Private health insurance

The current healthcare system in New Jersey has been accused of lacking “cost discipline. ” This system also lacks standardization because federal and state laws more often than not contradict each other. This has sparked court cases demanding a clear definition of these the jurisdictions as well as the regulators. Currently, employers can cover their workers via either a single-employer or multi-employer programs. Both programs can either be self-funded or fully-insured. These distinctions help to determine the federal and state laws applicable on any given program.

State governments are currently working to ensure comprehensive healthcare reforms are achieved in their respective states. However, they are faced with numerous healthcare coverage issues. Among them is the role of ERISA as regards employer self-insured plans and group purchasing plans. This paper focuses on the health insurance policy in the United States. It explores how politics has entered the policy development process. The paper further narrows down to private health insurance in New Jersey.

It explores the viability of the idea of New Jersey establishing a regulatory policy mandating private health insurance and group purchasing arrangements. This is due to the realization that policy making is the result of political choices by made by a set of elected and non-elected decision makers. These policies are a reflection of a community’s values. They often change with a shift in political preferences. The current situation Employer-oriented health insurance forms the basis of the healthcare system in the US. Employers are playing a key role to provide healthcare to citizens under 65.

In the past two years this kind of coverage has shown a pattern of skyrocketing cost of premiums and coverage erosion. In order to provide and maintain employee coverage, employers are seeking ways of bringing down these costs. This trend is heading towards group purchasing and self-insurance. These two have gained popularity in many states, including New Jersey (Brennan, 1994). In regulation of the health insurance sector, the New Jersey state must face the fact that self-insured plans fall under the regulation of the federal law. ERISA overrules any state laws governing the insurance sector (Brennan, 1994).

The main tasks ahead for New Jersey State policy makers include: ? Reforming the New Jersey comprehensive healthcare bearing in mind ERISA’s role and its implications on the employer self-insured programs ? Handling liability cases that involve denying or change of coverage for particular benefits since self-insured programs are outside the mandate of state benefits. ? Addressing the financial stability of the self-insured programs Self-insurance and group purchasing programs A survey conducted among both private and public firms of various sizes discovered the following: ? Private health insurance cost rose by 13.

9 per cent in 2003 ? 2003 was the third year of increases of 10 per cent and above ? Employers were not abandoning such programs. Instead, they were passing down the cost to the workers ? Mean family coverage yearly premiums had gone up to 2,412 dollars from 1619 dollars, representing a 50 per cent increase ? Averagely, employers are contributing 73 per cent of the premiums paid by the employees while the employees themselves contribute 27 per cent (Biddle, 2003). Employers, in their effort to reduce cost but still main worker’s coverage, have resorted to using various models.

These models are the self-insured and the group purchasing programs. The self-insurance program can save cost and is flexible in designing a healthcare program. This has made it very popular among the employers. The employers put money directly into a program that later helps in paying for the benefits should there be claims. In 2000, about 30 per cent of all private firms in New Jersey provided health programs. This was a great increase from 20 per cent in 1999 (Biddle, 2003). Group purchasing plans help in cutting cost due to their combined purchasing power.

They use this power in negotiating a lower rate than any of them would have bargained for. Self-insured group purchasing plans help in reducing costs. This is because they operate less expensively compared to traditional ones. Some costs like taxes on premiums are completely eliminated. This arrangement has various functions including: ? Negotiation of benefits and rates with insurers. ? Payment of premiums ? Performance of billing functions ? Enrollment of new members New Jersey policy makers must make a decision which state insurance laws will be applicable to group purchasing plans considering the state limitations by ERISA.

Any decision made will affect consumers, the arrangement and even traditional insurers. The state can exempt these arrangements from any regulations. This will enable them to form and grow. On the other hand, this exemption can weaken protection of consumers. In addition, exemption from rating rules may affect the cost of coverage in the market. If this arrangement manipulates premiums for the sake of attracting the healthy and deterring the sick, this will raise costs in the traditional insurance market. Self-funded group purchasing plans assist in saving employers money by avoiding increasing health coverage premiums.

