During the first two days of committee action on his bill, Baucus, a Democrat from Montana, beat back repeated attempts by most of the committee’s Republicans to gut provisions that would slow runaway growth in Medicare spending. Republicans want us to believe that they care deeply about the federal deficit and about keeping Medicare from going broke, while at the same time demanding that there should be no cuts in benefits, no cuts in payments to insurers or providers, and no reduction in the utilization of medical services. It was the most craven, cynical, hypocritical performance by a group of elected officials that I can remember, and a good measure of the political, intellectual and moral bankruptcy of the Republican leadership in Congress.

ad_icon

There is, however, one feature of all the Democratic health proposals — including Baucus’s — that’s been bothering me for a while, and it has drawn little attention. That’s the two-tiered structure of the health-insurance market that the proposals envision.

One part of the market — the one that has received all the attention — would be organized around the new government-sponsored health-insurance exchanges, in which insurance companies would offer standardized policies to small businesses, self-employed individuals and employees of any firm that does not offer insurance.

By going through an exchange, these firms and individuals would get the purchasing power and risk-spreading that comes with being a part of a large, heterogeneous group. Insurers would be required to offer the policies to anyone, regardless of health condition, at a price that varies only by age. Plans would have to offer preventive care with no deductibles or co-pays, and annual out-of-pocket costs would be capped.

People who purchase insurance through an exchange would have, as one option, the choice of an insurance plan run by the government — or, in the case of the Baucus proposal, a nonprofit insurance cooperative. Most significantly, lower-income workers who purchase insurance through the exchange would be eligible for federal subsidies to help them pay for their insurance premiums, as would small businesses that offer health-insurance benefits.

If they work as envisioned, these exchanges would be a huge step toward extending coverage and lowering the cost of health insurance for about 25 to 30 million Americans, according to congressional estimates. But that still leaves roughly 125 million workers and family members who would continue to get their health insurance from medium and large employers under the existing system, where the insurance reforms would not apply and where there would be few — if any — subsidies.

In the Baucus plan, for example, workers with the lowest wages in the current system could opt out of their employers’ plans and buy coverage through an exchange instead, triggering a “free-rider” tax on their employers. In several proposals, the new rules on benefits, pricing and guaranteed coverage would not extend to insurance plans offered outside the exchange. The size thresholds that would determine which businesses qualify for the exchanges or the subsidies or an exemption from providing health benefits are all over the map. Nobody outside the exchange could opt for the government-run public plan.

The reasons given for maintaining separate markets are mostly political. It allows politicians to assure Americans who already have and like their health insurance that they can keep things as they are. It saves money by limiting the worker subsidies to employees of small firms or companies that don’t offer insurance. And it allows Congress to continue kowtowing to small-business owners who throw a political hissy fit any time anyone proposes that they live by the same rules as everyone else.

Unfortunately, what this means is that the system not only winds up unnecessarily complicated and susceptible to all manner of games-playing by companies, workers and even insurance companies angling to qualify for subsides and exemptions. It means that the government will be in the awkward position of subsidizing some low-wage workers but not others, simply because one works for a small firm and the other does not. And it means that both labor and product markets will be distorted by variations in health-care costs.

As a practical matter, it’s probably a good idea to get the exchanges up and running by limiting them initially to individuals and small businesses that now have the hardest time finding affordable insurance. But if they prove to be efficient and effective at spreading risk and offering a wide choice of plans at competitive prices, there’s no reason why they shouldn’t be quickly opened to all workers and all companies, as Sens. Ron Wyden (D-Ore.) and Olympia J. Snowe (R-Maine) have proposed. Under the pressure of competition — and with some tweaks in the regulations and the structure of the subsidies — the distinctions between the two markets could fade away.

It’s all a bit wonky, I realize, but it sure beats the shouting matches over death panels and government takeovers.

There’s no simple answer.

“It may be they can get a plan that’s just as good or possibly even better than what their employer offers for less money on the individual market if they are young and healthy,” says Karyn Schwartz, a senior policy analyst with the Henry J. Kaiser Family Foundation. But there are lots of individual plans that lack the comprehensive coverage of an employer-based plan, she adds.

“You can end up with a situation where your health care needs aren’t being met by the insurance you bought. It’s hard to figure out, and you don’t have [a human resources] department to help navigate it,” Schwartz says. “If you have any health problems, you can end up with some pretty serious bills.” And you won’t be able to switch back to your employer plan until the next open enrollment.

Make no mistake, you need insurance. Going without insurance to save a buck is not an option. And there are plenty of good reasons to stick with your work plan. Besides often offering generous benefits, employer plans don’t require that you be in perfect health to be covered. Employers also pick up a good chunk of the cost, which many workers don’t realize. A Kaiser study found this year that the average annual premium in a workplace plan was $13,375 for family coverage and $4,824 for singles. Yet the employee on average pays $3,515 for family coverage and $779 for single coverage.

At $779 a year, that’s about $65 a month. “For most people, that would be tough to find comprehensive coverage for less than that,” Schwartz says. Kaiser also found that 81 percent of workers enroll in employer-sponsored plans when offered them. Of those who don’t enroll, the likely reason is they are being priced out, Schwartz says.

For those in such a squeeze, it’s worth investigating whether they can find an affordable policy in the individual market, she says. One of the advantages of an individual policy is you can select your benefits, says Sam Gibbs, senior vice president of eHealthInsurance.com, an online insurance broker. “Only pick and choose the benefit you need and save a substantial amount of money.”

A young male, for instance, doesn’t need maternity benefits that are typically included in a workplace plan. (Some states, including Maryland, mandate coverage for certain conditions.)

Don’t just choose the cheapest policy, Gibbs says. “Spend extra time and know what you are getting for your money,” he says. Also, look at the maximum out-of-pocket costs you could pay each year under the policy.

According to eHealth, a 25-year-old Baltimore man who doesn’t smoke can find a policy with premiums ranging from $33 to $373.70 a month. But dig into the details. With the cheapest policy, the annual out-of-pocket costs – including the deductible – can be as much as $12,500.

“Try to look carefully at the plan and exactly what it covers. A lot of plans have caps that might be hidden in the fine print,” Schwartz says. A plan may cap, say, outpatient hospital care, which might not seem like a big deal. But given that more and more illnesses, including cancer, are treated on an outpatient basis, a cap could be significant, Schwartz says.

Be warned, you might not qualify for an individual policy if you have certain health conditions. And once you look closely at the numbers, it’s possible that an employer plan may be cheaper after all because of the company’s subsidy.