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February 2007

New State Reform Proposals

The recent surge in state activity addressing health reform and the uninsured has been remarkable. According to the National Conference of State Legislatures, even while “health care reform was hot in legislatures…in 2006, the forecast for [the 2007] session may be even hotter.” At least nine states have introduced health reform plans. Seven others have established commissions that will develop recommendations for health reform and coverage expansions.

While Maine, Massachusetts, and Vermont implement their reforms, and observers follow new proposals from states including California, Pennsylvania, Oregon, Wisconsin and Indiana through the legislative process, still more states are coming forward with reform proposals. States appear particularly interested in covering all uninsured children and establishing entities similar to the Massachusetts Connector. Many also include a strong emphasis on promoting healthy behavior. Maryland, Minnesota, New York, and Washington are among the states in the proposal stage. Details are provided below, although modifications made during the legislative process may alter them substantially.

Maryland: Legislators are currently debating a proposal to raise the state’s cigarette tax by $1 per pack. Revenue from the tax could be used for a Medicaid expansion—specifically raising eligibility for adults to 116 percent of the federal poverty level (FPL), and for children in families with incomes up to 400 percent FPL. The proposal also allows families over 400 percent of FPL to buy into the State Children’s Health Insurance Program (SCHIP) program at full cost. Under this plan, small businesses with fewer than 50 employees would receive subsidies to provide health benefits. In addition, insurers would be required to offer coverage to dependents until age 25. In addition, Governor O’Malley (D) has introduced the Maryland Health Care Access Act which is under consideration in the legislature. The governor’s bill also includes a provision to extend dependent coverage until age 25. Furthermore, an insurance pool would be created for small businesses to help them purchase insurance on a pre-tax basis.

Minnesota: Governor Pawlenty (R) announced his “Healthy Connections” proposal in early January. His plan includes several components:

  • Modernizing MinnesotaCare: The Governor intends to improve the state’s Medicaid program by making existing premiums for children more affordable. Additionally, eligibility for children under age 21 will be expanded from 275 percent FPL to 300 percent FPL. The state will also create a new private sector option—MinnesotaCare II—which will be available for children above 200 percent FPL. Private health plans with greater than 3 percent market share in the individual market will be required to offer the new plan that, according to the state, will offer significantly reduced premiums with the hopes that more children and their families will enroll. The plan also includes special accounts to encourage healthy behaviors.
  • Tax Incentives: Employers with 10 or more employees will be required to establish Section 125 plans which allow employees to purchase health insurance with pre-tax dollars. The state, however, will not mandate that employers offer or contribute to health insurance coverage.
  • Minnesota Health Insurance Exchange: Governor Pawlenty is interested in implementing a model similar to the Massachusetts Connector. The Exchange will be the vehicle through which eligible individuals can access the MinnesotaCare II plans. As in Massachusetts, the Exchange will facilitate the purchase of insurance by employers. Likewise, the entity also allows employees to purchase health insurance with pre-tax dollars and part-time employees can combine contributions from various employers. Policies in the individual market will only be available through the Exchange.

New York: Governor Spitzer’s (D) budget proposal for this year includes a SCHIP expansion increasing the eligibility from 250 percent FPL to 400 percent FPL. This would expand coverage to 400,000 children in the state. The Governor’s proposal is also focused on a major restructuring of the state’s Medicaid program.

Washington: In early February, building on the foundation of recommendations put forth by the Blue Ribbon Commission on Health Care Costs and Access, Governor Gregoire (D) introduced the ”Healthy Washington Initiative” which includes several elements with the goal that all Washingtonians have access to coverage by 2012. These include:

  • Covering young adults between the ages of 19-25 by extending the age of dependent coverage and requiring insurers to implement other strategies to address the gap in coverage for this population.
  • Designing a Connector-like mechanism to facilitate the purchase of health insurance in the non-large group markets. 
  • Establishing a grant program for community health centers to work on reducing unnecessary emergency room visits.
  • Designing a state-supported reinsurance program for high-cost enrollees to improve the affordability of premiums in the non-large group markets. 
  •  Exploring opportunities to partner with the federal government to expand coverage in Medicaid and the state’s Basic Health program.