New York State

Interim Report to Governor David A. Paterson, May 28, 2008

I. Introduction

In July 2007, Governor Eliot Spitzer charged Commissioner of Health Richard F. Daines, M.D., and Superintendent of Insurance Eric R. Dinallo with development of a comprehensive strategy for achieving quality, affordable health insurance for all New Yorkers. Important progress toward this goal had been achieved during the first six months of the Governor's administration with enactment of State legislation to expand Child Health Plus, streamline enrollment into government-sponsored health programs, allow employers and unions to buy into the Family Health Plus program, and expand provider and consumer protections under managed care. While the federal government continues to block implementation of some of these reforms, they represent significant first steps that the Governor seeks to build upon with additional incremental reforms to expand access to affordable health insurance coverage.

Toward this goal, the Governor requested the Departments of Health and Insurance to study the current obstacles to health coverage and to then develop, evaluate and recommend proposals for achieving universal coverage, within the general framework of a building block approach. As part of the evaluation and recommendation process, the agencies were also directed to model various proposals under consideration and were authorized to engage a consultant to assist in this regard.

In developing their recommendations, the Commissioner and the Superintendent are considering the extent to which proposals: (1) rapidly provide universal health coverage to the people of New York; (2) control the cost of health insurance and health care; (3) fairly and equitably distribute the cost of health insurance and health care; (4) improve the state's economy and the competitiveness of the state's businesses; (5) promote the economic viability of health care providers, and (6) embrace increased use of preventive medicine to improve quality and reduce health care costs.

The purpose of this report is to provide Governor Paterson, and the public at large, with an update on the work to date in developing a universal coverage strategy. That work has focused primarily on two areas – activities designed to inform the development of universal coverage proposals and activities relating to the economic modeling of reform proposals.

II. Informing the Process

To help inform the development of reform recommendations as well as to solicit actual reform proposals, the Departments of Insurance and Health have reached out broadly to the general public, to stakeholders in the health care system, to academic experts in the field and to other states engaged in universal coverage initiatives. The purpose of this outreach has been to listen to the concerns and experiences of those engaged in our health care system (consumers, employers, labor, providers and insurers), and to gain insight into reform possibilities from these same stakeholders as well as from academic experts and through the experiences of other states.

Toward this end, the Superintendent and the Commissioner conducted eight public hearings across the State. In addition, staff from the Departments has met individually with more than 40 stakeholder groups since September to provide an opportunity for in-depth dialogue. Meetings were also held with experts from academic institutions and health policy think tanks. In addition, there were numerous discussions with individuals closely involved in the universal coverage initiatives ongoing in Massachusetts, Maine and California. These meetings will continue into the spring to further the dialogue on a universal coverage approach for the state. A summary of these discussions follows.

A. Public Hearings and Stakeholder Meetings

In August 2007, Superintendent Dinallo and Commissioner Daines announced the schedule for five public hearings across the State, beginning in September in Glens Falls and concluding in December on Long Island, with hearings also scheduled for Buffalo, New York City and Syracuse. To accommodate demand, a sixth hearing was scheduled for Rochester and a second hearing date was set for New York City. In addition, a statewide conference call hearing was arranged to accommodate individuals who could not travel to the hearing locations.

To conduct the public hearings, a panel was established that included representatives from the Health and Insurance Departments, as well as the Executive Chamber. In addition, four independent experts were asked to participate formally in the hearing proceedings:

Name Organization
James Tallon President, United Hospital Fund
Mark Scherzer Counsel, New Yorkers for Accessible Health Coverage
Stan Lundine Former Lieutenant Governor
Elizabeth Moore Partner, Nixon Peabody and former Director, Governor's Office of Employee Relations

A complete listing of the panel membership as well as the hearing schedule is included in Appendix A.

More than 270 people attended the hearings and hundreds of others viewed the hearings via webcast. The panel heard testimony from consumers, advocacy organizations, health care providers, businesses, labor unions, insurers, elected officials, faith-based organizations, civic organizations, government agencies and political parties. Not surprisingly, the most common theme of those testifying was the difficulty in obtaining affordable health care coverage under the existing system. But many of those testifying also depicted our health care system as broken and described problems not just with obtaining health insurance coverage but also with obtaining appropriate services when covered and with the health care system in general. Many ideas were suggested for reforms ranging from solutions for specific problems to principles for reform, and to comprehensive reform proposals. A summary of the input received through testimony at the hearings as well as in the individual stakeholder meetings follows.

