2005 Senate Bill 848 (Mandate health insurance “wellness” plans )

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Public Act 412 of 2006

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Introduced by Sen. Tom George (R) on October 27, 2005, to require health insurance companies and HMOs to provide “wellness plans” to group insurance sponsors (employers) in which a rebate of up to 10 percent would be paid at the end of the year if the majority of employees have enrolled in a health wellness, maintenance, or improvement program offered by the employer, and maintenance or improvement of the employees’ health status can be demonstrated by health status indicators agreed by the employer and the health insurer or HMO. Also, to require insurers and HMOs to offer a similar plan to those who purchase individual coverage, which would require the individual and his or her family to participate in a "wellness" program sponsored by the insurer or HMO.
- Referred to the Senate Health Policy Committee on October 27, 2005, to require health insurance companies and HMOs to provide “wellness plans” to group insurance sponsors (employers) in which a rebate of up to 10 percent would be paid at the end of the year if the majority of employees have enrolled in a health wellness, maintenance, or improvement program offered by the employer, and maintenance or improvement of the employees’ health status can be demonstrated by health status indicators agreed by the employer and the health insurer or HMO. Also, to require insurers and HMOs to offer a similar plan to those who purchase individual coverage, which would require the individual and his or her family to participate in a "wellness" program sponsored by the insurer or HMO.
  - Reported in the Senate on March 14, 2006, with the recommendation that the substitute (S-1) be adopted and that the bill then pass.
- Substitute offered in the Senate on March 15, 2006, to allow rather than require insurers to offer the "wellness plans". The substitute passed in the Senate by voice vote on March 15, 2006.
- Amendment offered by Sen. Bob Emerson (D) on March 16, 2006, to prohibit an employer from firing, demoting or cutting the pay of an employee who chooses not to participate in a "wellness program". The amendment passed in the Senate (19 to 17) on March 16, 2006. [Vote Details and Comments]
- Substitute offered by Sen. Tom George (R) on May 9, 2006, to replace the previous version of the bill with one that revises details but does not change the substance of the bill as previously described. The substitute passed in the Senate by voice vote on May 9, 2006.
Passed in the Senate (38 to 0) on May 9, 2006, to allow health insurance companies and HMOs to provide “wellness plans” to group insurance sponsors (employers) in which a rebate of up to 10 percent would be paid at the end of the year if the majority of employees have enrolled in a health wellness, maintenance, or improvement program offered by the employer, and maintenance or improvement of the employees’ health status can be demonstrated by health status indicators agreed by the employer and the health insurer or HMO. Also, to allow insurers and HMOs to offer a similar plan to those who purchase individual coverage, which would require the individual and his or her family to participate in a "wellness" program sponsored by the insurer or HMO. [Vote Details and Comments]
Received in the House on May 9, 2006.
- Referred to the House Health Policy Committee on May 9, 2006.
  - Reported in the House on May 23, 2006, without amendment and with the recommendation that the bill pass.
Passed in the House (74 to 32) on September 13, 2006, to allow health insurance companies and HMOs to provide “wellness plans” to group insurance sponsors (employers) in which a rebate of up to 10 percent would be paid at the end of the year if the majority of employees have enrolled in a health wellness, maintenance, or improvement program offered by the employer, and maintenance or improvement of the employees’ health status can be demonstrated by health status indicators agreed by the employer and the health insurer or HMO. Also, to allow insurers and HMOs to offer a similar plan to those who purchase individual coverage, which would require the individual and his or her family to participate in a "wellness" program sponsored by the insurer or HMO. [Vote Details and Comments]
Motion by Rep. Chris Ward (R) on September 13, 2006, to give the bill immediate effect. The motion failed in the House (70 to 36) on September 13, 2006. [Vote Details and Comments]
Signed by Gov. Jennifer Granholm on September 29, 2006.

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1) Beware RomneyCare: WSJ articles here. [by Anonymous Citizen on May 30, 2006]
Wall Street Journal: "Romneycare's Fine Print"

By BETSY MCCAUGHEY
May 5, 2006; Page A16

Republicans and Democrats are hailing Massachusetts's new universal health coverage law as a model for what other states should do. Before you conclude that your state should enact a similar law, you might want to know how it would affect you. A careful reading of the Massachusetts law turns up surprises.

