grow.

Some Solutions

One solution to building market competition may lie in reducing the number of mandates that RI imposes on insurance companies. That step may encourage other health insurers to offer policies in RI. Yet another simple step would be to allow Rhode Islanders to purchase health insurance across state lines! And in our own backyard, we might take a hard look at the administrative costs and other overhead at BCBSRI’s widely perceived quasi-public status.

RI’s Answer

So what has RI done in the health insurance arena to address these problems? The Governor, by Executive Order, implemented the Health Insurance Exchange (HIE) in response to the Affordable Care Act (Obamacare). In 2008, President Obama stated that his health care reform would save the average family $2,500 but, premiums have actually increased over $3,000 per year according to a Forbes article. You may want to read it as you consider Rhode Island’s response to health care reform.

But back to the Governor’s HIE. It is described as an on line marketplace to assist businesses and individuals compare health insurance plans. Yet some may recall references were made early on that it would help make health insurance more affordable. How can that be? The Exchange has hired an Executive Director and will be moving forward to staff the effort as it ramps up toward going live this October. Rhode Island was one of the first states to create this Exchange given the fact that the Feds were offering approximately $65 million to make it happen. Who will pay for this new bureaucracy once the federal revenue dries up? Well, at this point, it looks like RI taxpayers will be footing the bill. What, if anything, will this Exchange do to contain costs or even drive them downward? As of today the answer appears to be nothing. After all, building up staff increases costs, so where do the savings come from? Hard to say. 

Here’s a look at one of the questions on the state’s web site FAQ section for the Exchange:

How will Rhode Island pay for the Exchange? Federal funds are supporting the planning, establishment and initial operations of the Exchange through the end of 2014 (one year after the Exchange opens). After that, the Exchange must find a way to raise its own money for staff, supplies, and rent. Exchange board and staff is now weighing different options to ensure its success well into the future. tax credits for health insurance will continue to come from federal funds.

While the Exchange is “finding a way” to support itself, legislation was introduced last year to pay for the HIE. The proposal? Add a surcharge which would ultimately be passed on to, guess who, the insured!

Finally, we may add another financial burden because the Exchange is also going to be utilized as an on line tool to help people determine if they are eligible for other taxpayer-funded assistance. Given that waste, fraud and abuse may indeed exist in RI’s current system of various assistance programs; will this newly dubbed “Dependency Portal” exasperate the problem or contain it?

The Bottom Line

All in all, we need less bureaucracy and a significant spike in market competition before we will see relief in our costs for health insurance here in Rhode Island.

Lisa Blais is a Board Member with the OSTPA organization. She can be reached at [email protected] or [email protected]

 

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