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A Functional Compromise (Gwen Moritz Editor's Note)

As promised last week, the subject of this column will be a concept for universal health care coverage that neither depends on the patchwork of public and private plans that currently cover most Americans most of the time nor a “Medicare for All” approach that puts private insurers out of business. It’s an idea called universal catastrophic coverage, it’s been kicked around for decades, and it’s the kind of thing that could have bipartisan appeal if given a chance.

Here’s the concept, as explained in a white paper issued by the traditionally libertarian Niskanen Center in June:

“The objective of UCC is to relieve the threat of financially ruinous medical bills for the very poor and very sick while requiring those who can to pay an affordable share of the cost of their own non-catastrophic care.”

How? Well, UCC would also enlist both public and private insurance, but not in a patchwork. Instead, the government would provide every American with a layer of coverage for the kind of financially ruinous health care expenses that are relatively rare for most of us. This would be mandatory and funded by taxpayers. (While the idea of letting private insurers offer these very specific catastrophic plans crops up, I think a single government payer is more likely and easier to grasp conceptually.)

For very low-income households — think poverty level or slightly above, as with Medicaid and Medicaid expansion — this UCC policy would provide first-dollar coverage. Households with income above that threshold would pay a sliding deductible. The exact formula would be a political decision, but Ed Dolan, senior fellow at the Niskanen Center, suggested a deductible of 10% applied to income above the federal poverty level, which is about $25,000 for a family of four.

“A family of four with total income of $50,000 would then have eligible income of $25,000 and a deductible of $2,500,” Dolan explained, “A family with total income of $100,000 … would have a deductible of $7,500. A family with total income of $1 million would have a deductible of $97,500, and so on.”

That would be a hefty deductible for some families — certainly enough “skin in the game” to encourage smart consumer behavior but possibly more risk than a family would want to take year after year. That’s where the second layer would come in: private gap insurance. Consumers who want to pay an additional premium in order to reduce their deductible could buy policies from private insurers. I can imagine a vast, responsive and competitive market for those, unburdened by the need to offer cookie-cutter group plans. Since no consumer (or carrier) would risk catastrophic expenses, thanks to the UCC blanket, these gap policies could be more like adjustable “name your price” auto insurance, tailored to the individual’s needs and financial decisions.

Other advantages of UCC: No employer would have to make coverage decisions for all employees, and no employee would be shackled to an employer for fear of not having coverage for catastrophic medical expenses. As a longtime member of my company’s benefits committee, I can’t imagine that many businesses really relish having this responsibility, but those that do could offer gap insurance as an attractive employee benefit.


So can we afford UCC? Dolan concluded that dollars currently spent on health care would be adequate, and Jodi L. Liu of the Rand Corp. came to a similar conclusion. But, assuming we all agree that health care in the U.S. costs too much in the first place, Dolan also included suggestions for lowering costs:

► Increasing the supply of providers by adding capacity to medical schools, relying more on nurse practitioners and physician assistants and attracting more foreign-trained doctors;

► Incentives for providers to control costs, including outcome-based payments;

► Reform of patent laws that contribute to the high cost of pharmaceuticals; and

► Savings on administrative expenses by streamlining the payment system. “Even without going all the way to a single-payer system, a move to UCC could greatly reduce this problem,” Dolan wrote.


I’ve long had faith in the idea that higher deductibles incentivize smarter consumer behavior, so part of Ed Dolan’s policy paper on UCC came as a surprise to me: The National Bureau of Economic Research, a private nonprofit think tank in Cambridge, Massachusetts, found in 2015 “no evidence of consumers learning to price shop after two years in high-deductible coverage.”

Instead, the NBER concluded, consumers were more likely to just reduce the amount of health care services they accessed, including preventive care and other “appropriate care.”


Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.

Companies Can Act Responsibly and Innovate Too (Rodney Ferguson Commentary)

Walmart CEO Doug McMillon participates in a Business Roundtable forum.

It’s a pleasure to see an innovative Arkansan like Walmart’s Doug McMillon chosen to lead the Business Roundtable. He is taking over at an important time for the group.

The Business Roundtable’s recent declaration that businesses have responsibilities to protect the interests of all stakeholders, not just their shareholders, has elicited a wide range of responses that follow predictable partisan patterns.

The right maintains that protecting workers and the environment exemplifies the leftward creep of the global elite who manage multinational corporations. The left argues that corporations can’t be trusted, and the announcement was just a PR exercise.

But one argument has spread across the spectrum — the notion that innovation will be thwarted in the name of protecting workers made obsolete as companies disrupt the status quo.

