John Livingston

Principle vs Process

House passes teacher health insurance bill after overwhelmingly positive debate

The headline above from the Eye on Boise Column written by Betsy Russell caught my attention. I watched the floor debate on Public Broadcasting and then went back and read some of the committee testimony last week. A lot of things don’t add up. What first got me interested in this was when I found out that the Committee that heard this Bill was the Judiciary Committee and not the Commerce or Health and Welfare Committee. What is the point about taking a health insurance bill before the Judiciary committee except that maybe there was a calculous that the votes to move the Bill forward were easier pursuing that route? Then I saw where respondents were given only two minutes to object to the proposal. If I were a legislator in favor of the bill I would certainly want to hear from both sides.

The Bill’s sponsor Rep. Rod Furness did an excellent job of presenting his proposal. Teachers that used to be insured by The State until 1972, were now having to be insured by individual districts. The 20,000 State employees and their families could provide economies of scale to the 14,000 teachers plus another 4,000 employees and their families. The State like almost all large employers is self-insured. In other words, they have allocated funds set aside to pay claims in any year. These funds come from taxpayers. Insurance carriers administrate the plans and negotiate rates with providers, process claims, along with performing several other administrative functions. Individual districts with anywhere from thousands of employees to small rural districts with sixty or less employees are in a very different positions when they negotiate rates with carriers, The larger the pool the lower the individual risk and the lower the individual premiums. The more covered lives that are managed by the administrator, the more clout they have in negotiating provider rates. The economies of scale of being in a larger pool are significant and beneficial to those paying the cost of coverage. The proposed cost to be paid by the State this year is yet to be determined and was not mentioned in the bill but during debate it was stated at being around $75million—this year. The $75.5M is to provide money for the reserve that only benefits Blue Cross. There is another $105 M for actual health care premiums. 

In addition to Mr. Furness who has a lifetime of experience as an insurance broker and who owned his own company, several teachers spoke in favor of the bill. Rep Sally Toone spoke eloquently of a lifetime of experience in a rural school district and having to pay higher premiums co-pays and deductibles than her colleagues who taught in larger districts. Rep. Julie Yamamoto stated that districts would still have a choice of accepting the new plan and joining the State employee’s fund—surely the cheaper option for teachers in most districts or continue negotiating their own plans through their districts.

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All who spoke on the floor talked of their love and esteem for teachers and the sacrifices they make for the work they do. I come from a family of teachers, and I share those same feelings, but when feelings supersede critical analysis the people who laws are supposed to help get hurt the most. Opportunity costs and collateral damage to the marketplace and long-term budgets were never part of the debate. The big issue for me was the long-term cost of eliminating competition from the marketplace, and the impact of not only rates charged to employers for covering employees, but the increased costs of coverage that will run through co-pays and deductibles to providers demanding higher fees for service. Created utility with increased access always costs more—much more. Something not considered by the “experts” who designed Obama Care (ACA). You can bet one thing for sure carriers and providers will be realizing larger margins and higher profits four years from now than they are today even when they try to hide their profits by buying land, building large buildings, or increasing reserves—operational and investment.

At the core of this debate and never discussed was the issue of PROCESS BEFORE PRINCIPLE. Blue Cross currently holds the contract with the State to administer the health care fund. They stand to increase the number of covered lives—by 25%. They did this without having to submit a Request for Proposal (RFP). The spokesperson for Blue Shield wanted to make the point that her organization was boxed out of competing for this group of people. To me the State of Idaho is interfering with competition in the marketplace. Every carrier in the State should have an opportunity to bid for this book of business. The proper way of handling the situation would be for the State to issue an RFP, for the districts to vote on how they want to proceed, and then allocate funds based on the bids and needs of the districts. In the past the State has found itself in big trouble with legal bills to pay when they tried to circumvent the RFP process. 

Why the rush? If Blue Cross can get their foot in the door, they stand to make a nice profit over the next two years, allowing them to make a lower bid with the next RFP, even if it becomes a loss leader, they have boxed out the competition.

The question becomes one of principle or process. It speaks to the underlying cronyism, collusion, and corruption—all of which may be legal but are always costly to taxpayers and profitable to large conglomerates who try to squeeze out the little guy from the marketplace. Let’s look at the players: The Governor’s former legal council is now Vice President and legal counsel for Blue Shield. Several people now working in State government are now on the pay roll of Blue Shield and former executives at Blue Shield have and currently are running large state agencies. Can we deploy a new word—Symbicrony, the combination of symbiosis and cronyism? Or maybe corruptbiosis—corruption and symbiosis combined. And what about the campaign contributions and Governor’s Cup fees that the large companies pay to legislators to maintain their monopolistic advantage. Only one legislator declared a possible conflict of interest in this regard, written disclosures are never announced on the floor. One final remedy that I don’t think was ever considered. The teachers throughout the State could form their own pool including teachers in parochial schools that get paid even less than public school teachers. They could vet and negotiate rates with carriers on their own. 25,000 covered lives plus should get them a pretty good deal especially if bids are competitive. But far too many of our legislators in our so-called Republican conservative State always see government as the solution to the problem, especially if the entity that you are doing business with will contribute to your campaign!

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