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HEALTH REFORM: Step Forward from Health Insurers
The health insurance industry, in what was widely seen as a step toward consensus on health reform, has said it would stop charging sick people higher rates as part of a comprehensive health reform plan that required everyone to have insurance.
The New York Times said the concessions on pricing in the individual market and acceptance of more regulation "came as a surprise to lawmakers" and could "make it easier for Congress to reach a consensus." The Times and others also pointed out, however, that the offer from America's Health Insurance Plans and Blue Cross Blue Shield Association were made in part to counter proposals that private insurers would have to compete against a new public insurance plan. (We're going to post separately about that shortly).
"Creating a new government-run plan would thwart the ability of the healthcare sector to implement meaningful delivery system reforms, exacerbate the cost shifting from public programs to consumers in the private market, and destabilize the employer-based system," AHIP CEO Karen Ignagni and BCBSA CEO Scott Serota wrote in a letter to the chairmen and ranking Republicans of the Senate HELP and Finance Committees.
But the changes the insurers offered are significant, particularly given the role the industry had in thwarting reform in the early 1990s. Insurers had previously argued that if they lowered costs for sicker people, rates would skyrocket for healthier ones, which would lead to more healthy people skipping insurance, which would then boost rates for the sicker ones even more.
There were caveats. The insurers still want to be able to vary prices based on age, geography and family size. And while they promised to change underwriting based on health status in the individual insurance market, they didn't extend that proposal to the small business market, although AHIP's Ignagni said her group would release a proposal addressing small business within a month.
"The offer here is to transition away from risk rating, which is one of the things that makes life hell for real people," New America's health policy director Len Nichols told the AP. "They have never in their history offered to give up risk rating."
Len also addressed aspects of insurance market reform in his testimony to the Senate HELP committee on Tuesday:
The role of policy is to set the rules so that self-interest is channeled to serve the social interest. We have not done this very well with regard to insurance regulation, either at the federal or state levels. We can do far better. ...
Our goal should be to create marketplaces wherein insurers who adopt socially responsible business models will thrive. The obsolete business model that has inflicted so much inefficiency and human suffering on so many is centered on aggressive underwriting and risk selection. Under this model, insurers compete to insure the best risks and avoid the sick at all costs. Americans will be much better served by rules that make it unprofitable and illegal to continue these strategies. ... We want to create markets wherein insurers compete based on price, clinical value added, and consumer satisfaction, rather than on avoiding the sick or strategically denying claims.
AHIP, BCBSA health reform concessions
AHIP and BCBSA are undoubtedly right that a public option would "destabilize" (read "quickly eliminate") private coverage, employer-based or otherwise. Yet in the face of a demand for change as strong as any in the last 70 years, and in the face of a threat to force change through a reconciliation approach, the insurers give as little as they possibly can. Guaranteed issue in the nongroup market in return for a mandate (necessarily accompanied by premium supports either in the form of refundable tax credits or vouchers) is not a big concession. Indeed, you can be sure that age rating in the individual market is not a line in the sand for them, either, but one suspects that it is the spread of such logic to employer markets - eliminating rating in the small group market based on age or size or health profiles, each allowable today to some extent in many states - that makes them hold back. That is, the insurers seek to assure that a reformed market looks as much like the existing market, to preserve the ability to segment risks by type of market as much as they can.
I don't think you avoid a public option by trying to hold as much territory as you can, by trying to preserve as much of the existing marketing and rating structure of private insurance as possible, by saying, in effect, "We're on the Hope and Change train, see: we're for [a wee little tiny bit of] reform, too. "
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