Insurance Assurance

Even as it is under attack, Arizona's health-care plan could be a national model for reform

When it comes to healthy futures, Healthcare Group of Arizona still has a ways to go. The 24-year-old program, insuring some 20,000 state residents who are either self-employed or work for small businesses, has come under steady fire from conservative lawmakers.

But even as Republican legislators decry the program as tantamount to socialized medicine, many others are seeing Healthcare Group and similar programs across the nation as effective, in-place networks to use for vastly broadened health-care coverage as envisioned by President Barack Obama.

Count Kathy Oestreich among them. She's CEO of University Physicians Healthcare Group, which administers the state plan in Southern Arizona. "It's a compelling argument," Oestreich says, "because this infrastructure already exists, and it works. There's not going to be a lot of administrative cost to the country by just adopting the current model and building it into the states that don't have it."

One report by the Lewin Group, a health-care consulting and research firm, estimates that the current Obama plan would cost roughly $1.7 trillion over 10 years. Major guidelines include insuring all children, subsidizing coverage for the poor and requiring large employers to provide health coverage or pay a tax. It would also expand Medicaid and the State Children's Health Insurance Program, or SCHIP, to include another 16.7 million Americans.

Expanding that much is a huge task. But according to Oestreich, talks have already occurred between the Washington, D.C.-based Association for Community Affiliated Plans (University Physicians is a member) and the Obama team.

"There aren't a lot of details," about the success of those meetings, she says. "But what we do think is that managed-care organizations like University Physicians, and any of us in the country that particularly do Medicaid managed care, provide an infrastructure that the administration could use to quickly assimilate more people into coverage."

Unlike commercial insurance, Healthcare Group of Arizona does not use traditional underwriting to gauge premiums. Instead, it follows a "community-rated" approach, which doesn't consider pre-existing conditions during enrollment. That's precisely why it has proven so valuable to small businesses that may have employees with serious health problems. It complements its parent agency, the Arizona Health Care Cost Containment system (AHCCCS), which administers Medicaid to extremely low-income state residents.

Oestreich's argument is bolstered in the Lewin Group report. Commissioned by the Association for Community Affiliated Plans, it examined programs in Massachusetts and California, both of which--like Arizona--use Medicaid-based health plans to provide care.

Those plans have received remarkable attention, says Jennifer McGuigan Babcock, ACAP's director of policy. "When you hear President Obama's plan, or others talking about health care in terms of coverage, you hear them alluding to how Massachusetts expanded its coverage."

That reform "incorporated several elements, one of which was to expand subsidized coverage on a sliding scale up to 300 percent of the federal poverty level," Babcock explains. "In addition, the state expanded coverage under Medicaid and the state children's health-insurance program. They have a great deal of experience in serving low-income or higher-needs clients. But not all of the newly covered folks are low-income. Or they have not been consistently covered."

How to enroll--and keep enrolled--people who may have little experience with coverage, and tend to rely on the emergency rooms rather than routine doctor's visits, is just one of the many challenges facing true health-care reform.

But who can better face that challenge, Babcock argues, than programs long experienced with low-income groups? "The structure that is already serving the Medicaid program can be used to expand coverage quickly and efficiently and effectively to other uninsured people," she says. That includes AHCCCS and, by corollary, Healthcare Group of Arizona. "It's all the same idea."

For instance, Massachusetts created the Commonwealth Health Insurance Connector Authority to act as a broker. "It was selling new health-insurance products," Babcock says, "to folks who were formerly uninsured, and had low-to-middle incomes--300 percent of the federal poverty level, which for a single person is roughly $30,000 per year. For a family of four, it would be $55,000 or $60,000."

The state then sweetened the deal by offering exclusive developing and marketing contracts to health plans already administering Medicaid.

It seems like a natural fit. "Those health plans have a long, long history of working with government programs," Babcock says.

There are some parallels between the Arizona and Massachusetts programs, although conservatives in the Arizona statehouse have effectively reduced coverage, not expanded it. "There are two philosophies in the Legislature," AHCCCS director Tony Rodgers told the Weekly in August. "One is that government shouldn't be competing with the private sector. That ideology sees Healthcare Group as a threat, or at least as inappropriate."

Subsequently, the program's "community-rated" approach was nearly its undoing. The lack of pre-screening, combined with a period of explosive growth--from around 16,000 members at the end of 2005 to almost 27,000 two years later--left Healthcare Group unaware that a storm of claims was brewing.

That enabled critical lawmakers to force a temporary cap on enrollment, driving down membership by about 7,000.

For this fiscal year, Healthcare Group was slated to receive a $5 million subsidy. But that money was cut when it was deemed unnecessary. While that's not a victory for expanded coverage, it does demonstrate a continued ability for Healthcare Group to operate in the black.

Still, no one can predict how this program will fare in the future, or what role it may play in the national debate. But its record in Arizona remains clear, says state Rep. Daniel Patterson, a Tucson Democrat.

"For over 20 years, Healthcare Group has helped insure the uninsured small-business community," he writes in an email to the Weekly. "... We need to keep and expand it for the common good. I and the House Democrats continue to lead the way with fair and reasonable budget option proposals, and the governor and Republicans would be wise to open the door and work closely with us."