House Majority Policy Committee
|
|
House Majority Policy Committee Hearing Testimony of George Hoover, Deputy Insurance Commissioner for the Office of CHIP March 28, 2007 Good morning. I am George Hoover, Deputy Insurance Commissioner for the Office of the Children's Health Insurance Program (CHIP) and adultBasic health insurance program in the Pennsylvania Insurance Department. On behalf of the Insurance Commissioner, I would like to thank the committee members for the opportunity to come before you today to talk about Governor Rendell's new initiative to provide access to affordable, quality health care for all Pennsylvanians. In January 2007, Governor Rendell stated that now is the time to Cover All Pennsylvanians and reform and repair our broken health care system. To address these issues, the Governor announced the Prescription for Pennsylvania, an aggressive and comprehensive plan to reform Pennsylvania's health care system and reduce the number of uninsured adults. The Prescription for Pennsylvania is a set of integrated practical strategies for improving the health care of all Pennsylvanians, making the health care system more efficient and containing its cost - resulting in quality health care affordable and accessible to all Pennsylvanians. The key is that it is a set of integrated strategies. Addressing one area alone may serve as a band-aid, but will not result in reform of the health care system. That being said, I have been asked to speak about the cost of the uninsured in Pennsylvania. Let me take just a moment to provide a brief picture of the uninsured in Pennsylvania. Last year, this committee hosted numerous hearings about the Cover All Kids initiative. In those hearings, we described the 133,000 children that were currently uninsured and our plan to provide them access to affordable, comprehensive health insurance. With your assistance, and the subsequent approval by the Federal government of our plan to provide coverage to additional children, the Cover All Kids initiative has been implemented and I thank you for helping to bring the CHIP expansion from concept to reality. With the Cover All Kids initiative now in effect, we are addressing the uninsured children. But what about the 767,000 uninsured adults in Pennsylvania that need access to the health care system? Data from the 2004 Pennsylvania's Health Insurance Status Survey conducted on behalf of the Pennsylvania Insurance Department indicate: You may be thinking "How does this affect my constituents?" According to a June 2005 Families USA Report, six and one half percent (6.5%) of every health insurance premium dollar in Pennsylvania goes toward covering the cost of the uninsured. Because of this every Pennsylvanian with insurance ends up paying a "free-rider tax." In 2005, the mark-up on private health insurance premiums due to health care costs for the uninsured was estimated to average $277 per year for individual coverage and $681 per year for family coverage. For employers, these added costs are increasingly challenging. Pennsylvania spends approximately eleven percent (11%) more per person on health care than the U.S. average and our health care costs are increasing twice as fast as wages. The Kaiser Family Foundation, in its 2006 Annual Report, stated that premiums for employer-based health insurance rose 9.2% in 2005, the fifth consecutive year of increases over 9%. From 2000 to 2006, growth in Pennsylvania family premium costs was nearly six times (75.6%) that of median wages (13.3%) and more than four times that of inflation (17%). How are those additional premiums spent? Just because someone is uninsured does not mean that he does not get sick and need health care services. But it does mean that person is unlikely to receive care in a doctor's office, and is more likely to receive care from a hospital emergency department - and emergency rooms are much more expensive than primary care providers. A non-emergency visit to the emergency room costs about $353; a non-emergency visit to a clinic or doctor's office costs approximately $137. Yet, without insurance, individuals are limited to where they can turn for health care. In 2005, according to the Families USA report referred to earlier, the cost of health care for uninsured Pennsylvanians, not including what was paid by uninsured individuals, was more than $1.4 billion. That cost is expected to rise to $2.0 billion by 2010. But costs of the uninsured should not be measured in direct dollars alone. Other impacts also must be considered in the cost of the uninsured. In an Institute of Medicine 2003 report, every year the deaths of 18,000 people between the ages of 25 and 64 can be attributed to a lack of health insurance. In addition, hours of missed work due to illnesses, unpaid bills due to those hours of missed work, the consumption of savings, ballooning of credit card debt, etc., all add to the overall cost of not having affordable access to quality health care. For the uninsured, each additional cost has a snowball effect, further impoverishing him with every event. Additionally, the cost of uncompensated care adds to the cost base of physician and hospital revenue. This drives up the cost for those that are able to pay for care through insurance. Insurance rates increase as hospitals and other health care providers attempt to recover this cost through negotiating higher rates for health care services paid for by private insurance. As rates increase, more employers drop employer sponsored insurance (decrease of 4.5% between 2000 and 2005 according to a Kaiser Commission on Medicaid and the Uninsured (KCMU) report). This causes an increase in the number of uninsured, adding to the size and speed of the snowball - and the cycle continues. More and more people rely on the safety nets that are available and funded through tax dollars or philanthropy. Federal outlays for the health care safety net grew from $19.8 billion in 2001 to $22.8 