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Congressional Testimony
October 4, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 5720 words
COMMITTEE:
SENATE HEALTH, EDUCATION, LABOR & PENSIONS
HEADLINE: TESTIMONY EXPANDING HEALTH
CARE COVERAGE
TESTIMONY-BY: MARY R. GREALY , PRESIDENT
AFFILIATION: HEALTHCARE LEADERSHIP COUNCIL
BODY:
October 4, 2000 Testimony of Mary R. Grealy
President Healthcare Leadership Council On "Health Care
Coverage: 45 Million Uninsured and Counting" Before the Senate
Committee on Health, Education, Labor, and Pensions Good
morning, Chairman Jeffords, Senator Kennedy and members of the Committee. I want
to express my gratitude on behalf of the Healthcare Leadership Council for the
opportunity to testify today, and the Council's commendation to this committee
for giving this issue the attention it both needs and deserves. I would also
like to commend the many members of this Committee who have introduced or
co-sponsored legislation that would make health insurance
coverage more accessible to more Americans. The Healthcare Leadership Council is
a coalition of chief executives of the nation's leading health
care companies and institutions. The purpose and vision of the Healthcare
Leadership Council is to build a consumer-centered, market-based
health care system that is accessible, that is affordable, that
fosters innovation and that offers the highest quality health
care to all patients and consumers. Consistent with this vision, the members of
the HLC have made accessible health care coverage for
uninsured Americans our organization's highest priority. Within
the past few months, we have commissioned in-depth studies to understand the
makeup of the uninsured population, to better understand how to
target effective policy solutions. We have surveyed the nation's small business
owners - particularly those who do not currently offer health
insurance coverage to their employees - to understand the reforms they need in
order to make health insurance a viable option. We have
examined dozens of programs taking place throughout the country, innovative
initiatives that are striving to make coverage accessible. These examinations
have led us to fundamental conclusions about this issue and how it should be
addressed: Cab Reducing America's uninsured rolls is not an
insolvable problem. Our studies have found that the makeup of the
uninsured population - the fact that more than seven of every
ten persons without health coverage lives in a household in
which at least one family member is employed - tells us that we have an existing
framework within which we can effectively address this challenge. The vast
majority of uninsured Americans have a direct connection to the
existing employer-based health insurance system and, therefore,
the most feasible solutions are to be found by working within that structure. In
fact, the Census Bureau data released last week confirmed for us that
employer-provided health insurance was the driving factor that
caused uninsured rates to drop in the past year. Cab We have
the resources to get the job done. There is an ongoing debate in this country
about how the growing budget surplus can best be utilized. We would suggest that
this nation has no greater priority right now than the nearly 43 million
Americans who are without health insurance. This is a critical
priority because these individuals and families do not have access to the most
innovative care and preventive medicine that is provided to those who do have
coverage. And it is a critical priority because of the severe toll uncompensated
care is taking on our nation's health care system. In every
state in this country, there are dozens of hospitals that are in serious
jeopardy because of health care provided - usually expensive
acute or emergency room care - for which there will be no direct payment. If we
do not make progress in reducing the uninsured population, the
ramifications will be severe for all patients and health care
consumers. Cab We know that the owners of America's small businesses - the
people who face the greatest challenge in providing health
coverage to their employees - want to offer insurance to their employees, have a
strong desire to provide that coverage, and believe that solutions are within
reach. Our survey of small employers told us this, and it also revealed that if
we don't move toward solutions in the near future, a significant number of small
businesses who currently offer health insurance will succumb to
economic pressures and will cease to do so. Allow me to go into a little more
detail on the research HLC has done on this issue. Our initiatives have
included: Research by the Moran Company to analyze data on the
uninsured and to determine how to most cost-effectively target
tax subsidies (See attachment 1). Among the crucial findings of this study was
that the number of active working adults in a family - more than the type of
industry in which a person is employed - largely determines whether or not a
family is insured. We found that 72 percent of individuals who are without
health insurance live in a family in which at least one
individual is employed. Of that group, approximately half are in families in
which an offer of insurance from an employer is received, but declined. The
other half are in families in which an employer does not offer
health coverage. Research by The George Washington University
Center for Health Services Research and Policy, and
Health Policy R&D to look at how various communities and
employers are expanding coverage for working families (See attachment 2). These
local programs, although small in scale, have proven themselves as excellent
laboratories on this issue. They provide crucial information on what is
necessary to encourage small employers and individuals to participate in
coverage programs. For example, an insurance program in Wayne County, Michigan,
named HealthChoice, found that it was difficult to entice businesses to
participate as long as subsidies to those businesses were less than one-third of
their insurance premium costs. The premium formula that eventually made the
program a success was one-third paid by the employer, one-third paid by the
employee, and one-third subsidized by the county government. These programs give
us real- world examples of what level of financial support is necessary to make
health insurance a feasible reality for Main Street businesses.
