AcademyHealth Stateside - 04/11/2005  (Plain Text Version)

Currently, 46 state legislatures are in session, three states (Utah, Virginia and Wyoming) have adjourned for the year, and the Louisiana Legislature has yet to convene. Facing increasing numbers of uninsured, many state legislators and governors are looking for innovative ways to expand health insurance coverage. Countering the common myth that the uninsured are primarily unemployed, the data show that the majority of the uninsured (80 percent) are either employed or are dependents of those who are employed. As a result, many states are exploring strategies that will target this population, thereby reducing the rate of uninsurance.

Outside of ways to expand Medicaid and SCHIP, state legislators are looking at a variety of public-private strategies to reduce the number of uninsured. These include creating incentives for small businesses to offer health insurance to their employees as well as changing state tax codes to encourage Health Savings Accounts (HSAs). This article provides an update on some of the legislation being considered by state legislators to address the problem of access to health insurance. Most of the bills discussed below have either already been signed into law or have passed one house or both houses, signaling a strong possibility that the bills will be enacted this year.

A majority of the working uninsured are employed in small businesses. Small businesses are less likely to offer insurance to their employees and employees of small employers are less likely to take-up any insurance that is offered. These low offer and take-up rates occur for a number of reasons including: small employers employ more low-wage, part-time, or high-turnover workers who may not be eligible or cannot afford health insurance premiums; administrative costs per policy are higher for small employers; and many small employers operate with marginal profits and cannot afford to contribute to the premium, thus affecting the take-up rates by their employees. Legislators in a number of states are taking various steps to stem rising health insurance premiums for small businesses.

- North Carolina legislators are considering legislation (H.B. 20) that would give a tax credit to small employers that pay at least half of their employees' health insurance premiums. The bill calls for a $400-per-year credit for each employee insured and would apply to any business with 25 or fewer employees. The bill has garnered significant support in the House and is expected to move forward.

- Indiana S.B. 459 would allow small businesses that make health insurance available to their employees and their employees’ dependents through at least one health benefit plan to obtain a credit against the business’s state tax liability for the first two taxable years in which the business makes the plan available. The credit is available as long as the employee’s participation in the plan is voluntary and the employee’s share of the premium is paid on a pre-tax basis. The bill has passed both houses and is waiting for the governor’s signature.

- In Illinois, Gov. Rod Blagojevich (D) is proposing an innovative partnership between the state government and local chambers of commerce to help small businesses save money on health insurance. H.B. 905 allows small employers, self-employed individuals, and farmers to form health benefit purchasing cooperatives. The bill calls for the “health benefit purchasing cooperative to be designed so that all of the following are accomplished: (1) the members become better informed about health care trends and cost increases; (2) all members purchase their health care benefits and prescription drug coverage from the same insurer; (3) the members are actively engaged in designing health care benefit options that are offered by the insurer and that meet the needs of their community; (4) the health insurance risk of all of the members is pooled; and (5) the members actively participate in health improvement decisions for their community.”

- A New Mexico bill, H.B. 523/S.B. 271, allows for-profit and non-profit small employers who employ an average of 50 or fewer employees over a 12-month period to voluntarily purchase health care coverage through the state employee health insurance plan. To be eligible, the small employer must not have offered health insurance during the previous 12-month period. Additionally, the bill allows the state to enter into agreements with an association, cooperative, or mutual alliance representing small employers to provide outreach and assistance to small employers to voluntarily purchase such health care coverage. This bill has been signed by the governor.

Health Savings Accounts

Building on the wave of interest in consumer-driven health care, many states are also looking to Health Savings Accounts (HSAs) to decrease rising health insurance premiums, which proponents hope will allow more people to buy health insurance. Because this issue has the backing of federal law and the encouragement of the Bush administration, it is expected to be a priority in many statehouses this session. At this point in the legislative season, 34 states have introduced measures related to HSAs and Medical Saving Accounts (MSAs). These measures range from states adjusting their state tax regulations to include HSAs for purposes of state income tax deductions to making minor technical changes to allowable deductible amounts. So far, six states have enacted HSA legislation.

- In Arkansas, H.B. 1064 adopts federal tax code to exempt HSAs from taxes under state law. It also establishes that contributions made by an employer to an employee's HSA will not be included in the employee's gross income.

- South Dakota S.B. 29 allows for the incorporation of HSA-compatible high-deductible health plans into the South Dakota high-risk pool. The hope is that HSA plans will be a less expensive coverage alternative for pool participants.

