December 19, 2006

The Rhode Island Small Business Healthcare Plan

Carroll Andrew Morse

In today’s Projo, Felice J. Freyer describes a new small business/individual health insurance blueprint unveiled yesterday by the Rhode Island Office of the Health Insurance Commissioner

Blue Cross & Blue Shield of Rhode Island and UnitedHealthcare of New England are required, starting in May, to offer a “wellness health benefit plan” to individuals and businesses with 50 or fewer employees. The plan has to meet the state’s criteria and the average premium can’t exceed 10 percent of the average Rhode Island wage....

The new plan’s deductible will be about $500, with out-of-pocket costs capped at $3,000 — provided the enrollee signs a pledge promising to choose a primary-care physician, undergo a health-risk appraisal, either maintain a healthy weight or participate in weight-management programs, either remain smoke-free or participate in smoking cessation programs, and participate in disease-management programs if applicable. In the first year, subscribers will be asked just to promise these things; in the second year, they will have to prove participation.

Someone who didn’t want to sign such a pledge could still buy the plan but he or she would face a $3,000 deductible and out-of-pocket costs up to $6,000 a year.

The program's concepts are stunningly unoriginal, consisting of nothing more than…
  1. Price controls on the amount insurance companies can charge employees of small businesses, and
  2. Government regulation of individual behavior that will hopefully lead to individuals consuming less insurance.
Why didn’t someone think of this before; we can prevent healthcare costs from rising just by having the state order them to stop rising!

Seriously, there are at least 3 problems with the plan…

  1. A fixed-price formula divorced from actual costs of providing healthcare could eventually drive health insurers out of the state. There is recent precedent for this. An irrational regulatory structure forced most workers’ compensation insurers to pull out of Rhode Island in the early 1990s because they were required to pay out more money than pricing regulations allowed them to collect. There is no reason that the same thing couldn't eventually happen to health insurance.
  2. The partcular mechanism for implementing the “wellness” program sets a dangerous precedent. It is wrong for government to use its power to demand that interaction between individuals occur only on the government's terms. It is not hard to imagine a future where, for example, attendance at the sex-education program of the government's choice, chosen with as much political input as medical input, is made a pre-requisite of getting lower insurance rates on a family plan. (I chose the sex-education example because liberals, conservatives and everyone in-between should be able to envision a potential problem here.)
  3. Finally, it will never make sense to pay for “wellness” programs through an insurance-type system. Insurance assumes that many people pay into a pool of money, while only a few take monies out to pay for unexpected emergencies. But usage of "wellness" care will not be occurring on an infrequent, emergency basis. Ideally, the wellness program will be utilized by many people at regular intervals. This means that paying for wellness care through an insurance program will be always be less cost-effective than paying doctors for wellness care directly, sans any middleman. (Of course, if people start paying their doctors directly, they will never develop a sense that their visits to a doctor are a government-provided entitlement, making the government seem a little less powerful, creating an impression that strong-government advocates would prefer to avoid.)
This plan is an example of the government’s ability to take separate ideas which have individual merit and ruin them by putting them together in a way that focuses on increasing bureaucratic power rather than creating effective public policy. A better implementation of the "wellness" concept in the Rhode Island plan would be...
  1. Implementing some sort of community rating system, ala the Wyden plan, so people can buy insurance independent of their employer,
  2. Modifying the community rating system so that insurers can modify their rates based on certain types of behavior (participating in a wellness program, not smoking, etc.), and
  3. Creating health-savings accounts that people can use to pay for their routine and “wellness” care.
Through this set of proposals, you can provide wellness incentives and get individuals thinking about their own care, without invoking a government threat to deny medical access to those who do not behave "correctly".

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I wonder where the ACLU comes down on this? Will they defend my right to smoke and eat cheeseburgers and not get charged a higher rate than the health nut?

Posted by: Greg at December 19, 2006 12:44 PM

This is what inevitably occurs once you make something a "government responsibility."

Individual liberty gets eroded in direct proportion to government involvement, which in turn has a natural inclination to grow: 1) government gets involved and makes the problem worse (e.g., Medicare and Medicaid), so 2) the government solution is to add more government, which 3) brings us back to 1, and the cycle continues.

Where oh where in either the U.S. or Rhode Island Constitutions does it say ANYTHING about health care being a government responsbility?????

Posted by: Tom W at December 19, 2006 4:05 PM

I still don't understand how health insurance is a government responsibility but homeowners and auto insurance ISN'T. What's the difference?

