This New Health Plan Is No Cure
By Arlene Weintraub
In coming months 50 of the nation's top employers are going to begin promoting what sounds like a radical new health plan. On Jan. 27, the coalition -- which includes GE (GE ), McDonald's (MCD ), and Sears (S ) -- announced it'll offer discounted health benefits to its members' uninsured employees under a new plan called National Access. Potential beneficiaries include 3 million part-timers, contractors, franchise workers, and others who are traditionally denied access to health benefits.
Those employees will have to dig into their own pockets to get the coverage. But the companies vow they'll offer much better rates than the workers could get if they were to buy individual coverage on the open market.
Drill down to the details, though, and National Access looks like nothing more than a Band-Aid for a rapidly hemorraghing health-care wound. On Feb. 2, the journal Health Affairs published a study showing that half of all personal bankruptcies filed in the U.S. each year are attributed to medical costs -- even though most of those people have health insurance.
BARELY A DENT.
If that's true, imagine how hard it is for those who don't have any insurance: The ranks of the uninsured have grown 13%, to 44.7 million, since 2000, according to the Kaiser Family Foundation. Four out of five people who don't have coverage live in households with at least one full-time or part-time worker. Many of these people refuse to pay anything for health coverage, because they think they don't need it, or they just can't afford it.
National Access employers readily admit that they expect only 15% of eligible workers to sign up for the program when it starts. That's 450,000 people -- roughly 1% of the country's entire uninsured population. "I have a hard time saying this will make a dent in the problem," says Kaiser Family Foundation Vice-President Gary Claxton.
National Access will be a hard sell for the employers offering it. The lowest-cost option, available in some states for under $5 a month, provides nothing but small discounts for some doctor visits and prescription drugs. More pricey plans, costing anywhere from $88 to $400 a month, offer limited coverage for doctor and hospital visits, prescriptions, and preventative care. The companies don't have to kick in any subsidies because UnitedHealthcare (UNH ), Cigna (CI ), and Humana (HUM ) agreed to provide the coverage, assuming the employers would be able to provide a big risk pool.
However, that pool of reasonable risk will only get harder to maintain over time. National Access guarantees coverage to workers with preexisting illnesses, and it doesn't kick them out if they get sick. By contrast, individual policies sold on the open market penalize unhealthy workers by charging them ridiculously high premiums or excluding them altogether.
But by including everyone, National Access courts the likelihood of ending up with a lopsided pool, filled with too many sick people. That's because healthy workers tend to shop around for cheap coverage, and if they can find better deals in the individual-plan market, they'll flee. The sicker the National Access pool gets, the higher the rates will climb for those who stay in.
Adding to the problem is the consistent failure of the federal government to pass measures that would provide tax credits and other incentives for people to buy their own insurance. President George W. Bush is expected to push a plan in his next budget similar to his campaign proposal to provide $90 billion in tax breaks over 10 years for people to purchase health coverage.
But past proposals to provide such incentives haven't gotten anywhere in Washington. "It just never happens," laments Greg Lee, senior vice-president for human resources at Sears. "Public policy is what we need to kick this into high gear."
National Access employers will start pitching the program to their employees in the fall. They're gearing up now for massive information campaigns designed to target the uninsured and explain to them in simple terms why they should buy this new kind of coverage. "It's an important private-sector experiment," says Tom Beauregard, health care practice leader for Hewitt Associates, which helped design National Access.
Perhaps, but even with their deep pockets and good intentions, the giant companies behind this initiative may not have enough muscle to close the gaping hole between the health-care haves and have-nots.
Weintraub is Science editor for BusinessWeek in New York
Edited by Beth Belton