The ‘public option’ in forefront of state’s health reform debate

Even as Gov. Dannel P. Malloy expressed concerns about the proposed SustiNet state-run health plan this week, he emphasized that he embraces its goals. He supports universal health care coverage and allowing municipalities and nonprofits to buy into the state employee insurance pool.

But the SustiNet plan also calls for offering state-run insurance to the public–the so-called public option. To many SustiNet supporters, the public option is a must-have. The insurance industry vehemently opposes it.

Malloy embraces health reform and sees the insurance industry as a key source for job growth. His take on the public option?

“He is hard pressed to see how something that has not been tried and proven effective anywhere else could be done here, especially given who we are historically, and the industries that are so prominent and important to the state economically,” said Roy Occhiogrosso, a senior advisor to the governor.

Malloy believes the state is “years away, if even that, from what is currently being envisioned as a workable option,” Occhiogrosso said. “The reality is we are in a place where the economics of that might not make sense.”

Nonetheless, Occhiogrosso said, Malloy would be open to a compromise on SustiNet if it addresses his concerns, which include the plan’s potential cost and its call to give control of more than $5 billion in state health care spending to a quasi-public agency.

“Are there discussions happening? Yes,” Occhiogrosso said. “Do we hope something can be worked out that makes sense? Of course.”

There are elements of the proposal that the governor, SustiNet supporters, and the insurance industry can agree on. But the public option could be a stumbling block.

The push for SustiNet grew out of a multiyear effort to promote universal health care, and has galvanized many people who want an alternative to the insurance industry, not just expanded coverage. The movement tapped into the frustration of people who believe the federal health reform law, which has no public option, did not go far enough.

Juan A. Figueroa, president of the Universal Health Care Foundation of Connecticut, which developed the original plan for SustiNet, said many of Malloy’s concerns, including the governance and timing of the plan, can be addressed.

But Figueroa said any plan that moves forward must include a public insurance plan to compete with private insurers like Aetna, CIGNA and Anthem Blue Cross and Blue Shield.

“What’s really more important to me is the framework for having a long-range vision and making sure that we have a new product via a public option that is offered to the public,” he said. “That’s the bottom line.”

Insurance industry representatives, meanwhile, have pointed to pieces of SustiNet they would support, including delivery system changes like the use of medical homes and alternative payment models. Keith Stover, a lobbyist for the Connecticut Association of Health Plans, said insurers also agree with the principle of getting as many people covered as possible.

“Our fundamental problem is that there is a disconnect in the SustiNet report and in the legislation between the philosophical objective to get people insured and the practical aspect of what they’ve actually proposed, which is ‘let’s attack the insurance industry,'” Stover said.

Cost, Job Concerns

As proposed, SustiNet would join the health plans the state currently pays for–including the state employee and retiree plan and Medicaid–under a common purchaser, a quasi-public SustiNet Plan Authority. The idea is to use the leverage of a large insurance pool and a single authority to save money and promote delivery system changes to improve care and slow the growth of costs.

As soon as is feasible, municipalities, small businesses and nonprofits would be allowed to buy SustiNet coverage. They would buy into a coverage group separate from the state plans.

Then comes the public option: All individuals and employers in the state would be allowed to buy SustiNet coverage. The bill requires that the authority first determine that offering the coverage will be financially viable and won’t require money from the general fund.

The Malloy administration has raised concerns about giving a quasi-governmental agency authority over state employee health plans and Medicaid. Malloy voiced the concerns himself earlier this week at a town hall meeting in response to a question from the Rev. Joshua Mason Pawelek of the Unitarian Universalist Society: East in Manchester.

Malloy has also said the short-term costs of SustiNet could be problematic. The legislature’s nonpartisan Office of Fiscal Analysis is expected to release its analysis of the SustiNet bill next week.

