Of all the health insurance market reforms that are supported by the White House, a government-run public health plan option has come under some of the most intense and discerning criticism and, arguably, threatens to derail the President’s entire health reform agenda. However, on Sunday, August 16, the Administration sent its strongest signal yet that it is prepared to deal away a public option in favor of other measures, as long as they would foster competition among health insurers and keep health insurance affordable. Speaking on several Sunday morning talk shows, Health and Human Services Secretary Kathleen Sebelius said that the public option is “not the essential element” of reforming our health care system. White House Press Secretary Robert Gibbs echoed the Secretary’s sentiments. Senator Kent Conrad (DNorth Dakota) – a proponent of establishing nonprofit health insurance co-operatives (co-ops) to provide competition for private health insurers – opines that there simply are not enough Senate votes to pass health reform legislation which included a public option. Interestingly, Secretary Sebelius now suggests that the Administration is open to the consideration of co-ops in lieu of a public plan.

During a town hall meeting held on Saturday, August 15, the President continued to defend the public plan option. However, he also insinuated that he viewed the public option as a small piece of his health reform initiatives. “The public option, whether we have it or we don’t have it, the President remarked, “is not the entirety of health care reform.” This is just one sliver of it, one aspect of it. The President’s stated objective for having a public option is to keep health insurance affordable and, although there remain unwavering supporters of a strong public option among liberal Democrats, the Administration seems to recognize that the public option is not the only means to achieve competition in the health insurance marketplace. At least, the Administration appears to recognize that other competitive measures should be considered to ensure the passage of more sweeping health insurance market reforms.

In today’s LLB&L Weekly Health Care Reform Update, we shall explore the structure of non-profit co-ops, one of the popular alternatives to a public plan, in greater depth and address other features contained in the key health care reform bills introduced in Congress.

Co-Op Structures Considered in Lieu of Government- Run Health Coverage

One of the options being explored in the Senate as an alternative to the “public option” is some form of nonprofit, co-operative association that would either provide benefits through an insurance–like program or would provide health care directly to members, much like a staff-model HMO, or perhaps some combination of these delivery systems. Indirectly modeled after programs such as the rural electric co-operatives, including the Tennessee Valley Authority, there are several health co-operatives existing today in different parts of the country, each sharing certain basic consumer-oriented principles.  

Two examples are HealthPartners, based in Minneapolis-St. Paul, and Group Health Cooperative, located in the Seattle, Washington area. Each of these co-operatives is governed by a consumer board and serves more than 500,000 members in a wide geographic area around its headquarters. Each co-operative provides insurance options as well as direct health care. Their non-profit health care delivery systems own their own hospitals and have their own multi-specialty physician groups. By providing coordinated, high quality care, the two systems contend that they are able to contain costs and make the best use of their integrated delivery system resources. However, another large cooperative in New York City, Group Health Inc., is said to be converting to for-profit status to better compete in the current marketplace.

Co-operatives face opposition from organized medicine, and find it difficult to provide a full range of services in states where the corporate practice of medicine prohibitions do not allow lay entities to employ physicians. Several states like Texas allow co-operatives to be formed as non-profit, employer-driven purchasing groups. These co-operatives must purchase their health insurance coverage from established insurance carriers, but are allowed to combine selected or limited benefit options with multiple employer businesses to create the purchasing power to obtain lower health insurance rates. Individuals are not allowed to join these Texas co-operatives, and the businesses which belong to these co-operatives, have little control over their benefit programs. Additionally, there is little incentive for the insurance carriers to make innovative benefit programs available to the co-operatives.

The goal of senators exploring the co-operative option is to create entities that are sensitive to regional and consumer issues and, as non-profits, may be better able to control premium prices because of the lack of shareholders to satisfy. However, establishing co-operatives from scratch may be a daunting task. One possibility that has been discussed is to require that cooperatives be allowed to purchase services at the lowest available price, a “most-favored-nations” ability that might allow them to leverage their purchasing power to attract members. Another concept being discussed is the creation of a national co-operative organization that would negotiate health care prices for all the regional or local co-operatives. This approach might create a series of state centered co-operatives that would sell insurance coverage and be subject to standard insurance reserve requirements, creating competition with state regulated insurance carriers. The biggest task may be to determine how to launch multiple co-operative initiatives across the county at the same time. It is doubtful that a handful of pilot projects will be seen as helping to bring about meaningful, broad-based health care reform.

The Future of Dental Plans

Today, nearly all dental insurance is provided through “stand-alone” plans and sold separately from medical insurance by companies that specialize in dental benefits. However, that could change if health reform legislation, as passed by the House Tri-Committees (Ways & Means, Energy & Commerce, and Education & Labor) or the Senate Health Education Labor & Pension (HELP) Committee, becomes law.

In the Tri-Committee’s Affordable Health Choices Act of 2009, health insurance plans offered through a new health insurance exchange must be Qualified Health Benefit Plans (QHBPs) and, as such, provide “essential benefits.” Among a number of traditional medical benefits such as hospital and physician services, an essential benefits package must include “well baby and well child care and oral health, vision, and hearing services, equipment and supplies at least for children under 21 years of age.” In addition, under the bill’s individual and employer mandate provisions, individuals must obtain health insurance that meets the requirements for “acceptable coverage” and employers must offer such coverage. Unless grandfathered or a state or federal health insurance program like Medicare or Medicaid, a plan must be a QHBP in order to satisfy the acceptable coverage requirement. For adults, the House bill also allows for a “premium-plus plan that provides additional benefits, such as adult oral health and vision care.”

Similarly, under the Affordable Health Choices Act, which the Senate HELP Committee passed last month, Qualified Health Plans provided through state exchanges must offer essential benefits that include pediatric oral care. In addition, unless exceptions are met, individuals must have qualifying insurance coverage that includes essential benefits or face tax penalties. Under the Senate HELP bill, employers also are required to offer such coverage.

In a letter sent to House committee leaders last month, advocacy groups for the dental and vision industries explained that the dental coverage requirements currently found in the House bill would effectively split children’s dental coverage from adult coverage. Consequently, such a split could lead to adults dropping their own coverage or increased costs related to maintaining both plans. The advocacy groups also argued that medical plans do not generally have the infrastructure to deliver dental and vision coverage. The dental and vision insurance industries have offered to work with lawmakers on revising the proposed legislation in a way that would build on what currently works for oral health care.

End-of-Life Care Dropped by Senate Negotiators

The Senate panel striving to complete a bi-partisan health care reform bill for the Senate Finance Committee has dropped a provision that has become a lightning rod for partisan criticism. The Senate sub-committee members are taking the provision that would have allowed Medicare to pay physicians for counseling patients about end-of-life decisions out of their proposal. The provision would have authorized payment for voluntary consultations with Medicare recipients that could have included information about living wills, pain medication, delegated health care decisions and hospice care. However, some critics have likened the process to rationing care, deciding who would be allowed to receive services and who would not.

According to Senator Charles Grassley (R-Iowa), the ranking Republican on the Senate Finance Committee, the Senate negotiators dropped the provision since it could be “misinterpreted or implemented incorrectly.” The Tri-Committee bills voted on by the House just prior to the summer recess still contain similar provisions, and could remain part of a final bill to be agreed upon by lawmakers when Congress resumes in September.