Vermont signs ambitious health-insurance law

MONTPELIER, Vermont (Reuters) - Vermont's governor signed a bill on Thursday that would make the state the second in the nation with near-universal health-care insurance by extending coverage to as much as 96 percent of its residents by 2010.

The law comes a month after neighboring Massachusetts passed the nation's first near-universal health-care reform plan, which aims to provide insurance to about 95 percent of the state's half-million uninsured residents by 2009.

Both plans reflect state efforts to tackle growing concerns over health care with 46 million Americans uninsured, traditional employer-based coverage shrinking and the cost of insurance premiums steadily rising.

Vermont's legislation, signed by Gov. James Douglas at a ceremony at the state's second-largest hospital, aims to reduce the ranks of uninsured -- about 10 percent of the state's 620,000 residents -- while also streamlining care given to those with coverage.

A new subsidized health-care plan called Catamount Health will be offered by insurance companies and paid for in part with a hike in the state's cigarette tax and a fee on employers who do not offer health insurance to their workers.

It will provide coverage similar to that offered to state employees, taking nearly 25,000 people off the rolls of the uninsured, backers of the legislation say.

"This is potentially a national model," said Kenneth Thorpe, an Emory University professor and health-care consultant who helped create Vermont's reforms.

Massachusetts' plan has also been touted as a possible national model by requiring all residents to obtain health insurance by July 1, 2007, or face possible tax penalties

The Massachusetts plan will provide insurance to the lowest-earning residents by offering low- or no-cost plans, with premiums and co-payments paid entirely by the state.

In Vermont, insurers can begin offering the new plan from July 1, 2007, but some benefits will be phased-in sooner.

Douglas, a Republican, had up to a month ago threatened the Democrat-controlled Legislature with a veto if they rejected his demand that the plan be run by private insurers.

"This law preserves the private sector role in providing insurance, it preserves economic security of our state and it makes a strong commitment toward wellness and the management of chronic diseases," he said.

The reforms follow a two-year debate in the state Legislature and call for streamlined record keeping, free immunizations, and greater access to preventive care.

Should Your Business Switch to an HSA?

IT'S RARE WHEN a small-business owner is enthusiastic on the topic of health care. Each year, rising costs force more firms to drop coverage for employees. But Andrew Field, owner of a web-based commercial printer in Livingston, Mont., tells a different tale: His company's medical plan has gone from bare-bones to better, with a cost savings to boot.

In February 2005, Field switched his 130 employees at PrintingForLess.com from a traditional Blue Cross plan to health savings accounts, or HSAs. The process, he admits, has not been without rough patches. And "we were a little worried that it might have some bad side effects — that it might not be as good as the advocates claim," he says. But the verdict, more than a year later? "It's better than we thought," he says.

HSAs, created by Medicare legislation in late 2003, were designed to help small businesses trim the soaring costs of employees' health benefits. In 2005, small firms (those with fewer than 200 employees) reported a 9.8% increase in health-insurance premiums, according to the nonprofit Kaiser Family Foundation in Menlo Park, Calif. On average, a small business pays $4,032 a year to cover an employee's individual coverage, and $10,587 if the worker needs family coverage. The hefty tag has forced many small businesses to drop health coverage entirely.

The alternative that Field and other business owners are trying is the HSA, a tax-free savings account where employees can store money for medical expenses. The money in the account can earn interest and "roll over" year-to-year, potentially creating a sizable nest egg for the employee. The HSA can only be opened in conjunction with a high-deductible health plan, which is typically cheaper than a comprehensive plan and covers major expenses such as hospitalization and surgery.

At PrintForLess.com, Field had heard employees complain that the Blue Cross plan cost a lot but didn't cover many common expenses, such as the price of contact lenses. The annual premium for a worker's family coverage was about $6,000; of that, the company picked up 60%, or about $3,600, and the employee paid the remaining 40%, or $2,400. "I was getting complaints from people saying, 'I've taken the kids to the doctor once this year...I'm not utilizing it,'" Field says.

