CALPIRG Education Fund
The recently passed federal health care reform law will make significant changes in how health insurance and health care work for consumers, businesses, and local and state governments, as well as how insurers and providers operate. But whether Americans experience improved care, lower costs and greater access depends largely on what happens next.
The federal bill provides powerful tools. Many of its provisions go into effect automatically or are enforced through federal agencies. But several of the most important decisions are left up to states. Unless state leaders take advantage of this opportunity and put reform into action, consumers and businesses will continue to face soaring premiums and out-of-pocket costs. While there are federal backstops for state inaction, these are an inadequate substitute for the active engagement of on-the-ground policymakers who are able to adapt the law’s requirements to the unique policy and political landscape of their states.
Beyond formulating laws and regulations, states share responsibility for educating the public about health reform. Some of the new law’s changes take effect this year, and many consumers will not be aware of what new benefits are available to them.
This guide has been written to assist state policymakers and advocates as they engage with the numerous issues and opportunities presented by the new law.
States will have the opportunity to create new health insurance exchanges where individuals and small businesses will be able to pool their bargaining power and get information allowing them to choose the best health plan for them. But an exchange should be more than “Expedia for health care.” In giving consumers better choices and offering the help they need in buying coverage, it can act much like the human resources department of a large employer. As a purchasing pool, it can use its purchasing power to drive better quality for patients, and rein in costs.
Key recommendations for states as they create the exchanges include:
* Studying the state’s coverage landscape to ensure the exchange meets its unique needs.
* Offering a powerful, easy-to-use set of tools for consumers, including clear comparisons between plans, quality and cost ratings, and ensuring there are a range of clear, distinct choices, rather than an endless array of confusing products. The exchange should help consumers easily sign up for a plan, and get the benefits to which they are entitled.
* Improving care quality and lowering costs by encouraging payment reforms that deliver better care for consumers. This may be accomplished by actively negotiating with plans on behalf of consumers, stopping excessive premium hikes, setting strong standards and ratings for quality care, and opening eligibility to as many individuals and businesses as possible, allowing them to pool their bargaining power on a single exchange.
* Protecting against the risk of insurers cherry-picking healthy people outside the exchange, which would drive up exchange premiums.
* Ensuring that the exchange’s governance is transparent, accountable, and responsive to consumers’ interests, not those of the insurance industry.
Lowering Costs and Improving Quality
The new law offers a host of opportunities that will allow states to adopt ground-breaking reforms to make their health care systems more efficient and effective. Key strategies include prioritizing primary care via coordinated care teams called “medical homes,” promoting the management of chronic diseases to help patients prevent acute flare-ups of their conditions, bundling payments to hospitals to reward those who provide effective care, and encouraging integrated care models called Accountable Care Organizations.
The specific steps states should take include:
* Adopting these transformative changes in state Medicaid programs;
* Pursuing the grant funding the federal law offers to support these programs;
* Directly implementing these reforms in state employee benefit programs.
New protections extended by the reform law will end many of the worst insurance industry abuses. But many of these protections will require a state role to ensure that they are enforced and deliver the maximum benefit to consumers:
* Young people up to age 26 will now be able to stay on their parents’ coverage. States should encourage insurers to extend this benefit immediately, so that graduating seniors do not lose their coverage, and should ensure that young people applying to rejoin family plans can do so without being discriminated against if they are sick.
* The practice of insurers’ retroactive cancellation of sick enrollees’ coverage will soon be ended. States should further require insurers to get regulatory approval before a patient is dropped.
* The law offers states grant funding to create or strengthen programs to review insurers’ premium increases. States should use these funds to make sure that their programs look at all aspects of an insurers’ business, including the steps they are taking to lower costs and improve quality. They should also make rate filings publically available.
* There is also funding to help states set up new temporary high-risk pools helping those with pre-existing conditions get coverage. States should make sure consumers are informed about these options, ensure the pools are not used as a dumping ground by insurers and employers, and finance them in an equitable fashion.
* Insurers will have to meet new standards for how much they devote to care, as against administrative costs. States should analyze these new standards to see how they mesh with their existing protections, potentially strengthening the federal rules if they would otherwise weaken current state law.
Beyond the Federal Reform
For all the strides taken by the new law, there are many important reforms it does not enact. States should take the opportunity to improve on the law by engaging with these unaddressed issues:
* Promoting greater administrative streamlining and reducing health care paperwork can lower costs for consumers, providers, and insurers.
* Limiting the worst marketing practices of the drug and medical device industries can deliver more affordable medical treatments.
* Encouraging research into the best treatments, and integrating this new knowledge into health IT systems, can reduce medical errors and help doctors.
* Ending the practice of billing consumers directly when hospitals are dissatisfied with the out-of-network reimbursements paid by insurers will protect patients.
* Empowering all payers to negotiate with hospitals en masse will take advantage of consumers’ bargaining power to lower costs.
A State-Level Public Option
The federal reform ultimately did not include a national public option, which would be a strong policy for giving consumers more choices and driving competition in the insurance market. States may wish to pursue this policy within their own borders, but should be aware of issues of size and competitiveness that could affect its viability. They should also make sure that the public option is transparent and accountable, that it works to adopt the latest quality-enhancing and cost-lowering innovations, and that private insurers cannot game the system to weaken it.