Everyone should have access to health care. Massachusetts aims to achieve this goal with a double mandate: All residents must have health coverage (Section 12) and all employers with more than 10 workers must assume ultimate financial responsibility if employees or their immediate family members need expensive medical care and can't pay for it (Sections 32, 44).

What is the impact on individuals? The state will offer subsidies to help low income residents pay for coverage (Section 19), but most of the uninsured earn too much to be eligible. An individual making $29,000 or more would probably have to pay the full cost or find a job that provides health insurance. Individual coverage costs about $3,600 in Massachusetts -- a hefty bill. Moreover, under the new law, individuals purchasing their own insurance must buy HMO policies. Preferred provider plans (PPOs) -- which give you more ability to choose your own doctors and treatments -- are not allowed (Section 65).

The impact of this law on employers is substantial. The original bill required employers with more than 10 full-time workers to provide all of them (and their families) with health insurance or to opt out of that requirement by paying a $295 annual tax per worker into a state fund. This modest penalty was highly publicized by the bill's supporters as proof that the bill would not be a heavy burden on businesses. Nevertheless, Gov. Romney vetoed it, perhaps to display his Republican credentials as a tax-cutter.

The Massachusetts House of Representatives overrode the veto -- but the reality is that the $295 penalty is small potatoes compared with the other obligations in the law. Say, for example, you open a restaurant and don't provide health coverage. If the chef's spouse or child is rushed to the hospital and can't pay because they don't have insurance, you -- the employer -- are responsible for up to 100% of the cost of that medical care. There is no cap on your obligation. Once the costs reach $50,000, the state will start billing you and fine you $5,000 a week for every week you are late in filling out the paperwork on your uncovered employees (Section 44). These provisions are onerous enough to motivate the owners of small businesses to limit their full-time workforce to 10 people, or even to lay employees off.

What else is surprising about this new law? Union shops are exempt (Section 32).

* * *
It's one thing to criticize. There are alternatives to make health insurance more affordable. State legislators have pushed up prices by requiring policies to cover chiropractics, acupuncture and other services that are worthwhile -- if you can afford them. But mandating them is like passing a law that the only car you can buy is a Lexus, when all you can afford is a Ford Focus. People should be allowed to buy basic, high deductible insurance without costly extras. The new Massachusetts law allows only people under age 27 to buy such policies (Section 90). Lawmakers could also devise incentives for hospitals to prevent the needless costs (and deaths) resulting from hospital infections. These infections are adding $30.5 billion to the nation's hospital costs, according to a new report. They are almost all preventable through better hygiene, and doing so will make hospitals more profitable and reduce health costs. Let's hope other states consider these alternatives, rather than duplicating the new Massachusetts law.

Ms. McCaughey, a former lieutenant governor of New York, is chairman of the Committee to Reduce Infection Deaths.

Mitt's Non-Miracle
WSJ, May 2, 2006; Page A16

Well, that didn't take long. Only two weeks ago Massachusetts passed an experiment in compulsory, subsidized health insurance, and already it's turning into an employer mandate and a vehicle for increasing the role of government.

Last week the Democrat-controlled Massachusetts legislature began moving in just that direction, overriding all of the line-item vetoes that Republican Governor Mitt Romney had cast in an effort to give the state's new insurance law a market-oriented veneer. Various Medicaid expansions were restored, as, more importantly, was a $295-per-employee annual penalty on employers who don't provide health insurance.

That $295 may not sound like much, but it's sure to grow over time. And in any case the real employer penalty in the bill is a draconian provision that puts employers on the hook for the major medical bills of employees they don't insure. This might as well be considered an employer mandate, since it means just one case of cancer for an uncovered employee would be enough to wipe out a small business.

