Insurance Reform Success Story

Monday, January 29, 2007 | 0

By Stephen D'Amato

Here's a story for anyone interested in health care reform: A gubernatorial candidate travels around Massachusetts and hears complaint after complaint from employers about the spiraling cost of insuring their employees. Annual double-digit rate increases have become the norm. Small businesses are wilting under the weight of these costs. Large businesses are considering relocating to places where insurance costs are lower. Many employees do not have access to quality health care. The candidate understands that a crisis exists and makes a priority of controlling, if not reducing, these costs. The candidate becomes governor. Is there any possible way this story ends happily?

Actually, it did, in an almost fairy-tale-like fashion, though not without a lot of angst.

The year was 1990, the candidate was Bill Weld, and workers' compensation insurance rates had gone up a staggering 92% over four years. Then, shortly after Weld took office in 1991, things went from bad to horrible. Insurers filed for another rate increase, this time a record 45.6%. Faced with this mess, the governor pushed through the Legislature a reform bill that he promised would eliminate the need for any rate increase. Very few people thought he would be able to keep that promise.

Let's skip to the happy ending.

Workers' compensation rates have plummeted by about 60% since passage of the reform, in what many observers have described as the most remarkable turnaround in any insurance market in the country. And it is in this context that I pass along this recent recommendation of Peter Rousmaniere, a cost-containment expert who worked as a consultant to the state in 1991: We should set a goal of cutting health insurance premiums in half, using the same approach that worked so well for workers' compensation.

The audacity of the goal is intentional, designed to force us to search for options that we have not yet considered. But it may well be a realistic long-term goal, especially in light of our success in turning a 45% increase in rates into a 60% decrease. Plus, attaining the goal might be our only real chance to achieve both universal and comprehensive health insurance in Massachusetts. (Of course, big reductions in health care costs would also make more room in the budget for other items such as education and public safety.)

Applying the "workers' compensation approach" to health care means we must work together to save costs in innovative ways that do not simply shift costs among system participants. Identifying changes that help all parties is vital. Employees, employers, and insurers all gained from workers' compensation reforms aimed at preventing accidents, reintegrating employees into the workplace, investing in better quality health care in the short run to avoid increased costs later, and streamlining administrative processes. These steps may seem incremental, but they added up to a lot of savings for everyone. One of the most useful ideas -- offering discounted premiums to employers that hired cost-control firms -- came from a collaboration by insurers and regulators.

Similarly, bringing health insurance premiums down will require an unprecedented level of cooperation from providers, hospitals, insurers, employers, consumer groups, public officials, and other interested parties.

As was the case for workers' compensation, we need to implement a variety of initiatives that reduce costs, improve care, and make our workforce healthier and more productive. Creative funding ideas can allow us to save by investing in areas such as advanced health information technology, consumer education, catastrophic reinsurance, chronic disease management, tobacco control, childhood vaccinations, flu shots, screenings for hypertension and certain cancers, prenatal care, HIV/AIDS prevention, and efforts to eliminate medical errors and hospital acquired infections.

The forum for gathering useful proposals might be the new Health Care Quality and Cost Council, the office of the secretary of Health and Human Services, or the Division of Insurance. The large collection of ideas gathered by the Patrick-Murray Transition Health Care Working Group gives us a head start.

Our situation is simultaneously more dire and easier to remedy than we acknowledge. In order to provide comprehensive health coverage to all of our residents, we need to do much more than simply slow rising costs. The good news is that once we recognize this -- and commit ourselves to the goal of reducing costs dramatically -- innovations will follow.

Stephen D'Amato, a public interest attorney in Cambridge and a former Massachusetts insurance regulator, co-drafted the Workers' Compensation Reform Act of 1991. This guest column was first published in the Boston Globe.

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