Dangerous Bill To Be Aimed at the Individual Market

Do you remember when Colorado House Bill 1355 was passed last year? Beginning in January, HB1355 will essentially put an end to the current rating system in place for small businesses.  As it stands now, small businesses (groups of 2 – 50) are eligible for a discount of up to 25% if their employees are generally healthy.  On the other end of the spectrum, businesses with employees who have significant medical histories are still guaranteed issue, but with up to a 10% rate increase.  Currently, nearly two thirds of the small businesses in Colorado are receiving a discount of some level on their health insurance.  As of January, they will be hit with not only their normal annual rate increase, but their discounts will be going away.  For small businesses already struggling to pay their health insurance premiums, January will be a rough month.   It’s likely that many businesses with only a few employees, who had been getting a premium discount, will stop offering health insurance as an employee benefit, as it will simply no longer be affordable.  For the employees in perfect health, the individual health insurance market will be a workable solution.  But the introduction of community rating and the inevitable decline in the number of employers offering health insurance will present a tough situation for people with pre-existing conditions.

Sidenote: As a benefit to existing groups, Anthem Blue Cross Blue Shield is allowing employers who currently have discounted premiums and renewal dates early in 2009, to do an early renewal in November or December of 2008.  This will lock in their discounted premiums for another year (although normal annual rate increases will still apply).  But any group that processes a renewal starting January 1 will be subject to the provisions of HB1355.

Things may also get ugly for those with individual/family health insurance as-well.  There is a possibility of a bill being introduced by Colorado legislators in January 2009 to require individual/family health insurance to be guarantee-issue.  This issue is one that gets a lot of emotional response, and people often talk about the “fairness” of guaranteed issue health insurance.  It’s a nice thought:  no underwriting, no pre-existing condition worries.  But there’s a darker side to guaranteed issue coverage – most of us won’t be able to afford the policies, and that’s not fair either.  Group plans are guarantee-issue, which is why they cost so much more than individual health insurance.  But most employers pay a good chunk of the premiums, so the employees usually don’t realize the actual cost of the health insurance.  If you’re buying individual health insurance, you’re on your own; there’s no employer kicking in a chunk of the premiums.

Jay and I pay $430/month right now for a $3,000 deductible HSA policy for our family of three.  If we were to switch to a group plan through our company (and assuming we didn’t get a rate discount, since that will be going away in January), we would be paying about $700/month for a similar policy.  That’s what happens when a policy is guaranteed issue, and it’s a rate increase that would be hard for the average family to absorb – especially in a troubled economy.

And there is an even darker side to guarantee issue health insurance in the individual market – only people with health conditions will purchase health insurance.  If you knew you could get your current health insurance policy without pre-existing health conditions being a concern, why not cancel it and wait until you get a health condition to purchase the “insurance.”  This concept would not meet the definition of insurance and the system would collapse.  This is because only people needing benefits would be paying into the pool, leaving those with health conditions out to dry.

With Cover Colorado, we already have a guaranteed issue health insurance policy for people who can’t qualify for individual health insurance.  The $1 million lifetime cap means that some people will run out of coverage and have nowhere else to turn.  Instead of doing away with medically underwritten health insurance (the only affordable option for most people who don’t have access to employer-sponsored health insurance) we should work at improving the coverage in our existing high risk pool.  A state or federal re-insurance program using tax dollars to pick up the cost of high dollar claims would be a good start.  It’s not often that people exceed the lifetime maximums on health insurance policies, but we need to have a safety net in place so that bankruptcy isn’t the only solution.

There are absolutely problems with our current health care system and the health insurance industry.  But changes to the health care system like these need to be carefully thought out.  Our health care system is very complex and when legislators rush to quick solutions like they are “get rich quick schemes,” everybody gets burned in the end.

So if you currently have pre-existing health conditions and would like to double or triple your health insurance premiums, contact your legislators and tell them to remove underwriting from individual/family health insurance in Colorado so healthy people no longer have a reason to purchase coverage for the possibility of future health problems.

-Louise