Polling data on small business attitudes toward health coverage
(See attachment 3). We enlisted the respected public opinion firm, American
Viewpoint, to survey small business owners throughout the country. The survey
found that many companies that do not now offer health coverage
would begin to do so if premiums were subsidized through tax incentives by as
little as 10 percent, although many would require as much as a 25 percent
subsidy. One concern raised by the survey is the fact that a significant number
of small employers will likely drop their coverage if their
health insurance premiums rise by 10 percent over the next
year. Unfortunately, that is actually the projected increase for 2001. It
underscores the imperative for action on this issue. In terms of what that
action should be, the nation's small businesses, by a wide margin, support tax
incentives to lower the cost of insurance as the best mechanism for reducing the
number of uninsured. A far smaller percentage supported new or
expanded government insurance programs. In addition to these initiatives, HLC
began a new awards program this year to honor local initiatives that are having
a positive impact making health coverage more accessible. "The
HLC Honor Roll for Coverage" recognizes individuals and community programs that
have helped expand coverage to small businesses and individuals. These awards
will help elevate national awareness of community health
coverage efforts and provide additional information on barriers to
health insurance coverage and potential solutions. Our findings
through these projects have helped us to better understand how to target
solutions for the uninsured. While most understand that a
feasible plan to reduce the rolls of the uninsured will require
new funding sources, much more than just funding will be necessary. A plan to
carefully and cost- effectively target new funds in an incentive-based manner is
essential. Also very important to the success of any effort on the
uninsured is a healthy infrastructure to ensure that those with
subsidies have a coverage product available to purchase. It is also important
that national policy on accessible, affordable health coverage
be consistent. It will be counterproductive for Congress to use a portion of our
nation's budget surplus to make health insurance more
affordable, yet at the same time pass legislation that makes
health coverage more expensive. Imposing new mandates on
insurers and employers, or making employers liable for coverage decisions will
impose additional barriers and decrease our chances of providing
health coverage for more workers and their families. Now I
would like to discuss in greater detail some of the conclusions HLC has drawn
from these research projects: Variability and Flexibility Are Key. The more than
40 million uninsured are not a monolithic population and there
is no one- size-fits-all solution for the uninsured. Such a
solution would be both too costly and ineffective given the varied nature of the
uninsured. Obstacles to coverage vary among disparate
populations of the uninsured, and solutions must be tailored
accordingly. For example, an individual who is offered employer coverage but
declines because he finds the premiums unaffordable merits a separate solution
than one who is chronically unemployed with no hope of an employer subsidized
insurance offer. We believe that an eclectic mix of market-based approaches will
be necessary to effectively address the problem of the
uninsured including tax credits, insurance market reforms, more
effective use of existing public program resources and educational efforts about
the value and importance of health insurance. Tax credits by
their nature allow variation. They can be adjusted in amount according to income
levels, they can be made refundable if necessary. And they can be targeted to
individuals or employers or both. In fact, it is probably due to the versatile
character of tax credits that they are virtually the only solution for the
uninsured to be supported by lawmakers at both ends of the
political spectrum. And tax credits have demonstrated success. Just last week we
heard a striking example of how well-targeted tax relief incentives have helped
reduce the level of poverty in this country to an all-time low. One of the
factors cited as a key to this success is the use of the Earned Income Tax
Credit which increases employee paychecks, encouraging the lowest paid
individuals to work. We believe that low-income tax credits for the purchase of
employer group coverage can similarly reduce the level of uninsurance in
America. Just as the EITC has encouraged people to work, health
insurance tax incentives could encourage and enable many to accept insurance
offered by their employers. As an alternative, tax credits directed toward small
employers not now offering insurance could encourage and enable them to begin
doing so. Return on Investment Is Key. Many individuals cite affordability as a
prominent barrier to health coverage. Lawmakers across the
political spectrum have recognized this and have recently demonstrated a
willingness to spend money on the uninsured. But realistically,
any proposal to seriously address this problem will have to pass the through the
"sticker shock" stage in order to even approach the implementation stage. Thus,
examining various tax subsidy alternatives for their value or cost-effectiveness
is an essential part of the policy-making and political process for solving the
problem of the uninsured. For example, over 16 million people,
or more than one-third of the uninsured, are in families where
at least one employee has been offered employer coverage but has turned it down.
