Tennessee Employers May Face 'Play or Pay'

Tennessee Employers May Face 'Play or Pay'
November 1, 2001


Ironically, the notion that businesses, commercial insurers, and health care providers should either participate (play) in TennCare or subsidize it (pay) could emerge as a divisive issue in the Volunteer State’s next legislative session, which convenes January 9, 2002.

At the close of this year’s legislative session, cash-strapped Tennessee lawmakers failed to balance the budget on the back of taxpayers. They were told by the state’s residents, in no uncertain terms, "no new taxes." (See “Tennessee Taxpayers Revolt,” Health Care News, August 2001.)

Governor Don Sundquist (D) recently offered his qualified support for "play or pay" in a press conference, stating, "Clearly, we have to figure out some way for insurance companies to either participate by covering people and not shifting them to TennCare, or they ought to share in the cost of people who are shifted." The governor said TennCare "ought not to be the only insurance policy in the state."

The trick, the governor said, is to use a carrot to draw more businesses, health care providers, and insurers to TennCare, rather than use a stick to force those entities to underwrite the program. "We don't want to mandate to them, but we need them to participate, and where they don't they ought to help us in other ways,' Sundquist said.

Deputy Finance Commissioner John Tighe said the state has not taken a firm position on pay or play at this point, "but we do embrace the idea that all who benefit from TennCare should also contribute to the program."


Follow the Money

Pay or play could gain momentum as the General Assembly seeks some kind of plan to overcome a projected $130 million revenue shortfall for the current fiscal year.

"It's an idea that's too logical to ignore," said Ron Harr, vice president of communications at BlueCross. "We need to find a way to give those who participate in TennCare an advantage in the marketplace, or get those who don't a slight disadvantage, perhaps a higher premium tax to cover the burden they're shifting," he said.

Pay or play has long been advocated by BlueCross BlueShield of Tennessee, an obvious beneficiary of forced participation in TennCare. The insurer is the largest managed care organization in TennCare, covering 575,000 of the program's 1.3 million enrollees.


Bumper Sticker Mentality

Dave Goetz, executive vice president of the Tennessee Association of Business, sees things differently. He told reporters, "The problem is, businesses are not (failing to offer) health care because they're bad people. They're not offering health care because they can't afford it."

He added, "The idea that somehow all you have to do is pass a law and you will force companies to do something is really nonsensical. What you will force them to do is leave Tennessee." Over 90 percent of the businesses in his organization provide health insurance for their workers.

To some observers, the effect pay or play legislation could have on small businesses appears obvious. State Senator David Fowler (R-Signal Mountain) told the Chattanooga Times and Free Press, the proposal could "stifle entrepreneurship" and introduce "bankrupting costs. The businesses that don't offer health care now are those that are the most marginal. If they could offer health care and attract better employees, they'd be doing it."

State Senate Speaker Pro Tem Bob Rochelle (D-Lebanon) is skeptical as well. "Pay or play is a nice bumper-sticker solution,” he said, "[and] nobody's been able to come up with the details of a plan."

"The goal is to try to have an impact on businesses that don't supply health insurance,” Rochelle explained. “Well, an inordinate number of those are small businesses. When you force additional expenses on them you have impacts, too. As for the larger companies that don't provide health insurance, we haven't had that many pointed out to us."


Gaming TennCare

Like Governor Sundquist, however, Senator Rochelle said the state should try to lure insurers into TennCare with incentives, rather than punish them for their lack of participation. "We have to find a way to make it financially advantageous for these companies to participate in TennCare. We'd rather have them participating as strong MCOs, than be forced to have to tax them," he said.

Representative Gene Caldwell (D), chair of the Joint TennCare Oversight Committee, said, "We have anecdotal evidence that a lot of small companies have dropped insurance so their employees can get on TennCare. We don't think that's right." He added, "The pay or play plan is the way the state might push business into participating. Whether it will pass or not, I don't know."

Last year, Caldwell noted, a pay or play bill "died quietly" in a legislative committee.

TennCare’s Tighe said the program "should be the last resort, not the first," for most Tennessee residents. "If you're a businessman who offers health insurance to your employees, you're contributing," Tighe said. "If you don't and you are benefiting because TennCare is covering your workers, you ought to be contributing."

The current Medicaid waiver for TennCare, a $5.3 billion program, will expire at the end of this year. The Bush administration has promised continued funding from the federal Centers for Medicare and Medicaid Services (formerly HCFA) should the state’s new waiver request not be ready by the deadline. The TennCare reform proposal includes a top-to-bottom restructuring of the program’s organization, administration, and governance. It also calls for a complete reworking of its benefits structure.

Senator Fowler summed up the reform plan this way: "What they're trying to do is put a different saddle on a dead horse and bring it back to life."