February 22, 2007
Pay or play

First mentioned in his State of the City address, Mayor White has unveiled the outline of his pay or play proposal for contractors that do business with the city.

In an effort to reduce the estimated 1.2 million county residents without health insurance, the city is preparing to set an example by requiring that its contractors provide employees with health benefits or pay a fee that would help defray the costs of medical care for the uninsured.

The details of the "Pay or Play" program aren't all in place, but Mayor Bill White already has touted the plan.

He suggests that some employers aren't pulling their share of the health care load.

"Instead of shifting your health benefit costs onto your fellow citizens who pay taxes and the hospital system," White said, "we want you to contribute to this fund if you do not have health insurance for your full-time employees."

The proposal, scheduled to go before a City Council committee today, is one example of how local governments are working to deal with the uninsured, who are overburdening emergency rooms and local budgets across the country.

I look forward to hearing the details. This makes a lot of sense to me.

As envisioned now, the city program would apply to contractors with projects over a certain amount, likely $100,000. Such contractors who don't provide employee health insurance would pay the city $1 for each hour an employee worked on the city project. The money would be turned over to the Harris County Hospital District or another entity that serves uninsured patients.

The rule likely would apply only to general contractors, not subcontractors -- about 450 contracts. That's about 45 percent of city contracts and 80 percent of contract dollars.

About three-quarters of those contractors already provide their employees with health insurance, according to city surveys. Those who don't have an unfair advantage, White said, because without that financial burden they can make lower contract bids.

"However small and incremental this is, if the mayor can pull it off, it's great," said Charles Begley, a University of Texas professor who follows public health policy.

But some contractors say if the rule is adopted, they'll charge more for city work to make up the difference.

"I'd be more than willing to do what the city wanted as long as I could raise my rates," said Michael Fisco, owner of AAA Flexible Pipe Cleaning, which has a multimillion-dollar contract with the city.

You go right ahead and do that. That will give a competitor the opportunity to undercut you. And even if that doesn't happen, if the city winds up spending less money on uninsured sick people than it spends on your higher rates, it's still a win. Color me unimpressed by the scare tactic.

The city is encouraging other large entities to follow suit on this, and so far both Harris County and the Memorial Hermann Healthcare System are considering it. On top of that, there's this as well:

Besides its "Pay or Play" initiative, the city is working with Harris County to create a further-reaching program that would provide an affordable health insurance option for working residents who make less than $50,000 a year.

Called "three-share," the program would create a pooled monthly premium of $150 per participant, split evenly among the employee, employer and a funding source to subsidize the remaining third.

The problem lies in the subsidy. Officials asked the federal government last year for $80 million to fund the project for three years, but the request was denied. They're now looking into other ways to get the money, possibly from the state.

Smaller cities that have used similar models have turned to philanthropists or paid for the program using funding from Medicaid, the federal health care program for the poor.

Houston officials are considering lowering their sights to a potential 23,000 participants from 100,000. That would require an annual subsidy of about $15 million once the program is in full swing instead of $60 million.

"What we're doing now is trying to scale back the size of the three-share -- because clearly we can't come up with $80 million without federal intervention -- and try to find the point where it is large enough to make a dent and is still worth doing," said Elena Marks, White's health policy director.

Yes, well, unfortunately the state has other uses in mind for its money. But this is still a great idea, one that perhaps can be brought up again in Congress down the line. Kudos to all for pursuing it.

Posted by Charles Kuffner on February 22, 2007 to Local politics