With the price of health insurance rising each year, Field decided to ditch the traditional plan and switch to HSAs. The move has allowed him to hold costs steady — and, in his opinion, give his staff a better health plan. The company splits with employees, 60-40, the total cost of fully funding the HSA and paying the high-deductible insurance premium — roughly $6,000 a year. So employees' payroll deductions remain virtually the same.

Under the new plan, employees now have a slightly higher deductible — $2,400 a year for families, and $1,200 for individuals — than they had before. But now, employees can tap into their HSAs to pay for qualified medical expenses, which includes medical, dental and vision care, as well as eye glasses, flu shots, birth-control pills and over-the-counter drugs such as aspirin. (Under federal rules, the maximum contribution to an HSA in 2006 matches the amount of deductible, up to $5,450 for families and $2,700 for individuals.)

Field estimates that it took about six months to put the HSA plan in place — a tedious process made harder by the fact that, in 2004, the accounts were unfamiliar to banks, insurers and employees alike. He settled on an HSA plan using John Alden Insurance though a regional firm, Payne Financial Group in Helena, Mont.

To smooth the transition, the company explained HSAs in a slide show to employees, and Payne Financial representatives came on-site to answer questions. Employees reacted with "trepidation" but most like the new plan, Field says.

"We didn't know how well it would be accepted — with any change, people may think they're being screwed," he says. To make it more palatable, the company funded the first year upfront, so that employees had money in their HSAs at the get-go. (Through a paycheck deduction, the employees paid the company back over the course of the year). Most employees like HSAs over their old plans because they can choose their doctor and pay for services or products with relative ease, using their debit cards or checks, according to Field.

"I wholeheartedly recommend it," says Field. "It fits into our whole philosophy of letting people make their own decisions."

Blue Cross Launches New Plans for Small Business

As a growing number of small businesses in Florida are dropping health coverage because they can no longer afford it, the state's leading insurer announced today new health plans aimed at dramatically cutting the costs of insurance for small businesses.

Blue Cross Blue Shield of Florida has come up with several ideas intended to limit coverage but able to protect persons from huge losses.

''This is to protect yourself from bankruptcy -- the really catastrophic stuff,'' said BCBS spokeswoman Valerie Rubin.

The offerings could reduce employer costs by 30 to 70 percent, the company said. The exact amount depends on the age and sex of employees as well as previous medical conditions.

The issue is huge because small business coverage in the state has been plummeting. Studies by the Florida Office of Insurance Regulation and the Bureau of Labor Statistics show that the number of small employers in the state that offer health insurance dropped from 266,000 in 1996 to 123,000 in 2004 -- a decline of 53 percent.

Measuring health plans, enrollment in small groups dropped 42 percent -- from nearly 1.8 million to just over 1 million during that period, while Florida's population grew by three million.

These numbers ''provide a worrisome glimpse into how far the healthcare crisis has come in a single, large state,'' says Brian Klepper of the Center for Practical Health Reform. ``There is little reason to believe that the dynamics are not approximately the same throughout the rest of the U.S.''

Klepper says the figures show Florida's small group plan enrollment ``has eroded, on average, by about 5.3 percent (95,000 lives) per year. This number is significantly higher than the 3.0 percent year national drop in private sector jobs with health benefits during the same period reported by the US Bureau of Labor Statistics (BLS) in 2004.''

In BCBS's plans announced Monday, one will cover only the most costly events -- inpatient hospitalizations and outpatient surgeries.

Another would provide comprehensive coverage, with deductibles and co-pays for basic family physician visits and generic drugs. Everything else, including hospitalizations, would require the patient to pay a 50 percent co-insurance but the rates would be those negotiated by BCBS, which are about a third of the gross charges that the uninsured are usually hit with after hospital stays.

Another plan would be based on health savings accounts, similar to 401(k) plans, in which people can set aside money in tax-free savings accounts for future health expenses. This plan is combined with a high-deductible and co-pays. Many other companies are also offering HSA plans.

The plans are intended to help smaller businesses, many of which have been dropping health coverage in recent years as insurance premiums keep going up by more than 10 percent a year.

As part of its motivation, BCBS cited surveys by the Florida Chamber Federation, which showed that 91 percent of Florida businesses offered health benefits in 1999. This year the chamber says only 63 percent will over coverage.

