Health Reform Act - first major effects - Fall 2010

The Health Reform Act as interpreted by Health and Human Services has required that starting September 23, 2010 children cannot be denied for insurance for any medical “pre existing condition”. In addition these conditions must be covered immediately. My concern is that this issue will only become “newsworthy” the weekend before September 23. This will have a profound affect on rates and perhaps availability of insurance plans. In CT this affects about 15% of all policyholders. Typically a much larger percentage of policyholders are clustered into 3 categories: self employed; retired (under 65) or young adults. For them there often is no other way to insure themselves.
What I am trying to do in this article is not make a political point (I have my own opinion about health reform). My intent is to offer a practical analysis of the impact of the changes that the Health Reform will have starting September 23rd .
Currently, if individual insurance is needed for a child 18 or younger or for a family which includes a child 18 or younger an application can be made to any of 8 individual insurance carriers . Prices vary widely, but insurance companies can reject applicants with serious or expensive medical issues. Healthy applicants can get preferred pricing. Some applicants will be accepted, but with higher premiums or riders excluding some conditions.
On September 23 (6 months after the passage March 23 of the health reform bill) this system ends for children. Let’s logically see what effect this will have. I believe virtually no one is really aware of what is coming. Since to my knowledge the final Health and Human Services regulations about this have not been released, I am basing these conclusions on what I assume they will contain.
If the insurance companies have to accept all children the premium must go up for the healthy children and families with healthy children. In Connecticut we have 2 parallel health insurance marketplaces: Individual and group. Group is about 40% more expensive than individual because they must accept everyone. On September 23, 2010 group prices will not be affected. For individual plans, prices for children will rise. A child who has a very severe medical problem, pending surgery, etc. will automatically be accepted. I believe the insurance companies will be allowed to charge up to 3 times the standard rate for high risk children. That will not be a high enough premium to cover the most severe medical cases.
Theoretically, a baby who is in Neonatal care might be able to get individual coverage. We have a very unusual situation in that a group of insurance companies, which are private commercial ventures, are being required to sell their products even when they will lose money on them. An equivalent situation might be a law that required insurance companies to sell flood insurance to cover a flood after it happened. We don’t know how many children will need coverage or how much it will cost the insurance companies, but we can say with certainty that prices will rise. There is nothing in the health reform act which helps fund this new expense for the insurance companies or the consumers.
We might see companies pull out completely of the individual market. The largest individual carrier, United Health One (Golden Rule) has already stopped selling any policies to any children unless they are on a plan with at least one parent. If other companies pull out also, carriers remaining in the marketplace may realize that they will get too many bad risks and pull out as well. We may see no providers willing to stay in this uncharted and uncertain marketplace.
In New York, individual insurance plans are already guaranteed issue and rates for children are about triple the rates in CT. New York follows existing HIPPAA laws stipulating that if someone has not had insurance for 90 days prior to the start date, then pre-existing conditions are not covered for one year. This acts as market mechanism to motivate consumers to stay insured. However, with the Health Reform Act a child can be uninsured, have a pending medical expense and then buy the insurance to cover the expense. Even New York will experience price increases, but not as dramatic. In 2014 all insurance will be guaranteed issue for all policies, but there will be penalties for not carrying insurance. In September there will be no penalty for children who are uninsured. My prediction is that premiums will be so high many consumers will have no choice but to remain un-insured and only purchase a policy when they have a known expense pending. The fewer healthy children that buy policies, the more expensive the premiums will be.
There appear to be three categories of policies in the Reform Act:
1. Policies that existed on the day the reform was passed, March 23, 2010 (“Grandfathered” plans)
2. Policies started after March 23, but before September 23
3. Policies written after September 23
I believe children added to “grandfathered” plans will not be guaranteed issue. This includes newborns and adopted children. If this is true, these policyholders could be protected from the rate increases that will affect newer plans. If not, even these premiums will go up.
At this point, I can only speculate about how the health reform bill will affect plans with start dates between March 24, 2010 and September 22, 2010. I don’t know if these plans will be required to add children to existing policies on a guaranteed issue basis after September 23. If not, and the plans remain protected, anyone who may be purchasing individual insurance and has healthy children should do so before September 23 to lock in rates.
After September 23, I assume all carriers will have new high priced plans so that they are starting with a completely new “pool” of policyholders. One carrier, Aetna, has already announced this.
I don’t have a good way to end this article. Because Health and Human Services has not issued final regulations, everyone is in a holding pattern. If I was the director of Health and Human Services and I had to issue regulations about this law, I don’t know how I would do it fairly. How this law is interpreted will affect people now and in the future. Once children are added to plans on a guaranteed issue basis how can you undo that?
Those who passed this law heard stories of children who could not get the medical help they needed under the current system. They passed the law to help them. Instead of creating some sort of high risk pool for children, they chose instead to force the insurance companies to add them to the “low risk” pool; forcing higher prices for all. I am concerned that the public will blame insurers for using this law as an excuse to increase their profit by imposing “unfair” price increases. That is not where the responsibility lies. It will be interesting political theater to see what develops, but I am afraid it cuts a little too close to our wallets as these changes occur.
The author, Joseph Knudsen, is an independent agent and the owner of Health Insurance Quote Service in Bethel, CT an agency that specializes in health insurance. (www.HIQSGroup.com)

Obama’s health plan - will it work?

Where to start?  On June 3rd 2009 Obama announced that he had sent letters to key congressional leaders outlining the key provisions of his health care plan.  He wants legislation completed before the end of August.   Here is a link to a New York Times article about this: 

Obama Open to a Mandate on Health Insurance

I have hopes ….and concerns about this approach.

Hopes:

We need a healthy private sector insurance choice.  This seems to offer it……….If people are required to buy the insurance then everyone is covered  (just like car insurance - you drive you must be insured; otherwise it affects everyone else if you cause an accident - hey maybe we should have no fault health insurance.  If you hit me and I go to the hospital I still have to pay for it!)……..This forces everyone to be responsible…..If agents can still be given commission for signing people up Obama has an army of willing helpers to make sure everyone has coverage……public option can be valid alternative if priced right.

Fears:

lots of em….in Mass. the only state to implement this type of plan, there is an escape valve for those who say that they can’t afford it. 76,000 people have been granted the right not to have insurance.  That’s way too many.  There has to be a system to include everyone. … In Mass the goverment mandated the plan design and did not allow high deductible plans….That choice has to be allowed for people willing to take the risk…..The government, which means us - the taxpayers, needs to price (or fund) the public coverage appropriately so that they don’t come to the congress in a few years saying that they totally underestimated the cost of the plan and need lots more money.  We all will have been tricked into a costly national health plan.  If this is what we want lets all decide that we will pay the price — I don’t think we will.

that’s all I have time for now