This would clearly be a cost-effective group to target to substantially reduce
the number of uninsured. First, they are already members of an
insured employer pool and, second, there is already willingness on the part of
the employer to subsidize part of the premium. According to the Moran study, the
"decliners" of employer health insurance predominantly decline
coverage for their families, not themselves. Thus, if necessary, a tax credit
could be even more narrowly defined to be applicable to only dependent coverage.
HLC's survey of small employers found that only 58 percent of small businesses
offering insurance extended the offer to their employees' dependents as well.
And the the majority of companies surveyed charge a higher premium for dependent
coverage than for employee coverage. Our other research indicates that a very
large portion of the uninsured are employed workers' dependents
who do not qualify for public health programs. Again, special
incentives for dependent coverage could be a wise choice for targeting federal
funds toward the uninsured. Another cost-effective option to
reduce the number of uninsured among the employed population is
allowing State Children's Health Insurance Program (S-CHIP)
funds to be used by parents of eligible children to purchase coverage for them
through their employer. One reason employers with mostly low-wage workers often
do not offer employee health insurance is because their
employees cannot afford to pay a share of the premium. Aid from the S-CHIP
program could encourage more employers to offer family coverage as well as more
employees to buy into employer insurance. Currently, due to displacement
concerns, states are prohibited from allowing the funding to be used in this
way. However, recent studies have demonstrated that this concern may be
unwarranted. Nonetheless, appropriate safeguards could be implemented to avoid
replacing private dollars with public dollars. Another subgroup of the
uninsured, also associated with employment, is the more than 17
million people in families with at least one worker and no employer offer of
coverage. This group, while lacking the advantage of an employer premium
contribution, would also be a cost-effective group to target with tax subsidies
because employer group coverage can be purchased for 30 to 40 percent less than
coverage in the individual market. The Infrastructure of the Employer System Is
Key. Access to health coverage is not only an issue of
affordability, but infrastructure and information. Many employers already play
an important role in each of these areas and, with the proper incentives, more
employers could do the same. The current employer-based coverage system in the
U.S. is serving the nation well. Not only are employers uniquely effective in
pooling varied risks, but they also are a driving force in negotiating fair
prices and quality improvement measures. Individuals negotiating on their own
behalf would have far less influence in driving these variables. While both the
number of workers offered health insurance by their employer
and the number of workers taking health insurance offered by
their employer have decreased over the past decade, appropriate reforms could
reverse this trend. This will be especially true once small employers - with the
help of targeted tax incentives to either the employer or the employee for
purchasing employer coverage - become more formidable players in the insurance
market and insurers begin competing for them on the basis of cost, quality and
ease of administration. But most importantly, the employer-based insurance
system is already in place. The urgent nature of the growing
uninsured population precludes the option to build a
substantially new and different insurance system based on a different purchasing
structure, as some are suggesting. Political and financial obstacles associated
with such massive reform would severely delay the resolution of the problem of
the uninsured. Expanding Employer and Employee Participation Is
Key . Designing tax subsidies to attract both employer and employee purchase of
insurance requires careful study of subsidy level, administrative complexity and
other factors necessary to reach a threshold that would result in the choice to
participate. We have found that community-sponsored programs around the country
that are expanding insurance coverage in their local areas can serve as models
of reference for these thresholds. For example, one employer-based model found
that subsidizing less than one-third of the premium caused difficulty in
attracting participants. Moreover, the stability of the subsidy appeared to be
important to the success of the program - indicating that the subsidy should
operate as a guaranteed percentage rather than as a fixed dollar amount.
