Does it sometimes seem as though we are replaying the events of 1993? In 1993, IBM reported a $4.7 billion loss -- the largest single-year loss in United States corporate history. In 2009, AIG captured that record when it reported losses of $61.7 billion. In 1993, a Democrat (Clinton) succeeded a Republican named Bush as President. This year, another President Bush left the White House. In 1993, the U.S. was involved in an unconventional, urban conflict in Mogadishu, and today we are largely fighting that same kind of battle in Afghanistan.
On Sept. 22, 1993, President Clinton -- who had used health care "reform" as a staple of his campaign -- addressed a joint session of Congress. In that speech, he said, "Millions of Americans are just a pink slip away from losing their health insurance, and one serious illness away from losing all their savings. Millions more are locked into the jobs they have now just because they or someone in their family has once been sick and they have what is called a preexisting condition. And on any given day, over 37 million Americans -- most of them working people and their little children -- have no health insurance at all. And in spite of all of this, our medical bills are growing at over twice the rate of inflation, and the United States spends a third more of its income on health care than any other nation on Earth."
Sound familiar? It should. It is nearly identical to the rhetoric being used today.
In November 1993, President Clinton delivered his proposal, "The American Health Security Act of 1993" to Congress. The 1,342-page bill mandated that every American become enrolled in a qualified health plan. It also proposed the creation of Health Insurance Purchasing Co-operatives (HIPCs). Those of us who were engaged in the national conversation surrounding President Clinton's proposals have every reason to find it yet another episode of legislative d?j? vu.
Numerous empirical and independent studies indicate that mandates are not a concept embraced by Americans. As we've previously reported, states that require drivers to carry insurance have about the same percentage (15% to 17%) of uninsured drivers as states that have no such requirements. Even the most feared government agency, the Internal Revenue Service, estimates that 16% of Americans evade taxes outright. Why some in government believe that a mandate will assure that every citizen is insured is a mystery. It is less a matter of law than of nature. Remember, Americans are the folks who believe a speed "limit" sign is a "suggestion."
HIPCs haven't caught on
Another hallmark of the Clinton plan was the creation of Health Insurance Purchasing Co-operatives that would allow smaller businesses to achieve the same economies of scale as their larger brethren. The Clinton plan didn't get reported out of committee, but the notion of pooled purchasing arrangements such as the HIPCs caught the eye of more than a dozen states. Advocates believe that these co-operatives can lower costs by as much as 30%.
There are some state co-ops with significant membership. Health Partners in Minnesota claims 660,000 members. PacAdvantage in California has 147,000 members. Some co-ops claim that they have achieved significant cost savings or improved efficiency over traditional insurers. Yet the numbers remain difficult to verify. There are so many variables in plan design that cost-saving scenarios are tantalizingly easy to construct.
Students of our industry understand the old dictum that "a claim is a claim is a claim." If a dollar of premium is received and 85 cents of that dollar is paid in claims, even a Ginsu knife ("makes tomato slices so thin they have just one side") can't peel 30 cents more from that bill. Co-ops in states with community rating laws (or modified community rating aimed at smaller businesses) find it even more difficult to achieve savings.
For every co-op that has survived, there are many others that have failed. Co-ops in Texas and North Carolina have failed outright. Some have never gotten off the ground at all. On Feb. 19, 2008, Gov. Mark Sanford signed a law permitting South Carolina companies to band together to form co-operatives for the purpose of obtaining health insurance. Despite the Governor's assertion that these co-ops would save employers 20% or more, not one co-op has been created.
While South Carolina is my current home state, I spent 30 years living in Florida. While South Floridians were cleaning up the residue of Hurricane Andrew, Florida Gov. Lawton Chiles eagerly signed a law creating Florida Community Health Purchasing Alliances (CHPAs). President Clinton used Florida as a model and suggested that other states as well as the federal government should emulate the Sunshine state.
As an appointed member of the District 11 CHPA, I had a front row seat to an experiment that was doomed from its start. As proof of that statement, I offer an Oct. 1993 opinion from Florida Attorney General Bob Butterworth that addressed a variety of CHPA-related issues. In the preface to his opinion, he offered the following synopsis of the necessity and objectives of the Florida CHPAs: "The legislature, finding that the current health care system in Florida does not provide access to affordable health care for all persons in this state, sought to implement a structured health care competition model to improve the efficiency of the health care markets in this state."
Where to start? Even those who believe that co-ops can deliver value to members will agree that without a large number of participants, the concept cannot gain altitude. The Florida CHPAs were ill-conceived; constrained by a Florida law that did not permit them to be considered "purchasing pools." This allowed the participating insurers and HMOs to consider each participating employer on an individual basis. Couple that restriction with a legislative design that virtually forced the CHPAs to use off-the-shelf plans from admitted insurers and HMOs, and it is easy to understand why the CHPAs only signed up 92,000 participants. The legal shackles and paltry membership made the CHPAs ineffective and they closed up shop in 2000.
Round two
Undaunted by history, and desperately trying to find a pathway through or around the minefield of the "public plan" option in the current health care reform "debate," some politicians are again dusting off the concept of using co-operatives.
North Dakota Sen. Kent Conrad, Chairman of the Senate Budget Committee and member of the Senate Finance Committee, has begun talking about co-ops as a method of "bringing down insurance costs." In Sen. Conrad's view, there should be a national co-op structure with consumer-driven state affiliates. He would grant these state "affiliates" a $4 billion subsidy to help them until they could become self-sufficient.
At the end of this trail, there are two intersecting concerns. First is the question of whether these would be co-ops, which are -- by definition -- owned and operated by their members, or whether they would be just another government entity; a head-fake amounting to what is (or what would become) a de facto public plan. Sen. Charles Schumer (D-N.Y.) believes that it isn't even worth serving up the initial cloak of independence. In his view, the co-op's officers and directors would be appointed by the President and Congress, and that if there is to be a co-operative; it should be a government monolith. Even Sen. Max Baucus (D-Mont.) who has struggled to achieve the appearance of bipartisanship, says that any co-op enabling legislation needs to be "... written in a way that accomplishes the objectives of a public option."
Welshman Robert Owen (1771-1858) is considered the founder of the co-operative movement. His goal was that workers who participated in co-ops would become self-sufficient and ultimately become self-governing. Nothing could be further from Owen's goal than the co-op being proposed on The Hill. Michael Tanner, Senior Fellow at the CATO Institute, suggests that, "If a co-op is run by the federal government under rules imposed by the federal government with funding provided by the federal government, it's simply government-run health insurance by another name."
"Opponents," he suggests, "should not be fooled."
Readers may write to David Saltzman at Carolina Care Plan Inc., 201 Executive Center Drive, Columbia, SC 29210. He is a past president of NAHU and has been a health, disability, life and employee benefits broker for more than 25 years. He is director of the large group segment for Carolina Care Plan.
