White Paper on Health Care Reform

April 2009

Real Incentives + Real Rewards

=
Real Solutions & Real Reform
This is a responsible “Plan” to achieve affordable
universal health insurance coverage while preserving free
markets, capitalism, and most importantly, the greatest
health care system in the world.
About The Authors

This proposed solution is brought to you courtesy of the Conservative Healthcare

Industry Professionals Society or “CHIPS” group. We are an organization of
conservative professionals who believe solutions for improving health, reforming our
health care system, and providing access to affordable health insurance should be based
upon conservative principles and values.

Our mission is to formulate, support, and promote conservative health initiatives based
upon the principles of free market enterprise, limited government, individual freedom of
choice, personal responsibility, and personal accountability. We are committed to
fighting for an America where freedom, opportunity, prosperity, and civil society
flourish.

All inquiries should be directed to www.politicalCHIPS.org or follow us on Twitter® as

we travel the country to promote “Real Solutions & Real Reform”

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Introduction
There is a “table” in
Washington D.C.
whereby a collection of
brilliant minds, partisan
politicians, insurance
professionals, doctors,
consumers, and hundreds of special interest groups will attempt to solve the rising cost of
health care while providing affordable health insurance to every American. This is a
very noble quest and the achievement of this initiative would greatly benefit every
American and the country as a whole.

The roadmap or blueprint for achieving this initiative MUST be modeled after concepts
and programs that work versus ones that have failed miserably over time. We won’t
spend much time in this paper dwelling over the financial failures or the billion dollar
budget shortfalls of the Medicare and Medicaid programs. Rather, we will focus on the
only concept and only program that has actually worked to reduce health care costs in
recent history. The concept that we are referring to is the Qualified High Deductible
Health Plan and the program we are referring to is the Health Savings Account or HSA.
Our proposal for reform has 5 fundamental core principals:

1. The health care system in the United States of America is the greatest system in the
world as it pertains to quality of care and access to care. In the event that you or a
loved one experienced a catastrophic event, is there anywhere else in the world you
would rather be treated?

2. The purpose of health insurance is to protect oneself from financial ruin subsequent to
experiencing a large unforeseen catastrophic event or illness.

3. We can all agree that reform measures are necessary in the areas of health insurance
and healthcare. However, the greatest prevailing "crisis" that is most responsible for
escalating health care costs and health insurance premiums is the "obesity" epidemic
that is sweeping through our nation! A recent study posted at www.cdc.gov
estimated that 34% of American adults possessed a Body Mass Index or BMI of 30 or
greater. Our white paper is unique in that we focus on this "crisis" and provide a plan
of action that provides real rewards for the millions of Americans currently leading
healthy lifestyles. On the contrary, our action plan also provides real incentives for
millions of Americans to engage in a healthier lifestyle and encourages them to
achieve a healthy status without restricting or comprising their individual liberty or
freedom to choose.

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4. Health Care Services are the only commodity in the country that consumers actively
purchase without knowing or caring in advance how much they cost. Consumer
Driven Health care (CDH), Qualified High Deductible Health Plans (QHDHP’s), and
Health Savings Accounts (HSA’s) are the foundation and solution to solving a
majority of this problem. However, in order to successfully solve this problem, we
need complete Pricing Transparency on this commodity!

5. A majority of the industry leaders that are attempting to resolve these issues through
various reform measures lack credibility. They do not lead by example nor do they
demand that individuals with authority to make decisions take the lead. The authors
of this plan have credibility. The authors are covered under Qualified High
Deductible Health Plans with underlying HSAs, they’ve completed routine annual
physicals each of the past 4 years, they lead healthy lifestyles, and they have achieved
a healthy weight as a result.

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A True Story
Alex believes that health insurance is a mechanism to protect oneself from financial ruin
subsequent to experiencing large unforeseen catastrophic events. So, Alex purchases a
QHDHP to cover himself and his family and opens an HSA in February 2004.

His professional health insurance agent promotes QHDHP’s and HSA’s to friends and
clients as a valid solution to their health care dilemmas. The combination of the
insurance plan and the financial savings mechanism (HSA) will always provide the
greatest return on investment for 2 of the 3 categories of claimants. The 1st category is
the claimant who has little or low claim activity during the year. The 2nd category is the
claimant who experiences a large unforeseen catastrophic event or experiences a plethora
of claims throughout the year, thus maximizing their full exposure under the insurance
plan. These 2 categories of folks experience a win win situation as compared to any
other traditional plan available in the entire marketplace. This is a statement of fact.

The 3rd category of claimant is everyone that does not fall in either of the 2 categories
referred to above. Each of these claimants need to be isolated and analyzed individually
to determine whether they would be better off, worse off, or indifferent subsequent to
being covered under a QHDHP and underlying HSA.

