Oklahoma
Health Care Recovery Act
1 September 2003
Oklahoma Uninsured and Insurance Costs - - Both Too High
Health insurance costs are skyrocketing. This
year employers report a 16% increase in
insurance premiums, the fourth year in a row of
double digit increases and the largest annual
increase in more than a decade. Since 2001,
the share of the employee’s premium has like-wise
burgeoned, up 50%.
In Oklahoma, health insurance costs are even
more a’kilter. The Daily Oklahoman reports that
HMO rates for the privately insured will rise
26%, ten percentage points higher than the national average. Oklahoma health care providers lose more than
$152 million a year providing care to the medically indigent. This loss is offset by higher payments from
private insurance companies and Oklahoma citizens. According to the Oklahoma Health Academy, the cost
shift created by treating the uninsured and underinsured increases health insurance premiums as much as
30%. As these costs rise, employers drop coverage, which increases the ranks of the uninsured, which
increases the cost of uncompensated care which requires additional cost-shifting from providers to private
insurance, which causes more employers to drop coverage . . . and so on.
Coverage on the individual market, at 10.9% of median household income (the 3rd highest in the country) is
plainly unaffordable for working families.
By reducing the number of uninsured and improving provider reimbursement rates, the Oklahoma Health
Care Recovery Act is designed to reverse this insurance death spiral and to finally allow working families
access to health insurance that has long been far from their reach.
Oklahoma’s Uninsured
2000-2001, Oklahoma uninsured = 19% (630,000)
est 470,000 (75%) adults 19-64
est 155,000 (25%) children
Who Offers Insurance?
98% of larger employers - > 50 employees (97% US)
37% of small employers (47% US)
Who Works?
57% of uninsured adults had at least one full time worker
33% of uninsured adults live in unemployed households
What Happens to the Uninsured?
Receive less preventive care;
Diagnosed at more advanced disease stages, therefore requiring more expensive care; and
Higher mortality rates.
Better health is noted to improve annual earning by as much as 10-30% annually; and
Better health increases educational attainment.
Uninsured 1998-2001
16% 16% 16%
14%
16%
18% 19% 18%
0%
5%
10%
15%
20%
1998
1999
2000
2001
US
Oklahoma
Oklahoma
Health Care Recovery Act
2 September 2003
Oklahoma’s Medicaid Per Beneficiary Spending…
Per beneficiary cost low compared to other states;
Growth (spending) lower than GAO’s estimated Medicaid growth of 9% annually;
Low provider reimbursement;
Lost federal matching.
Steps Toward Oklahoma’s Health Care Recovery…
As state policy makers across the nation strive to balance providing health care coverage to the uninsured
with scarce financial resources, Oklahoma must also explore new ideas in public purchasing of health care
coverage.
Premium Assistance for Oklahoma Working Families
Premium assistance for Oklahoma working families lies at the core of the Oklahoma Health Care
Recovery Act. The program will be designed to facilitate the purchase of health care for an expanded
population (currently uninsured) up to 200% FPL through:
1. Coordinate with existing employer sponsored insurance coverage;
2. Establish work-based health care coverage approaches; and
3. Create individual program “buy-in” options.
Avg Medicaid Payments Per Beneficiary - Federal Share Only
CMS Region VI States
SFY2001 / 2002
4620
4459
3802
2939
$2,688
4726
3920
3721
3103
$2,669
0 1000 2000 3000 4000 5000
OK
NM
TX
LA
AR
SFY2003
SFY2002
Oklahoma, on average, received
$1,260 less in federal matching funds
per beneficiary than neighboring
states.
Estimated SFY2003 Economic Effect
o $816 million - unrealized federal
dollars
o 55,000 - unrealized jobs
o $1.6 billion – unrealized income
o $4.5 billion – unrealized business
activity
SFY2003 average federal participation per
beneficiary (excluding Oklahoma) = $3,868.
Oklahoma
Health Care Recovery Act
3 September 2003
1. Coordinating with Existing Employer Sponsored Insurance (ESI) Coverage
Some of Oklahoma’s uninsured, or even those currently enrolled in Medicaid, may have been offered
coverage by their employer or the employer of one of their immediate family but have declined the coverage.
