Prospects for Reform in Health Insurance Coverage and Workers’ Compensation

1. Prospects for Reform in Health Insurance Coverage and Workers’ Compensation E. Richard Brown, PhDProfessor, UCLA School of Public HealthDirector, UCLA Center for Health Policy Research May 2, 2003

2. Health care reform appears to be back on political and policy agenda • U.S. is only economically developed country that has a large uninsured population — a continuing and growing problem • US plagued by rapid increase in health care costs — more out of control than in other economically developed countries • These problems are related — fragmented health care coverage arrangements make it more difficult to control costs as well as improve access and quality • Efforts to solve these problems may create opportunity to also control workers’ compensation costs

3. The number of uninsured is back up, driven by declining job-based insurance and rising costs Persons Without Health Insurance, All Ages, U.S., 2000 and 2001 Source: March 2001 and 2002 Current Population Survey

4. California has a lower rate of job-based insurance than the nation as a whole • Nonelderly adults and children overall (under age 65) (March 2002 Current Population Survey) • 58.0% in California vs. 65.9% in US have coverage through own or family member’s employment • Both primary and dependent coverage rates are lower • Even in full-time full-year employee families, job-based insurance coverage rates are lower • Job-based insurance coverage in California is lower across all firm sizes • Job-based insurance is lower in Californiamainly due to lower proportion of workers whose employer offers health benefits and much less related to eligibility of workers for benefits or their acceptance (or take-up) of them

5. Low rate of employer offer accounts for high uninsured rates among employees • Among uninsured employees, 6 in 10 work for employer that doesn’t offer health benefits – the main reason for their being uninsured Uninsured Employees by Access to Own Job-based Insurance, Ages 18-64, California, 2001Source: 2001 California Health Interview Survey

6. Rising costs are further eroding employment-based health insurance coverage • Premiums increased 13.0% in California and 12.7% nationally in 2002 — largest rise since 1990 • Premiums now average $2,845 for single coverage in California and $7,471 for family coverage — slightly lower than nationally • Amount employees pay for coverage has risen substantially • For single coverage, employees now pay an average of $342 per • For family coverage, employees now pay an average of $2,806 per year • Employees’ share has been increasing rapidly • Incomes of most workers falling behind rising health insurance costs • Benefits eroding — less coverage, higher cost sharing for services • Small firms offering coverage at all has declined and large firms are cutting back on or dropping retiree coverage Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2002

7. These health care coverage problems translate into political dis-ease and rekindle reform efforts • Despite budget problem, rising health care costs and growing uninsured problem are pushing health care reform onto policy and political agenda • Health insurance coverage and costs rank high among Democratic voters • All Democratic candidates will address this issue • Among general population • 35% say health care costs are key issue for government to address • 17% say access to care is key issue • 3 in 4 say it is very important for the President and Congress to address problem of uninsurance (Kaiser Family Foundation poll, Feb 2003) • Among employers, health insurance is the leading concern among compensation costs — ahead of salaries and even workers’ compensation(Kaiser Family Foundation/HRET 2002 California Employer Health Benefits Survey)

8. Key proposals in California to expand coverage • Universal coverage should remain our goal • All other economically developed countries have achieved this goal • We already spend enough to do the job! • More likely to effectively expand coverage than to effectively control health care costs • Two approaches in California • Requiring employers to help payfor and maybe organize health insurance coverage — an employer mandate or “pay-or-play”? • Replacing employers’ role in organizing health insurance with general tax financing and government program — “single-payer” system?

9. Rationale for employer mandate or “pay-or-play” • Two ways to require employers to participate in health insurance financing • Employer mandate requires employers to provide & help pay for health benefits • “Pay-or-play” requires employer either to provide health benefits OR pay into public program that provides coverage • Rationalerests on low employer offer rate & unaffordability of health benefits for low- and moderate-wage workers with current voluntary “system” • 85% of uninsured are in working families — 52% in families headed by full-time full-year employee — mainly low-wage workers • 6 in 10 uninsured employees work for firm that doesn’t offer health benefits • Cost shifting of health benefits to spouse’s employer • Creates uneven playing field among employers • Many employers get “free ride” by not paying for their employees’ health benefits • Results in competitive disadvantage for employers that pay for health benefits

10. “Pay-or-play” has political legs in California • Pay-or-play interest began to grow after Health Care Options Project • California Health and Human Services Agency commissioned 9 papers through policy process mandated by legislation (SB 480) • Health Care Options Project: www.healthcareoptions.ca.gov • Pay-or-play proposal by Brown and Kronick, “Healthy California”, generated considerable interest • “Healthy California” proposal introduced in Legislature by Sen. Jackie Speier (SB 1414 in 2002) — mixed public-private financing for universal coverage • Pay-or-play would: • Create level playing field • Enable those who want to keep employer health insurance to do so • Can achieve universal coverage when includes public program for those who are dissatisfied with employer plan or don’t have one available

11. “Pay-or-play” has political legs in California • New pay-or-play bill introduced in 2003 as SB 2 by Sen. John Burton (President of Senate) and Sen. Jackie Speier • Comprehensive health benefits • Financed by employer/employee payroll premium “fee” and by maximizing federal matching funds for Medi-Cal and Healthy Families • Existing state agency administers program, including public “pay” program • Contracts with health plans • Has strong support with powerful political supporters • Sponsored by California Federation of Labor — unions plan to make pay-or-play their No. 1 legislative agenda in California and nationally in 2003 and 2004 • Supported by California Medical Association — CMA planning to put political resources into this legislative campaign • Also supported by health care advocates • Parallel proposal with partial employer mandate sponsored by Blue Shield

12. “Single-payer” proposal also prominent in California debate • Single-payer bill introduced in 2003 by Sen. Sheila Kuehl as SB 921 • Would create universal health insurance program in California that replaces all current health insurance financing and eliminates employer and/or individual purchase of health insurance • Comprehensive health benefits • Financed by employer/employee payroll tax and other taxes • New state agency administers program • Contracts with all licensed providers and plans • Single-payer has support of health care advocates and some unions

13. Political support growing for reform • Broad and (so far) unified coalition supporting efforts to expand health insurance in California — more common ground than decade ago • Labor, health care organizations, advocates • Strong legislative leadership • Most business interests oppose any type of employer requirements — pay-or-play or single-payer • Small-firm associations such as National Federation of Independent Businesses (NFIB) likely to mount aggressive anti-reform campaign • Some large firms, especially unionized ones, may support pay-or-play in order to create even playing field • Opportunity to link with reform of workers’ compensation medical care • Uniform fee schedule for ambulatory care and utilization management especially likely • 24-hour coverage?