Missouri General Assembly broadens insurance coverage

The Missouri legislature this year took incremental steps to help the state’s businesses—particularly smaller employers—provide health insurance coverage for workers.

Gov. Matt Blunt said he plans to sign House Bill 818, health insurance legislation. One of the governor’s highest priorities when the session opened was reducing the number of uninsured Missourians. That number is currently estimated at 700,000, and almost half work for small business.

The chief bill handlers, Rep. Doug Ervin of Kearney and Sen. John Loudon of Ballwin, said they expected the legislation to reduce the number of uninsured by a relatively small 10,000 to 20,000 persons, who would gain access to the high-cost, high-risk state health insurance pool.

Estimates about how many employers would add health insurance coverage for workers and their families were unavailable, and the state has not yet designed a separate program to provide Medicaid subsidies for low-income workers.

Legislation undergoes dramatic overhaul

The final legislation differed markedly from the original version that Ervin introduced in February and Blunt publicly endorsed. Blunt had wanted to eliminate the corporate franchise tax for firms that provided health insurance, but the legislature rejected the franchise tax repeal.

Ervin’s initial version provided for replacing the current small employer market with a quasi-state “exchange,” which would function as the insurer for all such companies in Missouri and allow employees individually to select from any plans offered by private insurers statewide rather than using one picked by owners. All such purchases—whether paid by businesses or employees—would have been tax exempt through cafeteria-plan arrangements.

Ervin modeled the plan on Massachusetts’s “connector agency,” which is designed to help businesses and their workers meet new state regulations requiring all residents to carry health insurance, although Ervin’s approach had no mandates.

Ervin said he originally proposed the “exchange” as “a vehicle to get the message out on tax equity and portability” lacking in Missouri’s small-employer market. “You can tell that Missouri’s small-group market is lacking” because so few employers offer coverage, Ervin said.

The exchange concept quickly fell by the wayside in the legislation’s first stop, the House Special Committee for Health Insurance. Committee Chair Kevin Wilson, a human relations professional and Neosho Republican, said the state’s insurance agents “positively hated it” because the exchange would have replaced the traditional sales pitch. A long list of insurance-industry lobbyists testified against the legislation.

“We started out in an idyllic world, but we got everyone’s attention real quick,” said Wilson, the legislation’s main co-sponsor. “In the beginning, we didn’t have an [insurance] industry that wanted to be part of the solution, so they had to understand that this bill was going to happen one way or another” before insurance company representatives cooperated.

Insurance lobbyists then helped redraft the legislation and built it on a platform that featured the industry’s longstanding attempt to use the state pool—a 15-year-old mechanism for helping provide expensive coverage to otherwise uninsurable ill individuals—as a means of complying with the 1996 federal Health Insurance Portability and Accountability Act.

Missouri previously has attempted to comply by allowing persons who lose group coverage to buy any individual plan sold in the state, although that path largely has been unsuccessful because of high rates charged for the coverage.

Using the pool, however, shifted any losses to the state.

An invitation to end group health insurance?

Much of the business community’s attention has been drawn to provisions that would allow small companies to offer “defined contribution” plans that would let employees draw down funds from cafeteria plans to buy individual coverage but relieve owners of arranging to buy group coverage.

“It gets those companies out of the health insurance business and back to the business they actually do,” Ervin said.

Ervin said he’s familiar with many small business owners who have tired of haggling about insurance plans and changes in coverage and just cashed in their contributions to increase base pay for workers. Workers, however, now have to pay taxes on the increased pay and then have less available to cover buying those individual plans.

The change in this year’s legislation would at least allow workers to use the entire amount, tax free, for insurance purchase.

However, all individual insurance plans—by their very nature—are more expensive than group coverage because they involve the expense of individual underwriting; only two-thirds of the cost of an individual plan actually covers the cost of medical care, compared to 85 percent of the cost of large companies’ policies.

Individual insurance plans often are prohibitively expensive or simply unavailable to workers if they or their family members are older and have pre-existing conditions.

Such workers would have the alternative of buying pool coverage under the legislation but would pay 35 percent more than the state average for an individual plan and far more than the current cost of group policies.

