Portable Insurance For Mobile Society

Getting and keeping health insurance - a major worry for millions of American workers - could be greatly eased by reform legislation that the GOP-led Congress passed earlier this month and President Clinton may sign into law as early as today.

The Kennedy-Kassebaum bill - named after its sponsors, Sens. Edward Kennedy (D) of Massachusetts and Nancy Kassebaum (R) of Kansas - remains a modest effort compared with the sweeping health-care plan that the White House proposed two years ago. If the Clinton reform rated a 10 on a 1-to-10 scale of change, then Kennedy-Kassebaum might be judged a 2.

But the bipartisan bill does represent the kind of incremental reforms in the US health-care delivery system that many experts predicted would follow the failed White House effort. And it could help end the problem of "job lock" for workers who feel they can't leave their current positions because of possible difficulties in obtaining new health coverage.

"There are a lot of people that will be helped by this," says Linda Blumberg, a health-care policy researcher at the Urban Institute in Washington.

The White House signing ceremony for Kennedy-Kassebaum will be part of what might be called Clinton's pre-convention burst of social policy activity. Already the president has put his signature to legislation raising the minimum wage, a long-sought Democratic goal. Before the weekend, he's due to sign the mammoth welfare-reform bill over the objections of liberals in his own party.

Have insurance, will travel

Kennedy-Kassebaum is between these two bills both in timing and scope. Its main theme is portability - the capacity of American workers to carry health-insurance coverage with them as they navigate the course of their working life.

Specifically, the health-care reform legislation would:

Limit to 12 months the period of time in which a group insurer could deny or limit an individual's coverage because of preexisting medical conditions. Workers would have to wait through only one such year-long period in their employment lifetimes, as long as they don't allow a substantial gap between the expiration of an old group policy and application for a new one.

Further, insurers would be prohibited from refusing renewal of health coverage because of the development of health problems.

*Require health insurers who offer individual policies to proffer them to anyone who has previously had coverage for at least 18 months and has exhausted his group health-insurance options.

Insurers would have some flexibility in determining the level of benefits these individual policies would contain, however.

*Generally require insurers who offer group policies to small businesses to offer similar plans to all small firms in their market.

*Mandate that insurers renew almost all health-insurance policies. Nonpayment of premiums and other illegal actions could lead to policy termination.

*Increase the tax deductibility of health insurance for the self-employed. Currently, those who work for themselves can deduct 30 percent of health-insurance premiums from their income.

That percentage would increase to 40 percent next year, with further phased-in hikes leading to 80 percent deductibility by 2006.

*Make long-term health-care insurance tax deductible. Benefits received under such long-term plans would also be tax exempt, up to a limit of $63,875 a year.

*Allow an experiment with medical savings accounts. These MSAs would allow individuals who buy high-deductible insurance coverage to pay for their plans via tax deductible contributions made to a special medical bank account.

Money from the account could also be used to pay out-of-pocket health-care costs. Employees could save any of the contributions not used in the end for medical purposes.

MSAs will be available to approximately 750,000 Americans over the next four years, under the terms of the Kennedy-Kassebaum legislation. After that Congress will decide whether to expand the program.

Many Democrats oppose MSAs, saying they will siphon the well-off and healthy out of insurance programs. As group insurance pools become poorer and less healthy, firms might be forced to raise prices, pushing health care out of the reach of those at the bottom of the economic ladder, opponents argue.

MSAs give flexibility

MSA supporters, many of them Republicans, reply that such worries are overblown - and that the accounts will give new flexibility and control over health-care costs to many Americans.

One general health-care problem the Kennedy-Kassebaum bill doesn't attempt to solve is the uninsured. Today, 43 million Americans remain outside the nation's private health-insurance pool, according to government estimates.

Nor does Kennedy-Kassebaum attempt to control health-care costs. While it generally requires health-insurance firms to offer individual policies to anyone who has previously been covered for at least 18 months, for instance, it is silent on what the price of these policies should be.

"Cost is still the highest hurdle keeping small business from offering health insurance to their employees," points out Jim Weidman, spokesman for the National Federation of Independent Business. "This bill doesn't do much to address that."