The Real Life Effect Of Health Reform In San Diego
ST. JOHN: It's Monday, June second, I'm Alison St. John in for Maureen Cavanaugh. We've heard the pundits debate the implications of the ruling on healthcare reform. Today, we want to focus on the real-life rubber meets the road kind of changes for you, me, and our neighbors. Some claim it won't make much difference to people who are already insured. Is that really true? And what about the 30% of people in San Diego who are uninsured? My guests today are on the phone doctor Gerald Kominski, who is the director of the UCLA policy for research. KOMINSKI: My pleasure. ST. JOHN: And Mike Barone, Intercare solutions is a local insurance brokerage that provides insurance to companies who offer them to their employees. Thank you for joining us. BARONE: A pleasure. ST. JOHN: Doctor Kominski, I wanted to talk about first people who do not have insurance, and then we'll talk more about people who do have insurance. The group they think has been most affected by the recession are people who have lost their jobs and can't afford insurance. How will health reform help them get coverage? KOMINSKI: It's going to provide them insurance through two mechanisms. One is through expansion of the state's Medicaid program. The expansion of Medi-Cal is expected to provide coverage to about 1.5 million Californians who do not have insurance today. That's one major way that the legislation is going to increase coverage. ST. JOHN: And before you move on, we've heard that health insurance isn't going to cover everybody. So is there an estimate of how many people will remain uninsured? KOMINSKI: Yeah, there is. We've done work here at UCLA to say on any given day in California, we estimate there are about five million people without coverage. You take that at any day of the year, we estimate that the legislation is going to provide coverage to about 3 million of those currently uninsured, which means that another 2.8 million or so are not going to receive coverage under the legislation. ST. JOHN: Do they get covered by this increase in Medicaid or are they left out in the cold again? KOMINSKI: No, the people who remain uninsured under the law are two groups primarily. One group are the undocumented. They are excluded from benefits under the legislation. And we estimate there are about a million Californian who is fall into that category. The other two million who we think will not be uninsured -- I'm sorry, who will not be insured are eligible for benefits but for a variety of reasons will not take up coverage or will not sign up for programs that they're eligible for. ST. JOHN: They may feel that the punishment as it were, the so called tax might be more affordable for them than buying health insurance? KOMINSKI: Yeah, that's a part of the group. But a large part of that are people who will be eligible for Medi-Cal but won't sign up for reasons that historically have just been that people don't take advantage of public programs that they're eligible for. ST. JOHN: Interesting. KOMINSKI: And because under the law these individuals will be relatively low income, they're not required to pay the penalty either. ST. JOHN: How will someone know if they qualify for Medi-Cal and don't have to pay that penalty? KOMINSKI: They'll have to actually go to sign up for an eligibility determination, which is going to be one of the functions of the new exchange that's being set up to be in operation in 2014. So the exchange will be a mechanism for people to determine weather eligibility for benefits and whether they go into Medi-Cal or whether they qualify for a subsidy to buy private insurance. ST. JOHN: Let's talk about this state insurance exchange because that's important for both groups of people in a sense, and also possibly for people who are employed. What is the state's insurance exchange? KOMINSKI: It's basically a large marketplace for people to buy insurance policies. Anybody who qualifies for a subsidy under the affordable care act will have to buy their policy through the exchange. We estimate that as many as three million Californians will be buying their insurance through the exchange in 2014. And that includes people who currently buy insurance in the private market on their own without subsidies, as well as people who are currently uninsured because they can't afford to buy insurance on their way. The exchange is going to be a big marketplace. It regulates insurance policies, it will regulate what insurance can be offered. But it's the mechanism for people who qualify to get those subsidies and get insurance. ST. JOHN: We're all going to be learning a lot more about the exchange. Let's turn to Mike Barone now who as I mentioned is with a local insurance commercial brokerage, advising employers. About half of San Diegans get their insurance through their employers. BARONE: That's correct. I think it's true in the near term, if you fall into one of six categories. If you're an employee of a government agency, it's not going to impact you in the long-term. Some individuals might choose to purchase healthcare in that regard. The biggest amount of change is going to be in the private sector. If you work with less 50 employees, you don't have to. If you work for an organization with more than 51 employees, your employer is subject to healthcare reform, and there will be some interesting decisions especially on the smaller end of the market with respect to these exchange, and whether or not it's beneficial for you to purchase healthcare in that regard. ST. JOHN: You mean for the employer? BARONE: The employer and even individuals of that organization. ST. JOHN: So there might be organizations who offer you a choice? BARONE: Correct. ST. JOHN: To either go, here you can have our health insurance or you can go out there to the California change. BARONE: And there may or may not be penalties that accrue to the employer in that regard as well. ST. JOHN: It's all about play or pay, right? How will it work for companies with 50-1 hundred employees? BARONE: It goes beyond that. A pay or play decision, if you're the CEO of an organization, you look at a calculation and say does it make more sense for me to pay a penalty, and that could $2,000, $3,000 per year per person on a monthly basis. And that's predicated on whether you offer insurance for your employees or not. It's a fairly complex calculation. There will be organizations especially in three primary sector, restaurant, hotels, and retail, where you have a fair number of part-time employees, and even those with full-time, they'll be making some difficult decisions as to whether or not they want to even continue to provide healthcare. ST. JOHN: Legally, they have to provide something, but they could just pay. BARONE: They have to