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POLICY: Crossing state lines with unaccompanied healthy people

LeftnavcoverThe Kaiser Family Foundation reviews The New Republic’s Jonathan Cohn’s piece (now directly linked)about the Shadegg bill which would allow the purchase of health insurance across state lines. Here’s their description of Jonathan’s piece pulled verbatim:

A bill (HR 2355) that would allow U.S. residents to purchase health insurance in any state serves as a "vivid example" of Republican efforts to provide U.S residents with more "choice," but "what conservatives in this country never mention is that giving us these new choices also means taking something away — typically, programs that make us more secure," Jonathan Cohn, senior editor at the New Republic, writes in an opinion piece. "At first blush," the legislation, sponsored by Rep. John Shadegg (R-Ariz.), "seems utterly sensible," in part because it would allow residents to "shop for insurance the same way they should for consumer goods," Cohn writes. However, he writes, health insurance "isn’t just another sweater you can return to L.L. Bean if it arrives with holes in it," and residents "won’t have somebody to warn them if they are about to purchase a defective policy." Cohn adds that the bill would "flood consumers with new options, overwhelming the regulators, many of whom already feel undermanned in the fight against scam artists." In addition, the legislation would eliminate state regulations that require health insurers to cover "cancer screening, psychiatric treatment and other services that most Americans rightly deem essential," he writes. According to Cohn, the bill would leave some of the sickest residents with "no choices at all" for health insurance, and state high-risk health coverage pools would prove "woefully inadequate" to address their needs. The "best way to fix" the U.S. health insurance system is to "create one big pool of beneficiaries through some kind of universal health insurance system" that would allow residents to select from "well-regulated private health plans" or from all physicians and hospitals under a system that "bypasses insurance companies altogether," Cohn writes. He concludes, "Those aren’t the kind of choices that conservatives want to give Americans, since they happen to require expanding government. But they’re the kind of choices Americans would appreciate the most" (Cohn, The New Republic, 8/22).

Jon hits at the two problems with these bills. a) Fraud and how state insurance departments are relatively helpless/hopeless now — so just wait till they have to try to figure out what’s being sold locally by the bad guys from Topeka (or wherever), and b) (my main bugbear) how those states who do have some minimal attempt at community rating will find those insurance risk pools utterly destroyed when consumers find that they can bay a bare bones plan, which in the small print is licensed in Nevada (or wherever).

The problem of course which John mentions but doesn’t really drill into is how this would turbo-charge underwriting. Only those who pass muster would be accepted by these plans, and if they figure out that you may be sick or ever met a sick person or a doctor before, then you’ve got no chance. Even in guaranteed issue states (like California) health insurers currently can and do medically underwrite you, making premiums for the exact same benefits for people with pre-existing conditions or a history of prior surgery go up by a factor of maybe six and maybe twenty. See here for more evidence about that.

So effectively in Shadegg’s world the individual and small business market would fall into two camps. One for healthy people with high deductible cheap plans that they never use, and one for the sick and increasingly uninsured. And we’re seeing from new data on California out today from UCLA, that even without Shadegg’s help the number of people with employer-based insurance is falling very fast (leaving it to the taxpayer to pick up the pieces).

The only possible stop to this legislation may come from the rest of the health care industry. A health plan that operated within one state and had a hard time moving may not like this bill (or the AHP alternative for small businesses) very much. Some of those health plans are a certain color, and we’ll see how much clout they have with their state’s senators when this bill gets to that august body later in the year. Meanwhile, you know why my credit card can charge me 35% interest despite the fact that California has a law banning "usury"?  Well that’s because my credit card comes from the banking mecca of South Dakota. Think about the equivalent of that in health insurance.

CODA: Incidentally, this news service from Kaiser Family Foundation and several like it (including California Health Care Foundation’s) is provided by the The Advisory Board Company. Kind of funny that they’re running a left wing piece, from an editor who’s opinions most of the health care system (i.e. their clients) probably disapproves of, when they have probably made the most pure profit off the current health system of any single firm. But don’t start me on my criticism of "The Grand Alliance" again….and anyway, I guess I have the same issue (without the profit or potential ownership headaches that go with a major league baseball team).

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Ron GreinerRichard FerriEric NovackMatthew HoltAbby Recent comment authors
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Ron Greiner
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Ron Greiner

Well said Richard, When New York switched to no medical underwriting the premiums shot up and 500,000 healthy people dropped their health insurance knowing they could get insurance if they became sick. If they could get low cost insurance again, many would become insured again. Insurance is interstate commerce and should be regulated by the Federal government. This will stop these huge monopolies with lobbyists up the wazoo at the state capitals from buying off our local politicians. It’s too bad that Mass law allows Mass insurance companies to terminate sick people. I’m sure they contribute a ton of cash… Read more »

Richard Ferri
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Well, here is a new wrinkle to the Massachusetts (and other states) health insurance. In 2001 I left Massachusetts and my job to take a position in New York. After paying over $400 to my Massachusetts based insurer to provide coverage until my new job started I was told that if I got sick I could only be seen by one of their primary care providers in Massachusetts and no one in New York. I could opt to go to an emergency room but no coverage for any medications would be provided. Since I am living with HIV and on… Read more »

rdg
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rdg

Based on the articles that Eric linked, community rating does not appear to be a solution for people without insurance. COBRA coverage is cheaper than the policies quoted in the American Chronicle article.

rdg
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rdg

So what is the monthly premium for a married couple (in say their late 20s) in Massachusetts?

Eric Novack
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Link here for the the potential costs of community rating and guaranteed issue:
http://www.americanchronicle.com/articles/viewArticle.asp?articleID=1806
and here (health affairs 2004): http://content.healthaffairs.org/cgi/content/abstract/23/4/167

Matthew Holt
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Abby — I love you back! And you explained exactly what I meant.

Abby
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Abby

rdg, Massachusetts is an example of a state with community rating. If you buy health insurance in Massachusetts as an individual, the plans must sell it to you. (There are really only 3 active in the individual market in eastern Mass–Blue Cross, Harvard Pilgrim and Tufts.) They must offer all individuals insurance at the same rates. The insurers can only consider two things: (1.) your age and (2.) your zip code. I believe that New York operates in a similar regulatory environment, but I’m not sure, and it’s not quite the same. If all of the healthy people start buying… Read more »

rdg
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rdg

//how those states who do have some minimal attempt at community rating will find those insurance risk pools utterly destroyed when consumers find that they can bay a bare bones plan//
Please explain further. Are you talking about state high risk pools? My conclusion is that these pools are useless. This is based on the fact that individuals cannot obtain coverage under them. The fact is that IL has about 12 million people and about 6000 can get coverage under the high risk pool.
http://www.chip.state.il.us/Limit9700.htm