Health Insurance

HEALTH REFORM: Medical Loss Ratio or Just Medical Loss?

Allison Levy — Tue, 03 Nov 2009 21:28:00 -0500

(We are refiling this post to make the paragraph about the SEC a little clearer for our readers.)

"The American people and I are asking a serious question and one that deserves a straight answer -- why are health insurance costs going up each year?" Sen. Jay Rockefeller (D-WV) questioned in a letter (part 1 and part 2) to H. Edward Hanway, the CEO of CIGNA, yesterday. "Are they spending it to make people well when they are sick and keep them healthy? Or is the money they charge going to profits, to executive salaries, and to figuring out how to deny care to people when they really need it?"

Sen. Rockefeller explains:

One of the basic financial measures used in the health care industry is the percentage of health insurance premiums that insurers use to provide health care to their customers. This percentage is commonly known as the "medical loss ratio." For example, if an insurer uses 75 cents out of every premium dollar to pays its customers' medical claims, the company has a medical loss ratio of 75 percent. A medical loss ratio of 75 percent indicates that the insurer is using the remaining 25 cents of each premium dollar to pay expenses that do not directly benefit policyholders, such as salaries, administrative costs, advertising, agent commissions, and profits.

(Ezra Klein of the Washington Post notes that the "industry literally has a term for how much money it ‘loses' paying for health care.")

While the health insurance industry says its average medical loss ratio is 87 percent, a new analysis released by the Senate suggests otherwise.

Back in August, Rockefeller wrote to insurance companies, asking them to reveal their medical loss ratios "broken down by state and by the individual, small, and large group market segments." The goal was to be able to provide valuable information to individuals and companies who are shopping around for health insurance policies. Sen. Rockefeller writes that, "Just as a car buyer might use gas mileage to choose one car model over another, medical loss ratios are a tool that can help consumers compare various health insurance options."

The insurance giants argued that medical loss information is "proprietary" and "business sensitive." So Rockefeller asked the Senate Commerce Committee to investigate. The committee concluded, by examining premium and claims data reported to the National Association of Insurance Commissioners, that the medical loss ratio is significantly lower than the industry would have them believe.

Reed Abelson of the New York Times reports that in 2008, the for-profit average medical loss ratio was 84 percent in policies offered to large employers and 80 percent in policies offered to small businesses. In the individual market, there was an average medical loss ratio of 74 percent. Rockefeller specifically accuses CIGNA of breaking the law and inaccurately reporting information to the NAIC -- they had claimed a medical loss ratio of 93 percent.

The Senate analysis shows that the health insurance industry "provided one set of premium-benefit numbers to the public and to Congress, and presented a different one to their investors." The letter says that America's Health Insurance Plans' (AHIP) claim that the industry spends 87 cents of every premium dollar on medical care was part of an "expensive public relations effort." The publicly-traded health insurers' own financial reporting to the Securities and Exchange Commission does not come close to supporting the figure -- see page 7 of the letter to CIGNA for the individual breakdown.

The Commerce Committee revealed that the "largest for-profit insurance companies appear to be squeezing more profits for Wall Street investors by spending a lower percentage of premium dollars on patient care than other insurers." Wendell Potter, a former CIGNA senior executive, in testimony to the Commerce Committee said:

Wall Street investors and analysts look for two key figures: earnings per share and the medical loss ratio...To win the favor of powerful analysts, for-profit insurers must prove that they made more money during the previous quarter than a year earlier and that the portion of the premium going to medical costs is falling. Even very profitable companies can see sharp declines in stock prices moments after admitting they've failed to trim costs. I have seen one insurer's stock price fall 20 percent or more in a single day after executives disclosed that the company had to spend a slightly higher percentage of premiums on medical claims during the quarter than it did during a previous period. The smoking gun was the company's first-quarter medical loss ratio, which had increased from 77.9 percent to 79.4 percent a year later.

Health reform promises to extend coverage to millions more Americans, but as Rockefeller maintains, it is important that these dollars (billions of which will come from new government subsidies for low income and middle income people to get insured) actually go toward paying for medical care. We can debate the best way to lower our health care costs, but making sure that the dollars we do spend on health care actually get spent on taking care of the ill and keeping everyone else healthy is a good place to start.

COVERAGE: Poor and Uninsured Wait for Lung Cancer Treatment (And We Don't Mean In Canada)

Joanne Kenen — Tue, 03 Nov 2009 16:57:00 -0500

We get really tired of hearing foes of health reform go on and on about waiting lists in Canada and how it's rationing... And how nobody in the United States lacks care because they can always go to the emergency room. We know that yes, people in other wealthy industrialized countries sometimes wait for elective procedures, but here in the United States people -- particularly the poor and the underserved or the uninsured -- do plenty of waiting and postponing even when lives are at stake. (And how many people do you know who get cancer diagnosis, surgery, chemo, radiation and follow up care in their local ER?)

