Published: Sunday, November 29, 2009
IN OUR VIEW / HEALTH CARE REFORM
It’s all in — no ‘free riders’
One of the chief goals of health-care reform — getting close to universal coverage — hinges on achieving a certain financial balance: A system that provides decent, affordable coverage for all also must require everyone to pay into it.
If too few pay, insurance costs for the rest will inevitably rise. Possibly more than they would with no reform at all.
Under the current House and Senate bills, those who truly can’t afford coverage would get a government subsidy. Everyone else is expected to get into the game either through an employer-based or other group plan, or by purchasing an individual policy. No more “free riders,” people who can afford insurance but won’t buy it, often leaving the rest of us to pay the bill when they get sick or injured.
But if the penalty for not obtaining insurance is far less than the cost of buying it, as is the case in the recently introduced Senate bill, too many young, healthy adults will stay on the sidelines. Reform will still require insurance companies to sell policies to all comers, regardless of health, age or pre-existing conditions. That combination will leave a disproportionate number of high-risk, relatively expensive patients in the insurance pool. Easy math says that will raise premiums for everyone.
Premera Blue Cross, a not-for-profit health insurer and one of Washington’s largest, calculates that a weak individual mandate like the one in the Senate bill would result in premiums 10 percent to 20 percent higher in 2013 than they would be under the status quo.
Another reform proposal could put even more pressure on premiums. Both bills would require benefit levels that are higher than the average most people currently buy. Deductibles, for example, would be lower than current averages. Consumers are generally willing to assume some financial risk when they buy a policy, because the more they’re willing to pay out of pocket, the less they pay in premiums. Mandating lower deductibles and other benefits will force premiums up — 24 percent higher for individual policies than under the status quo, according to Premera.
Many Democrats say that’s why a government-run insurance plan — a “public option” — is necessary. President Obama has argued it would “keep the insurance companies honest.” But if a government plan played by the same rules as private insurers, as proponents have said, it would be subject to the same upward pressures on costs. It would have to adjust by bringing in more money through higher premiums or taxes, or by paying physicians and hospitals less — which could decrease access to care.
Getting to near-universal coverage while controlling costs is huge challenge. The new system won’t work if everyone doesn’t pay into it. Ensuring they do is an essential piece of effective reform.
If too few pay, insurance costs for the rest will inevitably rise. Possibly more than they would with no reform at all.
Under the current House and Senate bills, those who truly can’t afford coverage would get a government subsidy. Everyone else is expected to get into the game either through an employer-based or other group plan, or by purchasing an individual policy. No more “free riders,” people who can afford insurance but won’t buy it, often leaving the rest of us to pay the bill when they get sick or injured.
But if the penalty for not obtaining insurance is far less than the cost of buying it, as is the case in the recently introduced Senate bill, too many young, healthy adults will stay on the sidelines. Reform will still require insurance companies to sell policies to all comers, regardless of health, age or pre-existing conditions. That combination will leave a disproportionate number of high-risk, relatively expensive patients in the insurance pool. Easy math says that will raise premiums for everyone.
Premera Blue Cross, a not-for-profit health insurer and one of Washington’s largest, calculates that a weak individual mandate like the one in the Senate bill would result in premiums 10 percent to 20 percent higher in 2013 than they would be under the status quo.
Another reform proposal could put even more pressure on premiums. Both bills would require benefit levels that are higher than the average most people currently buy. Deductibles, for example, would be lower than current averages. Consumers are generally willing to assume some financial risk when they buy a policy, because the more they’re willing to pay out of pocket, the less they pay in premiums. Mandating lower deductibles and other benefits will force premiums up — 24 percent higher for individual policies than under the status quo, according to Premera.
Many Democrats say that’s why a government-run insurance plan — a “public option” — is necessary. President Obama has argued it would “keep the insurance companies honest.” But if a government plan played by the same rules as private insurers, as proponents have said, it would be subject to the same upward pressures on costs. It would have to adjust by bringing in more money through higher premiums or taxes, or by paying physicians and hospitals less — which could decrease access to care.
Getting to near-universal coverage while controlling costs is huge challenge. The new system won’t work if everyone doesn’t pay into it. Ensuring they do is an essential piece of effective reform.
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