However, the cost of these plans has also gone up due to the increasing healthcare costs. In the last three years, three self-funded MEWA programs have collapsed in New Jersey and left many in unpaid claims. Another is still being investigated by the Department of Banking and Insurance. When insurance corporations collapse, the insurance guarantee in New Jersey is able to settle all unpaid claims. But Multi Employee Welfare Arrangements (MEWA) is not supported by the state fund. New Jersey has enacted a law mandating financial standards for MEWA in response to MEWA’s failed plans.

This law has placed plans like MEWA under the state’s regulation. This law was meant to ensure integrity in terms of finances of such arrangements. It requires these arrangements to be registered, reported and sanctioned in case they do not comply with any regulations (Ferrera, 2003). There is a concern regarding insurance mandates that they are encouraging companies to self-insure to avoid the mandates. Research has reported that the size of the firm determines whether it self-insures or not. The research further points out that premium tax rates and state benefit mandates have no role in this determination (Ferrera, 2003).

A survey by New Jersey Business and Industry (NJBI) shows that the fast increase in the cost of insurance is overwhelming employers in New Jersey. There was a rise of 15 per cent in employee health benefits in 2002 and 35 per cent in the past three years. Employers are challenging the additional mandated benefits in the Legislature’s proposal. Actuarial and insurance findings have shown that mandated benefits play a big role in increasing insurance costs. However, more studies indicate that exemption from them does not lead to large savings.

Recognizing these shortcomings by mandated benefits, some states have enacted compulsory review of all mandates before any consideration by the legislature. They are incorporating a requirement that a cost-benefit analysis accompanies any mandated health benefit proposals. In New Jersey, the legislation is awaiting the Governor’s signing before it becomes law. It will establish the Mandated Health Benefits Advisory Commission to study the medical, financial and social implications of the proposed mandated health benefits bills before they are considered by the Legislature.

Even though self-insurance gives attractive packages to employers, numerous states view it as an impediment to realizing healthcare reforms. ERISA has prevented states from implementing these reforms since self-insured plans do not fall under their mandate. Various states assess the tax and fees on healthcare programs for the purpose of subsidizing medically risky pools and uncompensated care. Due to the rising cost of self-insurance, various states have seen falling pools of money for the uninsured. Consequently, some states have tried bypassing self-insurance exemptions but have not been successful.

Another big concern with self-insurance is the lacking regulation. This makes those covered by it vulnerable to termination, abuse and program mismanagement. Insurance firms have also complained of being treated unfairly, causing unfair competition between purchased plans and the self-insured. Under these tough economic conditions, group purchasing programs are attractive due to their high probability to reduce costs. On the other hand, this must be balanced with the need to protect those using these programs as well as those still in traditional policies. There must be proper protection against financial instability and scams (Polzer, 1996).

In recognition of these problems and concerns, attempts have been made in amending ERISA or passing federal regulations ameliorating some of these problems. An act advocating for portability was passed in 1996 to try to solve this. But the basic ERISA fundamentals cannot be improved if employers still play a key role in medical care provisions in the US. If recent practices and trends are anything to go by, then the future of healthcare coverage will have little change. How the state of New Jersey and its policymakers stay focused to navigate through such times remains the big question. Conclusion Both sides of the argument have valid points.

Those in favor of private health insurance argue that it will tremendously cut down on costs. They argue that the current system lacks cost discipline since premiums are constantly increasing. They further fault its regulation as not being standard since state and federal laws clash with each other at some point. Those in favor of the employer-based system argue that it is the best system to check on the insolvency of insurance companies. This will ensure that there are no cases of unpaid claims. It will also enable the uninsured to access medical care. New Jersey should establish a regulatory policy mandating private health insurance.

This seems to be the best way to go to reduce the escalating cost of premiums and make it easy for all the stakeholders. But this system should be properly regulated to seal any loopholes that may pose a threat to its success. References Biddle, C (2003) NJBIA 2003 Health Benefits Survey, New Jersey’s Business and Industrial Association Brennan, T et al (1994) The critical role of ERISA in state health reform-Health Affairs Ferrera, T et al (2003) PEO Health Plans-NAPEO Legal Review Polzer, K et al (1996) Private sector health coverage: The George Washington University; Washington