The American Cancer Society has made the point during the health care debate that uninsured and underinsured people get diagnosed later and die sooner. A new study in the Journal of Thoracic Oncology (which we read about on Health News Daily) found that the length of time a newly diagnosed lung cancer patient has to wait for treatment depends in part on whether they are treated at a public (safety net) or private hospital, whether they are insured, their age, and their race.

Researchers at the University of Texas Southwestern Medical Center analyzed data on 482 patients diagnosed with non-small cell lung cancer. They found that 59 percent of patients treated at a public hospital had advanced (stage 3) lung cancer, compared with 37 percent of patients treated at a private hospital. They also found differences in patient populations at public and private hospitals in terms of age, race and socioeconomic status. This is a lethal disease, and earlier detection can't always save lives. But the prognosis by stage three is pretty grim.

"This study demonstrates that in a contemporary U.S. health-care system, intervals among suspicion, diagnosis and treatment vary widely and are predominately associated with system variables such as insurance and hospital type," said study author Dr. David E. Gerber. "An organized and timely approach to subsequent diagnostic and therapeutic measures may benefit these individuals and reduce this health-care disparity."

Disparities are very complicated and the health reform legislation won't wipe them out overnight, although it will help. But health reform will address a lot of the life and death inequities about coverage -- who gets timely care and who does the waiting.

COST: Senate Judiciary Committee Looks to End Insurer Antitrust Exemption

Julie Barnes — Fri, 16 Oct 2009 16:22:00 -0400

Much of the debate in Congress right now still centers on the public plan, and the need to make sure there is adequate competition in the new insurance exchanges that would be established under health reform. We have also written several times about fresh approaches to dealing with malpractice reform, which President Obama has said is overdue.

Senate Democrats recently revisited an old idea that could potentially address both of these challenges -- ending the exemption that medical malpractice companies and health insurers currently enjoy from antitrust laws.

Earlier this week, the Senate Judiciary Committee held a hearing to discuss Judiciary Chairman Patrick Leahy's (D-VT) Health Insurance Industry Antitrust Enforcement Act of 2009. Currently, insurance companies -- including health and medical malpractice insurers -- are exempt from a limited number of antitrust laws. Leahy's legislation would narrow the exemption by prohibiting plans from engaging "in any form of price fixing, bid rigging, or market allocations." Yesterday's hearing featured testimony about how the insurance industry got the exemption in the first place, and whether the exemption should be eliminated.

There are three sets of laws involved here; 1) the federal antitrust laws; 2) the state laws that regulate the insurance industry; and 3) the federal law passed in 1945 called the McCarran-Ferguson Act. The antitrust laws promote competition, and states have a long tradition of regulating insurance practices for their citizenry. The McCarran-Ferguson Act doesn't regulate insurance or prohibit certain anticompetitive behavior, but it does allow federal and state governments to regulate insurance and makes clear when antitrust laws do and do not apply to the insurance industry.

The McCarran-Ferguson Act exemption from the antitrust laws has long been criticized as giving an unwarranted exception to the insurance industry. Health care providers, in particular, complain the exemption is unfair, particularly because they are subject to frequent antitrust investigations and challenges to their conduct. The reason why we are hearing about this now is because the McCarran-Ferguson Act immunizes health plans from federal antitrust laws when they engage in certain insurance business activities -- like premium rate setting. And Democrats have decided to take a shot at revoking this immunity, now that health insurers are publicly attacking the federal health reform proposals. It's a tit-for-tat.

This is not the first time Congress has tried to revoke health plan's antitrust immunity. In 2007, a bipartisan group of senators (former and current Senate leaders Leahy, Lott, Reid and Landrieu) introduced the Insurance Industry Competition Act of 2007 to repeal the 60 year old McCarran-Ferguson Act's partial antitrust exemption for the insurance business. Leahy pushed it again this Congress, to no avail -- until just now.

Leahy and others accuse health insurers of dominating the markets they do business in, prohibiting competition that could bring down premium prices. According to the AMA, 94 percent of insurance markets in the U.S. are highly concentrated. The median share of the largest insurance carrier in a region is about 47 percent, and in 16 markets the largest carrier had a 50 percent share or higher, reports BusinessWeek, citing a GAO study from 2002. If the McCarran-Ferguson exemption is repealed, the argument goes, competition would help to lower costs and expand choice in the health and medical malpractice insurance markets.