This is the exact opposite of what should happen. Fighting policies that protect workers from disruption should unite the left, right and center — and should bring into clear focus the point at which corporations should rightly cede responsibility for employee protections to government.

First, the idea among progressives that corporations must protect workers from the sturm und drang of market forces seriously imperils one of the most significant forces at play in the global economy — the slow, inexorable and hugely beneficial shift away from carbon-intensive energy to cleaner sustainable energy sources. As predicted for years — but with greater acceleration than many energy market analysts predicted — the world is moving away from carbon-emitting energy production at a fast pace.

According to the national nonpartisan business group E2 (Environmental Entrepreneurs), clean energy jobs now outnumber fossil fuel jobs nearly 3 to 1. There were more than 3.2 million jobs in solar, hydro, wind and allied industries in 2018, with the promise of millions more to come. There are short-term losers in this transition — coal miners and oil-field workers, to name a few — but this transition is not only economically beneficial, it is environmentally necessary as we move the global economic engine to sustainable energy sources.

Second, conservatives who fear that CEOs are joining left-leaning globalists who want to replace capitalism with a gauzy, anti-growth, socialist agenda that renders shareholders impotent in boardroom politics are missing a central piece of logic. What prompted many of the 188 Business Roundtable members to approve the new model is that shareholders themselves are pushing corporations to greater environmental protections and worker rights.

While European companies are ahead of us in this area, American shareholders proposed 464 environmental and social resolutions in 2018 compared with 407 in 2010, according to the Sustainable Investments Institute. And the average percentage of shares voting for those resolutions rose to almost 26%, up from about 19% in 2010.

This trend is not going away. More and more corporate boards are adding sustainability officers, environmental stewards and consumer protection activists. And these pressures aren’t coming from a small activist elite but are increasingly driven by those who think that higher food safety standards or fewer children working in commodity supply chains are not secondary to profits, but equally — or perhaps even more — important.

Meanwhile, those at the center believe that a balance of profits and responsible behavior is possible. And one way ahead, to be led from a moderate political middle, is to reposition government as the arbiter of not necessarily how companies achieve these environmental and consumer protections, but the required floor every company should be responsible for reaching.

While many CEOs see increasing support for expanding the stakeholder landscape, they are still under great pressure to compete with companies that, because they are privately held or have a very narrow shareholder base, can ignore these concerns. Government should punish the free riders by enacting stronger child labor restrictions, restoring methane restrictions in energy production and re-engaging on international environmental conventions like the Paris accords. In doing so, we level the playing field and prevent companies from harming workers, the environment and the American consumer.

Don’t buy the line coming from both left and right that the Business Roundtable threw a worthless PR lifeline to U.S. multinationals looking for cover from the anti-corporate sentiment surging through both ends of the political spectrum. I’m not yet cynical enough to believe that most corporate CEOs believe they operate in a hermetically sealed world that shields them from the actions of their own, and their colleagues’, companies. Trust but verify, yes. That’s the responsibility of government. But take seriously the recent declaration to expand the beneficiaries of our capitalist economy. And if you own shares in a public company, encourage corporate leaders to follow through — and reward them and their companies for doing so.




Rodney Ferguson is the president and CEO of Winrock International, an Arkansas nonprofit that works in the United States and more than 40 countries to empower the disadvantaged, increase economic opportunity and sustain natural resources. He is a member of the Export-Import Bank of the United States (EXIM) 2019 Advisory Committee and the Milken Institute Center for Public Health Advisory.

Matters of Life and Death (Gwen Moritz Editor's Note)

Someday our federal lawmakers will have the luxury of turning their attention away from impeachment and back to matters of life and death. One of those is health insurance.

Currently, we rely on a patchwork of public (mainly Medicaid and Medicare) and private (individual and group) insurance, and the holes in it are starting to grow again. According to Census Bureau data released in September, the share of Americans who had no health insurance at all in 2018 grew to 8.5% from 7.9% in 2017. It was the first year-over-year increase since the Great Recession hit in 2008-09, although we’ve retained much of the gain made since the Affordable Care Act took full effect in 2014. (In 2013, despite four years of improvement, 13.3% of Americans were still uninsured.)

Several factors seem to have contributed to the uptick, and it’s fair to say that most of those factors are political. The number of Americans with private insurance was statistically unchanged last year, as one would expect when the unemployment rate is steady or even falling. (That could change this year since Congress did away with the “individual mandate” that imposed a tax penalty for not having health insurance.)

The number covered by Medicare grew, as one would expect when 10,000 baby boomers are turning 65 every day. But the number covered by Medicaid declined, which would be a positive if they were gaining coverage elsewhere — and that doesn’t seem to be the case.