Meanwhile, Governor Romney recently offered what sounded like a response to some of our editorial criticisms at an appearance before the U.S. Chamber of Commerce in Washington. "The key factor that some of my libertarian friends forget is that today everybody who doesn't have health insurance is getting free coverage from the government," he said. He also repeated his claim that treating such free riders adds significantly to the cost of private insurance for those who do have it, thus justifying his compulsory scheme.

Nice try, Governor. But there's actual data out there on the cost of "free care" for the uninsured, and the numbers suggest it should rank fairly low among policy makers' concerns. A 2003 study by Jack Hadley and John Holahan in the policy journal Health Affairs estimated that in 2001 the nationwide cost of such uncompensated treatment was $34.5 billion, or 2.8% of all health spending.

That's not nothing, but neither has it been the major cost driver for private insurance that the Governor claims it is. The real cost drivers are two regulations -- guaranteed issue and community rating -- that unreasonably restrict the freedom of insurers to offer and price coverage, and which his new law explicitly preserves in his state. If Governor Romney thinks care for the uninsured is expensive now, wait until Massachusetts taxpayers see how much his government-heavy "solution" costs.

WSJ - Mitt's Market Misfire
April 24, 2006; Page A14

Massachusetts Governor Mitt Romney signed a bill recently that's being praised as a model for how to achieve "universal" health care. But while the governor claims his plan is market based, it does little to reform the regulations that have made coverage in his state among the most expensive in the country.

How bad are Massachusetts' insurance regulations? One good indicator is that it's one of few states in which eHealthinsurance doesn't sell policies in the individual market. eHealthinsurance is an Internet insurance brokerage that makes it easy for people in most of the 50 states to find out what kind of coverage is being offered in their areas. We tried to price coverage in the Bay State and came up empty. So we called the company to ask why. "Guaranteed issue," was Chief Operating Officer Bob Fahlman's instantaneous reply.

Guaranteed issue is the name of a regulation that requires insurance companies to sell policies to all comers, even those who wait until they're sick to seek coverage. Naturally the requirement to accept those free riders makes insurance much more expensive for everyone else. It also means insurance companies aren't eager to be found by consumers, even though they are generally required to sell in the individual market in order to be able to offer coverage through employers. Yes, you read that right, they don't want customers.

So in Massachusetts, insurers hide, in part by refusing to pay commissions to brokers such as eHealthinsurance. Their prices are also a disincentive. An eHealthinsurance survey earlier this month found the Aetna HMO in Boston asking $1,719 a month to cover a young family of four, and $560 for one nine-year-old child.

The new Massachusetts health care legislation does little to address the root causes of this cost problem. Guaranteed issue is explicitly preserved. And while a new insurance regulation board could in theory do something about other costly mandates, it's not likely to do much in practice.

The $200 per month target price Governor Romney is talking about for the state's new mandatory insurance is higher than 80% of the individual policies eHealthinsurance reported in a study of 80,000 customers nationwide late last year. The range of average monthly premiums for individuals was as low as $98 in Michigan and as high as $245 in New Jersey and $379 in New York. The latter are the only two guaranteed-issue states in which eHealthinsurance sold individual policies during the study period, by the way. Massachusetts didn't make the cut.

We note all this because there's a far simpler way to begin tackling the problem of the uninsured than the Massachusetts path. To wit: Let the market start operating as it should. Companies like eHealthinsurance have already got a great infrastructure up and running and in many states consumers have real choices when it comes to health insurance products. States like New York and New Jersey, meanwhile, might try getting the regulators out of the way before following the Bay State in forcing people to buy needlessly expensive coverage.

WSJ
Health Care for Everyone? We Found a Way.

By MITT ROMNEY
April 11, 2006; Page A16

BOSTON -- Only weeks after I was elected governor, Tom Stemberg, the founder and former CEO of Staples, stopped by my office. He told me that "if you really want to help people, find a way to get everyone health insurance." I replied that would mean raising taxes and a Clinton-style government takeover of health care. He insisted: "You can find a way."

I believe that we have. Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced. And we will need no new taxes, no employer mandate and no government takeover to make this happen.