In 2008, Alex is covered under a $5,000 individual deductible as well as each of his
family members. His balance in his health savings account after 4 years of funding is in
the realm of $9,600 dollars. In October 2008, subsequent to rolling down a mountain on
an ATV, Alex experiences a large unforeseen claim in excess of $20,000. Thank
goodness he was the beneficiary of the greatest health care system in the world! What
was his number one complaint? He spent 4 days in the hospital and nobody could or
would disclose to him the cost of any procedure! Yes, he had a $5,000 deductible and
he knew his charges would exceed the deductible. However, had he known how much
they were charging for each of these services, he would have demanded that he be
released on day number 2 versus day number 4. That is an illustration of Consumer
Driven Health Care with its current limitations and complete lack of pricing transparency.

While in the hospital for 4 days, Alex the concerned consumer crosses paths with Mike
“the Medicaid” recipient. Mike was quite an interesting fellow. He was a type I
diabetic, alcoholic, and looked like he may have been approaching a BMI of 35.
Apparently, Mike had gone on a drinking binge which resulted in a diabetic coma. Mike
spent 8 days in the ICU prior to being released to a semi-private room where his
roommate was Alex. Mike was discharged on day 3 of Alex’s 4 day stay. During the
process of being discharged, Alex noticed that Mike, his pregnant spouse, and 4 children
were extremely irritated at the doctor for the amount of time it was taking to release him
from the hospital. The holdup was that a state sponsored medical provider needed to talk
to Mike about his “alcoholism” and its affects on his “diabetes”. While Mike

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impatiently waited for this representative to arrive, he continued to complain openly that
he was heading straight to a poker match that night and was going to drink and nobody
was going to stop him!

As Alex lay in his bed 4 feet away, his thought process was that Mike was simply a lost
soul and there was not much of anything society could do to right his ship. As Alex went
about his business trying to ignore the scene unfolding on the other side of the curtain, he
suddenly witnessed an extraordinary event that has changed his life forever!

The discharge planner from the hospital arrived to obtain Mikes signature and discuss his
responsibility for paying the miscellaneous charges that were not covered by Medicaid.
The total miscellaneous charges of $27 were for long distance telephone calls and
personal items the spouse asked for while Mike was in ICU such as pajamas, a
toothbrush, toothpaste, etc. Mike’s response was filled with profanity as he declared, “I
am not paying for that!”

Meanwhile, Alex the concerned consumer does the responsible thing in life and it costs
him $5,000 of his savings. On the other hand, Mike the “Medicaid recipient” is
irresponsible and is taking advantage of Alex, the State of Kansas, Alex’s children,
Alex’s unborn grandchildren, and every other American Taxpayer!

The Solution is NOT to bring Alex up to the standard of financial dependency and sense
of entitlement that Mike and 47 million other Americans enjoy (www.hhs.gov) but rather
to bring Mike and 47 million of his cohorts down to the level of financial planning and
accountability that Alex is responsible for!

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Action Plan – The Formula for Reform
We believe the current system does not have to be scrapped or overhauled in its entirety.
Rather, we believe the system needs to be tweaked in a way that the five fundamental
core principles mentioned earlier become the foundation for reform. The following is a
step-by-step action plan for preserving the free market system, saving trillions of dollars,
and putting our great country on the road to healthier America while providing
meaningful incentives and meaningful rewards to all Americans who achieve the desired
results.

Step #1 - The Establishment of a Qualified Universal Health Plan or QUHP

This is not a Federal Plan run by the Federal Government. Rather, it is a Federal
Guideline that sets the STANDARD for all other comprehensive major medical plans to
be compared to. The hi-lights of the QUHP are as follows:

 $5,000 individual deductible; 20% co-insurance up to $15,000 in charges for

a maximum calendar year exposure of $8,000 per person; No family
deductible or family out of pockets;
 No first dollar benefits other than a schedule of specific preventive procedures
payable at 100% up to a maximum of $1,000 per calendar year;
 Unlimited lifetime maximum;

Step #2 – The establishment of a Universal Pricing Schedule or UPS

The purpose of the UPS would be to itemize every single possible “health care service”
and publish the price of the service. This schedule may be as simple as 120% of
Medicare or a combination of methods. Regardless of how it is derived, it needs to be
established by the Federal Government. Once established, all private insurance
companies must scrap all network pricing contracts and re-price all of their private
insurance products based upon the UPS. They must also offer one plan commensurate
with the QUHP plan and any number of plans richer in benefits they choose to offer.

Step #3 - Federal guarantee issue & rating reform

These guidelines will supersede all existing state mandates, state reforms, and state rating
laws pertaining to health insurance. All insurance companies providing individual or
group health products must price one product commensurate with the QUHP. All legal
Americans whether applying individually or as members of a group (regardless of size)
will be the beneficiary of guarantee issue. You cannot be declined. You will however
be subject to underwriting whether you are an individual applying for a policy or a
member of a group of ANY size. All private insurance companies must file standard

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rates based upon preferred health characteristics. All private insurance companies will
be given the opportunity to medically underwrite the presented risk and may adjust their
premiums +/- 66.66% from index, (i.e. apply risk surcharges to their preferred rating of
up to 500%). Because multiple insurance companies have different pricing formulas
and different underwriting philosophies, this will provide fierce competition amongst
insurance companies to the benefit of the consumer. One could refer to the Small Group
Reform rating laws in the state of Arizona to see the large number of competitive carriers
in the state.