The General Problem:

Overall, there was consensus that expanding access to New York State's 2.6 million non-elderly uninsured residents was a critical yet difficult task. However, no consensus emerged as to how to achieve this goal. Many testifiers highlighted the well-known facts about the uninsured population, citing the increasing numbers and strong evidence that the uninsured are often low-income workers who are less likely to receive needed care, tend to be more severely ill when diagnosed, and receive fewer preventive services than the insured. The plight of the underinsured was also frequently mentioned. The growth in the un- (and under) insured was attributed largely to spiraling increases in health care costs and health insurance costs. These costs have resulted in erosion of employer-based coverage and have made coverage prohibitively expensive for individuals without coverage through their employer.

With regard to public programs, common themes throughout the hearings included the struggle to get and keep coverage for eligible individuals and the lack of standardization and communication among the various programs, processes and systems. Temporary and permanent loss of coverage was portrayed not only as expensive but also disruptive to plans, providers and individuals, and to continuity of care. To maximize access to public programs and minimize unnecessary disenrollment and reenrollment, recommendations to simplify the eligibility and renewal processes were suggested. While many promoted expansion of public programs, others cautioned about the cost of such expansions, the impact on the state budget and the public tax burden and concern about replacing private dollars with public dollars.

On the private payer side, many addressed the impact that high health care costs are having on New York's economy. Small business owners want but cannot afford to provide coverage for their employees. Those who do provide coverage are at a competitive disadvantage in terms of their operating costs. Yet employers also spoke to the need to provide insurance to attract and keep qualified staff. Testifiers also spoke to the many problems with commercial health insurance, including confusion associated with the multitude of benefit packages, perceived barriers to accessing services and baffling coverage policies. Many also commented on the "death spiral" in the individual direct pay market. While applauding the state for mandating that direct pay coverage be available to individuals, many commented that the prohibitive premiums for that coverage have resulted in a broken market in which only the very sick with the means to afford the premiums can participate.

Advocates:

Advocates for the disabled and individuals with particular health problems highlighted the significantly higher health costs and special needs of this population. Insurance status was cited as the greatest barrier to obtaining screening, treatment and health care services. This was a particular concern expressed by numerous cancer survivors as well as American Cancer Society representatives who participated in every hearing. Even those with health coverage encounter significant financial barriers when faced with a major acute or chronic condition because of increasingly high out-of-pocket costs and limits to benefit packages. Too often, these individuals slip through the cracks because their health conditions limit their ability to work and receive employer-sponsored coverage, they earn too much to qualify for public programs and they cannot afford individual coverage. For these reasons, many support the expansion of Elderly Pharmaceutical Insurance Coverage (EPIC) to low-income people with chronic illnesses and/or disabilities under age 65 in addition to expanded access to FHP.

Advocates for specific populations all proposed additional funding, expanded services, and comprehensive benefits for the populations they serve. For example, Gay Men's Health Crisis and Housing Works would like the AIDS Drug Assistance Program (ADAP) to receive increased funding and be expanded to cover inpatient hospitalization, while family planning advocates voiced the importance of comprehensive reproductive health care, including family planning services, in any universal coverage proposal. There was also general recognition, however, that with a true universal coverage system that provided comprehensive coverage, the need for special funding for programs targeting specific diseases would be reduced.

Many of the civic organizations and groups representing children and low-income populations recommend building on the existing Medicaid, CHP and FHP programs by widening eligibility and removing enrollment and renewal barriers.

Health Care Providers:

Physicians and Other Direct Providers of Care

Recruiting and retaining primary care providers, soaring medical liability premiums, and high overhead expenses tied to a complicated insurance system are key problems for the provider community. For these reasons, the provider community tends to support a reemphasis on primary care, preventive medicine, disease management and promoting the delivery of care in physician private practice and community-based settings through enhanced reimbursement. In addition, the need to reduce the administrative burden associated with our system of multiple insurance carriers was frequently mentioned as well as the need for medical malpractice reform and the ability to collectively bargain with payers.

Not surprisingly, each provider type focused on problems perceived as unique to their area and promoted increases in funding. For example, the Psychological Association stressed the need for adequate networks and reimbursement for psychologists, while the NYS Speech-Language and Hearing Association highlighted access barriers due to the low reimbursement for hearing aids. Numerous speakers expressed concern over low primary care reimbursement rates and the impact that was having on primary care access, particularly in rural communities.

There also appeared to be growing support for a single-payer system among certain physician groups. Individual primary care physicians, representatives of the Academy of Family Physicians and Physicians for a National Health Program testified at multiple hearings in favor of this approach.

