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Many Still Hope For Insurance Reform

With a major health overhaul in deep trouble, some lawmakers want a scaled-back approach that targets the indisputably unpopular insurance industry.

Include the popular ideas, they say, such as requiring insurers to accept people with medical problems and barring them from canceling policies or charging more for customers with health problems.

But that raises a question about a central plank of the overhaul legislation: a controversial requirement that nearly all Americans carry insurance. While many policy analysts insist such changes wouldn't be effective without that mandate, other experts and advocates across the political spectrum are contesting that premise.

A major concern is that without legally requiring most Americans to carry coverage, people would wait until they're ill to obtain it, raising costs for everyone. The health insurance industry's major trade group agreed to accept all applicants as long as there was an individual insurance mandate drawing in younger and healthier people to spread risks and costs.

Some liberal and conservative thinkers and even some insurance company officials say insurance reforms are still possible in the individual and small-group markets, where consumers are most vulnerable, even without a mandate.

Stuart Butler, vice president of domestic policy studies at the Heritage Foundation, a conservative think tank, says there are other ways to encourage Americans to buy coverage. "I'm always a little cynical when I hear an industry saying everyone should be required to buy my product," he says.

Jerry Flanagan, health care policy director of the Consumer Watchdog advocacy group in Los Angeles, never bought the idea of a mandate. "The industry was crying a lot of crocodile tears. The idea that people won't buy coverage unless it's required is largely overblown," he says. A more modest bill that includes new limits on insurers, but doesn't force people to buy coverage will prove that "Congress can stand up to the industry."

But some longtime supporters of comprehensive overhaul legislation say it can't be so easily pulled apart – that the insurance reforms were part of a closely-woven package that included the mandate and government subsidies for those who couldn't afford to buy insurance.

One of the most outspoken defenders of the Democratic approach, Ron Pollack of Families USA, warned Congress in a letter Thursday not to pursue an incremental approach, terming it "a recipe for disaster, both substantively and politically."

States that have tried such approaches, Pollack wrote, found that new insurance rules alone – without requiring expanded coverage – leads to "skyrocketing premiums as sicker, older people secure coverage and younger, healthier people don't."

Political Support

House Speaker Nancy Pelosi acknowledged the problem after announcing that there weren't enough votes in the House to pass the Senate version of health overhaul legislation, fueling the burgeoning debate over other options. "Well, I don't think anybody disagrees with, 'Let's pass the popular part of the bill,' but some of that popular part of the bill is the engine that drives some of the rest of it."

Yet, Pelosi said, "however we achieve it we must arrive at accountability of the insurance companies," listing "any discrimination (based on) pre-existing conditions" and "stopping them from canceling policies" when people get sick. Her list also included provisions that Republicans might try to block, such as repealing the insurance industry's antitrust exemption.

Republican lawmakers haven't taken a formal position on a downsized bill, but Michigan Rep. Dave Camp, the ranking member of the House Ways and Means Committee, told reporters Thursday he could back a proposal that barred insurers from rejecting the sick, or charging them more. Still, any proposal would also have to include medical malpractice reforms, said Camp, who is opposed to an individual mandate.

Getting bipartisan support would be difficult if not impossible. Timothy Jost, a law professor at Washington and Lee University in Virginia, said, "Anyone who thinks the Republicans will embrace market reforms and help the Democrats out of this hole is crazy. They have a clear strategy to say no to everything."

All Republican proposals introduced last year lacked an individual mandate and stopped short of an outright ban on insurers rejecting people with health problems. One bill, for example, would prohibit insurers that participate in newly created, state-based insurance marketplaces, called exchanges, from rejecting applicants. But the bill gives the insurers at out by allowing them to sell policies outside the exchanges that would not be subject to the ban.

Although America's Health Insurance Plans and the Blue Cross Blue Shield Association, the leading industry groups, oppose separating insurance reforms from an individual mandate, a top CIGNA official says it could work. G. William Hoagland, vice president of public policy for the big health insurer, says there are some risks, including "premium spikes" in some cases, "but it's not going to put [insurers] out of business."

Hoagland says while CIGNA would prefer to have an individual mandate to help cushion the reforms, "we could live without it" if it "means getting something done and moving along here. It's better than nothing." CIGNA's main business is selling insurance to employers, rather than on the individual market where the reforms would have the most impact.

States' Experience

Some experts cite the experience of five states – Massachusetts, New York, Maine, Vermont and New Jersey – that currently require insurers to accept all people who buy their own coverage, such as the self-employed or those who work for companies that don't offer insurance. Those states do set some rules. For example, they allow insurers not to pay for pre-existing conditions for a period of time – such as one year – if the person has gone for more than a couple of months without coverage before applying.

Only Massachusetts has a requirement that most residents carry coverage. In the four other states, premium costs tend to be higher than in states that do not force insurers to offer insurance to all who apply. A survey by AHIP reported the average policy for an individual in New York cost $6,630 in 2009, compared with $3,503 in Connecticut or $2,943 in California.

"You can't point to a state that's done it without premium increases as a result," says Mark Hall, a professor of law and public health at Wake Forest University, who predicts a backlash among consumers if Congress approves such a measure and then premiums do, indeed rise.

Still, other policy experts like Karen Pollitz, research professor at the Health Policy Institute at Georgetown University, say additional factors contribute to higher premiums in those states, including higher labor costs, whether individuals and small businesses are lumped together into one risk pool and how much authority state regulators have over premium increases.

She says all the states do have rules allowing insurers to bar payment for pre-existing conditions for a period of time – commonly one year – if the applicant had been without coverage for more than a couple of months. "That's so people don't wait to buy the policy on the way to the hospital," she says.

Butler at the Heritage Foundation and others say there are ways to encourage most Americans to buy coverage, short of a mandate. One way would be to automatically enroll people in coverage through their jobs. Employers would either sign up workers for employer-based coverage if they offer it, or enroll them in the lowest-cost plan offered on an exchange.

Workers could opt out, but Butler suspects many won't. "If you don't have to do anything to be in something, you'll be in it," he says, pointing to automatic enrollment in 401(k) programs as an example of how it could work.

He also suggests another way to prompt laggards: a "soft penalty." After an initial period of open enrollment, premiums would be higher for those who have been uninsured for an extended period. In addition, there could be high-risk pools for individuals who have serious illnesses.

Joseph Antos of the American Enterprise Institute, a conservative think tank, proposes an initial one-time open enrollment period during which all Americans could sign up for health insurance without facing higher premiums for their health status, and limited premium increases for their age. But if someone chooses to remain uninsured after open enrollment ended or has a lapse in coverage, Antos says, that person would face potentially higher premiums based on age, gender and health status.

Butler, among others, believes a bipartisan agreement that includes insurance reform is possible. But others say even scaled-back legislation would be difficult to pull off.

Chris Jennings, a former Clinton administration official who runs a consulting firm in Washington, says groups like hospitals and drug-makers that supported the cost-saving and revenue-raising provisions of the comprehensive bills wouldn't necessarily sign on.

"From both a policy and political perspective," he says, "small-ball incremental reform can be as hard to viably construct as any comprehensive approach."

Mary Agnes Carey and Phil Galewitz contributed to this article.

This story was produced through collaboration between NPR and Kaiser Health News (KHN), an editorially independent program of the Henry J. Kaiser Family Foundation, a nonpartisan health-care policy research organization. The Kaiser Family Foundation is not affiliated with Kaiser Permanente.

Copyright 2023 Kaiser Health News. To see more, visit Kaiser Health News.

Julie Appleby
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