Brad Jones, director of the National Federation of Business-Missouri, said he expects companies to both drop existing group policies in favor of defined contribution models and move to the contributions after providing nothing for workers before. “To what degree, I don’t know, though,” he said. “I think it will be a slow rolling ball at first as people begin to talk about it. But I think you’ll see more people look at [the defined contribution model] if small businesses continue to get 10 to 15 percent increases in their premiums.”

Michael Grote, the Missouri Chamber of Commerce’s vice president for governmental relations and legal counsel, said many companies will find the defined contribution model attractive because they can more easily plan and control costs. “Using the defined contribution amount is also allowing the employees to decide what is best for their families.”

The bill gains notoriety – for the wrong reasons
For most of the session, the legislation lurked in the background with little attention except in business and insurance circles. Insurance lobbyists privately predicted that the legislation’s cost, a projected $31 million a year, likely would kill the bill.

But just a week before the session’s end, Loudon, the Senate handler and Small Business Committee chair, unveiled a new version on the Senate floor and gained quick passage in both chambers. A move he anticipated—capping the state’s financial responsibility at $10 million a year and forcing insurers to bear the rest—did not materialize.

Loudon argued for the state to pick up the cost because insurers could spread the losses among only the 36 percent of Missourians they cover. The remainders are insured through government programs or self-insured companies.

In a poignant note, Loudon said he aimed to make the legislation solve the problems faced by his in-laws, who, as a self-employed couple, currently do not qualify as a group under state law, cannot get a reasonable quote and faced $42,000 in out-of-pocket medical costs. Loudon said he favored the original exchange legislation that Ervin introduced, but his in-laws “are the reason I’m settling for this.”

Even Sen. Chuck Graham, the Columbia Democrat, took the floor to praise Loudon for taking steps to help disabled professionals like himself (he uses a wheelchair) have health-insurance alternatives. When he leaves state government, he leaves its self-insured group coverage.

Unfortunately, no one had a chance to actually read the revised legislation Loudon presented.

Graham later was reduced to calling Loudon “a lying snake” when House staff members learned after the chamber passed the bill that it also included stilted language and federal legal references that legalize midwifery in Missouri. Graham had managed to block Loudon’s attempt earlier in the session to advance legislation that opened Missouri to midwives.

Senate President Pro Tem Mike Gibbons, a Kirkwood Republican, responded by stripping Loudon of his powerful committee post that controls most business and insurance legislation in the chamber. Gibbons said he is unsure whether he will reinstate Loudon before the 2008 session.

The Senate eventually tacked on the main health insurance bill—without the midwife language—to other legislation, but the House ran out of time to send it to Blunt as an alternative to HB 818.

Legislature advances premium offset program
to subsidize insurance for low-income workers
The legislature also adopted a scaled-down version of Blunt’s proposal to seek federal authority to offer Medicaid subsidies for insurance coverage of workers making less than 185 percent of the federal poverty level, or $38,200 for a family of four

Senate Bill 577, the Medicaid overhaul, authorizes the administration to seek federal approval of two pilot projects, one rural and one urban, for the insurance subsidies.

The appropriations language allows up to $5 million in state funds and $13.2 million altogether, which would follow the lead of states like Oklahoma and Arkansas in trying to help small businesses regarding their main obstacle to providing employee coverage: affordability. But the Missouri legislation limits business participation to five years.

The House originally voted to delete the program, and major players in the health insurance debate like Ervin are not supporters. “I just think it’s another welfare program,” he said.

Looking ahead
Ervin, though a relative newcomer to health legislation, already has asked Speaker Rod Jetton to appoint an interim committee to study issues related to cost and “transparency” in health coverage.

An enthusiast for health savings accounts, which shift more responsibility back to consumers for purchasing health care, Ervin is disturbed by the difficulty that patients have in determining the cost of procedures beforehand and shopping based on price.

Ervin also is intrigued about determining how insurers price their policies for small businesses. He—and others, like Wilson—said they were amazed when insurers said they charge all small groups basically the same rate through internal insurance pooling arrangements.

Missouri law does not require the “community rating” commonly found in East Coast states that prohibits pricing small companies out of the market because of employee health conditions.

Wilson, who heads the special health insurance committee, said he would like to work with Ervin on the project. Even if Jetton does not authorize an interim committee, Wilson said he expects his special committee to hold hearings around the state to hear from business owners about how the state can help overcome its problems in extending insurance coverage to more workers.