BNA reported Senator Leahy saying that there "is no justification for health insurers engaging in egregious anticompetitive conduct to the detriment of consumers."

As always, there are two sides to this coin: if it is true that the antitrust law exemption allows insurers to dominate a market, won't repealing the exemption shift power to doctors, hospitals and other health-care providers, encouraging them to demand a higher rate of reimbursement -- which would lead to higher premiums? Some experts think so, according to The Washington Post.

Elimination of the antitrust exemption in the McCarran-Ferguson Act could increase antitrust scrutiny (investigations and litigation) of regulated collective insurer activities -- like the joint development of standardized insurance policy language and collective trending of shared historical data. This would have the negative effect of increasing administrative costs of plans (which would likely figure into premium rates). Others who have considered the repeal of the exemption warn that medical liability insurers would no longer be able to share data as they traditionally do, which would likely result in a lack of credible information to assist in making cost determinations -- a risk that most entities will not expose themselves to. (See Towers Perrin consulting actuary James Hurley's testimony before the Senate Judiciary Committee for more information).

What we wonder is whether repealing the antitrust exemption would lead to increased competition and lower prices. The key is whether market allocation is considered the "business of insurance" -- because if it is, then the antitrust exemption applies. An activity must satisfy three prerequisites, actually, to be exempt under McCarran-Ferguson, (it must: (a) constitute the business of insurance; (b) be regulated by State law; and (c) not constitute an act of boycott, coercion, or intimidation) but whether it is considered the "business of insurance" is a question the courts have wrestled with for years. The Supreme Court developed a three-part test to figure it out: (1) whether the activity has the effect of transferring or spreading a policyholder's risk; (2) whether the activity is an integral part of the policy relationship between insurer and insured; and (3) whether the activity is limited to entities within the insurance industry. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S. Ct. 3002, 3008 (1982).

Notably, the government's position and the pervailing view is that mergers of insurance companies do not constitute the business of insurance, and therefore do not fall under the exemption. One would think that this would be the primary way an insurer could dominate a market -- by merging with the competition. But they are subject to antitrust scrutiny for proposed mergers and acquisitions just like every other economic sector.

In fact, a review of cases addressing what constitutes the "business of insurance" shows that the McCarran-Ferguson exemption has been judicially narrowed in the 60 years since its enactment. Health plans' provider contracting actions, for example, have been ruled outside the "business of insurance" and therefore are not considered exempt from antitrust laws. But there was a case in Rhode Island that involved allegedly anticompetitive behavior by a dominant health plan that had an exclusionary effect on a smaller health plan, where the court held that the exemption applied. So, if market domination is at issue, whether the exemption applies may be a case-by-case determination.

This leads us to our last query: Is it better to repeal or not to repeal? We have not done enough exhaustive research to give a full-throated answer. We do note that the people who have looked at this conclude that numerous lawsuits would follow a repeal to determine which insurance practices constituted antitrust violations.

Stay tuned -- this development is now part of the "to have a public plan or not" conversation -- because competition is typically a good way to bring down costs. Public plan advocates think the antitrust exemption is another reason why we need a public plan to compete with private insurers. Whether repealing the antitrust exemption for health insurer is the best way to create competition, though, is unclear.

HEALTH REFORM: AHIP Got What It Paid For

Len Nichols — Tue, 13 Oct 2009 16:20:00 -0400

When a lobby -- like AHIP, the health insurance lobby -- pushes out a report intended to inflict last minute damage on an important bill late on a Sunday on a three-day weekend, they may score a few points in the first wave of headlines but ultimately the truth wins out. Not only did the second-day headlines (like Politico's "Insurers Face Blowback") note the questions about the AHIP report’s veracity, even the consulting company that wrote the report, PricewaterhouseCoopers, basically said it was a meaningless exercise in the application of irrelevant assumptions. In other words, AHIP got what it paid for.

PricewaterhouseCoopers said:

America’s Health Insurance Plans engaged PricewaterhouseCoopers to prepare a report that focused on four components of the Senate Finance Committee proposal:

Insurance market reforms and consumer protections that would raise health insurance premiums for individuals and families if the reforms are not coupled with an effective coverage requirement.

An excise tax on employer-sponsored high value health plans.

Cuts in payment rates in public programs that could increase cost shifting to private sector businesses and consumers.

New taxes on health sector entities.

The analysis concluded that collectively the four provisions would raise premiums for private health insurance coverage. As the report itself acknowledges, other provisions that are part of health reform proposals were not included in the PwC analysis. The report stated on page 1:

“The reform packages under consideration have other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households. Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated.”