provide healthcare for those people working full-time, which is more than 30 hours per week. ST. JOHN: And for those -- what is the option for those who decide that's more than they can handle? BARONE: For those organizations, you might move your full-time employees to a part-time status, which would eliminate the need to provide healthcare. You could pay a penalty to the government and allow your employee who is qualified for a subsidy to take that subsidy and then purchase insurance in the exchange environment. However, you have to look at this from a recruiting and retention perspective. If I'm a full-time employee working for a hotel that offers healthcare and one that doesn't offer healthcare, am I going to ask for a higher wage from the organization that does not provide healthcare? ST. JOHN: Right. It sounds like the same kind of thing that's been happening with pensions might start happening with health benefits in the sense that rather than being offered, here's your benefit, you might find yourself as an employee being offered here's a lump sum, go off and find your own healthcare. BARONE: There will be in our opinion a huge shift to what's called defined contribution. It's the cafeteria type programs where the employers will say I will contribute $6,000 per year for healthcare. Here are your various options to go spend that, and they fix that price. ST. JOHN: But some people like that. It gives you more individual freedom. If you're really a savvy person, you might get a really good deal. There's arguments pro and con. But in general, a large organization with a lot of people to insure is bound to get a better deal for an individual, or not? BARONE: I believe on the whole, yes that is true. I think the law of large numbers plays to their advantage, and will be better served in an employer-type setting than on individual. But there will be some individuals who find it to their advantage to purchase healthcare independent of their employer, even if it's offered. ST. JOHN: When you look at this scenario and you look at even people who are currently getting insurance from their employer, do you think that there'll be a larger number of people actually either because they choose or because they're forced to, using this option and using the state insurance exchange health insurance plan? KOMINSKI: Well, I think Mike just gave? Excellent reasons why some smaller employers who are required to provide insurance, and those who have at least 51 employees or more, why they might choose to let their workers go into the exchange with a subsidy from the employer. This would actually be more advantageous for the employer and the worker. ST. JOHN: Can you explain why that would be? KOMINSKI: From the employer's perspective, it gets them out of the business of having to shop for health insurance for their workers. And if they are willing to contribute to a certain amount of money toward the premium, the workers are likely to find more options available in the exchange than the company would be able to provide. It's generally very expensive for small companies in particular to offer a variety of health plans for their workers. Generally, if they do provide health insurance, they provide one and only one option. Take it or leave it. It's only really large employers that can afford to negotiate with multiple health insurers and offer a choice to their employees. ST. JOHN: Mike was questioning that and suggesting it might be one or two plans? BARONE: No, I agree. I think the map is a little bit simple. If you're an individual, and in San Diego the average price of an individual product in a group setting is $5,000. So that's how much the employer has to pay the insurance company. And let's say today they have an 80-20 split. So they pay $4,000, the employee pays $1,000. If they can pay $3,000 and a penalty, do they save $1,000? They do, and the employee comes back and says you need to gross my income which is still $5,000 in the exchange. ST. JOHN: I can see why it's a benefit to the employer. KOMINSKI: Here's the benefit to the employee. I don't disagree with his calculation at all. He's got the calculation correct. What I'm saying is if the employer is saying to say, look, rather than pay $4,000 for your health insurance benefit to a single company, because I can't afford to negotiate, to offer you five different policies at $4,000 regardless of what you choose. I'm going to give you the $4,000 to buy insurance in the exchange, and we know that the exchange is going to offer a variety of health insurance plans. ST. JOHN: Okay. KOMINSKI: So the advantage is that currently the data show that very few small companies offer more than one plan to their workers. ST. JOHN: Got it. So the worker is going to get more options and more choice. KOMINSKI: That's correct. ST. JOHN: What is to stop insurance companies in this exchange from raising their rates in California? I understand that's an issue. KOMINSKI: Well, I think that the theory is that there are -- first of all, millions of potential customers, and the question is how many different insurers will be competing for those customers. The exchange has the potential to encourage a degree of competition that might not exist otherwise. What we need to see is whether there is sufficient price competition between the exchange to keep prices from just being much higher than they would have been otherwise. ST. JOHN: And pricing people out of the market even if they do have a nice lump sum from their employer. KOMINSKI: Correct. BARONE: Most health plans don't like to compete against each other in an open marketplace type environment. So what California is going to do, are who has been very aggressive and at the forefront of the development of these exchanges, and likely the first to probably launch a really large exchange in a particular state, they're going to pass legislation which is going to have pricing controls. If you're a health insurance carrier that provides products directly to the marketplace for employee, your pricing is going to be offered for products inside that exchange. You might not be able to provide products outside the exchange unless you provide products inside the exchange. There are going to be a set of market reforms that I see legislators passing that force insurance companies to do things to control pricing for that marketplace. ST. JOHN: Thank you for beginning to unwrap the unknowns about the way this is going to unfold.
We've heard the pundits debate the implications of the ruling on health care reform. Today we want to focus on the real life, "rubber meets the road" kinds of changes this will mean for you, me, and our neighbors in this community. Some claim it won't make much difference to people who are already insured. Is that really true?