June 28, 2001 | News Releases on Health Care
WASHINGTON, June 28, 2001-Rather than enact a "Patients' Bill of Rights" and dramatically expand the right of patients to sue health plans, Congress should make it easier for employers to pay insurance premiums to the plans chosen by their employees, a new Heritage Foundation paper says.
Such a "defined contribution" system would offer more consumer choice-and higher levels of patient satisfaction-than the "defined benefit" system available to most American workers, in which employers offer only one health-care plan to their employees, say health-care experts James Frogue and Grace-Marie Turner.
To promote more "defined contribution" plans, the Bush administration and Congress should ensure the tax code maintains employers' tax deduction for insurance and that employee contributions to health care continue to come from pre-tax income, they say. Lawmakers also should abolish the caps on medical savings accounts and amend the 1974 Employee Retirement Security Act (ERISA) to allow the formation of interstate health-insurance pools and let employees buy state-regulated coverage.
"Defined contribution" plans-such as the Federal Employees Health Benefits Program (FEHBP), which covers members of Congress, their staffs and about 9 million federal workers-enable workers to choose their own plans. Workers can change plans if they are dissatisfied and retain their insurance and doctors even if they change jobs. And by defining the contribution rather than the plan, employers find that health-care costs are more predictable and less susceptible to sudden increases, Frogue and Turner say.
Under FEHBP, numerous insurance companies vie to insure federal employees. And federal workers like the system, which pays up to 75 percent of their premiums.
Employers face daunting cost increases if they don't adopt defined contribution plans, according to the analysts. Health-plan costs jumped an average of 7.5 percent from 1998 to 1999 and 9.8 percent from 1999 to 2000. This year, experts expect increases of more than 11 percent for large employers and more than 12 percent for small employers.
Defined contributions plans-if coupled with reforms to ERISA allowing affiliated groups such as churches, unions and trade associations to purchase coverage for their members-could bring significant savings, Frogue and Turner argue. But, they say, the approach taken in the "Patients' Bill of Rights" proposals would produce just the opposite effect. "It's hard to see how a law that encourages more-and more expensive-lawsuits helps us toward better health care," Frogue and Turner say. "It's not hard, however, to imagine that a move toward more competition among insurers and greater choices for consumers would reduce costs and increase satisfaction for both employers and employees."