Sunday, June 26, 2011

HB 4574 Hard Cap talking points

HB 4574 – Hard Cap Talking Points

A hard cap is anti-family because it will make coverage unaffordable

It would shift the responsibility for paying nearly all future health care cost increases to Michigan public employees and their families.
Thousands of public employees and their families would end up paying thousands of dollars more out of their pockets to cover future increases.
And a public employee making $60,000 a year will pay the same for their healthcare as someone making $15,000 per year. This could cause many families to lose their house or even face bankruptcy.

A hard cap is a one-size-fits-all approach that does not work in Michigan.

The legislation ignores the fact that health care costs vary considerably by region in Michigan. The cost of healthcare in the metro Detroit area is different from the Grand Rapids area, which is different from the Marquette area.
Health care costs also vary by demographics factors including age and gender. Costs will be lower for a group of employees who are mostly in the age range of 20 to 30 than for a group with relatively older workers.Health care costs for women are much higher than for men, so the hard cap hurts Michigan women most. Per capita health spending is 32% higher for females than for males

The new state budget already addresses the issue. Let’s give it time to work.

The budget addressed these issues for school employees and municipalities. Before we move forward with something that will hurt Michigan families and women and have other unintended consequences, let’s give that time to work.

HB 4572 analysis

An Analysis of the Hard Cap

The hard cap proposed in House Bill 4572 shifts nearly all of the costs of serious and catastrophically-expensive illnesses such as heart attacks, strokes, premature babies, and leukemia and other cancers to public employees and their families.

Even when a health plan is successful at keeping a group’s medical claims cost trend down to 5%, the cost of one or two catastrophic illnesses such as cancer, heart attack, stroke or a premature baby will quickly make the coverage unaffordable for the employees. With experience-rated and self-insured plans, a cap shifts almost all of the cost and risk of a catastrophic sickness to the employee group.

Hard Cap Base Year

Typical group: 150 employees

Annual cost: $2,400,000

Cost per employee: $16,000

Hard Cap: $15,000 per employee

Employee share: $1,000 per employee

Hard Cap Year Two

Same group: 150 employees

Cost trend: 5% x $2,400,000 = $120,000 ($2,520,000 total base)

Catastrophic claim: Preemie baby requiring neonatal care: $300,000

Annual cost: $2,820,000

Cost per employee: $18,800

Hard Cap: $15,300 (2% inflation)

Employee share: $3,500 per employee

Hard Cap Year Three

Same group: 150 employees

Cost trend: 5% x $2,520,000 = $126,000 ($2,646,000 total base)

Catastrophic claims: 2nd year care for preemie: $50,000

Leukemia diagnosis: $350,000

Annual cost: $3,046,000

Cost per employee: $20,307

Hard cap: $15,606 (2% inflation)

Employee share: $4,701 per employee

Hard Cap Year Four? Five? Six? In only two years an employee’s share more thanquadrupled, increasing by 470%. What will happen in years four, five, six and beyond?