This Federal Guarantee Issue & Rating Reform would only apply to ANY qualified high
deductible health plan and the QUHP.

Step #4 – Federal mandate requiring all legal Americans to be insured

It is irresponsible to be uninsured and should be viewed as an illegal act subject to major

fines and punishment. All legal Americans MUST be covered under a comprehensive
Major Medical Policy that is commensurate with the QUHP or one that is certified as
being richer in benefits. All Americans will have the freedom to purchase any plan
from any insurance company subject to evaluating underwritten prices for varying levels
of benefits. If the health characteristics of any American in conjunction with income
restrictions make the purchase of an insurance policy “unaffordable”, they may qualify
for federal premium assistance as stated in Step #6.

Step #5 – Federal mandate requiring all insurance related products to be distributed

by certified / licensed independent health insurance agents

In an effort to protect all Americans from undue influence or misrepresentation from

insurance companies WITHOUT the creation of yet another federal agency, it is in the
best interest of Americans that all health insurance products be distributed by
independent professional agents. Each licensed agent will need to be certified by passing
appropriate licensing exams and obtaining appropriate Continuing Education (CE)
credits. However, all commissions, bonuses, etc. paid to independent professional
agents must be disclosed to the consumer at the time of sale. No direct selling of
insurance products by the insurance company or the Federal Government will be
permitted.

Step #6 – Federal Premium Assistance Program

Any American that is unable to afford a major medical policy that is commensurate with
the QUHP based upon a combination of health characteristics and income, may apply for
premium assistance from the Federal Government with the following caveats:

 The medical plan and schedule of benefits is the QUHP plan;

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  The Federal Premium Assistance Program supersedes all State Medicaid
programs including SCHIP/CHIP;

All recipients of premium assistance will undergo medical underwriting and will be
subject to medical underwriting and the Federal Guarantee Issue & Rating Reform
requirements stated in Step #3. However, due to the schedule of benefits of the QUHP, a
maximum rated premium should still be fairly manageable for most Americans and not
cost the Federal Government anything close to what it is spending today.

Step #7 – Establishment of the Healthy America Program

All Americans will retain their freedoms to eat what they want and live any lifestyle they
choose to live including our good friend “Mike”. However, all Americans will be
incentivized to become physically fit and rewarded for achievement. To qualify for the
healthy reward, each American must meet the following requirements:

 Be covered under a major medical policy that is commensurate with the QUHP
plan or a plan that is richer in benefits but still considered HSA Qualified;
 Have opened a Health Savings Account;
 Obtain a Healthy America Certificate from an MD in the preceding calendar year
subsequent to achieving the following tasks:

a. Completed a routine physical exam;

b. Documented a healthy weight and BMI between 16-26;
c. Routine blood work showing no signs of nicotine or any illegal substance;

Obviously, there will need to be some Federal Guidelines for physicians and there will be
numerous exceptions to the rules for those Americans possessing various disabilities,
deformities, etc. (refer to the Americans with Disabilities Act Amendments Act of 2008).
For all Americans that qualify, the Healthy America REWARD will be as follows:

 A federal tax-free amount of $2,500 per qualified family member deposited

directly into their Health Savings Account or HSA. This federal contribution is
independent of any other IRS regulated HSA contribution limit.

To get this program jump started, all Americans will receive a Healthy America
REWARD in year one for simply being covered under a QHDHP and having a health
savings account established. However, in year 2 and subsequent years, they must
receive a healthy America certificate from an MD in order to qualify for the $2500 tax
credit and subsequent deposit. In order to curtail abuse and fraud, the federal
government must require all HSA administrators to substantiate claim withdrawals from
the accounts similar to the way monies are withdrawn from FSA’s.

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Conclusion
This is an intellectual solution for achieving affordable universal health insurance
coverage for all Americans without compromising the private free market distribution of
health insurance related products. Unlike many other proposals set forth by politicians
or self-serving groups, this “Plan” has no political party agenda or the specific interests
of any particular group (ie Democrats, Republicans, Hospitals, Doctors, Insurance
Companies, Insurance Professionals, etc.) at the core of the proposal. The best interest
of the American taxpayer and quest for a healthy America is at the core of this proposal.

This “Plan” achieves universal coverage thus eliminating the segment of the population
labeled “uninsured”;

This “Plan” saves trillions of premium dollars currently wasted by the American taxpayer
used to fund the richest plan of benefits in the world to those Americans who are
currently benefiting under the Medicaid “entitlement” program;

This “Plan” reinforces Consumer Driven Health care which is the only conceptual health
care reform solution that has actually worked in the past 50 years and will explode
exponentially subsequent to the implementation of the Uniform Pricing Schedule or UPS;

This “Plan” provides meaningful incentives for Americans to passionately begin living
healthier lifestyles and meaningful rewards to the millions of Americans who achieve the
desired results under the Healthy America program;

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