All’s quiet on the workers’ compensation front. After a series of tentative overtures on increasing disability benefits was essentially cut off by some well-timed and very public comments by Gov. Arnold Schwarzenegger, most in the workers’ comp community have been reduced to speculating on what, if anything, may happen in the waning moments of the session. In the meantime, health care reform would appear, by all accounts, to be moving forward.
Assembly Bill 8 (Nuñ) has been announced as the vehicle for health care reform, signaling a merger of both Senate and Assembly Democratic proposals. Combine that with the governor’s recent speech at the America’s Health Insurance Plans Institute 2007 meeting in Las Vegas, and it is fairly easy to see that there is both a will and a way to get something to the governor for his signature this year.
The will to get one of these proposals to the governor, of course, is not shared by any Republicans in the legislature. The centerpiece of both the governor’s and legislative proposals is a “fee” assessed against employers. That “fee” ranges from 4 percent of wages in the governor’s proposal to 7.5 percent in the Democratic proposal. To Republicans, and oddly enough the Legislative Counsel as well, that “fee” is a “tax” that would then require a two-thirds vote from the legislature to enact. To the governor, this is semantics. But to the Republicans in the legislature it is a core principle.
The governor has taken single payer off the table.
That does not mean that health insurers aren’t staring into the headlights of an oncoming speeding bus. The governor’s proposal, initially laid out early in January, requires 85 percent of every dollar taken in to go to health care. Just this past Friday, at his speech in Las Vegas, the governor said, “I respect your right to provide a service, earn a reasonable profit for that service, and to compete in the marketplace, but we all must do a better job.” In that same speech, he noted the success of his workers’ comp reforms: “…now the costs have come down by 50 percent, and there’s an additional 16 percent coming this year.”
In other words, for the governor it boils down to a simplistic measurement: Insurance premiums are the barometer of successful reform. Regardless of improvements to the system, regardless of what is happening in self-insured workers’ comp or employee benefit plans, the ultimate measuring stick of any reform will be reduced insurer profits over the short term.
It is only because of the undeniably dramatic reduction in premiums for workers’ comp insurance that the profitability of insurers in that line has been reduced to talking points for opponents of the reform and public pronouncements by a Republican insurance commissioner. As profitability declines over the next several years, the debate over workers’ comp insurance rates will be reduced to a whisper bordering on the inaudible, and they will once again begin to rise.
Is There a Dirty Little Secret?
This is where it gets interesting. According to the governor, the major health insurers have agreed to a concept called guaranteed issue if there is an individual mandate to purchase insurance. Two of these insurers, Kaiser-Permanente and Wellpoint, are also very, very big players in the MPN and utilization review marketplaces for workers’ comp.
The financing of health care reform is very complicated and involves taking a close look at how physicians and hospitals are compensated for the services they provide. We are already aware of the ongoing struggles between providers and plans that resulted in litigation and settlements with the California Medical Association.
We are also aware of historically low loss ratios in the workers’ comp insurance industry and of the governor’s call for 85 percent of health insurer premium dollars going directly to patient care. With the freedom to contract reimbursement rates differently from the official medical fee schedule and the concentration of MPN statewide networks in just a few health care plans, it is at least possible that workers’ comp income for these plans is being taken into account even as premium dollars for health care face an imminent squeeze.
This clearly is not an issue covered in the governor’s talking points or by Herb Schultz, the governor’s Senior Health Policy Advisor, or of those of the Speaker or the President Pro Tem. It is also not an issue likely to be mentioned within the cluster of health care insurance experts negotiating the reforms.
But it is an issue nonetheless. In 1993 the legislature went to great lengths to try to prevent cross-subsidies between group health and workers’ comp medical care. That effort was complicated and, as we all remember, was not terribly effective. The issue, like it or not, is on the radar again. But the problem in 2007 is that it’s not on the radar of the people who matter in the health care debate.