By: HUB’s EB Compliance Team
Several states are starting to explore alternatives to the private health insurance market. While these initiatives focus on the individual insurance market, employers (who are in the group insurance market) should pay attention to these proposals.
U.S. Supreme Court Justice Louis Brandies wrote in 1932, “[A] State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” In carrying out this vision in the health insurance space, states are trying either to bring down costs through greater negotiating power or expand coverage through various options.
Expanding Negotiating Power
Among his first acts in office, California Governor Gavin Newsom signed an executive order that, among other changes, would allow California to negotiate drug prices for Medi-Cal, the state’s Medicaid program, and for all other public agencies in CA. The Governor believes that purchasing prescription drugs in bulk will drive down the cost of prescription drugs for the state and all public sector employers in CA.
In addition, the order directs the California Department of General Services to develop a framework that would allow private purchasers, such as employers, to opt in to this State prescription drug purchasing program.
What This Means: If California is able to successfully reduce drug prices for Medi-Cal and other public agencies in CA through this bulk purchasing program, those savings could be extended to employers to who choose to join the state program. However, it may also result in costs being pushed to the private insurance market if pharmaceutical companies feel they need to make up lost revenue due to California’s negotiations.
Public Options
Additionally, as part of the executive orders described above, Governor Newsom is asking the federal government to allow California to pursue a state-run “single payer” option. New York state also has a proposal to implement a single-payer system under consideration.
Washington state is looking more directly at insurance. Legislation proposed by the governor and a state senator would have the Washington Health Care Authority contract with health plans across the state to offer coverage through Washington’s exchange. Plans offered through the exchange would have standard designs and would reimburse at Medicare rates. Also, individuals who sign up would spend no more than 10% of their income on premiums. This program is referred to as a “public” option, but is one where the state contracts with private carriers to offer health insurance.
Colorado, Minnesota, and New Mexico each have proposed legislation that would allow individuals who don’t currently qualify for Medicaid buy into their state Medicaid plans. On the other hand, Connecticut (it appears), Massachusetts, and New Jersey are each looking at creating a separate public option health program to compete with private individual insurance. In a slightly different vein, Maine is looking at opening up the state insurance plan for its employees to any Maine resident.
What This Means: At this point, all of these proposals are just that: proposed. They have no immediate effect for now on employers or individuals. However, from state single-payer initiatives, to Medicaid buy-in, or opening up state plans to private individuals, each demonstrates a desire on the part of state politicians to try and find a solution to rising health care costs.
Even if any of these are enacted, employers that are subject to the Affordable Care Act’s employer mandate would need to continue to offer coverage to avoid those penalties. Regardless of the ACA employer mandate, employers looking to compete for talent will likely want to continue to offer benefits, even if public options become available. Additionally, if these programs (or some form of them) are enacted, enrollment in them may reduce the amount of uncompensated care from health care providers, which may result in a decrease in the cost of private insurance.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
NOTICE OF DISCLAIMER
The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.