Margaret Murray, MPA

Margaret Murray is the CEO of the Association for Community Affiliated Plans, based in Washington, D.C.

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As President Trump intensifies his battle with German Chancellor Angela Merkel over trade and NATO policies, he should pause to consider the lessons from another German Chancellor-Otto von Bismarck-who also took on the entrenched government of the time to remake it in his own image. In particular, the Iron Chancellor was the architect in 1883 of many of the main elements of the German healthcare system today. As President Trump continues his undermining of the ACA through the promotion of short-term, limited-duration plans, he would be well-served to study the German health system. American policy makers should look at the fundamental characteristics of the German healthcare system-such as risk adjustment, an individual mandate, comprehensive set of required benefits, private providers and hospitals, and a robust competitive insurance marketplace-as they work to improve the current insurance system in the U.S.


Bismarck built the world’s first national social insurance system on a foundation of communal solidarity to respond to working-class demands for higher wages and expanded rights. The current German system, in place for nearly 135 years, remains grounded in the fundamental principles of solidarity and self-governance that Bismarck developed which has led to a stable business climate for the insurance industry and providers. The German health insurance industry is a competitive market-oriented system with significant governmental oversight to ensure a fair and competitive market. All residents of Germany are required to have health insurance. Nine in 10 receive their insurance through statutory insurance companies, known as Sickness Funds, purchased through their workplace. Employers pay 7.3% of the employee’s wages to the Sickness Fund of the employee’s choice for individual and family coverage. The employee pays a similar amount to the Sickness Fund plus an additional varying amount of around 1% of income, which fosters price-based competition among the Funds.

All 110 Sickness Funds are required to provide a minimum benefit package that includes hospitalization, physician care, pharmaceuticals, maternity care, and mental health coverage similar to the Essential Health Benefits that are required to be offered in the marketplaces under the ACA. Sickness Funds can provide additional benefits such as gym memberships and travel immunizations, similar to Medicare Advantage. The short-term, limited-duration plans proposed by the Trump Administration will not be subject to the Essential Health Benefits requirement, making them certainly cheaper but ultimately not providing the coverage that people will need should they become sick or injured.

German outcomes are favorable compared to the U.S. on cost, access, and quality while German utilization is typically higher than in the U.S. 

 Germany spends only 11.3% of GDP on healthcare compared to 17.2% in the U.S. A 

 analysis of 10 Western countries ranked Germany second in people’s access to care while the US ranked last. Germany’s infant mortality rate was 3.2 deaths per 1,000 live births-almost half the U.S. rate of 6.0. Even though its overall percentage of GDP devoted to healthcare is low compared to the U.S., Germany has 

above-average utilization for hospital discharges, consultations, hospital bed days and all-cause readmissions compared to the U.S.

 as well as to eight other high-income countries.

The German system rests on the concept of social solidarity. Bismarck realized that anyone at any time, regardless of current needs, could become part of a family with a profound need for healthcare. Thus, the system both mandates insurance coverage for all and sets the statutory premiums based on income, capped at the higher end of the income spectrum. The German system of solidarity ensures that the young pay for the old, the healthy for the ill, small families for larger families and those with higher incomes pay for those with lower incomes. The repeal of the individual mandate in the U.S. undermines this fundamental insurance concept that non-users today subsidize users. Over time non-users become users who are, in turn, subsidized themselves.

President Trump and his advisors would be well-served to learn from and follow in Bismarck’s footsteps to shore up the individual insurance market, which may be headed for a meltdown in the next few years thanks to the demise of the individual mandate and the resurrection of short-term, limited-duration plans that could bifurcate the market between the sick and healthy. Like Bismarck in 1883, the U.S. needs to create a stable insurance market to ensure the stability of its workforce and families.

Meg Murray, MPA, is the CEO of the Association for Community Affiliated Plans and also serves as an editorial advisor for 

. She held a Federal Chancellor Fellowship through the Alexander von Humboldt Foundation in 1993 and again in the summer of 2018. 

Articles

As President Trump intensifies his battle with German Chancellor Angela Merkel over trade and NATO policies, he should pause to consider the lessons from another German Chancellor-Otto von Bismarck.

Opinion: The Best Lesson We Can Learn from the German Healthcare System

	We learned two things about health insurance during the debate over health reform prior to the Affordable Care Act. First, not enough people had coverage. Second, some who thought they were covered weren’t covered adequately. Had Twitter been as popular back then, many of these problematic plans might have been called “FAKE INSURANCE” in all caps.

	Sadly, the Trump Administration has proposed regulations to expand substandard insurance plans under the guise of consumer choice and lower costs-inviting back many of the problems that plagued the individual market before the ACA.

	The repeal of the individual mandate penalty as part of the December 2017 tax cut legislation grants permission to opt out of purchasing health insurance without penalty. Some people will opt out. Others will migrate to “non-compliant” plans that are less expensive but released from the ACA’s benefit and coverage requirements-such as short-term limited duration insurance (STLDI) plans. 

	STLDI plans are designed to fill temporary coverage gaps. But as a stand-in for full-time health insurance plans, STLDI plans are “Fake Insurance.” You have a policy and a lower premium, but your coverage is far less meaningful. As The Commonwealth Fund notes, STLDI plans can discriminate on the basis of pre-existing conditions and can decline to provide essential health benefits such as prescription drug or substance abuse coverage.

	STLDI plans typically shift costs to consumers: they feature very high deductibles, exceeding $7,000 to $20,000 for just three months of coverage. ACA-compliant plans, in contrast, cannot exceed $7,350 in out-of-pocket costs for 2018. STLDI plans also limit annual and lifetime coverage; many cap coverage at $1 million.  ACA-compliant plans have no such limits.

	The Trump Administration’s proposed regulation allows these plans to provide up to 364 days of coverage-and is considering allowing more. The regulation notes that STLDI plans are exempt from certain requirements because they are “not individual health insurance coverage.” The irony is thick.

	The difference in benefits and premiums between STLDI plans and those that comply with ACA regulations would effectively create separate risk pools. As the American Academy of Actuaries notes, “Noncompliant plans would likely be structured to be attractive to low-cost enrollees, through fewer required benefits, higher cost-sharing, and premiums that vary by health status.” In other words, STLDI plans would siphon off healthier enrollees from the ACA-compliant risk pool. This would mean that people in ACA-compliant plans would be generally less healthy, sending those premiums higher. Since STLDI plans can exclude individuals that get sick-even while they are still undergoing treatment-over time the difference between the two risk pools would create a feedback loop of higher premiums in the ACA-compliant market, causing greater adverse selection, which, in turn, leads to still-higher premiums.

	Health reform aimed to increase coverage, improve the affordability of comprehensive coverage, and improve the quality of care. The ACA did these things – the ranks of the uninsured dropped, health plans with better features became the industry standard, and cost-sharing reductions and tax credits made coverage affordable for people with low incomes. Pushing people out of ACA-compliant plans and into STLDI achieves the exact opposite. Fewer will be insured, “fake insurance” plans with little or no meaningful coverage will proliferate, and ACA-compliant premiums will increase as the Marketplace is destabilized. For these reasons, we will continue to oppose regulatory attempts to undermine quality health insurance for every American.

Sadly, President Trump has issued an executive order to expand these plans under the guise of consumer choice and lower costs. 

Author | Margaret Murray, MPA

Articles

Opinion: The Best Lesson We Can Learn from the German Healthcare System

Opinion: Trump’s Insurance Changes Will Undermine Coverage