What the Free Choice Proposal does
Yglesias breaks it down:
1) Employers that offer group health coverage must offer the equivalent of a minimum benefit plan, contribute at least 70% of the premium, and offer at least one other health plan of greater actuarial value; or
2) Employers that do not offer the choice of a low cost option must offer workers a voucher worth at least 70% of the average of the three lowest cost plans in the exchange; or
3) With an adequate transition, employers can take their entire group to the exchange where they would receive a group discount so long as they provide at least 70% of the cost of average of the three lowest cost plans in the exchange; or
4) Employers that do not offer health insurance choices, a voucher, or go to the exchange, would have to pay a “fair share” fee which would be a percent of the national average of the three lowest cost plans in each state.
Yglesias worried earlier that this would cause a drift away from employer based insurance, essentially destabilizing the status quo beyond the American public’s comfort zone, which would also break Obama’s promise that nobody would lose their health coverage, but…
It turns out, however, that Wyden is envisioning a couple of counterveiling measures to prevent this destabilization from happening. One important element is the establishment of a federally-sponsored (though probably privately administered) reinsurance system that would cover both Exchange- and non-Exchange plans. That would tend to automatically re-balance the distribution of risk in the system and basically stabilize things. The precise mechanics of this would have to be worked out by HHS but it would lean against any kind of dramatic destabilization spiral. The other thing is that even though nobody has talked about this aspect of health reform, the bills under consideration already have substantial provisions for doing risk adjustment to prevent anyone’s risk pool from getting too out of whack relative to anyone else’s.
Another good point that Wyden himself makes is that as employees were lured away from employer plans, the insurers would have to work harder to compete for the employers’ business. Here’s the excerpt from the Klein interview:
[Klein] Another argument I’ve heard is that this will change an employer’s ability to bargain for insurance. Right now, they go to an insurer and say, “I’ve got 500 employees, what can you give me for that price?” But if 125 of those employees could leave, or 300 could leave, that might change their ability to secure and protect a deal.
[Wyden] Imagine that Ezra Electronics has been working with a particular insurer for six or seven years. Ezra Electronics gets more leverage. Under this bill, Ezra Electronics can get out and go to the exchange unless the insurer gives him a better deal. And so can individuals. Free choice means additional options for employers and employees. If your insurance policy knows you can leave, they will work harder to keep you.
This makes sense, and so does the Free Choice proposal. More choice, more competition – these are good things no matter which way you look at it. I hope Wyden’s Democratic colleagues and the President agree because at this point nobody likes the Baucus bill – Democrat or Republican.