Shake-up envisioned in health insurance

The drive to provide health coverage for Massachusetts' uninsured could have a much wider impact: It may lead to major changes in everyone's health insurance.

Governor Mitt Romney and other political leaders propose covering many of the 500,000 state residents who lack insurance with high-deductible plans that require them to pay the first $250 to $1,000 of their annual healthcare bills. In return, such plans would have lower monthly premiums than traditional coverage.

If any one of the healthcare overhaul plans under consideration on Beacon Hill passes intact, state officials say, a ripple effect is likely. High-deductible plans would also be attractive to employers who have endured five consecutive years of double-digit premium hikes for standard health insurance; the state's HMOs could aggressively promote them; and employees would be allowed to take their health plans from job to job -- effectively seeding the marketplace.

''This is a paradigm shift. It wouldn't be surprising to me that you will see a lot more people actively taking these things up," said Timothy R. Murphy, Romney's secretary of health and human services. ''Large employers that we speak to are exploring a number of different options."

About 60,000 people have such insurance in Massachusetts, fewer than 1 percent. Nationwide, 1 million to 2 million are enrolled in high-deductible plans, according to industry estimates. Those numbers may soon increase.

According to results of a survey of 86 large national employers released last week, 45 percent plan to offer such plans.

The survey, conducted by Fidelity Investments, said the average projected savings on premiums would be 6 percent.

The shift toward more out-of-pocket expenses for consumers is controversial. Critics, including Massachusetts healthcare consumer groups, say it will encourage people to forgo routine doctor visits and vital preventive care, like pap smears and mammograms.

They also worry that the plans will be most attractive to the healthiest people, leaving a high concentration of high-risk patients in traditional plans and making their coverage more expensive.

Proponents argue that people covered by traditional health plans have no incentive to shop for price or quality. Making them bear more of the cost of routine care would change that, they say.

A leading health consumer advocate in Massachusetts, John McDonough, executive director of Health Care for All, in Boston, supports State House proposals to expand coverage for the uninsured. But he opposes the broader use of high-deductible plans.

''We call it faith-based health insurance. You're supposed to pray you don't get sick, because if you get sick, you're in trouble," McDonough said.

But Stuart H. Altman, a professor of national health policy at Brandeis University, said expanding traditional forms of health coverage to those without it would be too expensive.

''I do believe that advocates for comprehensive healthcare are actually hurting the poor, even though they say they are helping the poor, because we have made it so expensive that no one can afford it," he said.

Moreover, he said, insurance companies are starting to enhance high-deductible offerings by providing coverage for some primary care visits and important tests.

High-deductible plans that provide coverage for preventative care like mammograms are acceptable to the state's largest hospital and provider network, Partners HealthCare, said Dr. Thomas H. Lee, chief executive of Partners Community Healthcare, a physician group with about 4,500 members, including doctors at Massachusetts General and Brigham and Women's hospitals.

''For us, the worst situation is where we are trying to take care of people with no insurance at all," he said. ''I would rather have them in one of these plans."

The State House discussion of high-deductible plans has been overshadowed by more controversial features of the legislation: A 5 to 7 percent payroll tax on employers who don't offer coverage is included in legislation approved by the House late Thursday, and the Romney and House bills include a requirement that everyone in Massachusetts purchase health insurance.

All three reform proposals would require insurance companies to offer a variety of plans, through a state purchasing pool, to small employers and to individuals who do not qualify for state Medicaid insurance.

The proposals would also encourage greater use of consumer ''health savings accounts," tax-deductible accounts similar in concept to a 401(k) retirement plan. Consumers or their employers deposit money in the savings accounts to pay for costs not covered under a high-deductible plan. The deposits are exempt from taxes, as long as the money is used to pay for medical expenses. Insurance specialists say such accounts primarily benefit middle- and high-income earners.

None of the bills include information about benefit levels, deductibles, or costs. Those details would be worked out by insurers and state officials who would run the purchasing pool.

Romney has said he wants insurance companies, through the purchasing pool, to provide health plans with premiums as low as $200 a month for residents who are now uninsured and do not qualify for Medicaid. House Speaker Salvatore F. DiMasi has set a target premium of $320 a month for someone who does not quality for Medicaid, and as low as $140 a month for residents ages 19 to 26.

Those goals cannot be met without high deductibles, large co-payments, and restrictions on what doctors and hospitals a patient can use, insurance executives say.

''We believe that to make premiums affordable, using the kinds of numbers that the governor and the legislators have referenced, it is going to require deductibles and other elements of benefit restrictions," said Jon Kingsdale, senior vice president at Tufts Health Plan, which currently has about 10,000 enrollees in its Liberty plan, a high-deductible option that is coupled with a health savings account.

Blue Cross Blue Shield of Massachusetts has given the Romney administration the outline of a plan with a $500 annual deductible and a $200 monthly premium. Murphy, the health and human services secretary, said a $1,000 deductible would reduce monthly premium payments by 22 percent.

Plans with even higher deductibles have been floated in the State House, but are not backed in the Senate, said Senator Richard T. Moore, cochairman of the Joint Committee on Health Care Financing.

''They seem to have relatively high deductibles in the $1,500 to $3,000 range, and that might be a hurdle to some people getting regular care," he said.

The State House deliberations reflect a broader ideological debate that has raged in Washington for several years. Health plans with deductibles of $1,000 or more are favored by President George W. Bush and Republicans who want to limit Medicaid expenditures.

US Senator Edward M. Kennedy, a longtime champion of universal health coverage, has opposed legislation in Washington expanding the use of health savings accounts. But Kennedy, through a spokeswoman, said the Massachusetts legislation is reasonable.

''With any major reform there is compromise," said the spokeswoman, Melissa Wagoner. ''He continues to believe that the outcome of the legislation and the people it will help is the most important consideration."

The fact that Kennedy's home state, a traditional Democratic stronghold, is considering greater use of high-deductible plans suggests State House leaders recognize it is the best way to expand coverage without further burdening taxpayers, said Robert Blendon, a professor of health policy at Harvard University. ''It's not what is the best plan. It's what is affordable to taxpayers," he said.

Christopher Rowland can be reached at crowland@globe.com.