When I took up Tom's challenge, I assembled a team from business, academia and government and asked them first to find out who was uninsured, and why. What they found was surprising. Some 20% of the state's uninsured population qualified for Medicaid but had never signed up. So we built and installed an Internet portal for our hospitals and clinics: When uninsured individuals show up for treatment, we enter their data online. If they qualify for Medicaid, they're enrolled.

Another 40% of the uninsured were earning enough to buy insurance but had chosen not to do so. Why? Because it is expensive and because they know that if they become seriously ill, they will get free or subsidized treatment at the hospital. By law, emergency care cannot be withheld. Why pay for something you can get for free?

Of course, while it may be free for them, everyone else ends up paying the bill, either in higher insurance premiums or taxes. The solution we came up with was to make private health insurance much more affordable. Insurance reforms now permit policies with higher deductibles, higher co-pays, coinsurance, provider networks and fewer mandated benefits like in vitro fertilization -- and our insurers have committed to offer products nearly 50% less expensive. With private insurance finally affordable, I proposed that everyone must either purchase a product of their choice or demonstrate that they can pay for their own health care. It's a personal responsibility principle.

Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on government is not libertarian.

Another group of uninsured citizens in Massachusetts consisted of working people who make too much to qualify for Medicaid, but not enough to afford health-care insurance. Here the answer is to provide a subsidy so they can purchase a private policy. The premium is based on ability to pay: One pays a higher amount, along a sliding scale, as one's income is higher. The big question we faced, however, was where the money for the subsidy would come from. We didn't want higher taxes; but we did have about $1 billion already in the system through a long-established, uninsured-care fund that partially reimburses hospitals for free care. The fund is raised through an annual assessment on insurance providers and hospitals, plus contributions from the state and federal governments.

To determine if the $1 billion would be enough, Jonathan Gruber of MIT built an econometric model of the population, and with input from insurers, my in-house team crunched the numbers. Again, the result surprised us: We needed far less than the $1 billion for the subsidies. One reason is that this population is healthier than we had imagined. Instead of single parents, most were young single males, educated and in good health. And again, because health insurance will now be affordable and subsidized, we insist that everyone purchase health insurance from one of our private insurance companies.

And so, all Massachusetts citizens will have health insurance. It's a goal Democrats and Republicans share, and it has been achieved by a bipartisan effort, through market reforms.

We have received some helpful enhancements. The Heritage Foundation helped craft a mechanism, a "connector," allowing citizens to purchase health insurance with pre-tax dollars, even if their employer makes no contribution. The connector enables pre-tax payments, simplifies payroll deduction, permits pro-rated employer contributions for part-time employees, reduces insurer marketing costs, and makes it efficient for policies to be entirely portable. Because small businesses may use the connector, it gives them even greater bargaining power than large companies. Finally, health insurance is on a level playing field.

Two other features of the plan reduce the rate of health-care inflation. Medical transparency provisions will allow consumers to compare the quality, track record and cost of hospitals and providers; given deductibles and coinsurance, these consumers will have the incentive and the information for market forces to influence behavior. Also, electronic health records are in the works, which will reduce medical errors and lower costs.

My Democratic counterparts have added an annual, $295 per-person fee charged to employers that do not contribute toward insurance premiums for any of their employees. The fee is unnecessary and probably counterproductive, and so I will take corrective action.

How much of our health-care plan applies to other states? A lot. Instead of thinking that the best way to cover the uninsured is by expanding Medicaid, they can instead reform insurance.

Will it work? I'm optimistic, but time will tell. A great deal will depend on the people who implement the program. Legislative adjustments will surely be needed along the way. One great thing about federalism is that states can innovate, demonstrate and incorporate ideas from one another. Other states will learn from our experience and improve on what we've done. That's the way we'll make health care work for everyone.

Mr. Romney is governor of Massachusetts.

Readers respond:

Mandatory Health Care? Hold On, Governor
April 25, 2006

I've heard Massachusetts Gov. Mitt Romney's comparison of car insurance with health insurance almost everywhere now, especially on the evening news ("Health Care For Everyone? We Found a Way." -- editorial page, April 11). In essence, his claim is that the state makes us buy car insurance; it should be no different with health insurance. Hold on there, governor.