- Wyoming H.B. 111, which is very similar to the South Dakota legislation, amends the Wyoming Health Insurance Pool Act to allow the Commissioner of Insurance to offer at least two plans that include a higher deductible option or an HSA option in order to provide less expensive coverage alternatives for high-risk pool participants.

- Mississippi Governor Haley Barbour (R) recently signed a bill that will amend the state code to define the term Health Savings Account and to provide that the term Medical Savings Account be expanded to include HSAs for purposes of state income tax deductions.

- Similarly, Virginia H.B. 1492 creates the Health Savings Account Plan, which requires the Department of Taxation and the State Corporation Commission to propose amendments to the Medical Savings Account Plan to allow eligible individuals to establish HSAs. Recommendations are to be presented to the legislature by January 1, 2006. The bill also allows existing MSAs to be converted to HSAs and authorizes heath carriers to offer high-deductible health plans that can be offered in conjunction with HSAs. House Bill 1492 further requires the state employee health insurance plan to include a coverage option that could be offered with an HSA no later than July 1, 2006.

- North Dakota H.B. 1208 amends existing coverage requirements for mental health and substance abuse treatment to designate that deductible limitations for such treatments may not be applied to high-deductible health plans used to establish HSAs as specified by federal tax code.

Limited Benefit Plans

Another tactic states have explored to address the issue of rising health insurance premiums is allowing health insurance carriers to offer plans that do not include all state mandated health benefits. Typically, these types of plans have somewhat lower premiums because they do not provide coverage for many costly treatments. Traditionally take-up of these “bare-bones” or “mandate-light” policies has been low, however, states are still exploring this option. Below are a few examples of states that are currently considering legislation that would allow carriers to offer these limited benefit packages.

- Existing Montana law allows the Commissioner of Insurance to approve a 12-month demonstration project that allows a health insurance carrier to offer a limited coverage individual health benefit plan or managed care plan. A bill currently being considered (H.B. 318) extends eligibility criteria for the demonstration project to include those residents who either lost eligibility for a health plan because of age or lost coverage under a federally funded health insurance program because of age or failure to meet financial guidelines. The bill also adds coverage for diabetic education, treatment, services, and supplies and coverage for treatment of congenital metabolic disorders to the list of health services that the demonstration project may exclude from its health benefits plan or managed care plan.

- Illinois H.B. 500 creates the Illinois Consumer Choice of Benefits Health Insurance Plan Act, which allows health insurers to offer coverage options that do not include state-mandated health benefits to those in the individual market. The bill does require applications and policies to provide notice that the policy may not include some or all state-mandated benefits. The bill also stipulates that an insurer that offers one or more Consumer Choice of Benefits Health Insurance Plans must also offer at least one plan that includes coverage for all state-mandated health benefits.

- Indiana S.B. 269 allows health insurance carriers to offer a limited mandate policy to individuals and businesses with fewer than 50 employees who had not offered insurance during the previous calendar year. The insurer must provide a list of the benefits that the policy does not include. Policies for individuals must provide coverage for newborn testing, diabetes treatment, adopted children, and minimum maternity related benefits. Policies for small businesses must include screening for breast, prostate and colorectal cancer as well. There are differing House (H.B. 1487) and Senate versions, but they are similar. In his 2005 Agenda for an Indiana Comeback, Gov. Mitch Daniels (R) proposed a similar plan for those below 200 percent of the federal poverty level and for businesses with fewer than 75 employees.

- The legislation in Kentucky, H.B. 278, applies to even smaller businesses -- those with between two and 10 employees. Insurance companies still would be required to cover federally mandated benefits, as well as costs for diabetes treatments, hospice services, and chiropractic care. The bill also creates a high-risk insurance pool to help cover costs for the employees with the most expensive medical conditions. The high-risk pool would be funded by an assessment on premiums among participating businesses.

- Two bills on the table in Georgia have recently been reconciled into one bill, S.B. 174, called the “Small Business Employee Choice of Benefits Health Insurance Plan Act.” Specifically, the bill allows insurers in the individual and small group markets to offer an alternative health benefit plan to both individuals and businesses with 15 or fewer employees that provides coverage for some, but not all, state-mandated benefits. Individuals purchasing such a limited benefit plan must acknowledge in writing that they understand that many services are not covered in the policy. The bill recently passed both the House and the Senate.

Further information on limited benefits can be found in the SCI brief, “Limited-Benefit Policies: Public and Private-Sector Experiences.”