I wrote in more detail about the report’s numerous weaknesses and fallacies yesterday. Basically they took an out of context look at a few provisions, with faulty underlying assumptions and mysterious methodology. It’s sort of like when I was a college professor, if I had flunked a student based on my own extreme assumptions about what she “meant” to write on a couple of incomplete answers, ignoring all her other correct work on a three hour exam. As Ron Pollack, executive director of the health care advocacy group Families USA, said the industry report "gives hypocrisy a bad name...They are like a poker player who complains about his hand when, in fact, he is the dealer."

Ironically, one of the insurance industry’s concerns is legitimate – and is shared by me and many of my fellow economists as well as pro-reform advocates who want to cover all Americans in an economically sustainable way that is good for everyone in our society. If the enforceability of the mandate gets watered down too much, there’s a risk that not enough people will be covered, and the new insurance won’t work like it could and the new system won’t restrain costs the way it’s designed to.

But an honest conversation about how to ensure the right outcome will not be engendered by an inflammatory report. I reacted as I did because analysts have to defend the integrity of analysis, otherwise we will truly end up in a “fact free zone” in policy and political debates. Ron Pollack is right, this report didn’t help AHIP, PricewaterhouseCoopers, the Senate, policy analysis, or our nation. In fact, if anything, releasing this report, at this time, in this way may have strengthened the case in some people’s minds for the necessity of having a public option. If this is the kind of stuff the insurance industry would have us believe, how can they ever be trusted? Some folks have been asking this for some time, and once-skeptical senators may be listening, now.

HEALTH REFORM: The Gloves Are Off

Len Nichols — Mon, 12 Oct 2009 22:49:00 -0400

The gloves are off in the fight for health reform, and the insurance industry has decided that it's time to start throwing analytically indefensible punches. Two recent cases in point: (1) the headline grabbing "report" entitled the "Potential Impact of Health Reform the Cost of Private Health Insurance Coverage," by PriceWaterhouseCoopers , for AHIP (the main health insurance industry trade group); and (2) the "Blue Perspective" entitled "Age Discounts ‘A Must' to Encourage Young Adults to Purchase Insurance," by the Blue Cross and Blue Shield Association.

Thankfully the Urban Institute, in work funded by the Robert Wood Johnson Foundation, has recently released a thorough and devastating rebuttal to the Blue claims. So my comments below focus mostly on the AHIP paper.

Consider the source. Most think tank work is funded by Foundations, which by law are nonpartisan. They focus more on objectively informing the public debate than on promulgating particular points of view. On the other hand, consulting firm work is often funded by an interested party with a major stake in the outcome of a policy debate. Readers should be very careful before repeating or reporting claims made by reports that were funded by people (or businesses) with a "dog in the hunt."

Consider the openness of the data and methods. Good policy research uses nationally and statistically representative data so that its conclusions reflect behavior of the actual population. The PriceWaterhouseCoopers report uses proprietary data which are not representative of anything. Just because you have lots of data does not mean it accurately reflects the population.

As a great example, the Urban team describes their methodology and their model in great detail, so that its work is subject to scientific standards of scrutiny and reproducibility. The same cannot be said for the report AHIP commissioned from PriceWaterhouseCoopers. The consulting firm neither allowed neutral parties to check its methods, nor did it send it out for review by neutral parties before releasing to the press. The timing of the release (the Sunday of Columbus Day weekend, two days before the Finance Committee vote) indicates this report was about influencing the vote, not increasing the amount of good information in the debate.

The report ignores the subsidies included in the Finance Committee bill. Eighty-five percent of people getting coverage from the new insurance marketplace are going to receive financial assistance to pay for it. The estimates ignore this. How can you claim to analyze premiums without taking into account subsidies to help people afford that coverage? Providing subsidies to make insurance affordable is one of the primary goals (and costs) of reform. This is a stunning omission on the part of PriceWaterhouseCoopers.

The report ignores the excise tax on high-cost plans. It says: "Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is applied." You cannot purport to complete an economic analysis, and then ignore the behavioral effects of economic analysis! The claims that the excise tax will add to the cost of small and large group coverage should be ignored. The Congressional Budget Office (CBO) and most economists believe that the dual incentive for insurers to offer more value for dollar and consumers to choose less-expensive policies is one of the surest ways to slow the rate of health care cost growth.