Of the additional 2 million Americans without insurance last year, about a third are immigrants. Immigrants here illegally are not eligible for Medicaid in the first place, but the impact on eligible noncitizens “may reflect the administration’s more aggressive stance on immigration,” Joseph Antos, a health economist at the American Enterprise Institute, told Kaiser Health News.

We have traditionally covered children pretty well, but the uninsured rate in the population under 19 years old grew by 12% last year alone (from 4.9% to 5.5%).

States that did not expand Medicaid to households surviving just above the poverty level are where the holes in the patchwork become most obvious. In the tight labor market, more people find jobs and lose eligibility for traditional Medicaid — but they still can’t afford private insurance.

(Last week the Kaiser Family Foundation released the results of its annual survey of employer-provided health insurance. For the first time this year, the average premium for an employer-sponsored family policy topped $20,000, and the average cost to the employee is $6,015.)

The ACA was designed to cover low-income workers with expanded Medicaid, but a U.S. Supreme Court ruling made that optional. Not coincidentally, the highest uninsured rates in 2018 were in states where elected lawmakers turned down federal money to cover their working poor: Texas (17.7%), Oklahoma (14.2%), Georgia (13.7%) and Florida (13%).

A federal judge in Texas ruled the ACA unconstitutional last December, but it has been left in effect while his ruling is appealed. Arkansas Attorney General Leslie Rutledge is one of the plaintiffs who won that ruling, but legal observers are split on whether her side will continue to prevail. Whether or not she eventually has the satisfaction of having a couple of hundred thousand working Arkansans lose their insurance, Congress will eventually get around to making changes.

Arkansas’ own U.S. Rep. Bruce Westerman, R-Hot Springs, has introduced an idea for health insurance that he calls the Fair Care Act of 2019. It gets rid of the ACA’s employer mandate along with the individual mandate, and eliminates some of the taxes — especially on high income households — that were used to pay for the ACA. It would also allow carriers to charge more for older and high-risk customers — basically the kind of fewer-taxes, less-regulation, market-based approach one would expect from the Republican side of the aisle.

Democrats, meanwhile, are leaning toward more government-provided health insurance, whether that’s allowing younger Americans to opt into Medicare or expanding Medicare to be universal.

I remain intrigued by the concept of Universal Catastrophic Coverage, which will be the topic of next week’s column.


Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.

A Movement to Save the Future (Commentary)

We constantly see research, headlines and experts discussing increasing economic inequality and income volatility in the United States, but many don’t realize these shifts are resulting in fewer people saving, especially for retirement. About 40% of households cannot cover a $400 emergency without borrowing money or selling something. As far as retirement, one national investment company reported in April that the median account value for their customers age 65 and older was $58,035, which translates to just $3,000 in annual income over 20 years in retirement.

Simply put, we are in a national savings and retirement crisis.

Women are particularly vulnerable to having insufficient savings later in life: The combination of the wage gap and time spent out of the workforce for maternity or caring for children or aging parents means that women often have two-thirds the retirement savings of men. This, coupled with higher medical costs associated with living longer, means women are 80% more likely to face poverty by age 65, according to the National Institute on Retirement Security.

Action must be taken now to ensure long-term economic security for women. That is why organizations such as the Women’s Foundation of Arkansas, Southern Bancorp Community Partners, Southern Bancorp Bank and others are promoting Save10.

Save10 is a campaign to empower all women in Arkansas to save for life and retirement, with a specific call to action for women ages 18-30 to commit to save 10% of their income for retirement. By asking women to save 10%, the initiative offers a specific, easy-to-remember task that may feel achievable.

The campaign officially launches Oct. 10 — 10/10 — and already more than 4,500 women of all ages and income levels have signed on to Save10. The Save10 movement is encouraging women to take action on a personal level for a larger structural problem. Save10 aims to amplify the pressure for collective action by calling on our partners to not only educate their employees, but to also support policies and programs that facilitate savings and address the larger retirement crisis our country faces.

Save10 celebrates companies offering retirement plans and calls on companies that don’t have retirement plans to consider adopting them. Proposed legislation at the federal level should help make offering plans easier. The SECURE Act, which has passed the U.S. House and is expected to be taken up by the Senate in the fall, would create tax credits for small employers and relax restrictions on multiple-employer plans and annuities as part of retirement plans.

Additionally, studies in behavioral economics show that making saving easy and as automated as possible is effective in actually getting people to save. One best practice encouraged by financial planners and fund managers alike is auto-enrolling employees into retirement plans with a contribution of 6% (and higher) and auto-escalating contributions when employees receive raises, which makes saving easy and automatic.

