Health Insurance Reform: The Case for Change

Health and Human Services Secretary Kathleen Sebelius has analyzed the impact of health insurance reform on Kentucky.

Under reform in Kentucky:

• 654,000 residents who do not currently have insurance and 196,000 residents who have nongroup insurance could get affordable coverage through the health insurance exchange.


• 444,000 residents could qualify for premium tax credits to help them purchase health coverage.


• 724,000 seniors would receive free preventive services.


• 129,000 seniors would have their brand-name drug costs in the Medicare Part D “doughnut hole” halved.


• 44,800 small businesses could be helped by a small business tax credit to make premiums more affordable.

Health Insurance Reform Provides Early Relief and Health Security.
Proposals implemented in 2010 and 2011 will produce real benefits for:

• Families: The 4.3 million residents of Kentucky will benefit as reform:
  
  
  • Ensures consumer protections in the insurance market. Insurance companies will no longer be able to place lifetime limits on the coverage they provide, use of annual limits will be restricted, and they will not be able to arbitrarily drop coverage.
  
  
  • Creates immediate options for people who can’t get insurance today. 10 percent of people in Kentucky have diabetes, and 30 percent have high blood pressure – two conditions that insurance companies could use as a reason to deny health insurance coverage. Reform will establish a high-risk pool to enable people who cannot get insurance today to find an affordable health plan.
  
  
  • Ensures free preventive services. 36 percent of Kentucky residents have not had a colorectal cancer screening, and 22 percent of women over 50 have not had a mammogram in the past two years. Health insurance reform will ensure that people can access preventive services for free through their health plans. It will also invest in a prevention and public health fund to encourage prevention and wellness programs.
  
  
  • Supports health coverage for early retirees. An estimated 66,800 from Kentucky have early retiree coverage through their former employers, but early retiree coverage has eroded over time. A reinsurance program would stabilize early retiree coverage and provide premium relief to both early retirees and the workers in the firms that provide their health benefits. This could save families up to $1,200 on premiums.
  
  
• Seniors: Kentucky’s 724,000 Medicare beneficiaries will benefit as reform:
  
  
  • Lowers premiums by reducing Medicare’s overpayments to private plans. All Medicare beneficiaries pay the price of excessive overpayments through higher premiums – even the 87 percent of seniors in Kentucky who are not enrolled in a Medicare Advantage plan. A typical couple in traditional Medicare will pay nearly $90 in additional Medicare premiums next year to subsidize these private plans. Health insurance reform clamps down on these excessive payments.
  
  
  • Reduces prescription drug spending. Roughly 129,000 Medicare beneficiaries in Kentucky hit the “doughnut hole,” or gap in Medicare Part D drug coverage that can cost some seniors an average of $4,080 per year. Reform legislation will provide a 50 percent discount for brand-name drugs in this coverage gap.
  
  
  • Covers free preventive services. Currently, seniors in Medicare must pay part of the cost of many preventive services on their own. For a colonoscopy that costs $637, this means that a senior must pay $148 – a price that can be prohibitively expensive. Under reform, a senior will not pay anything for that colonoscopy, or for any other recommended preventive service. A senior will also get free annual wellness visits to his or her provider, with a personalized prevention plan to remain in good health.
  
  
• Small businesses: While small businesses make up 72 percent of Kentucky’s businesses, only 41 percent of them offered health coverage benefits in 2008. 44,800 small businesses in Kentucky could be helped by a small businesses tax credit proposal that makes premiums more affordable. And these small businesses would be exempt from any employer responsibility provisions.


• States: State budgets will be relieved from rising health care costs as reform:
  
  
  • Reduces state employee premiums. Coverage would immediately be expanded to the uninsured, decreasing the amount of uncompensated care costs that gets shifted to the premiums of state employees. For states that provide early retiree health benefits to their state employees, a reinsurance program would provide premium relief of up to $1,200 per family policy per year for all employees.
  
  
  • Reduces uncompensated care. Right now, providers in Kentucky lose $1.1 billion in uncompensated care each year, which states subsidize at least in part. Instead, under reform, uncompensated care would begin to be reduced immediately as more uninsured people gain coverage.

Health Insurance Reform Provides Stability, Security, and Choice.

• Provides relief from rising health care costs.
  
  
  • Ends the “hidden tax”. The $1.1 billion spent on uncompensated care in Kentucky often gets passed along to families in the form of a hidden premium “tax”. By expanding coverage to the uninsured, health insurance reform will eliminate this burden on people who already have insurance.
  
  
  • Provides premium tax credits. Without reform, individuals and families in Kentucky will spend increasing amounts of money out-of-pocket to cover premiums, deductibles, and co-payments, from $4 billion today to up to $6.5 billion in 2019. Through health insurance reform, 444,000 Kentucky residents could be eligible for premium credits to ease the burden of these high costs.
  
  
• Promotes health insurance portability and choice. Health insurance reform establishes a health insurance exchange that will provide individuals with a wide variety of choices and ensure that they will always have coverage, whether they change jobs, lose a job, move or get sick.
  
  
  • Currently 654,000 residents of Kentucky do not have health insurance, and if nothing is done, by 2019 this population could swell to 830,000. The exchange will help the uninsured to obtain needed coverage and will also help the 196,000 Kentucky residents who currently purchase insurance in the individual insurance market to get quality coverage at an affordable price.


• Supports long-term home and community based services: It is estimated that 65 percent of those who are 65 today will spend some time at home in need of long-term care services, which typically cost almost $18,000 per year. This means that 349,000 older residents of Kentucky who are aged 55 to 64 today will need home health services after they turn 65 – services that are not always covered by Medicare, Medicaid, or private health insurance.
  
  
  • Health insurance reform will create a new voluntary long-term care services insurance program, which will provide a cash benefit to help seniors and people with disabilities obtain services and supports that will enable them to remain in their homes and communities.
  
  
  • Reform will encourage states to expand their home and community based services through Medicaid by providing enhanced funding, and it will create a program to provide community support services for disabled Medicaid enrollees who would otherwise need to be in a nursing home. These programs could help improve care for many of the 213,000 disabled Medicaid beneficiaries in Kentucky.

Health Insurance Reform Improves Quality and Reforms the Delivery System.

• Reduces preventable readmissions. The current health care system does not place enough emphasis on improving quality of care. For example, nearly 20 percent of Medicare patients who are discharged from the hospital end up being readmitted within 30 days. For Kentucky, that’s 48,500 readmissions each year which could potentially be prevented with improved care coordination. Health insurance reform will invest in innovations in primary care and will provide financial incentives to hospitals to better coordinate care at discharge to avoid preventable readmissions.


• Lessens Paperwork. Physicians spend on average about 140 hours and $68,000 a year just dealing with health insurance bureaucracy. For the 11,318 physicians in Kentucky, this adds up to 1.6 million hours and $770 million in costs. By simplifying and standardizing paperwork and computerizing medical records, doctors will be able to focus on caring for their patients instead of dealing with bureaucracy.


• Incentivizes primary care. Roughly 4,400 doctors in Kentucky practice primary care and would qualify for a new 5 to 10 percent payment bonus under health insurance reform.


• Invests in the health primary care. Approximately 480,000 people, or 11 percent of Kentucky’s population, cannot access a primary care provider due to shortages in their communities. Health insurance reform will expand and improve programs to increase the number of health care providers, including doctors, nurses, and dentists, especially in rural and other underserved areas.