The report assumes that all Medicare savings will be converted into private sector cost shifts. In other words, it assumes that all Medicare savings realized through the legislation would ultimately translate into reduced payments to providers, which will be shifted into higher prices for private payers. In fact, the biggest savings from the Medicare program in the legislation are realized from reducing the current formulaic overpayments to Medicare Advantage plans (a.k.a. private insurance plans), instead requiring them to bid competitively. Long-run changes to payment policy are really about creating incentives for higher-quality, efficient care -- not simply about paying providers less. In reality, many high-quality providers will make more under the proposed reforms. (This is why so many provider groups and coalitions like Health CEOs for Health Reform support smart reforms that realign incentives.)

The report assumes that premium growth in the absence of reform will be the same as per capita health care cost growth. They made this "assumption" even though premium growth has outpaced health care cost growth for the last 10 years. Ironically, this is primarily because some insurers have increased their market share, reducing competition in the marketplace. By underestimating expected growth in premiums, this baseline is biased against reform.

The report ignores the fact that under the Senate Finance bill, "If you like your coverage, you can keep it." The report overemphasizes the number of Americans who will have to "buy up" under reform. Not only does the Finance Committee bill allow existing plans to be "grandfathered," but it provides young adults with the option of purchasing a less-generous policy. When combined with provisions to allow young adults to stay on their parents insurance until they are 26, this will help keep costs down for young adults. Further, a vast majority of insured Americans now have plans that meet the actuarial value standards in the bill. The Finance Committee takes steps to stabilize premiums even further by providing a reinsurance fund for the transitional years in the new health insurance exchange.

The report conflicts with CBO's assessment of the individual mandate. There is a legitimate point, raised by insurers, about the individual mandate. If Congress reduces the penalties for remaining uninsured too much, it weakens the mandate. And that in turn impacts how the insurance markets -- predicated on the reform linchpin of guaranteed issue -- will function. However, the CBO has analyzed this question. It concluded the combination of subsidies and bidding incentives in the Finance bill does not hit the danger zone. Vigilance and further thought on this point is important, but this inflammatory report should not be taken seriously by lawmakers weighing the merits of comprehensive health reform.

The report everyone should be reading is the new paper by Linda Blumberg and colleagues at the Urban Institute. They found that limiting (or even eliminating) the amount premiums can vary based on age does not add to aggregate subsidy costs. The Urban report makes short shrift of the claim by the Blue Cross Blue Shield Association that markets cannot survive if insurers cannot vary premiums five-fold based on age (i.e. charge older people five times more than they charge younger people).

I have long defended the private insurance industry's ability to add value to a reformed and regulated insurance marketplace where they compete based on price, quality and customer satisfaction -- not on underwriting. I still believe this to be true. But we cannot solve a challenge as great as our health care crisis if we are not honest about the facts and the implications of reform. Aside from the obvious conflict of interest associated with a report funded by the very industry it analyzes, PriceWaterhouse's basic analytic assumptions -- by their own admission -- are at variance with the bill and the opinions of most analysts.

HEALTH REFORM: A Small Businessman Who Can't Wait For Health Reform

Health Policy — Fri, 02 Oct 2009 14:15:00 -0400

A recent statement from the Senate Finance committee outlined how small business health insurance exchanges, tax credits, and grants for workplace wellness as part of health reform would all make quality coverage more available and affordable for small businesses. In this guest post, San Diego small business owner Vince Mudd explains why he -- and the workers he insures -- can't wait. Mudd is CEO of San Diego Office Interiors, a design-build interiors company and the president of International Realty and Development.

Through his involvement in the regional Chamber of Commerce, the San Diego Regional Economic Development Corporation, Campanile Foundation at San Diego State University, and State Compensation Insurance Fund, he has worked to ensure that health related issues -- and their impacts on small business -- are understood by policy makers, business people and the public.

Many politicians and pundits claim that efforts to reform our health system are moving too quickly. Yet for millions of small business owners like me, health reform cannot happen soon enough.

For 15 years, I have not only provided access to health insurance for my 45 employees and their family members, but also paid 100 percent of their premiums. I do this because I believe that when employees do not have to spend time dealing with the "problem" of health insurance, they are more productive. My employees live healthier lives. This benefits them, their families, and ultimately my business and society.

Despite these mutual gains, providing health insurance to my employees is simply unsustainable. Last year my small business premiums skyrocketed 18 percent. I wish this were surprising. But the truth is my premiums have risen significantly every one of the 15 years I have been buying coverage for my workers. Unfortunately, my health-care-related stress does not end there. Every year I pay tens of thousands of dollars in medical riders on other business-related policies, like liability and property insurance, adding even more to my health care costs. I want to focus on my business, not health care. The status quo makes this impossible.

