New York City, April 23, 2003—An innovative framework to provide automatic, affordable health insurance to nearly all Americans is outlined today in a Web-published Health Affairs article by health policy experts Karen Davis and Cathy Schoen of The Commonwealth Fund. The article, "Creating Consensus on Coverage Choices," would build on existing sources of public and private health coverage by combining tax credits for private insurance, public program expansions, and a new mechanism to make enrollment more automatic. The article also provides a roadmap for a phased-in series of steps to achieve affordable and automatic coverage for all Americans over time.
The framework presented by Davis and Schoen seeks to bridge differences between those policy strategies that rely on tax credits to increase private insurance coverage and those strategies that would increase health coverage through public program expansions. An estimated 39 million of the 42 million Americans who are uninsured would gain coverage, increasing total national health expenditures by a modest 3 percent.
"We know what works in the current system, so we should build on success instead of trying to reinvent the wheel," said Davis, president of The Commonwealth Fund. "The consensus approach gives people the choice to keep the coverage they have if it's working well for them. It provides a long-term vision, but also lends itself to phasing in and adjustment over time with experience. The federal government could begin to enact some pieces of this plan immediately."
Key aspects of the consensus framework include:
- Access to affordable coverage for small-business employees, the self-employed, and other uninsured individuals through a new Congressional Health Plan. The Congressional Health Plan would provide a choice of any insurance plan participating in the Federal Employees Health Benefits Program (FEHBP). It would be open to anyone working for a business that has fewer than 50 employees, as well as to self-employed workers and other uninsured individuals.
- Automatic enrollment and premium assistance. Any uninsured person would receive tax credits to help pay premiums that exceed 5 percent of their incomes (10 percent for those in upper tax brackets). The uninsured would be enrolled automatically in the Congressional Health Plan and would have a choice of other group options.
- Public coverage expansions for low-income individuals and people at risk for being uninsured because of their health or age. Medicare would be open to those 60 and older who lack access to group coverage, to the disabled on the Medicare waiting list, and to Medicare dependents. State-run programs, with enhanced federal financing to reduce state costs, would be open to any individual or family with an income below 150 percent of poverty.
- Building on employer-sponsored coverage where it is working well. To minimize disruptions in coverage, employers would continue to be the mainstay of the health insurance system for working families. Companies that do not offer coverage to employees would contribute 5 percent of payroll--up to $1 per hour worked--to a fund that would help pay for coverage.
"The framework illustrates ways in which various approaches could be combined, and it also shows what could be accomplished incrementally if you have a vision of how different parts fit together," noted Schoen, vice president at The Commonwealth Fund. "Another possible step toward covering everyone would be to conduct state demonstrations like those suggested by the recent Institute of Medicine report. Given the fiscal conditions that states are in, such demonstrations would require a new commitment of federal resources."
In the Health Affairs article, Davis and Schoen discuss how the tax system could be used to provide income-related credits and to ensure automatic enrollment of the uninsured into private and public group health plans. The framework would couple this automatic enrollment and premium assistance with a mix of private and public insurance expansions designed to provide affordable, continuous, and high-quality coverage options for the entire under-65 population.
The new Congressional Health Plan--the proposal's centerpiece--would allow small-business employees, the self-employed, and other uninsured individuals to enroll in the same insurance plans offered to federal employees. Members of Congress could also participate to show their commitment to high-quality coverage. The program would be open to everyone, regardless of their health status or age.
To make coverage affordable to those with very low incomes who cannot afford coverage even with tax credits, as well as to those at risk for being uninsured because of their health or age, public insurance programs would be expanded. In addition, the framework includes provisions that would improve the stability and continuity of employer-based coverage and encourage more firms to participate in group coverage.
In total, these components would reach an estimated 39 million of the 42 million Americans who were uninsured in 2002, if participation were mandatory. Even if participation were voluntary, an estimated 33 million of the uninsured would still be covered. For the entire under-65 population, the new insurance framework would provide the security of more continuous, affordable coverage.
The authors' cost estimates suggest that the combined approach would result in a marginal increase in total national spending, while providing out-of-pocket cost savings for the uninsured and more affordable premiums for individuals and small businesses. Various features would also likely reduce insurance administrative costs throughout the health system, including the costs associated with instability of coverage. People with health problems would have the added security that continuous insurance coverage would be available to them at an affordable price. The net federal costs of the expansion are estimated to be $70 billion when fully implemented--an amount that could be partially offset by repeal of the one-percentage-point reduction in the income tax scheduled to take effect in January 2004.