A report commissioned by America’s Health Insurance Plans, which lobbies for health insurers, concluded that SustiNet would increase state spending and could put the state at risk for the cost of higher-than-expected medical claims. The Universal Health Care Foundation disputed the report’s findings. Consultants who worked on SustiNet projected that the state could save money by implementing SustiNet, although most of the identified savings would come from increased federal reimbursement the state will or could get under federal health reform whether SustiNet takes effect or not.

Many of the bill’s opponents, including business groups and several Republican legislators, have cited concerns about its potential effect on the insurance industry.

In testimony, the Connecticut Association of Health Plans argued that SustiNet is inconsistent with rebuilding the state’s economy, and noted that the state has the highest per capita concentration of health insurance jobs in the country.

“There are approximately 70,000 people in our state employed directly or indirectly in the health insurance industry,” the association said. “SustiNet dismisses this essential part of our jobs infrastructure and sends precisely the wrong message to health insurers located here: We don’t want you and we don’t need you.”

Figueroa said a public option does not have to be inconsistent with job growth. Having an affordable way to provide insurance coverage could allow small employers to hire additional workers, he said. And the public plan could prompt changes in how health plans are run that would lead insurance company employees to focus on care coordination, prevention programs and working with health care providers to implement delivery system changes like medical homes.

“Insurance the way we know it today is probably going to be very different 20 or 30 years from now,” he said.

Stover said the debate over a public option was already conducted and decided at the federal level. Instead of a public option, federal reform creates marketplaces for buying insurance, called exchanges, which are meant to give consumers more transparent information about health plans. It also calls for many people to receive subsidies to purchase coverage.

“The important conversation that we need to have is how do we go about making Connecticut a national model on exchange implementation, not attempting to fight a fight that has already occurred and, for better, worse, good, bad or indifferent, been decided,” Stover said.

Figueroa also sees echoes of the federal reform debate in Connecticut.

“I think what we’re seeing is exactly what happened at the national level when the public option was talked about and debated and the influence that the big insurers had on Congress in basically killing it,” he said in response to Occhiogrosso’s comments on the public option. “No matter what, I’m hopeful that we can get out of this quagmire, that the administration will see to it not to have health care reform be held hostage and SustiNet or the public option be held hostage to the big interests of the insurers.”

Supporters expect more

Occhiogrosso said Malloy wants to open the state employee plan to municipalities as soon as possible, and hopes that nonprofit providers who contract with the state could join the pool a year or two after that.

The administration is also pushing ahead with implementing federal health reform, including planning for the exchange. Between those changes, Occhiogrosso said, “We will have taken several big important steps forward.”

But Figueroa said SustiNet supporters expect more.

“Let’s take care of the resources and the opportunities provided by the federal government, and let’s not be bullied by the insurance companies, and let’s make sure that they don’t hold hostage one more time meaningful health care reform in the state,” Figueroa said. “Many, many, many, hundreds if not thousands of people behind this movement in the state of Connecticut, that’s what they’re saying.”

SustiNet supporters, who have become fixtures at Malloy’s town hall meetings and a frequent presence in the Capitol, are part of a network built through several years of organizing efforts. (Ironically, much of the financial support for the movement has its roots in the insurance industry. The Universal Health Care Foundation–then called the Anthem Foundation of Connecticut–was established with money from Anthem Health Plans, provided as part of a settlement when it merged with the non-profit Blue Cross Blue Shield Health Plan.)

One supporter active in the campaign is Pawelek, the Manchester minister who questioned Malloy about his support for SustiNet. Pawelek said he wasn’t certain how significant of a problem the governance was, but he said he understood Malloy’s wariness about the cost.

A SustiNet plan that ultimately does not include a public option won’t be enough for Pawelek.

“Any reforms that make it easier for people to get access to affordable quality health care are good, but for me, and I think for a lot of us, it comes down again to this basic principle: Is the health care system at its core in terms of mission geared towards producing health for our residents or is it geared towards producing profits?” he said. “And when it’s geared towards profits, health gets short shrift.”

“I know that doesn’t sound business friendly,” he added, “but I think a state full of unhealthy people is not business friendly.”