Unlike other aspects of my business, I am powerless in the face rising health care costs. I have limited options, none satisfactory. I can stop paying my employees' premiums, cut back on the generosity of the benefits I offer, or change insurance companies every year in search of a "better deal." (To be clear, there is no such thing as a "better deal" in the world of small business health insurance.) These choices feel forced and out of balance, especially as we try to grow our economy in these tumultuous times. No business owner should have to choose between a healthy workforce and a successful business. No American should have to choose between a job they love and their health.

Reforms that will relieve me and my colleagues from the stranglehold of an unworkable small business insurance market and rising health care costs are within reach. Proposals in Congress would prevent insurers from charging me more if one of my workers gets sick and would allow me to easily compare and purchase insurance online without limiting myself to the choices offered by my local broker. Most importantly, health reform will provide small business owners with something that is often elusive today -- a choice of quality insurance products. Increased choice and competition are two reasons I think that an alternative to private insurance -- like a public health insurance option -- could be helpful to small business owners. Given the opportunity, I do not know if I would choose to enroll in either a public health insurance option or co-op. I do know, however, that I would like that choice. Finally, health care reform will begin to slow the rate of system-wide health care cost growth, bringing health care cost increases closer to changes in economy-wide productivity, making health insurance more affordable over time.

Detractors say it is impossible to provide health insurance to every American without costing the system even more than it spends to date. This is not an accurate statement. The fact is that every person paying for health insurance is already, in effect, "paying for" the erratic and dysfunctional care being received by the non-payers. There is so much waste and duplication in the existing system. Reform will address it.

I also believe that as health reform goes into effect, we will see savings in our auto insurance (check your care insurance policy and premium statement, you are probably paying five to seven percent of your premium value for "medical.") We'll also see savings on other insurance products that have a medical component -- boat, RV, home owners, professional liability, general liability and others.

Health reform will bring about improvements that will allow me to continue to provide insurance to my workers and grow my business. Small business owners do not want a free ride. We want to share in the responsibility for a healthy workforce and a prosperous economy. But we need help. Act now. We have waited long enough.

HEALTH INSURANCE: "Across States Lines" is Back -- And It Still Won't Work

Len Nichols — Thu, 01 Oct 2009 19:22:00 -0400

The idea that we can solve our health care problems by allowing people to buy an insurance policy "across state lines" sounds tantalizingly easy. Unfortunately it's not true. It will make our problems worse and be devastatingly risky for many Americans. Yet the idea has been resurrected in bills proposed by the Republican Study Committee (RSC), Congressman John Shadegg (R-AZ), and Senator Jim DeMint (R-SC).

Don't be fooled: without significant and nationwide market reforms (like those put forth by the committees of jurisdiction in both the House and Senate), selling health insurance across state lines will lead to less-comprehensive insurance packages, higher costs for families, and reduced access to care. It is a step backwards for not only our insurance markets, but also, and more importantly, for the American people who struggle every day to secure quality, affordable coverage.

Last year, New America published a detailed explanation of why this policy is an unviable solution. Our paper and two-page summary can be found here, and previous blog posts can be found here, here, here, and here. But this is the bottom line:

What does it mean to allow insurers to sell coverage "across state lines?"

Insurers could sell their products to Americans in any state. The insurer would have to follow the rules and regulations in the state where it is based or "domiciled" -- not the rules of the state where the consumer or policyholder lives. In the absence of uniform regulations in every state, insurers will in effect choose the state laws they want to follow based on where they domicile. This will lead to de facto deregulation of the insurance market and a race to the bottom.

Insurers who underwrite aggressively (those who spend lots of time trying to figure out your medical history, pre-existing conditions, etc.) would naturally prefer to domicile in South Carolina or Arizona, where there are virtually no regulations placed on non-group insurers. These insurers could then cherry pick the healthy from across the nation and deny coverage to anyone who looked the least bit sick. This leaves the rest of the insurers in more highly regulated states little choice but to migrate, too, to states like South Carolina or Arizona if they want to compete. In turn, individuals who are older or who have pre-existing conditions or risky health histories would be left with nowhere to turn.

Massachusetts' reformed marketplace could be completely unraveled by this sort of thing fairly quickly. Let's be clear: supporters of "across state lines" want to keep the insurance market unregulated and profitable for aggressive underwriters, period. They do not to solve our uninsured and cost growth problems.

How would selling insurance across state lines impact...

Premiums? Health insurance premiums may decrease for young, healthy individuals. Yet, premiums would likely go up for many other Americans, especially those with health conditions or individuals who prefer comprehensive insurance policies.

