SACRAMENTO, Calif., Nov. 14 /PRNewswire-USNewswire/ -- The vast
majority of people required to buy unsubsidized private health insurance
under Massachusetts' mandatory purchase law have failed to do so, according
to an updated analysis by the Foundation for Taxpayer and Consumer Rights
(FTCR).
A California proposal modeled on the Massachusetts law, by Assembly
Speaker Nunez, fails to correct for the affordability crisis faced by
Massachusetts residents. In fact, a provision of Nunez's proposal
encourages insurance companies to raise rates. Under that proposal,
insurers will be allowed to keep 15% of premium revenue for overhead and
profit.
"Insurers, who will keep 15% of premiums no matter what they pay
doctors and hospitals, will be all too happy to pay more -- and charge
policy holders more -- in order to keep more," said Jerry Flanagan of FTCR.
"Both the Massachusetts and California laws will inevitably lead to
unaffordable costs for individuals and taxpayers."
Under the new Massachusetts law, by December 31, 2007, residents must
be able to prove they have purchased private health insurance or face
financial penalties. Coverage in Massachusetts is already much more
expensive than promised and insurers, whose premiums are not capped or
regulated, have indicated rates will increase again next year.
Massachusetts Senate President Murray has proposed mandatory hearings into
rate increases over 7%.
Massachusetts' law would require citizens to spend up to 10% or more of
their incomes on health insurance. Co-pays and deductibles are not included
in the 10%. Even at that stiff upper limit, the state estimates that 18% of
the uninsured cannot afford insurance at all, including everyone making
just over the subsidy cutoff of 300% of the federal poverty level. The same
percentage of the uninsured in California would include over one million
people.
"In just six weeks, Massachusetts consumers must have health insurance
or pay a penalty under the law. They will end up paying more for less
health care -- an inevitable outcome when individuals are forced to
purchase private health insurance and costs are not regulated," said Carmen
Balber of FTCR, author of the report on Massachusetts' law. "Families with
children, older consumers and middle class families are some of the most
likely to be lacking health care. They're also the first to fall through
the cracks under Massachusetts' mandatory private insurance plan because
insurers won't provide an affordable product unless the state controls
costs."
Few middle-income Massachusetts consumers have enrolled in the new
mandatory coverage. Only 6% of new enrollees are buying private plans with
no subsidy. Most of the remaining 94% of new enrollees are under 150% of
the federal poverty level and receiving full subsidies.
"While it is beneficial to provide health care to the working poor, the
Massachusetts plan is far from solving the un-affordability of private
insurance for middle-income workers," said Balber. "Both California and
Massachusetts plans, with small employer contributions, also may encourage
employers to steeply reduce or eliminate work-based coverage."
Key points:
1. Massachusetts faces a simpler problem than California does: The
state has 500,000 to 650,000 uninsured versus six to seven million in
California. Unlike California, Massachusetts health insurers are primarily
non-profit and the state had guaranteed issue and community rating before
the mandate. Massachusetts' median annual income is also $15,000 higher
than California's. Even so, the law is not reaching the middle class.
Newly enrolled in Mass. sponsored health insurance: 135,306 (approx.
25% of MA uninsured)
94% of enrollees are taxpayer subsidized:
Full Subsidy: 101,000= 75%
Some Subsidy: 26,000 = 19%
Unsubsidized: 8,306 = 6%
2. The cheapest "affordable" plans aren't affordable: Massachusetts
assumes that insurance is "affordable" if consumers can pay the premiums,
disregarding deductibles, co-pays and other co-insurance. The cheapest
plans offered come with $2000 deductibles, co-pays of up to 35% for most
health services, separate medication deductibles with up to 50% co-pays,
and cap only some out-of-pocket costs.
Families could be required to spend 10% or more of their incomes on the
health insurance premium alone. The cheapest "affordable" plans would
require each of the following to purchase insurance:
* A 55-year-old in Boston. Cost: $4,510 premium/yr, 9% of a $50,000
income;
* A small-town couple in their late-40s. Cost: $9,121 premium/yr, 11.4%
of an $80,000 income;
* Parents in their mid-fifties with two kids in rural Greenfield. Cost:
$13,752 premium/yr, 12% of $110,000 income.
3. Many cannot afford coverage even under this high affordability
standard: Massachusetts estimates that 18% of the uninsured will be unable
to afford to pay even the premiums of any insurance plan. This includes:
* Everyone, of any age, making just above 300% of the federal poverty
level (the cutoff point for state subsidies);
* Singles over 55 making less than $50,000 a year;
* Couples over 50 making less than $80,000 a year;
* Families, with parents over 30, making less than $90,000 a year
"The Massachusetts experiment shows that mandatory purchase of health
insurance just doesn't add up, for families or taxpayers. If inefficient,
high-overhead private insurers are allowed to charge whatever they choose,
consumers pay more in the form of higher premiums and less coverage," said
Balber.
The report released today provides an overview of the cost and status
of the Massachusetts' mandatory purchase requirement. Download the report:
http://www.consumerwatchdog.org/resources/MassHealthNovUpdate.pdf
FTCR is California's leading public interest watchdog. For more
information, visit us on the web at: http://www.ConsumerWatchdog.org
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SOURCE Foundation for Taxpayer and Consumer Rights
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Related links:
http://www.consumerwatchdog.org
CONTACT:
Jerry Flanagan, +1-310-889-4912, or Carmen
Balber, +1-310-403-0284, both of Foundation for Taxpayer and
Consumer Rights
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