Hospitals

Hospital groups tend to support coverage expansions and initiatives to increase enrollment of those eligible for public programs. They also emphasize a shared responsibility approach for covering the remaining uninsured. To ensure adequate and timely reimbursement for medical services, hospital organizations advocated for managed care reforms such as the elimination of administrative denials, limits to audit recoupments, investment in health information technology, shortened prompt pay timeframes, and community reinvestment funding by payers. Some also expressed concern that true universal coverage cannot be achieved at the state level but would require federal action.

Community Health Centers

Community Health Centers (CHCs) cited low reimbursement rates from private payers as a significant threat to their ability to serve their communities. To address the financial losses attributed to providing care to commercially-insured patients and the uninsured, CHCs stressed the need for better reimbursement from both private insurers and the D&TC Indigent Care Pool. In addition, investment in the primary care infrastructure by all payers was cited as critical to easing the provider shortage, lowering costs, reducing health care disparities, and improving outcomes.

Insurers:

Health insurers identified New York as having some of the most restrictive HMO regulations in the nation. The costs of benefit mandates, lack of flexibility in product offerings and stringent community rating requirements were criticized as factors contributing to premium levels too high for many in the small group and individual markets, creating adverse selection in these pools.

Insurers focused on both halting the erosion of employment-based coverage through private market reforms and expansion of existing public programs. By allowing less comprehensive "mandate-light" benefit packages and reducing the HCRA surcharges, more businesses and individuals would be able to afford lower-priced coverage. Government subsidies should be used to target low-income uninsured workers.

Health plan representatives, particularly the Health Plan Association (HPA) and the NYS Coalition of PHSPs, support expanding reliance on public programs by widening eligibility and streamlining the enrollment and renewal processes.

Two groups that provide student insurance to colleges recommended a requirement similar to one in Massachusetts that requires all full-time college students to have insurance as a condition of enrollment at any public or private institution. Students who are not already insured must enroll in an institution-sponsored plan. Massachusetts' minimum benefit plan option costs significantly less than what is available in the community-rated market.

Business/Labor:

Several labor organizations, business owners and business representatives testified at the hearings. In addition, the Business and Labor Coalition of New York (BALCONY) organized a series of six meetings for SID and DOH staff with business and labor representatives across the state. These meetings were extremely helpful to the Departments in better understanding business and labor issues and concerns. The business and labor communities focused primarily on the increasing problem of soaring premiums for employee coverage coupled with an increasing tax burden due to the expansion of public programs. Many, including local chambers of commerce and the Business Council of New York State, cited the current trends as "unsustainable." Preserving and strengthening the employer-based coverage system was the general sentiment among businesses along with leveling the competitive playing field for small businesses. However, there was also some sentiment from individual small business owners that for many small businesses, providing health insurance for workers is an economic burden they simply cannot afford and that this is more appropriately the responsibility of government. Expansion of Healthy New York was also supported by a number of small business groups.

Overall recommendations for reform include combining the small group and individual markets and allowing plans to offer a greater number of benefit plans, including low-cost alternatives such as "mandate light" and high deductible policies. It should be noted that the sentiment on high-deductible health plans was mixed with some indicating they represented an affordable option that encouraged their employees to be smarter health care consumers. Others expressed concern that the coverage provided through these products is inadequate and affordability is only an illusion because of the high out-of-pocket expenses. Bulk purchasing of drugs and pooling of risk were suggested by several including the Business and Labor Coalition of New York (BALCONY). Labor leaders uniformly indicated that health insurance was the number one issue in labor negotiations and many expressed a desire to have health insurance removed from the negotiating table as an issue. However, many also expressed concern that any reform proposals not jeopardize their present level of coverage.

Individuals:

Individuals who provided testimony tended to fall into three main categories: small business owners, individual physicians, and those who shared personal experiences with the health care delivery system. From this group, there were many who advocated a single-payer model.

Small business owners stressed how much they want to offer coverage to their employees but are prevented from doing so due to the high cost of insurance. They perceive their tax dollars are going to state programs which their employees are not poor enough to join and believe that mandates are partially responsible for the high cost of coverage.

Physicians, many of whom had been in practice for many years, focused on the business side of medicine. They cited the tremendous administrative burden in terms of time and cost of dealing with numerous public programs and health plans and complying with the myriad of rules and regulations that vary by plan and program. An additional major concern expressed was the recruitment of physicians, particularly for primary care physicians and those practicing in rural areas. Inadequate compensation from insurers and the cost of malpractice insurance were cited as the key factors affecting recruitment and retention in New York State, despite the large number of physicians trained in the state.