Posted by: Greg at December 19, 2006 4:09 PM


That is what is needed in Rhode Island. You have Blue Cross, United and....? Hmm...

I'm disappointed that the Carcieri administration did not embrace a free-market approach. State funded public health programs in RI under Carcieri's predecessor were perhaps the biggest cause of our state's deficits. In fact, Koller was the head of Neighborhood Health Plan.

Now after screwing up the government version, the response is to force a government solution onto the private sector. This is the latest of many steps towards government control of healthcare.

I fear that we are setting up a system that may be doomed to fail. The insurers have already said that many of the savings that the state hopes to realize won't occur until years from now, if at all. Are we just setting ourselves up for increased goverment intervention down the road?

Look at what has happened in the past with government intervention. RI increased health benefits over several years only to yank them after people came to rely on the benefits. Didn't we just have this debate over mental health cuts. When Carcieri announced the original cuts in health-related areas, I supported them as necessary to improve the state's financial situation. But it truly is a crime not to cut healthcare programs without provide those needing help an alternative outside of government.

We're on the road to doing this with healthcare in RI. We should be looking to provide citizens with MORE healthcare options, not fewer healthcare options. That requires increasing competition among insurers. Blue Cross might not like it, but it's the way to ensure the long-term healthcare needs of our state.

Posted by: Anthony at December 19, 2006 4:59 PM

Wow, Anthony went an entire post without blaming Laffey for something.

Posted by: Greg at December 19, 2006 6:55 PM

I only blame Laffey when he is to blame.

Posted by: Anthony at December 19, 2006 9:27 PM

You are all correct. This new plan won't help a BIT. If the TRUTH BE TOLD, Rhode Island needs to RADICALLY OVERHAUL its entire legislative and regulatory foundation for the health insurance industry here in the state. It needs to TAKE THE ADVICE OF PROVEN NATIONAL HEALTH POLICY EXPERTS that know what they are doing and have a TRACK RECORD to show for it. Actually The Rhode Island chapter of the National Association of Health Underwriters has already contacted the experts that helped certain other floundering states get back on track and restore their markets by helping to craft GOOD legislation that was SUPPORTED BY STATE OFFICIALS and had the effect of BRINGING HEALTH INSURERS BACK to their states in a matter of months once passed....and it dramatically LOWERED HEALTH INSURANCE COSTS and IMPROVED AVAILABILITY of a WIDER CHOICE of AFFORDABLE plans and REDUCED the numbers of uninsured.

Actually, the work has already been done but our esteemed Rhode Island leaders decided to RESIST, IGNORE or outright REJECT these reforms for the past two years! These are reforms that would have ended our crisis as long as three years ago and cut our helth insurance costs by a had to 2/3s for some people.

The majority of the rest of the country proves day in and day out that GOOD legislation brings carriers to states and enables the market to function. Carriers are more profitable and consumers have more lower cost quality plans to choose from.

But Rhode Island has never looked to the successful states as models for reform. They continue to look to states that are just as crippled (and stubborn and arrogant)as we are. By allowing our officials to continue to try to do their own thing and reinvent the wheel, I promise. Things are only going to get worse.

Now going back to the PRO JO article and the description of the plan, if you compare it to the plan one of the plan designers, Valerie Tutson, said she had which was so terrible because she had to pay for "everything" herself, the Governor's "landmark" plan is MORE EXPENSIVE. She said her plan had a $2000 deductible and her premiums were $229 per month but the Governor's plan is $314 per month and has a $3000 of our of pocket responsibility which may or may not include a $500 deductible -- IF and ONLY IF you do a wellness program, otherwise the article said it will cost you even MORE money out of pocket.

Now if you had a choice between the two plans, which would YOU rather have to protect you in a worst case scenario?
The first one would cost your premiums for the year of $229 x 12 or $2748 plus the $2000 deductible for a total of $4748. The new "landmark" "lower cost" plan would cost $314 x 12 or $3768 PLUS the out of pocket amount of AT LEAST $3000 for a total of AT LEAST $6768!
The first one lets you choose your own doctors and the second one charges you more for that. The first one saves you over $2000 in a worst case scenario and has BETTER PROTECTION. The so-called lower cost plan is actually MORE EXPENSIVE and provides a LOT LESS protection. The first plan would save $85 in premiums per month which is MORE THAN ENOUGH to go towards a wellness program.

