By Kelly McCutchen
Georgia became a national leader in health care reform this week after Governor Sonny Perdue signed two bills into law at the Atlanta Medical Center. This practical legislation addresses some of health care’s biggest challenges – the high cost of insurance, inequities in the tax code, the lack of portability and the increasing toll of chronic disease.
Other states have attempted broader reforms that have failed (California and Illinois) or are struggling (Massachusetts). But John Goodman, President and CE0 of the National Center for Policy Analysis described Georgia’s as “very significant reforms.”
“Georgia is now the second state in the union to allow employers to help their employees obtain personal and portable health insurance – the type of insurance that employees own and can take with them when they move form job to job,” Goodman said.
Ron Bachman, a Georgia-based actuary with extensive experience in healthcare strategy for payers, providers and employers, says insurers are ready to develop the more flexible and affordable products allowed under this legislation.
“Brokers and insurance agents are excited about reaching out to many previously uninsured Georgians who will now be able to afford private insurance,” Bachman said. “This also establishes affordable individual portable coverage not dependent on employment, with many of the tax advantages of employment-based coverage.”
Cost is the biggest challenge in health care, and stories abound about businesses and individuals forced to drop their insurance as it eventually became unaffordable. Georgia’s legislation authorizes the state’s insurance commissioner to fast-track approval of the most affordable type of health insurance – high-deductible health plans (HDHPs). Switching from traditional to high-deductible policies can reduce premiums 30 percent to 40 percent.
A simple economic fact is that if you tax something you get less of it. Georgia currently assesses state and local premium taxes – as high as nearly 5 percent in some counties – on health insurance. Now, both state and local premium taxes on HDHPs will be eliminated.
Most uninsured Georgians work for small businesses and do not have access to health insurance. To make matters worse, the tax code currently discriminates against such individuals by denying them the right to deduct the cost of health insurance while businesses can deduct 100 percent of the cost. For a middle class family, this effectively almost doubles the cost of insurance. No wonder so many people are uninsured!
This inequity will end – at least as far as the state is concerned – now that individuals will be allowed deduct 100 percent of their insurance premiums from their state income taxes. Next, Georgia should petition the federal government to follow the state’s lead and eliminate this unfair bias once and for all.
Additionally, small businesses that have recently been priced out of the market will now be able to fund a Health Reimbursement Account (HRA), a type of flexible spending plan that employees can access to fund the purchase of individual insurance. Better yet, such insurance is personal because employees can choose the type of policy they want from hundreds of options, it is portable so they need not worry when they change jobs, and it is guaranteed renewable so they won’t be dropped or face premium increases if they get sick.
Most importantly, Georgia’s new legislation addresses chronic disease. Spending on individuals with chronic diseases such diabetes, heart disease, high blood pressure or depression makes up 75 percent of all the money spent on health care in Georgia; some argue the number is higher. The right medicine and disease management plans can prevent many such Georgians from developing costly and debilitating complications. But many individuals fail to follow these guidelines. Studies and real world experience, however, show that compliance is much higher if individuals can earn financial rewards and incentives. In Georgia, such incentives have been deemed “unfair business practices” – until now.
Now, insurance plans will be able to reward individuals for taking better care of themselves. The return on investment is tremendous, not only in dollars, but in productivity in the workplace and, most importantly, in the happiness of an individual living a long, healthy life.
Georgia’s new laws don’t address every problem. Health insurance is still out of reach financially for too many low-income Georgians and many Georgians lack access to health care and/or insurance due to their health status or geographic location. As legislators continue on the path toward resolving those challenges, they deserve congratulations for the bold, practical and significant steps they’ve taken in addressing an issue that impacts every Georgian.
Kelly McCutchen is executive vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (May 7, 2008). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.