Pooling insurance makes sense for Maryland

Health insurance. The topic is enough to make any of us anxious. Between the chaos at the federal level and businesses and individuals just trying to make ends meet, it’s a confusing, complex and costly world.

But what if there were a way to save money and improve coverage, starting with a large group of people and then maybe expanding it to others? There is. Here’s how.

The state of Maryland provides health insurance for its 81,000 employees. Maryland’s 23 counties and Baltimore City provide insurance for their 42,000 employees. And Maryland’s 24 school systems provide health insurance for another 120,000 employees. Each of these entities obtains health insurance on its own, but, directly or indirectly, all of these expenses are paid for by Maryland taxpayers.

The concept of insurance pooling is straightforward. The more people in the pool, the more the costs are spread, and the less the risk to any one entity. When that happens, there is greater bargaining strength leading to financial efficiencies and reductions in administrative expenses.

Currently, more than a dozen states pool health insurance purchases for their governmental employees (state and local), allowing them to leverage their large population size to advocate for modern health programs that aim to contain costs and boost well-being.

As a member of the state’s Procurement Modernization Commission, I am always on the look-out for efficiencies in government operations. In fact, the commission generated major government purchasing reform bills that were enacted in 2017. As a practicing physician, I am only too aware of the financial problems citizens face when dealing with health care expenses, whether they have insurance or not. Common sense would suggest that pooling would be a smart thing.

With the help of graduate students from the Johns Hopkins Bloomberg School of Public Health, I undertook an analysis of what Maryland was doing and what it could be doing.

Maryland’s various levels of government do not currently coordinate purchasing for health insurance. If they did, our analysis indicates that the average per employee cost decrease would be over $2,100 per year, amounting to tens of millions of dollars saved per year overall. These savings could be applied to reducing overall expenses as well as to provide improved coverage and lower co-pays and deductibles for employees.

Was there a legislative barrier that was holding back such a coordinated approach? Actually, there is not. In fact, Maryland law in Section 2-513 allows pooled insurance purchasing, and Section 2-512 even allows Maryland’s non-profits (also stretched financially) to join in.

The bottom line is that our current approach of having so many governmental entities obtaining health insurance independently all at taxpayer expense makes no sense. So, what’s the hold up? The problem appears to be that our various levels of government have not engaged in comprehensive and serious discussion about how to get this done. I spoke with representatives from each branch of government, and each expressed interest, some even cautious support, but none have formally initiated the effort.

The biggest barrier may be “turf” issues. People get comfortable doing things a certain way, and introducing change is hard. Clearly this would be a complicated task that would need to address many different aspects including timing, benefit packages and the interests of the employees. Getting this done would take time and effort. It might be best to start with a phased-in approach, for example, coordinating pharmacy benefits.

But let’s imagine that somehow this is accomplished in the next few years. Government employees would be getting better insurance coverage for less cost. Innovations, not available with small groups, would become possible. Maryland’s non-profits, who provide so much service to our state, could piggy-back into the program, thereby directing their savings to their causes. Perhaps even businesses (who also face rising health insurance costs) could choose to join the state pool if it made financial sense for them to do so.

Experts predict that health insurance costs will continue to rise. That being the case, it’s imperative that those who have the fiduciary responsibility for these issues take a long-term view. I plan to introduce legislation this session to jump-start this process. There will be controversy, and it’s a daunting task, but the first key steps should be started now.

Dan K. Morhaim is a physician and Democrat representing Baltimore County in the Maryland House of Delegates. His email is dan.morhaim@house.state.md.us. Rachel Hartsell, Jessica Friedman, Sarah LaFave, Andrea Wallach and Waruguru Wanjau — all graduate students from the Johns Hopkins Bloomberg School of Public Health — contributed to this op-ed.

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