Benefit Mandates? Most benefit mandates would be eliminated by an across state lines proposal. In fact, selling health insurance across state lines would eliminate any guarantee that important benefit mandates like maternity care would be included in insurance packages in the future. Consumers would get little in exchange. Overwhelming evidence shows that benefit mandates per se are not why health insurance costs so much, so premiums are unlikely to decrease significantly.

Access to Coverage? Many people would find it more difficult to access health insurance if health insurance were sold across state lines. This is because there would be fewer guaranteed issue policies and because insurers would have an increased incentive to deny people coverage and charge people more based on their health history.

Let's also be clear about an important distinction. The Senate Finance Committee recently proposed allowing states to form "compacts" (see page 12 of the Chairman's Mark) for the purchase of insurance across state lines. This provision would not have the devastating impacts described above because under the Finance bill insurance market rules would be uniform across states. Likewise, the legislation would establish a minimum level of benefits that insurers are allowed to offer, ensuring that every insurance package provides access to necessary services and protects consumers' health and financial needs.

Simply having an alternative plan to fix our health system is not good enough. The alternative must get serious about solving the problems facing our nation. Selling health insurance across state lines -- without significant market reforms -- falls woefully short of what is necessary to make quality health insurance accessible and affordable for us all.

HEALTH REFORM: Frist Backs Individual Mandate

Joanne Kenen — Tue, 29 Sep 2009 18:22:00 -0400

Last time I ran into Bill Frist, he was sounding distinctly nonpartisan on a panel discussion about preventive care and social determinants of health. We then talked about comparative effectiveness research at Vanderbilt, where he is affiliated, and he was so enthusiastic that he took my notebook out of my hands and began sketching diagrams of DNA molecules (at least I think that's what they were.) I asked him why he didn't write on op-ed about this, given that the research has been so controversial among his fellow Republicans. As far as I know, he hasn't written that an op-ed -- but he just penned an endorsement of an individual mandate to purchase health insurance.

The mandate is a lynch pin of effective insurance market reform and it's coming under increasing Republican attack. Some state legislators are even talking about amending their constitutions -- a largely symbolic conversation among conservatives -- to ban such a requirement.

In his guest column for U.S. News and World Report, Frist called for an individual mandate. He wants to begin smaller than the bills currently being considered in Congress, recommending a mandate for catastrophic coverage as "an appropriate place to start." But he defined catastrophic coverage as good enough to protect people from bankruptcy from medical bills, and made clear that he favors expanding coverage as the economy improves.

Of course, a number of Frist's former colleagues were for a mandate before they were against a mandate, and the idea was injected into the national debate (at least when I first became aware of it) in 1993–94 with by a Republican, albeit a moderate one, the late Sen. John Chafee. That was before Frist won his first Senate term in the 1994 Republican tidal wave.

Frist writes (emphasis ours) :

In our reimbursement-driven, public-private health sector (which delivers the most robust health services on the globe), the only way affordable access can be achieved is for every citizen to have some type of insurance... No industrialized country in the world leaves such a large proportion of its citizens without coverage. And insurance matters. Those without health insurance on average receive poorer care and die sooner.

He added,

No family in America should fear bankruptcy because of an accident, a child's cancer, or a heart attack. That is the purpose of insurance. An individual mandate is the only way to achieve affordable insurance coverage for every American in a pluralistic, public-private sector.

The former Senate majority leader made some effort to cast the mandate in a conservative light. He said it would eliminate wasteful cost-shifting, enhance transparency, reduce adverse selection, and make the insurance market function better. But his basic pitch was a moral one. People need to be covered. A mandate is the best and fairest way to achieve that.

Judging from what we're seeing in the Senate, conservatives are not going to rush to his side. But his comments might add a bit of ammunition and fortitude to those in the center who may play an outsized role in determining the contours of reform.

We're looking forward to reading Frist next on comparative effectiveness. We can even suggest an opening paragraph. Something along the lines of :"Conservatives should embrace research designed to improve the quality of American health care, and make sure that our hard-earned dollars don't get wasted on care that doesn't work or isn't needed."

HEALTH REFORM: Change Insurers Will Have to Believe In

Joanne Kenen — Tue, 22 Sep 2009 17:04:00 -0400

While you listen to the Democrats (and Republican Olympia Snowe) on the Senate Finance Committee talk about affordability and access, and the Republicans (minus Snowe) talk about malpractice, partisanship and "rush jobs" (are there any members of the panel who haven't spent years and years in the Senate, House or state government pondering how to fix health care?) -- we wanted to also point your attention to another White House paper on "The Burden of Health Insurance Premium Increases on American Families."