Rubin said later the products will be introduced into the market for individual purchasers.

United HealthCare to give discount for splitting prescription drugs

Retirees often joke they will get in trouble if the HMO finds out they split their pills to save money, but now one of the nation's largest health insurers is pushing the idea.

United HealthCare, the nation's second largest insurer and among the largest in Florida, is the first major health plan to give discounts of up to $300 a year to members who split pills in half as a way to save on prescription drugs.

United executives said they have extended the offer of pill-splitting discounts to 13 million people who have company health policies at their workplaces, including about 1 million in Florida. That does not include Medicare recipients, but might in the future. So far, only 16 drugs are covered by the offer.

"You essentially get two pills for the price of one," said Tim Heady, chief executive of the company's UnitedHealth Pharmaceutical Solutions subsidiary. "The members can save money, the employers can save money and we can save money."

Of $8 billion in drug costs a year, United, based in Minnesota, said pill-splitting could save 1 percent, or $80 million. Of that, about one-third would go to consumers, Heady said.

Drug makers strongly oppose pill-splitting, but United is trying to cash in on a common pricing quirk of the drug business, in which manufacturers charge the same price for, say, a pill containing a 10 milligram dose as one containing 20 milligrams.

Manufacturers do that to dissuade customers from jumping to a competitor's pill if the doctor raises the dosage level, especially if the cost of making the drug is small compared with other costs.

For example, Walgreens charges $148 for 30 of Merck & Co.'s Zocor cholesterol-lowering tablets, regardless of whether the dosage is 20, 40 or 80 milligrams.

United's program lets members pay half the normal co-pay if they split their pills, Heady said. Paying $25 a month for a brand-name drug that normally has a $50 co-pay would save $300 a year. Consumers could save $60 or $150 a year for drugs with lower co-pays. They also get a pill splitter.

United tested the program in Wisconsin early in 2005 and found that 30 percent of people taking the 16 drugs participated, Heady said. During the first few months after extending the offer nationwide late last year, 11 percent participated, but Heady expects the number to approach 30 percent.

The pill-splitting discounts apply to the 16 drugs because United included only those that come in easy-to-split tablets, that have the manufacturer pricing and that physicians deemed would be effective even if the pills were not split perfectly, Heady said. That still includes blockbusters like the cholesterol drug Lipitor and the heart pill Cozaar.

Consumers can get the discounts only if the doctor writes a prescription for half-pills, preventing consumers from trying to go it on their own, Heady said.

"You don't want people to unilaterally split medicines when they might not know what they are doing," he said.

Several other health plans have encouraged pill-splitting as a way to cut costs for insurers and consumers, said Dr. Randall Stafford of Stanford University's Prevention Research Center in California.

"It can be a reasonable strategy for cost savings when drug costs are out of control," said Stafford, an associate professor of medicine.

Drug manufacturers oppose the widespread use of drug-splitting, saying there's not enough clinical evidence that the practice produces doses that are safe and effective.

Some manufacturers argue the main reason they put the same price on several different dosages is so patients will not switch to a too-low dosage solely to save money.

"Splitting pills can be dangerous for certain types of patients and for certain medications," said Jeffrey Trewhitt, spokesman for the Pharmaceutical Research and Manufacturers of America, an industry trade group.

Pill-splitting should be attempted only if the patient has enough hand strength to handle the pill cutter and has no memory impairment such as Alzheimer's disease, said Dr. Karl Dhana, medical director at the Joseph L. Morse Geriatric Center in West Palm Beach.

But Dhana said he has advised patients in some cases to halve their pills to cut costs.

"The bottom line is it's been done for years," Dhana said. "Doctors say, `Take a half of tablet.'"

Splitting is gaining a foothold among other health insurers. WellCare Health Plans, in Tampa, has no program or plans to offer one, but is "willing to support people doing this, assuming they have spoken to their doctor and pharmacist," said Heath Schiesser, the company's president of prescription drug plans. WellCare has 1.5 million members nationwide, most of whom are not elders.

Bloomberg News Service contributed to this report.