In a sharp break from past practice, the health insurance industry called Wednesday for a new federal law that would require universal health-care coverage, define a basic set of benefits and try to contain costs by limiting tax breaks for the purchase of insurance.
The board of directors of the Health Insurance Association of America, representing 270 commercial insurers, adopted a policy statement on Wednesday that said ”the insurance industry itself needs reform.”
The industry has often been described as an obstacle to change in the nation`s health-care system. But with the new proposal, to be announced Thursday, the industry signals its willingness to accept sweeping changes, many of them similar to those proposed by President-elect Bill Clinton.
Details of the insurers` proposal remain to be worked out, and many of the unresolved issues are contentious. But Democrats and Republicans as well as business executives and labor unions agree that the nation must do something to help the estimated 37 million people who do not have health insurance.
For more than a year, the insurers have been denouncing proposals for a government-run program of national health insurance that would minimize the role of private insurers.
But Carl J. Schramm, president of the association, said the new proposal was in the long-term financial interest of insurance companies.
”This is probably the only way you preserve the private health insurance industry,” Schramm said. ”It`s plain-out enlightened self-interest.”
The insurers, like Clinton, endorsed the idea of universal coverage, mandated by federal law, along with new measures to control costs, including a larger role for the government in supervising fees charged by doctors and hospitals.
But the insurers did not support Clinton`s proposal for an annual limit on all health spending, public and private.
The Health Insurance Association is one of many business groups that have offered to cooperate with Clinton since his election. Many of these groups previously opposed overhauling the health-care system but now say they see major changes as inevitable and want to help shape the results to their liking.
Ian M. Rolland, chairman of the board of directors of the association and chief executive of Lincoln National Corp., in Ft. Wayne, Ind., said the new proposal was ”radically different from positions taken by the industry in the past.”
In Little Rock, Ark., Judith Feder, health policy coordinator for the Clinton transition team, welcomed the new proposal and described it as ”a major turnaround” for members of the health insurance industry.
”It suggests they are willing to participate in the process of health-care reform,” she said. ”They seem to be demonstrating a commitment to universal coverage and cost containment, which we`ve not seen before.”
The insurers` proposal might help break a logjam that has blocked congressional action on comprehensive health legislation for the last two years. Dozens of bills died earlier this year amid partisan squabbling in the election campaign.
When he announced his candidacy in October 1991, Clinton said he would
”take on the big insurance companies” in an effort to control health costs. He repeated that vow hundreds of times in the campaign.
The insurers` new position would require health insurance coverage for all Americans and limit the amount of tax-free health benefits that employees could get from their employers.
The proposal would require employees to pay a tax on the value of health insurance exceeding the standard package of benefits. This proposal is noteworthy because companies rarely propose a new tax on their own goods and services. Revenue from the health insurance tax would be used to help finance additional coverage for poor people.
The industry`s new proposal, set forth in a discussion paper adopted unanimously Wednesday by the board of the association, is incomplete. But the proposal has four main elements:
– Through unspecified tax incentives for employers and tax penalties for consumers who do not purchase insurance, the government would require all Americans to buy ”an essential package” of health benefits. If the government fails to achieve universal coverage in this way, then ”it may become necessary to require employers to help finance such coverage,” the insurance industry said. Most big companies already provide health benefits to employees, but 30 million workers and dependents have no coverage.
– The government would help define the essential package of benefits. The package, though not described in detail, would go beyond minimum benefits and would meet ”most of the needs of Americans” for doctors` services and hospital care. Private insurers would agree to provide the standard coverage, regardless of a person`s medical history.
– The open-ended federal subsidy for health insurance would be curtailed. If employers bought insurance covering more than the essential package of benefits for their employees, the premiums paid for that extra coverage would be treated as income to the employees, and they would have to pay income tax on it. The core benefits would remain tax-free.
Under current law, none of the employer-provided health benefits are taxable. Economists say these tax breaks contribute to the costly overuse of health care, by encouraging companies to overinsure their employees.
– The government would work with insurers and providers of care to reduce the immense variation in payments to doctors and hospitals. Private insurers and government programs would eventually have to pay similar amounts for the same services in the same geographic area. Medicaid and Medicare, the programs for poor people and the elderly, now usually pay less than private insurers.
Schramm said this recommendation ”represents a sea change because it implies that insurers are willing to consider a larger role for government in overseeing the prices charged by doctors and hospitals.”
The Health Insurance Association said the standard rates would help stabilize health-care prices and would prevent the government from shifting costs to patients with private insurance.
The insurers are eager to promote competition in the health-care market, but they recognize that a decade of competition has not restrained the growth in medical prices, now rising twice as fast as other consumer prices.
The association has not decided on the proper balance between regulation and free-market competition, one of the most delicate issues in any plan to revamp the health-care system.
The federal government already has fee schedules for doctors and hospitals under Medicare, and some private insurers have begun to use similar price lists.
In January, President Bush seriously considered taxing a portion of the health benefits received by some workers. But he abandoned the idea after Republican lawmakers warned him that such a tax would cause a political uproar on Capitol Hill.
Now the commercial insurance industry is offering a similar proposal. Under its plan, the association said, ”no one would have to worry about losing insurance coverage because of bad health or switching jobs.”
The package of essential benefits would be the same for rich and poor alike. But people could buy additional coverage to supplement the package, just as many elderly people buy private insurance to fill gaps in Medicare.