The paper points out that insurance keeps costing more and more, and, on the whole, we keep getting less and less. Insurance premiums have doubled in the last decade (and our wages sure haven't) and they are going to keep rising. One in five adults under age 65 was uninsured in 2008. Those numbers, too, are rising.

Health reform won't just expand coverage. Insurance regulation has the potential to change the very nature of coverage, with real consumer protection. As the White House paper put it, "Stability and security will be accomplished by establishing the following rights for all Americans:"

1. No Discrimination for Pre-Existing Conditions

2. No Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays

3. No Cost-Sharing for Preventive Care

4. No Dropping of Coverage for Seriously Ill

5. No Gender Discrimination

6. No Annual or Lifetime Caps on Coverage

7. Extended Coverage for Young Adults

8. Guaranteed Insurance Renewal

In other words, you can keep your insurance even if you've been sick, or you get sick or you are at risk for getting sick. You won't lose your house or your life savings if you or someone you love gets sick.

Peace of mind. Stability. Security. And a chance to stay on Mom and Dad's insurance until you are 26.

HEALTH REFORM: The Public Plan Question

Health Policy — Tue, 22 Sep 2009 14:53:00 -0400

Veteran health advocate and researcher Stan Dorn is guest blogging for us today. Stan has worked on health policy for 25 years at the state and federal level. He began as a legal aid attorney helping low-income Californians obtain health care. Later as health division director at the Children's Defense Fund he led the organization's health policy team in a national campaign that contributed to the creation of the Children's Health Insurance Program -- and he helped defeat Newt Gingrich's proposal to replace Medicaid with a block grant. He is now a senior research associate at the Urban Institute. The views here are his own.

If health reform legislation does not guarantee a public option, could progressives support it, in good conscience?

I hear this question a lot. My answer is yes -- so long as the bill provides millions of low-income uninsured with affordable, comprehensive health coverage.

To be clear, giving consumers the choice of a public option could be a critically important check on high prices charged by private insurers as well as discrimination frequently encountered by people with health problems. If proposed insurance regulations that are part of health reform legislation fail to curb these practices, a public plan could offer consumers a relatively humane and efficient alternative. Most people support such a public option, and the main arguments against it involve absurd fantasies about a government takeover of American health care.

But what happens if the public option falls to the cutting room floor as health reform moves forward? Should Congress "kill off any legislation that doesn't have a public-insurance option"?

That depends on the legislation. Nearly 50 million people in this country lack health insurance. Many are people of color. Most are low-income workers and their families. These Americans work hard, sometimes holding down multiple jobs. Yet they are cheated out of the dignity and security of knowing that they and their families can see a doctor or fill a prescription when they get sick.

Of course, the consequences of uninsurance go beyond indignity and insecurity. All too often, uninsured women with breast cancer have their disease diagnosed too late for effective treatment, because they can't afford to go to the doctor. Uninsured adults with diabetes and high blood pressure can't afford to fill their prescriptions, with grim and sometimes fatal results. In 2006 more than 22,000 preventable deaths were estimated to result from a lack of health insurance; that number is doubtless higher today.

So suppose health reform legislation provides health coverage to tens of millions of low-income people -- but it fails to guarantee a public option. Maybe the legislation contains a "trigger" that creates a public plan if the insurance industry fails to perform. Maybe it offers consumer-owned health insurance cooperatives rather than a Medicare-like public option. Should progressives oppose such a bill?

Two thought experiments may shed light on this question. First, imagine that Congress is considering a major expansion of the food stamp program. The bill could greatly reduce hunger in America. Would progressives nevertheless fight to defeat the legislation, since, in buying the products of major corporations, food stamps merely line the pockets of industry? Not very likely. MoveOn.org, for example, has campaigned to stop food stamp cutbacks, despite increasing criticism of the food industry for a range of troubling practices.

Here's a second thought experiment. Imagine you're with dozens of your uninsured neighbors, low-wage workers with chronic illness. Maybe they clean your office building, care for your children, or help with your dry cleaning. Facing you are two buttons, green and red.

Push the green one, and your friends and neighbors get health insurance. Chronically ill parents survive and get to know their grandchildren.

Push the red one, and these low-wage workers remain uninsured. Some needlessly suffer severe illness. Others die, and some of their children grow up without a parent. Either way -- whether you choose red or green -- there's no public option.

Which button do you push?

The answer is clear. Legislation that provides affordable access to essential health care for millions of low-income, uninsured Americans deserves strong progressive support -- even if that means the fight for a public option continues into the future.