A ban on health insurance discrimination might make ‘cherry picking’ worse

  • Sat Oct 3rd, 2009 11:14pm
  • News

By David S. Hilzenrath The Washington Post

Any health-care overhaul that Congress and President Barack Obama enact is likely to have as its centerpiece a fundamental reform: Insurers would not be allowed to reject individuals or charge them higher premiums based on their medical history.

But simply banning medical discrimination would not necessarily remove it from the equation, economists and health-care analysts say.

If insurers are prohibited from openly rejecting people with pre-existing conditions, they could try to cherry-pick through more subtle means. For example, offering free health club memberships tends to attract people who can use the equipment, says Paul Precht, director of policy at the Medicare Rights Center.

Being uncooperative on insurance claims can chase away the chronically ill, but is less of a factor for people who have few medical bills, said Karen Pollitz, research professor at the Georgetown University Health Policy Institute.

And to avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark Pauly, professor of health-care management at the University of Pennsylvania’s Wharton School.

By itself, a ban on discrimination would not eliminate the economic pressure to discriminate.

“It would probably increase the incentive for cherry-picking,” Pauly said. “I’m strongly motivated to try to avoid you if I’m not allowed to charge you extra.”

Cognizant of the threat, lawmakers are trying to neutralize it. For example, the bill advanced by Senate Finance Committee Chairman Max Baucus, D-Mont., calls for creation of complex mechanisms to essentially raise or lower compensation to insurers depending on whether they attract disproportionately sick or healthy populations.

The bill assumes the problem would be greatest during the first few years; after that, part of the machinery to compensate for variations would go away.

A straightforward way to reduce gamesmanship is to standardize benefit packages, Precht wrote in a July report. One of the issues lawmakers must resolve is how much latitude to leave insurers over what they cover and how.

Unless lawmakers tackle the problem effectively, a reformed health-care system could continue to reward insurers for avoiding rather than treating illness. It also could perpetuate existing economic penalties for health plans that do a better job of covering the sickest patients. They tend to attract costlier members, which can force them to raise premiums, fueling a cycle that can make it harder for the severely ill to get affordable coverage.

“In a competitive market, a good-guy insurer is a patsy,” Pollitz said. “The race is to the bottom.”

America’s Health Insurance Plans, a lobbying group for health insurers, has endorsed the idea of guaranteeing individuals access to coverage regardless of their medical history if that guarantee is part of a larger plan to help the uninsured pay for coverage and bring everyone into the insurance market.

At a more nuts-and-bolts level, America’s Health Insurance Plans has been trying to shape the legislation in ways that could help insurers attract the healthy and avoid the sick — though it has given other reasons for advancing those positions. In a recent letter to Baucus, AHIP president Karen Ignagni said benefit packages “should give consumers flexible options to meet diverse needs.”