Employers and community organizations can also provide leadership to help normalize the conversation about money and personal finances by providing meaningful financial education at their institutions and anchoring messages to the Save10 concept. With the many options and tools available, making decisions about savings — especially retirement savings — can be so confusing and overwhelming that people don’t make the attempt. Offering specific and clear guidance free of conflicts of interest will help people feel more confident about their financial decision-making and more likely to commit to action.

We all benefit in the long run when women are empowered to take control of their financial futures because when women succeed, Arkansas succeeds. Join the Save10 army and help create a widespread savings success story in Arkansas.

For more information or to join, contact Stephanie Matthews, Save10 campaign director, at Save10Campaign@Gmail.com.


Anna Beth Gorman is executive director of the Women’s Foundation of Arkansas.   

Karama Neal is president of Southern Bancorp Community Partners.

'A Relentless Drumbeat' (Gwen Moritz Editor's Note)

A few weeks back, I wrote an article about the demographic changes that are already putting pressure on enrollment at private colleges in Arkansas. A trend story is less about any individual school than about factors affecting them all to some degree, so I interviewed the presidents of just three: Lyon College at Batesville, University of the Ozarks at Clarksville and my alma mater, Harding University at Searcy.

As I talked with Joey King, Rich Dunsworth and Bruce McLarty, I started to see a parallel between their line of work and my own. News and higher education are mature industries, and both had a fairly standard business plan that pretty much took care of itself. In the good old days, executives could concentrate on the quality of the product, which would attract customers, who would pay for the enterprise. There were always executive decisions to be made — hiring, pricing, capital investments — but they didn’t face existential threats completely outside their control, and the pool of likely customers continued to grow.

Until it didn’t. Newspapers reached that point a couple of decades ago; colleges and universities are, in Dunsworth’s words, “looking at flat enrollment for the next four or five years and then something of a cliff.” Not only are Americans in general having fewer babies, but college-educated adults — the ones most likely to produce college-going children — are having the fewest babies.

The parallels aren’t perfect. News consumers can subscribe to multiple publications at the same time, and the cost to readers has increased but is still not prohibitive for most people. Students, on the other hand, rarely enroll in more than one college at a time, and the cost has become a genuine impediment.

I’m not here to debate whether higher education is worth the money. That’s like arguing whether a car is worth the money. There is no one right answer. If you need a car in order to make a living, then the right vehicle is worth some amount of money, even if you have to borrow the money and pay it back over time. Same for higher education.

But the cost of a college degree has inflated so much more than wages — and faster at public universities than at private. My article didn’t delve deeply into costs, but it is a factor that looms large in any discussion of higher education. Harding President McLarty described “a relentless drumbeat about the exorbitant debt that people are going into and questioning the return on investment.”

College was historically seen as a desirable thing for any young adult with the interest and ability. But now, McLarty told me, “We’re having to defend the value of getting a college education, and we’re having to defend the value of being a broadly read and educated person.”

Forty years ago, when I was a freshman at Harding, my middle-class parents could tighten their belts and pay my tuition, room and board out of their income and household savings. To do that today is almost impossible even for upper-middle-class families and even with kids in state-subsidized schools. My husband and I set money aside every month for 20 years in order for our two sons to go to Arkansas state schools debt-free, but most families can’t do that — and many families that could just don’t make it a priority.

As of March 31, Americans owed $1.5 trillion in student loans, according to the Federal Reserve Bank of New York, and 34% of Americans between the ages of 18 and 29 are burdened with some student debt. Millions of Americans have student loan debt without having finished a degree, a prospect that makes my stomach hurt. That kind of debt generally cannot be discharged even in bankruptcy.

Plus, even a college degree doesn’t guarantee adequate income to repay student loans. My colleague Mark Friedman spotted a heartbreaking case when he was prowling through bankruptcy filings. A Fayetteville woman — her name doesn’t matter — is trying to get relief from her student loans, which date back to the late 80s.

After she finished her master’s degree in 2000, she owed about $23,500 at an annual interest rate of 9%. Over the past 19 years, through a series of personal and professional setbacks that have left her with little current income, she has paid more than $38,000 on that debt and the balance is now $37,700.

I wish I knew the right answer. As H.L. Mencken recognized a century ago, “[T]here is always a well-known solution to every human problem — neat, plausible, and wrong.” Earlier this month, The Atlantic published an excerpt from a new book by Paul Tough, “The Years That Matter Most: How College Makes or Breaks Us.” The article systematically deconstructs a popular myth that welders are in such demand that they can earn $150,000. The average is a bit over $40,000.

Tough’s case study is a young father from North Carolina who couldn’t finish an associate’s degree in welding because he couldn’t pass the English requirement — and had $19,000 in student loans.


Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.