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Utah’s Health Insurance Experiment Built Around Small Businesses

Under the federal health care reform law, all states will be required to set up a health insurance exchange starting in 2014. Betty Ann Bowser reports on one state that is ahead of the game, and how the new system is helping small businesses.

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    Now, as states around the country grapple with big decisions about how to help people buy health insurance as part of the new reform law, many are looking at an experiment already under way in Utah.

    Health correspondent Betty Ann Bowser reports.


    Just over a year ago, Salt Lake doggie day care owner Sharon Opfermann was getting desperate. Health insurance costs for her employees was going up so rapidly, she thought she might have to drop it altogether. Then she heard about Utah's new health insurance exchange, so she jumped at the chance to try it. In July, she switched over.


    I started exploring that more, and we came up with a great plan for our employees.


    Starting in 2014, under the federal health care reform law, all states will be required to set up an exchange. If they don't, the federal government will come in and do it for them.

    When they're fully operational, it's estimated about 30 million Americans will be able to go online and buy health insurance, many of them for the first time. But two states are ahead of the game, Massachusetts and Utah. Utah did it because its 67,000 small business owners, who account for three of every five jobs in the state, were drowning in high costs.

    Patty Conner is director of the Utah Health Exchange.

  • PATTY CONNER, Utah Health Exchange:

    Consumer shopping on the health care exchange is very similar to shopping in a mall. They may go in and out of a variety of stores and identify what they're looking for that day. The exchange is very similar to that. There are over 100 choices.

  • MAN:

    Click on here to "My family."

  • MAN:



    To sign up, employers decide how much they can give each worker to buy insurance. That's called a defined contribution.

  • MAN:

    With the Utah Health Exchange, employers can access Utah's new defined contribution market.


    Then each employee shops online and picks the insurance plan they can afford and that meets their health care needs.

    Last year, Utah launched its new exchange with a pilot program. And in January, it opened it up to all small businesses. But that's the only group the exchange addresses. Right now, larger businesses and the 300,000 uninsured residents of the state cannot get coverage through the exchange, because state officials were not focused on getting more people insured, a key goal of the federal health care reform law.

    Before family-owned Wasatch Steel signed up, it was heavy lifting providing benefits for about 20 employees. The continual premium increases for workers was a nightmare for general manager Teresa Wu.

  • TERESA WU, Wasatch Steel:

    I was scared. I felt bad. I couldn't sleep. You know, I really couldn't sleep, because I have employees that I love and care about, and I couldn't tell them, you know, I'm going to have to raise your premium $100 a month, you know, or drop insurance altogether.


    Wu's situation mirrored the national picture. Between 1999 and 2009, family premiums more than doubled and small businesses paid on average 18 percent more than their larger competitors for coverage.


    We have that in 060 or a 083.


    When Wu turned to Utah's health insurance exchange, she saved $20,000 in the first year alone, when she switched to the less expensive employer-defined contribution model. And her employees were able to pick plans that worked for them.


    They chose different plans. If somebody wanted a higher deductible, they could take a higher deductible. If they wanted something that cost more because they had a lot of Rx, and they wanted their Rx to go down, then they would choose something different. So it's all over the board.


    While many other states have been looking to Utah for advice on how to set up an exchange, critics point out the response to it has been at best lukewarm, with only 160 small businesses signed up so far.

    Lincoln Nehring, senior health policy analyst for Voices for Utah Children, says that's one marker of failure.

    LINCOLN NEHRING, Voices for Utah Children: There is a misconception of what Utah's exchange has truly accomplished. I don't think other states understand just how few people Utah's exchange serves.

    There are more uninsured in Utah than there were in 2008, when Utah started its health care reform. Health care premiums are more expensive than they were in 2008, when Utah started its health care reform. So, when we look at Utah's exchange in that context, unfortunately, it really has not been a success.


    Nehring says a better way is the Massachusetts exchange, where the state is more involved in regulation, picking a limited number of plans and providing workers with subsidies to buy insurance.

    Former Gov. Michael Leavitt disagrees. He says Utah's lack of government regulation is a good model for other states to follow. Leavitt, who was head of the federal government's Department of Health and Human Services under George W. Bush, now runs a national health care consulting firm.

    MICHAEL LEAVITT, Former U.S. secretary of Health and Human Services: This is the way new things are built. Typically, if they're going to build a new power plant using a new technology, they will build a small one, and then they will build it in a large way. If you're going to build a new machine, you do the same thing.

    So, the Utah exchange represents essentially an opportunity to try a concept, do it with enough volume that you can test its viability, and then, over time, you begin to scale it up. It's also an opportunity for other states to learn.


    And Utah's Republican governor says the exchange has been a boon for the small business economy.


    It controls the bottom line and it gives predictability and certainty to the business plan. So, businesses are more solvent. Our economy grows. We have more opportunities for people to be employed. And we are also helping to control the costs by introducing competition from the different insurance providers that are competing for your business now.


    But Nehring sees a larger problem with the whole Utah exchange concept, because it shifts the risk of rising insurance premiums to the employee, not the employer.


    What the exchange does is, it allows an employer to control its health care costs. But it divorces the employer from the actual cost of health care. So, it shifts any increase in costs to the employee. Unfortunately, it's done nothing to help health care be more affordable.


    Patty Conner says it's too soon to make that judgment.


    Affordability is going to have to happen over time. And you can't just snap your fingers and have the prices of all the premiums decrease just because you opened up an exchange. It's going to take the competition between the carriers. It's going to take streamlining and creating efficiencies between the carriers to help reduce those costs.


    Even though more than half of the states are in federal court challenging the constitutionality of the health insurance mandate in the reform law, many of the governors involved in the suits are still urging states to get on board with setting up exchanges, including Utah's Herbert.


    We will learn from our successes, but we will also learn from our failures. And, over time, we will find, I think, a good pathway to finding affordable, accessible, high-quality health care.

    My encouragement is, every state should be doing this. We ought to have 50 laboratories of democracy out there experimenting on health care reform, finding their own unique ways to find their own unique challenges and solutions to those challenges.

  • MAN:

    I'm going to hold it like that. So, you just relax the arm.


    One thing that Republican opponents of the law and Democratic supporters both agree on is that setting up health insurance exchanges is complicated, will take time. And, so far, the states have not been enthused. Only 13 have passed legislation to get them started.


    Federal Health and Human Services Secretary Kathleen Sebelius will answer questions about health insurance exchanges. Submit yours on our website on the Rundown blog.

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