Over the next few weeks, we’re all going to hear a lot about the Connector. It’s not an Internet dating service or the name of one of Batman’s villains. It is this year’s “next big thing” in health care reform. And it does have a lot in common with both matchmaking and mischief.
Democratic lawmakers want to import the idea from Massachusetts, where the Connector serves as the centerpiece of that state’s celebrated health care reform. The Massachusetts law also imposes an “individual mandate,” requiring everyone to have health insurance, and a requirement that employers who do not provide health insurance contribute to a fund to offset the costs of treating the uninsured.
According to Robert Moffit of the conservative Heritage Foundation, the revolutionary piece of the Massachusetts plan is the Connector, a statewide marketplace connecting individuals and employees of small businesses with health insurance. That’s the matchmaking.
Heritage worked with Mitt Romney, then governor of Massachusetts, to design the plan to get around the “800 pound gorilla of health care policy” – the federal tax code, which lets employers, but not individuals, deduct the cost of health insurance. That inequity, he says, effectively adds 40 percent or more to the cost of insurance for individuals not insured by an employer. The Connector allows them to buy policies with pre-tax dollars.
President Bush proposes a simple correction: a standard tax deduction for health insurance. The change would rectify the inequity and invigorate the individual market, expanding consumer choice and reducing the ranks of the uninsured. Unfortunately, Congress has little interest in making the change. Without it, we’ll continue to see workarounds like the Connector.
In Moffitt’s view, the Connector is only “a way to process the paperwork” to get around the barriers set up by current tax law. He emphasizes: The Connector is not a regulatory agency. It does not negotiate rates and benefits. It does not establish a comprehensive benefit plan. And it is not an instrument to establish mandates. He likens it to the stock exchange, simply a neutral platform for transactions. For the exchange to work properly there must be a vibrant health insurance market. A stock exchange that offers investors only six stocks wouldn’t be much of a marketplace at all.
And here’s the mischief.
The legislation chiefly under consideration in Olympia, a plan offered by Rep. Eileen Cody (D-Seattle), would not only mandate participation, it would tightly restrict the number of plans and cost-sharing options. Small groups and association plans would be forced into it first, with individuals, state employees, teachers and other state plans brought in later. (Disclosure: My employer offers an association plan.) The plan also includes the individual mandate, which can be likened to the requirement that drivers have car insurance. Paul Guppy, with the conservative Washington Policy Center, writes that, with its limited options, the Cody Connector may become better known as “The Constrictor.”
Romney originally hoped that a basic plan could be offered for $200 a month; the best estimates now put it closer to $300. With the individual mandate taking effect soon, the plan’s administrators are scrambling.
Moffitt calls the pricing problems being experienced in Massachusetts “reality therapy for liberals.” Massachusetts imposes too many mandates and did not deregulate the market. That keeps costs high. The Connector didn’t create the problem. It does expose the policy consequences.
While wonkish types call states “the laboratories of democracy” that allow governments to experiment and learn from each other, that’s a bit off. States often act more like 5-year-olds on the soccer field, all chasing the same ball at the same time, with little appreciation of patience or strategy. For experiments to have value, we need to know the results.
Gov. Chris Gregoire wants a Connector study, with legislation in 2008. That sounds reasonable. There’s value in expanding access and eliminating the tax inequity. Participation, though, should be voluntary and the choices as unconstrained as possible. Let the marketplace work.
Boston’s Big Dig cost overruns may have helped make the governor a tunnel skeptic. Let’s also be sure that the Connector isn’t just another Massachusetts millstone. If we want the benefits of the matchmaker, we should minimize the regulatory mischief.
Richard S. Davis, vice president-communications of the Association of Washington Business, writes every other Wednesday. His columns do not necessarily reflect the views of AWB. Write Davis at richardd@awb.org or Association of Washington Business, P.O. Box 658, 1414 Cherry Street S.E., Olympia, WA 98507-0658.
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