Applying observations such as these in designing a tax incentive plan to reduce
the number of uninsured could greatly increase that plan's
potential for success. With added federal support that leverages funding from
private and other public sources, substantial opportunity exists to replicate
these experiences around the country. In any case, tax incentives would give
more small employers the proper incentive to provide coverage and the incentive
for employees to accept coverage for themselves and their dependents. This would
result in more Americans being insured, lower overall health
care costs, and ultimately more affordable coverage for small businesses.
Maintaining Current Employer Efforts Is Key. Some concerns have been raised that
public/private models for expanding coverage will encourage employers to drop
existing insurance offerings in the belief that public programs will cover their
employees. Any tax or other subsidy for the uninsured must be
carefully targeted to ensure that it be utilized only by the segment currently
declining coverage, and not be misdirected toward (or "crowd out") those who are
already insured. Possible measures to prevent displacement or crowd-out include
targeting subsidies to employers who do not now offer insurance options or who
increase their insurance options, targeting employees who had not previously
elected coverage for themselves or for their dependents. Some community programs
we have studied that have tried to facilitate employer-based coverage in their
local areas limit subsidies to employers who have not offered coverage within
the past year. Still other models have prevented crowd-out by targeting
subsidies to only limited benefit packages that would not be otherwise
attractive to the employees of employers already offering a standard employer
benefit package. Information to Facilitate Awareness Is Key. An important part
of the solution to health insurance coverage - often overlooked
- is information and education, for both employees and employers. It is not
uncommon for small employers to be unaware of the various options they may have
for offering affordable coverage. Clearly, education initiatives could help
employees and employers understand the critical value of health
insurance, as well as ways to keep their health insurance
premiums down once they do have coverage. While many of the
uninsured do not purchase insurance because it is simply
unaffordable, there is some amount of misconception regarding the affordability
of health coverage. In a survey by the California
Health Institute, many individuals who cited expense as the
reason for not purchasing insurance actually agreed that it was affordable once
they were informed of the true cost of various policies. More than likely, there
are similar misconceptions among small business owners. This may indicate that
some amount of uninsurance could be reduced through broad efforts to increase
awareness of options. Educational efforts should be multifaceted - directed
toward small businesses, employees and individuals not linked to the workforce.
Efforts should include increasing awareness of all available insurance products
for both businesses and individuals. Educational efforts must also include
efforts to inform those already eligible for public insurance programs of how to
access those programs. The State Children's Health Insurance
Program (S- CHIP) is just the most recent example of a program in which too few
members of the eligible population are enrolling for program benefits.
Conclusion Finding answers to the challenge of the uninsured is
essential, not only for the uninsured but for the nation's
health care system as a whole. America's
health care providers are carrying a heavy financial burden
created by uncompensated care, and this burden cannot continue to grow in size
without serious damage to the nation's health care system, the
people who provide care, and those who receive that care. We have learned
through our research that the vast majority of the uninsured
have a connection to the work force. We believe the use of highly targeted tax
subsidies to encourage workers to purchase insurance coverage, and employers to
offer health coverage, can efficiently build upon the
infrastructure of the current employer-based system. We also have learned that
educating employees and employers can reduce the ranks of the
uninsured by ensuring that they are fully informed of the value
and options of health insurance. Recently, we have had
tremendously good news that lays the foundation for directing resources towards
this problem. The poverty level is the lowest in decades, the budget surplus is
estimated to exceed $230 billion, and more Americans were able to get insurance
coverage through their employers. The time to take action on the
uninsured is now. The Healthcare Leadership Council is
encouraged that there appears to be a renewed willingness by both political
parties to dedicate some of the nation's prosperity to resolving this important
public policy issue. We urge you to take advantage of this recent momentum and
pass legislation early in the 107th Congress to help end the crisis of the
uninsured. This must be our national priority for 2001. We will
work with the new Congress and the new Administration to find concrete solutions
for helping the uninsured. Thank you for the opportunity to
share HLC's views today. We stand ready to assist this committee in any way as
you work toward solutions that will allow all Americans to enjoy the benefits of
our nation's health care system.
LOAD-DATE: October 30, 2000, Monday
