Reform bills aimed at coverage shortages could fall short, insurers warn

Washington -- Democratic health system reform legislation passed by the House and still pending in the Senate would attempt to rehabilitate health insurance coverage through various combinations of coverage exchanges, mandates and industry reforms. But the details and timing of these proposals will determine if the legislation is successful or if it has unintended consequences, such as unexpectedly increasing premiums, industry experts said.

The health insurance industry is concerned, for example, that the bill adopted by the Senate Finance Committee on Oct. 13 requires health plans to offer coverage to everyone several years before it would start levying its maximum annual penalty of $750 on people who don't become insured. This could prompt some people to wait until they're sick to obtain health insurance, thus raising costs for the entire system.

"It's like saying I can wait until I smell smoke in my house to get homeowners insurance," said Justine Handelman, executive director for legislative and regulatory policy for the BlueCross BlueShield Assn.

Even some less controversial aspects of the legislation might not have the full effect that lawmakers intend. The idea of creating health insurance exchanges, for instance, has been hailed as a good way to help bring order and clarity to the individual and small group health insurance markets. But the concept might not lead to more private insurance choices for people.

Exchanges would offer a standardized format to compare health plans, possibly following a model that travel Web sites use to compare and sell airfares, Handelman said. "We think that could bring a lot of benefit, ease some of the confusion and the administrative burden." The House bill would create a national exchange and possibly regional and state exchanges, while the Senate bills would implement state-level exchanges only.

But Handelman didn't expect the exchange model to entice health insurance companies to compete in new markets. Massachusetts, which has operated an exchange since implementing its comprehensive 2006 reforms, has seen almost no new insurance companies enter the state.

Ed Haislmaier, senior research fellow at the Heritage Foundation's Center for Health Policy Studies, said the exchanges need to do more than facilitate multiple insurers to offer plans with similar benefits. True competition would involve comparing quality as well as the price of health plans. "That's what's missing in this whole debate," he said.

Young adults might pay more

The Democratic reform bills would restrict how much insurers could vary health plan premiums based on age, though the details vary depending on the legislation.

The Senate Finance bill would allow plans to charge older people up to four times the premiums younger, healthier people would pay. The House-passed bill limits the ratio to 2-to-1.

But a 64-year-old American probably uses about five times as many health care services as does an 18-year-old, Haislmaier said. The amount could be as high as six to seven times as much, America's Health Insurance Plans spokesman Robert Zirkelbach estimates.

The Finance bill's 4-1 ratio, even before taking into effect other regulations, would increase average premiums for most people by about 4%, Zirkelbach said, compared to a 5-1 ratio. The projected premium swings based on age are even more pronounced in the House-passed bill. That measure would lower premiums by about 15% for people in their late 50s but raise premiums for people in their 20s by nearly 60%.

"It's a huge difference," Handelman said.

The House and Senate bills also would set a basic level of benefits that health plans must offer to meet the individual health insurance requirement. This is a major issue, because current basic benefits levels vary dramatically among regions of the country, said Deborah Chollet, PhD, a senior fellow at Mathematica Policy Research.

The Finance bill would leave the minimum coverage decisions to the Health and Human Services secretary, but the other pending bills would create new committees or commissions to handle the work.

Setting a high benefit standard could limit health plans' ability to offer more basic, affordable coverage, Handelman said. "We're not saying there shouldn't be meaningful benefits. But someone who's young ... might not feel they need a very comprehensive package of benefits."

The Finance bill would allow for a less-expensive, basic health plan for young people.