Nationally, about 19% of the employed do not take-up job-based coverage, usually because the employee
share of health premiums is simply too much (up 50% in the last three years alone). In most companies,
the share of the insurance premium that an employee must pay is the same no matter how much a worker
earns. Under these financial conditions, even modest income workers can have a harder time affording
insurance when it is offered. The bottom line is that many adults work hard, but are unable to obtain
affordable health insurance through their employers.
Subsidizing enrollment in employer sponsored coverage for these individuals could induce some portion to
accept coverage offered by their employer. A premium assistance program offers a way to access available
employer contributions.
Instead of encouraging “crowd-out”, a subsidy program of this sort should encourage use of employer
coverage and should enable Oklahoma to tap into employer contributions, including the state’s own
contributions on behalf of educators and state employee dependents, that are currently available but not
being used.
2. Establishing Work-Based Coverage Approaches (Employer “Buy-In”)
A second approach at reducing the number of uninsured while being a prudent manager of the taxpayers
dollars is work-based coverage approaches aimed at businesses that have not traditionally sponsored health
insurance coverage - - small firms or businesses who have not been able to secure health insurance for their
employees. 71% of employers who do not offer health insurance to their workers would be much more or
somewhat more likely to offer job-based coverage if premium assistance were provided.
These businesses could “buy-in” to the existing health care coverage currently offered through the Medicaid
program. As described above, lower income individuals might be eligible for some level of employee premium
assistance; higher income individuals employed by the business could be responsible for their entire share of
the employee portion. The result - - less uninsured Oklahomans.
3. Creating Individual Program “Buy-In”
Those who do not have access to employer-sponsored insurance, either through their own or a spouse’s job,
have few options. Frequently, the only way is to buy a non-group insurance policy in the individual market.
But those without access to work-based coverage tend to have low wages and often work part-time. Many
may earn too much to be eligible for traditional public health programs, but too little to afford individual
coverage. The average cost of individual and family coverage -- $4,483 and $9,068 – is simply not
affordable.
Moreover, the individual market is largely unregulated, where premiums vary based on age and medical
history of the insured, and where the insurer may re-underwrite premiums annually based on utilization and
health of the individual. Oklahoma’s Medicaid program, by pooling the risk (as all group policies do) furnishes
the only viable option for these working families.
This third option of the Oklahoma Health Care Recovery Act permits a beneficiary to “buy-in” directly into the
current health care delivery system offered through the Medicaid program, if he or she could not otherwise
obtain health care coverage.
Oklahoma
Health Care Recovery Act
4 September 2003
Estimated Cost Per Payer
The table below summarizes the annual cost per payer of offering health coverage to 200,000 uninsured
Oklahomans. The Oklahoma Health Care Recovery Program is a voluntary program. No employer will be
forced to offer coverage or to participate in any way in the program. The expansion would be targeted at
Oklahomans without health insurance and with family incomes below 200% of the federal poverty level (FPL).
The estimates assume an average premium cost of $2,000 per year.
Estimated Economic Impact of Additional Public Dollars Only
Oklahoma will generate nearly a 20-fold return in State economic benefit for every $1.00 invested in the
Oklahoma Health Care Recovery Act. Our $80 million investment in public health will produce $1.5 billion in
new business activity each year and create over 18,000 new jobs. By leveraging federal funds, we are
guaranteed a 230% return on State dollars – performance measures that few portfolio managers and
entrepreneurs can match.
Some might say that in difficult economic times, States should reduce spending. To quote a Vision 2025
supporter, “there is never a bad time to make a good investment.” The passage of all four Vision 2025
initiatives, by a 60% margin, ought to send a powerful message that Oklahomans will support well-reasoned
programs, including expenditures that bolster and rebuild our public infrastructure.
Share of Cost as Monthly Cost Annual Cost Aggregate Annual Cost
Payer Percent of Total Per Insured Per Insured Total Program
State 20% $33 $400 $80,000,000
Federal Government 46% $77 $920 $184,000,000
Employer 20% $33 $400 $80,000,000
Insured 14% $23 $280 $56,000,000
Total 100% $167 $2,000 $400,000,000
Monthly Health Care Cost by Payer
State, $33
Federal, $77
Employer, $33
Individual, $23
=
$80 million
State
Matchable
Dollars
$184 million
Federal Dollars
into Oklahoma
$264 million
Public Dollars
for
Health Care and
Related
Expenses
+200,000 Oklahomans
Receive Health Care
18,073 Direct & Indirect
Jobs Supported
$528 million in
Income to Oklahomans
Generated $1.5 billion in
Business Activity
