Today’s Wall Street Journal editorial page attacks Mitt Romney and the health reform bill for not changing our state’s private insurance laws, especially our law requiring “guaranteed issue.” Here’s their charge — read and weep:
MA Gov. Mitt Romney signed a bill recently that’s being praised as a model for how to achieve “universal” health care. But while the governor claims his plan is market based, it does little to reform regulations that have made coverage in his state among the most expensive in the country.
How bad are Massachusetts’ insurance regulations? One good indicator is that it’s one of few states in which eHealthinsurance doesn’t sell policies in the individual market. eHealthinsurance is an Internet insurance brokerage that makes it easy for people in most of the 50 states to find out what kind of coverage is being offered in their areas. We tried to price coverage in the Bay State and came up empty. So we called the company to ask why. “Guaranteed issue,” was Chief Operating Officer Bob Fahlman’s instantaneous reply.
Guaranteed issue is the name of a regulation that requires insurance companies to sell policies to all comers, even those who wait until they’re sick to seek coverage. Naturally the requirement to accept free riders makes insurance more expensive for everyone else. It also means insurance companies aren’t eager to be found by consumers, even though they are generally required to sell in the individual market to be able to offer coverage through employers. Yes, you read that right, they don’t want customers.
So in Massachusetts, insurers hide, in part by refusing to pay commissions to brokers such as eHealthinsurance. Their prices are also a disincentive. An eHealthinsurance survey earlier this month found the Aetna HMO in Boston asking $1,719 a month to cover a young family of four, and $560 for one nine-year-old child.
The new Massachusetts health care legislation does little to address the root causes of this cost problem. Guaranteed issue is preserved. And while a new insurance regulation board could do something about other mandates, it’s not likely to do much in practice.
The $200 per month target price Gov. Romney talks about for the state’s new mandatory insurance is higher than 80% of the individual policies eHealthinsurance reported in a study of 80,000 customers nationwide late last year. The range of average monthly premiums for individuals was as low as $98 in Michigan and as high as $245 in New Jersey and $379 in New York. The latter are the only two guaranteed-issue states in which eHealthinsurance sold individual policies during the study period. Massachusetts didn’t make the cut.
We note all this because there’s a far simpler way to tackle the problem of the uninsured than the Massachusetts path. To wit: Let the market operate as it should. Companies like eHealthinsurance have got a great infrastructure up and running and in many states consumers have real choices when it comes to health insurance products. States like New York and New Jersey, meanwhile, might try getting regulators out of the way before following the Bay State in forcing people to buy needlessly expensive coverage.
OK, in truth, we don’t know where Mitt stands on the issue of “guaranteed issue.” BUT, we know where we stand. HCFA was a key participant in 1991 and 1996 in the creation of small and nongroup insurance reform laws the Journal doesn’t like. And because Mitt won’t do it, we will explain where WSJ got it wrong.
We stand behind “guaranteed issue,” the requirement that insurers take all comers, regardless of health status. (By the way, folks seeking individual coverage can’t just buy coverage whenever they want — they have to wait for the annual open enrollment period, which discourages folks who want to wait until they get sick.) We also support “community rating” that says people can’t be charged premiums based on their health status or history. These provisions ensure that sick people can get insurance. In states where insurers can cherry pick customers, individuals with health problems can’t find any coverage at any reasonable rate, and small businesses are priced out of health insurance because one worker gets really sick. It used to happen here in Massachusetts before we did something about it.
Repealing guaranteed issue and other protections allows insurers to collect premiums from you until you get sick and need coverage. Then tough luck to you. The legislature showed wisdom and humanity in finding other ways to bring down premiums. The new health reform law merges the individual and small group markets, expected to bring premiums down by as much as 25% for individuals, while raising them 2% to 3% for small groups. The legislation encourages tighter networks, which may also bring down costs. And, the biggest thing the Legislature did to bring down premiums was to require that everyone get insurance. We did not ask for, or endorse the individual mandate, but it will bring more young and healthy people into the market, improve the risk pool, and bring costs down for everyone.
What can’t work is imposing an individual mandate without guaranteed issue. We can’t require people to get insurance and allow insurers to refuse to sell. The legislature was smart to maintain consumer protections. We need a serious conversation about how to address health care costs. Shifting costs to people who are sick is not a smart answer. (Thanks to HCFA’s crack Melissa Shannon for help with this.)