Many individuals who shared their experiences with the health care system either were sick and uninsured or had cared for a loved one during a medical illness. Whether they were in a public program, had private insurance or were uninsured, they complained of the confusion associated with the health care system and dealing with a hodgepodge of bureaucracies and requirements. A number indicated that navigating the system for anyone with a significant illness could be a full-time job. Several who were sick and uninsured talked about making too much for public programs but not being able to afford private coverage. For many, clinics were the cornerstone of their care and they urged the panel to ensure their continued existence.

B. Principles and Proposals for Universal Health Reform

A majority of those testifying at the public hearings did not advocate for a particular universal coverage model but highlighted the principles that an acceptable approach would have to address. In general, the principles were similar to those outlined in the United Hospital Fund/Commonwealth Fund's Blueprint for Universal Health Insurance Coverage in New York. Many also indicated that proposals for universal coverage need to be evaluated based on their impact on the economic stability of employees, employers, and communities.

For those who did express a preference for a particular reform model, a single-payer system was the most common suggestion. A Medicare-for-All approach was frequently mentioned but options ranged from publicly-financed, privately-run models to the elimination of insurance companies. While many were ready to jump immediately into a single-payer model, details on how to get there and how to fund it were rarely addressed. Support for this model was based largely on its simplicity and perceived cost efficiency due to lower administrative costs. However, few supporters focused on how this model would control medical costs, how physician reimbursement rates would be determined or how quality improvement strategies would be incorporated. Most did agree that these components would need to be addressed in any reform proposal and offered preliminary suggestions that included health planning, health information technology and global budgeting as strategies that could be pursued.

A shared responsibility, building block approach was cited by many stakeholders as the best option for state reform at this time. This approach combines private market reforms with building on existing public programs. Within both the public and private systems, removing barriers to and creating incentives for expanded coverage is the key focus. Reforms to public programs would aim to increase participation rates among low-income uninsured persons while private insurance reforms would strive to improve coverage options to employers, individuals, and the insured.

Some of those testifying focused on principles for reform rather than advocating a particular model. Citizen Action, for example, put forth several principles by which reform proposals should be evaluated, including the degree to which they provide for consumer choice (including choice of a public plan), coverage for all including immigrants, comprehensive benefits, reductions in health care disparities, control costs while promoting quality and establish a funding mechanism that shares the cost burden progressively.

Many of those testifying used the experiences and proposals of other states, most prominently Massachusetts, Maine and California, as a framework for identifying positive and negative aspects of reform. Witnesses differed in particular as to the wisdom and fairness of employer or individual mandates to purchase coverage.

A number of organizations/individuals have submitted specific reforms proposals, both in their public testimony and in separate meetings with the departments of Health and Insurance. Some proposals referenced or reacted to the "Blueprint for Coverage" work done earlier by the United Hospital Fund and the Commonwealth Fund. Brief summaries of proposals received during the Partnership for Coverage discussions follow:

Empire/Excellus Blue Cross Plans

The Blue Cross plan focuses on addressing affordability in the small group and direct pay market. The plan proposes merging the two markets, creating additional benefit options ranging from lower-priced consumer directed plans to the existing comprehensive offerings, imposing minimum medical loss ratios of 80 percent to 85 percent on all standard products, relaxing community rating requirements and the redeployment of certain existing subsidies into a new stop-loss pool for claims in excess of $20,000. The proposal also calls for reducing the current HCRA surcharge.

United Health Group

The United proposal is targeted primarily to the individual direct pay market and suggests using the New York State employee health insurance program (NYSHIP) to administer a single direct payment plan for individuals in place of the standardized plan now required to be offered by every HMO. United also promotes initiatives to encourage adoption of evidence-based medicine and clinical best practices. Other reforms supported include high-risk pools and flexibility in benefit design and underwriting policies.

Assemblyman Richard Gottfried's "New York Health Plus"

Assemblyman Gottfried's proposal would open up the Family Health Plus/Child Health Plus programs to all New Yorkers. The proposal relies on the premise that New York's government programs provide more comprehensive benefits at a lower price than anything that is available in the commercial market. The proposal would remove income eligibility limits for these programs (over a phase-in period) and would offer consumers a choice of plans participating in these programs. Financing would be broad-based through the tax system. Employers would be permitted to continue to offer their existing insurance if they so choose.

Community Service Society "Cornerstone for Coverage"

CSS has proposed an incremental approach to reform that builds on the Child Health Plus expansion and Family Health Plus Buy-in statute. The proposal relies on private health plans offering comprehensive benefits with graduated subsidized coverage up to 500 percent of the poverty level. Coverage would be available to all, including immigrants, but there would be no individual mandate. The CSS proposal strongly promotes consumer choice, streamlining of public programs and affordability to consumers. A premium cost no greater than 6 percent of income for those below 500 percent of the poverty level is viewed as critical to consumer affordability.