All states have what are called financial responsibility laws: The states require people who operate motor vehicles to carry liability insurance of at least some state-mandated amount. Financial responsibility laws are designed to provide a measure of protection to people who may be injured or have their property destroyed by the careless acts of motor vehicle operators. In fact, financial responsibility laws extend to people who operate watercraft and aircraft as well. By the same token, if you don't operate a motor vehicle, there is no requirement for you to carry car insurance. Furthermore, there is no state requirement that anyone carry the kind of car insurance that protects one's own motor vehicle from damage or destruction (it's commonly called collision and comprehensive coverage). Some lender probably will require collision and comprehensive coverage if your car is collateral on a car loan, but the state doesn't care whether you have it or not.

On the other hand, what I've heard called RomneyCare requires everyone to have health insurance. Period. That's hardly the same as the state mandate for car insurance.

Gerald P. Hanner
Papillion, Neb.

Gov. Romney's commentary contains a fascinating bit of information that may get overlooked: Massachusetts discovered that 40% of the uninsured had good incomes and simply chose not to purchase health insurance. Apparently these were younger healthy individuals who could afford insurance but chose to spend the money on other things. As the governor points out, they also know they can get emergency care at little or no cost if an emergency arises.

When we hear from those who want to stampede us into a national single-payer health-care plan like the disaster in Canada, we need to remember that many of the uninsured are not made up of single working mothers who can't afford it but of those who simply chose not to pay for health care.

William B. Stephenson
Princeton, N.J.

As described, Gov. Romney's plan to mandate that everyone in Massachusetts obtain health insurance seems like a home run. No new taxes, affordable insurance, a small shifting of existing revenues -- wonderful! I do not understand how all this will work, but I was really impressed by the feat of getting insurers to offer policies nearly 50% less expensive than today. Governor, how did you do this? Can you share the secret? Never mind, I am sure you and your team have it all thought out.

Given the usual governing trends there, I never imagined I would be envious of those living in the Bay state, but this gives me pause. Failing my move to Massachusetts, Gov. Romney, can you put your consulting hat back on a couple of days a week and make a few visits to Trenton? The governor of my state faces similar, seemingly intractable problems, and has not been nearly so creative as your folks. New taxes are his primary response to overspending. I warn you we probably couldn't pay you your regular consulting fees, but think of the satisfaction of being able to solve a problem for an investment banker.

Steve Bergh
Morristown, N.J.

and more:
Not Such a Good Idea
April 14, 2006

In regard to "Health Care for Everyone? We Found a Way" by Mitt Romney, editorial page, April 11: This is a joke, right? Mr. Romney isn't seriously running for the GOP presidential nomination on a platform of universal medical insurance, is he? Unlike the Democrats, many of us have studied economics. We know it won't work, and we aren't impressed by people who think it can.

Scott Draeker
Austin, Texas

When politicians tell you they have a plan to fix something they broke in the first place, do yourselves a favor and hold on to your wallets.

Steve Hogan
Sunnyvale, Calif.

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2) Does this include government employees? [by Anonymous Citizen on May 25, 2006]
If this wellness plan was also intended for government employees, the taxpayers would save a bundle. Of course, I am certain the government would spend the extra money wisely, right?
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3) Free Americans offended by this patronizing bill [by Anonymous Citizen on November 1, 2005]
Sen. George - I am not a welfare "client" or a ward of the state. I am offended by a law that would force me to participate in the micromanagement of individual lifestyle decisions. This is very different from establishing proper incentives, like insurance discounts for those who don't smoke and aren't obese. This mandates participation in employer or insurance company sponsored behavior modification programs. Doing this for Medicaid recipients is one thing - if you take the shekels you accept the shackles, and no one makes you take the shekels. But this bill imposes a patronizing regime on free Americans. Your heart is in the right place as far as wanting to change the incentives, but you need to review some fundamentals about the role of government and the value of individualism. Americans believe in individualism, not European style collectivism. Find your roots, man.
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