Business Matters

A ten-part series on resolving Washington's anti-business climate

"We will do everything in our power to guarantee a thriving, environmentally-sustainable business climate." – Governor Gary Locke –

Part 9: Diagnosing Washington's health care system

Washington’s health care system is just now taking baby steps towards recovery from the state’s disastrous 1993 attempt to takeover health care. It’s perilously past time. When even the doctors are complaining, the health of the industry is in need of some serious review and reflection.

Kathleen O’Connor, author of the Washington CEO article "Frustrated Doctors Find Their Voices," relates the frustration of the state’s doctors: "They complain they do not often have the say in the type of medications they can readily prescribe and they have to call insurers to get approval for prescriptions, length of stay in hospitals and what they consider to be other care decisions."

Couple this with the practically non-existent competition in Washington’s health insurance industry and the state is facing a scary prognosis in its quest for accessible and affordable, quality health care. State government itself is also a major factor in the rapid rise of health care costs, in part because the state doesn’t fully reimburse for Medicaid, forcing health care providers to shift costs to the private sector. Washington state government is facing a 15% increase in health care costs of about $1.7 billion over the next two years.

As a result of these pressures, many small businesses will be forced to choose between hiring and retaining employees or providing health benefits. Thus, Washington is offering little incentive to current and prospective employers to locate or remain in the state. Though the state has started to take some steps to undo the damage of 1993, our leaders still seem to be unable to connect the dots between the increasing mandates upon health insurers in the state and the few insurers currently willing to do business in Washington.

Just recently, the state fought for and won the right to require all health insurance providers who cover prescription drug benefits in the state to cover women’s birth control. This is just the latest in a long list of state-mandated benefits insurers are required to cover. Outlined in RCW 48.47.010(10) mandated benefits are defined as ". . . covering or [an] offering required by law to be provided by a health carrier to: (a) Cover a specific health care service or services; (b) cover treatment of a specific condition or conditions; or (c) contract, pay or reimburse specific categories of health care providers for specific services . . ."

Benefits currently mandated upon health insurers choosing to do business in Washington by the state include: optometry, chiropractic care, psychological services, registered nurses and advanced registered nurse practitioners, chemical dependency, dentistry, denturist services, temporomandibular joint disorders, home health hospice, mental health, podiatry, chiropody, foot care services, reconstructive breast surgery, mastectomy and lumpectomy, phenylketonuria, mammograms, neurodevelopmental therapy, women’s health care provider self referral, maternity care stays, diabetes coverage, maternity and drugs in the individual market, and now women’s birth control (for insurers offering drug benefits).

While all of these mandated benefits seem noble and are much appreciated by those in need of the services, it has served to further separate the consumer from the expense of health care while driving up costs. This interference with marketplace incentives has made Washington state the vanguard in sending the insurance industry packing. In an attempt to "help" consumers obtain access to better and cheaper health insurance, every new legislative session for the past ten years has "reformed" the health care industry, instituting new mandates for services and people insurance companies must cover, new conditions for delivering services, more regulations for primary providers, etc. These "reform" efforts have made profitability for the private-sector insurance industry in Washington state unpredictable at best.

Health insurance consumers must also look in the mirror of culpability since they continue to support these same elected officials who force benefit mandates on health insurers. It is critical to remember that all benefits received by employees, including health care, are paid in lieu of wages. The average cost to employers for medical insurance for their employees with families is $545 per month and $200 per month for single employees. In 1998, the U.S. Chamber of Commerce reported that benefits account for 37.2 percent of payroll costs. But most employees believe "somebody else" is covering these costs, so they view benefits as an "entitlement" rather than compensation. This mentality, along with a state government that mandates extensive benefits upon the health insurance industry, force small businesses to make tough decisions on whether or not to even offer health benefits to their employees, increasing the ranks of the state’s uninsured.

So what can be done to improve the affordability and needed access to health insurance in the state?

• The health care insurance market must continue to be nurtured back to a strong state of competition from its near death experience of 1993, making it relatively easy for companies to enter and exit according to marketplace demands.
• Lawmakers need to let consumers decide what services they require and stop mandating increased costs on all of us by forcing more benefit requirements upon insurers.
• Lawmakers should also break from the current mold of using the top-down approach of structuring health insurance from a cookie cutter template and instead allow individuals to utilize the advantages of a defined contribution system (EFF has produced an in-depth primer regarding the defined contribution health insurance strategy and will be happy to answer any questions regarding this blueprint for reform).
• Consumers must remember what we are insuring ourselves against: the unexpected and catastrophic, not routine medical care.
• Finally, employees must understand the financial consequences of choices—health care is not cheap or free, and when our employers pay for it, it is in lieu of increased wages.

This is part nine in a ten-part series on resolving Washington’s anti-business climate.

Intro | Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 10

Contact: Jason Mercier, Deputy Communications Director, (360) 956-3482 or jmercier@effwa.org.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org