billion in 2004, an increase of 15.4%. (KCMU Report) So, you may ask, what are we to do about this? Expanding access to appropriate care will (a) improve the quality of care that Pennsylvanians receive and (b) drive down the cost of health care for families and employers. A major component of the Prescription for Pennsylvania is the Cover All Pennsylvanians initiative (CAP). CAP will provide access to affordable health care coverage by creating an affordable health insurance product for small business low-wage employees, the uninsured self-employed and other uninsured individuals through a combination of efforts. Small businesses with 2-50 employees that are low-wage employers (the average wage of all employees must be less than the average wage in Pennsylvania, currently $40,000), and who enroll at least 75% of all employees who work over a specified number of hours per week will be entitled to participate in the CAP program. As a participant, the premiums for the enrolled employees will be discounted. The employer will be required to pay 65% of the discounted premium for the enrolled employees and the enrolled employees will be responsible for the remaining 35% of the discounted premium. This means businesses will pay far less for employee health care because of the program, and thus will be more willing to purchase coverage than is currently the case. In dollars and cents, employers that meet the eligibility requirements and choose to participate will pay approximately $130 per employee per month. Employees whose employers participate in CAP will pay premiums ranging from $10 for those with income no greater than 100% of the poverty level ($10,210 for an individual and $20,650 for a family of four) to $70 for those with income greater than 300% of the poverty level ($30,630 for an individual and $61,950 for a family of four). Employees with incomes no greater than 300% of the federal poverty level, who are uninsured because they cannot afford the premiums for private health insurance offered by their employers, may also apply for CAP. The Commonwealth will determine if it is more cost effective to pay for their employer sponsored insurance or to have them participate in CAP. Other uninsured individuals, including the self-employed, may also participate in CAP. Those with incomes no greater than 300% of the federal poverty level may apply to CAP and will pay premiums ranging from $10 to $60 per month depending on family income. Current adultBasic enrollees, as well as those on the waitlist, will be eligible for CAP. If uninsured individuals, including the self-employed, have incomes greater than 300% of the federal poverty level, they also may apply to CAP; however, they will pay full monthly premiums, which are anticipated to be approximately $283. To discourage employers from dropping their current private insurance coverage just to participate in CAP, small low-wage employers must not have offered health insurance coverage to their employees for the six months preceding their application for participation in the program. To discourage individuals from doing the same, individuals with household incomes greater than 200% of the federal poverty level must be uninsured for six months; individuals with incomes no greater than 200% of the federal poverty level must be uninsured for three months. There are exceptions to these "go bare" periods to allow for individuals who have lost their health insurance coverage for reasons such as the loss of a job or the death of a spouse who was insured. CAP will be provided through managed care plans doing business in Pennsylvania. The Blue Cross/Blue Shield plans will be required to submit proposals. CAP will replace the current state funded adultBasic program, which provides a limited benefit package. The infusion of state funds from a number of sources will serve as the state match portion for accessing federal Medicaid funds to allow both an increase in the number of individuals enrolled as well as an increase in the benefits provided. The intent is to enroll approximately 153,600 individuals during the implementation year. We anticipate growing the program so that in state fiscal year 2011-2012 we will be serving approximately 431,000 adults. The health care premium and administrative costs of Cover All Pennsylvanian's will total approximately $302.2 million in FY 2007-08. These costs will be covered by a variety of revenue sources, including existing state funds currently used for the adultBasic program ($31.3 million from tobacco settlement funds and $52.2 million from the Community Health Reinvestment agreement), federal Medicaid matching funds ($104 million), enrollee ($68 million) and small employer cost-sharing ($0.7 million), and a Fair Share Tax levied on the payrolls of businesses that do not offer health care coverage to their employees ($58.6 million). Total estimated revenue is $314.8 million. CAP will begin providing health care coverage for uninsured adults in early 2008, assuming timely passage of state legislation to implement the program and prompt approval by the federal government of the proposal to use federal funds to cover individuals with income no greater than 300 percent of the federal poverty level. CAP and Cover All Kids will make affordable health insurance available to the vast majority of uninsured Pennsylvanians, but this is only one piece of the puzzle. To effect true reform, we must address affordability, access, and quality as equal parts of the plan. As you continue to hold hearings on each segment of the strategic plan, I am certain that you will agree that in this case, as the Governor stated, the cost of inaction will far outweigh those associated with the actions outlined in the Prescription for Pennsylvania. Thank you for convening this hearing and allowing me the opportunity to speak about the uninsured and the Prescription for Pennsylvania. I am available for any questions that you may have. |