III. Modeling Proposals for Universal Coverage

The 2007-08 state budget authorized and appropriated funding for a consultant to assist in the modeling of proposals for universal coverage. Under the appropriation language, at least three models for universal coverage are to be examined: one based on existing private and public health coverage mechanisms; a publicly sponsored health coverage model financed entirely or largely through broad-based public financing; and a combination of both mechanisms.

On July 9, 2007, the Department of Health (DOH), in consultation with the Department of Insurance (DOI), issued a Request for Proposals (RFP) titled "Analysis of Proposals for Achieving Universal Health Coverage in New York" to solicit qualified organizations to model proposals that will achieve universal coverage through public and private coverage mechanisms as set forth in the appropriation language. Applicants were requested to submit proposals providing for analysis of universal coverage proposals with respect to a number of critical aspects:

  • The cost of the proposals and how that cost would be distributed between government, employers and consumers
  • The extent to which the proposals advance the goal of universal coverage and reduce barriers to coverage
  • The impact of the proposals on the business community, including small business, self-employed individuals and sole proprietors, including an assessment of the impact of the proposals on employment as well as on collective bargaining agreements.
  • The impact of the proposals on the provider community.
  • The impact of the proposals on general scope of benefits, quality of care provided and consumer choice of provider

On September 14, 2007, proposals were received in response to the RFP from the following eight organizations:

  • Deloitte Consulting, LLP
  • The Lewin Group
  • Mathematica Policy Research
  • Navigant Consulting
  • Oliver Wyman Actuarial Consulting, Inc. /Mercer, Inc.
  • PricewaterhouseCoopers LLP
  • Towers Perrin
  • The Urban Institute

An evaluation of the proposals was conducted jointly by the DOH and DOI. The proposal that received the highest total combined score (technical and cost components) was submitted by The Urban Institute (UI). The contract, which was awarded to The Urban Institute in December 2007, will be supported by a $200,000 State Operations appropriation to support three models and supplemented by a "piggyback" contract between the SID and UI to fund additional modeling as needed.

IV. Next Steps

DOH and DOI have begun discussions with the UI on data needs for modeling and defining the parameters for modeling. UI will begin actual modeling activity upon completion of the State contracting process. Meetings are continuing with interested parties to further discussion on reform ideas and to obtain input into the modeling process. Details on the proposals to be modeled will be made available to the public. Preliminary modeling results are anticipated during summer 2008, and it is also anticipated that there will be a need for modification of the modeling to incorporate variations on assumptions, data, etc.

In addition to modeling reform proposals, the Departments will also focus on identifying cost containment strategies, both for public programs and for health insurance in general. Many commented during the hearing process and in the stakeholder meetings on the "unsustainability" of the current trends in health care costs. These trends impact all purchasers of health insurance, and government is the single largest purchaser. Given increasingly bleak economic indicators, it is clear that the extent to which we can contain increases in health care costs will be a key factor in our ability to expand access to health insurance coverage in the State.

The process to date has been extremely helpful to the Departments of Health and Insurance. The hearings and stakeholder meetings have engaged consumers, providers, businesses, insurers, advocacy groups, public officials, labor organizations and academic experts in a public conversation about how to achieve universal coverage for New Yorkers. At the same time, improving access to health insurance has emerged as an important topic of discussion in this year's presidential campaigns and has spurred additional ideas for reform. The ongoing public discussions and the modeling of reform proposals over the coming months will be critical to the development of the recommendations for achieving universal coverage.

Appendix A – Public Hearing Schedule and Panel Participants

Hearing Schedule

Hearing Panel

Name Organization
Richard F. Daines, M.D. Commissioner of Health
Eric R. Dinallo Superintendent of Insurance
Joseph Baker Executive Chamber
Lora Lefebvre Executive Chamber
James Tallon President, United Hospital Fund
Mark Scherzer Counsel, New Yorkers for Accessible Health Coverage
Elizabeth Moore Partner, Nixon Peabody LLP, former Director, Governor's Office of Employee Relations
Stan Lundine Former Lieutenant Governor and Congressman
Deborah Bachrach Department of Health
Troy Oechsner Department of Insurance
Kathleen Shure Department of Health
Eileen Hayes Department of Insurance

Appendix B – Agendas from Public Hearings*

*The public hearing agendas reflect those individuals who had pre-registered to testify at the hearings. Individuals who did not preregister were permitted to testify at the end of the hearings but do not appear on the agenda. In addition, there are some individuals who pre-registered and do appear on the agenda but in fact did not provide oral testimony at the hearings.