If the Governor wants to provide incentives to small businesses, why doesn't he do what he does for big businesses and give them some kind of a tax break if they have a wellness program or give the employee the tax break.

Establishing a Health Reimbursement Arrangment is a method that would enable employers to reimburse an employee for medically related expenses and then take a 100% tax deduction for doing it. The HRA is a great way to pay only for the benefits the employees actually use because it just reimburses employees who have incurred costs. Employees that don't have expenses aren't reimbursed. Employers could reimburse employees who decide to try to get off their prescriptions and get rid of their chronic problems by going to see a Naturopathic doctor who is trained to look for and eliminate underlying causes of disease by helping to strengthen and restore the body's own immune system and natural ability to heal and fight off disease. Whereas M/Ds are only trained in Allopathic medicine which only treats SYMPTOMS of disease. They are not trained the way N.D's are to actually help a person regain their robust health by helping them get completely RID of their disease. Encouraging something like THIS in Rhode Island would REALLY be a way to put Rhode Islanders on a fast track towards getting well and we can leave the insurers OUT OF IT. Of course the medical establishment would HATE it if people started getting well and not needing so many prescriptions and office visits but it would be the right thing to do.

Then to address the high costs of insurance, lets for a change INSIST all our elected and appointed oficials support the reforms we need to get carriers back that Senator Marc Cote has
sponsored for years. For details on what they are and more about state health insurance regulations and our crisis in general, visit

I won't hold my breath however. It has been said that states like Rhode Island that insist on doing things differently are like alcoholics. They keep making stabs at legislation continuing to try to fix it themselves, not having a clue, while they gradually make things worse and worse until things get so bad that the state FINALLY hits bottom. Then and only then do they finally TAKE THE ADVICE of the TRUE EXPERTS and the state finally recovers.

Posted by: Emily Harding at December 21, 2006 9:24 AM

VERY well said Emily. Governor Carcieri has spoken about increasing the number of carriers in the past, but for some reason his administration seems to be moving in a different direction. Why is that?

Posted by: Anthony at December 22, 2006 12:47 PM

The apparent blog hysteria directed at this plan is completely unwarranted.
First, the Plan, as proposed, is directed to the small business community and is an option, not a requirement. There is no government requirement stating that a small business has to offer the plan, or that the employees of the small business offering the plan (as an option) have to participate.

Additionally, the Plan was designed by members of the RI small business community who run small businesses, including direct payees, and leaders of small business organizations such as Chambers of Commerce. Chris Koller and his group functioned primarily as facilitators to address the challenge provided to his department by the Legislature.

The premium targets were set by the Legislature. The Plan was designed by the small business community, in reaction to rapidly rising health care costs that threaten to survival of their businesses.

Writer comments belie a complete ignorance of the RI governments current involvement in health insurance. There are over 40 mandates, established by the legislature, that have to be offered by health care providers.

Emily is evidently unaware the Senator Elizabeth Roberts (soon to be LG Roberts) has proposed a bill (Jan.06) to offer tax credits to small businesses that offer Wellness programs.

The small group Wellness component of the Plan was modeled on lower cost success stories from the Wellness model applied at the big business (large group) level. No data exists that indicates that a wellness component will ultimately result in cost savings in a small group, but it's certainly worth a try.

Also, the Wellness component of the Plan promotes individual responsibility, as opposed to government intrusion into lifestyle choices. Simply put, if an individual decides to participate in a healthy lifestyle, via smoking cessation or weight reduction, etc., that individual will pay lower premiums. A non-smoker or someone who controls their weight hardly qualifies the person as a "health nut".

The Plan is an attempt to address a problem that nobody else has been able to solve. From that point of view, it should be applauded as an attempt to solve the problem, as opposed to being condemned, particularly from individuals who did not participate in the Plan design, or who are not familiar with the mechanism used to develop it.

Finally, the inference that a Naturopathic approach to wellness and immune system enhancement and ultimately elimination of medication is the best answer to disease elimination is complete nonsense and has little if any scientific credibility or data to support it. Rapidly mutating RNA viruses or virulent forms of bacteria can rapidly wear down the strongest immune systems, and the best means of defense is by the development of vaccines and antibiotics that help the immune system combat the invasion.

Weaning people off of unnecessary prescriptions is certainly an admirable goal, just don't try to sell Naturopathy as the answer to our health care problems.

Posted by: Phil at December 22, 2006 11:55 PM
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