Insurance carriers in Colorado were strongly opposed to HB1355.  The majority of small businesses in Colorado were receiving a discount on premiums based on health status, which HB1355 forbids.  Insurers knew that businesses that were already struggling to pay premiums at a reduced rate might decide to forgo health insurance for their employees after the discount was eliminated.  This is especially true for the most healthy groups, whose members can find health insurance within the medically underwritten (and less expensive) individual market.  Of course the removal of healthy groups from the pool of insureds only serves to drive premiums even higher for the sicker groups who remain insured under the group plans.  It’s true that groups can no longer be rated higher than the base rate because of the specific health of the group, but the base rate can – and likely will – continue to rise.

Critics are questioning why insurers keep bringing up HB1355, as the trend in national health care reform these days is towards guaranteed issue health insurance without underwriting – which is what HB 1355 was all about.  But while HB1355 was beneficial to groups with unhealthy members, the majority of small groups in Colorado had a discount before HB1355 took effect.  And if those groups are unable to afford their new, higher rates, they can opt to cancel their coverage – which leads to higher prices for groups that remain covered.  On a national level, as far as individual health insurance is concerned, HB1355 should be considered a warning sign.  Getting rid of medical underwriting is the right, and fair, thing to do.  But not if people can come and go as they please in the insurance system.  We’ve seen what the impact will be on premiums if guaranteed issue coverage takes effect without a strong mandate requiring people to carry health insurance.  I think this is why insurers are still bringing up HB1355.  It’s impacting all small groups in Colorado now – there’s no more putting it off.  And significant rate hikes for healthy groups should serve as a warning for what we’ll likely see in the individual market if reform passes without a way to make sure that everyone is part of the insurance pool.

The good news is that the 11.8% rate hike is the lowest percentage increase Colorado businesses have seen in this decade (the next lowest were in 2000 and 2005, when rates jumped by 12%).  So while the increase is higher than the national average, perhaps it’s headed in the right direction.  Maybe one of these years, we’ll see a single digit rate increase.

Colorado residents tend to be healthier than the average American.  We’re thinner, and have lower incidence of hypertension and diabetes than most of the rest of the country.  So why would health insurance rates be rising faster here than in the rest of the country?  My guess is that it has something to do our higher-than-average percentage of the population without health insurance.  17.2% of Colorado residents are uninsured, compared with national numbers that tend to be in the 15 – 16% range.  When uninsured patients are treated by our health care providers (emergency rooms are a good example of this), the providers have to recoup their losses somehow.  This usually translates into higher reimbursement rates being negotiated with health insurance companies.  The insurance companies pass on their higher costs to customers in the form of higher premiums and/or reduced benefits.

Since Colorado has a higher percentage of the population without health insurance than the country as a whole, I imagine this has to have something to do with our health insurance premiums rising faster than the rest of the country.  Unfortunately, this is a self-perpetuating cycle: higher premiums mean that more businesses drop their health insurance policies, leading to more uninsured people, which leads to higher premiums for the people who still have coverage.  Not a good scenario, any way you look at it.

Of course, the question remains as to whether or not a public option would actually cause private health insurance premiums to rise more quickly than they already do.  David Williams believes that it would not, and has detailed several reasons for this in his article, which is well worth reading.

I found David’s article in Grand Rounds, hosted this week at Non-Clinical Jobs.

In 2007, the Lewin Group released a report for the Colorado Blue Ribbon Commission for Health Reform.  It showed that 38.7% of Colorado residents age 19 – 24 were uninsured.  This was far more than the next highest category (27.1% of people age 25 – 34 were uninsured).  Several factors contribute to the high percentage of young people who are uninsured.  They tend to be healthy, and thus aren’t as likely to see the value in health insurance.  They tend to work in entry-level jobs that aren’t as likely to provide health insurance benefits.  And they usually have lower incomes than older workers, making health insurance – even if it is cheaper for them – harder to afford.

Various committees in congress have proposed reforms that limit premiums for older Americans to two, three, or four times the cost of premiums for younger people.  One way or another, health insurance companies have to take in enough in premiums to cover the cost of claims for the entire insured population.  If the amount that can be charged for older insureds is limited to twice the cost of premiums for younger people, it makes sense that premiums for younger people will rise substantially above where they are now.  Given the large number of uninsured young people – many of whom cite cost as a major factor in their lack of coverage – it seems that dramatic increases in premiums for this demographic will be counterproductive.  Especially if the mandate requiring everyone to have health insurance remains weak.

In order for the health insurance system to function well, and really spread risk across the whole population, we need to make sure that young, healthy people are insured.  And to do that, we have to make sure that premiums are affordable for them.  People who are sick, and people who are older and more likely to have chronic health conditions, already see the value in health insurance, and will work to fit it into their budget.  Young, healthy people might not have as much motivation to budget for health insurance.  And if the premiums skyrocket, they will be even less likely to obtain coverage.  We need to work on long-term solutions for lowering health care costs for everyone.  But in the beginning, we need to make sure that young, healthy individuals aren’t facing health insurance premiums that are dramatically higher than the current premiums that they struggle to afford.

In Carroll’s article, she described a meeting of the Health Care Task Force where the practice of gender-based pricing in health insurance was debated.  I am amazed by the comment from Rep. Jim Kerr, who explained that “women like to shop” and we should thus do a better job of shopping for our health insurance.  And by the health insurance underwriter (a male) who said we should “blame God” for the fact that women’s parts are on the inside and men’s parts are on the outside.  Seriously?  Those comments alone make me hope for gender equality in health insurance just so that we can stop having this discussion.

Senator Carroll also noted in her article that in the individual health insurance market “the rates are already significantly higher than in the small or large group market.”  This isn’t correct – in fact, the opposite is true.  In most states, including Colorado, group health insurance premiums are more expensive than individual premiums.  This is because individual plans can exclude pre-existing conditions or decline applicants with serious health issues.  In addition, group plans have more state mandated coverage (like maternity) than individual policies.  For my own family, a group health insurance plan would be twice as expensive as our individual plan (even for a policy with much higher out of pocket exposure).

It’s a common misperception that group policies are less expensive than individual policies, likely because employers pay a chunk of the group policy premium, masking the true cost of the employee’s health insurance.  The amount that is taken out of an employee’s check is not the actual cost of the health insurance.

One of the analogies presented says that forcing everyone to carry health insurance would be like a person living in a building with pyromaniacs as neighbors having to pay for fire insurance along with everyone else – with no option to move.  I can see this argument being valid in the case of someone who works for an employer who only offers one health insurance policy to all of the employees.  Premiums in group health insurance plans typically vary by age but not much else.  So a non-smoking employee who exercises six days a week and eats vegetables at every meal will have the same premium as a same-age coworker who smokes and is obese.  The employer will pay part of the premiums, but it’s very common these days for the employees to have part of the premium deducted from their paychecks.  If the employer doesn’t offer any other options (like a higer deductible or an HSA qualified plan), the healthy employee could well become frustrated at paying for benefits she isn’t likely to use.  But it’s quite common for employers to offer a couple different choices, with a lower-cost, higher deductible option for people who don’t think they’ll need much in the way of health care.

I don’t buy the argument that people should be able to opt out completely from health insurance.  Because no matter how healthy we keep ourselves, the unexpected can still happen.  If you’ve chosen to “self-insure” and then you get struck by lightening while walking your dog in the park, who is going to pay your medical bill?  If you’re unconscious at the scene, the paramedics will load you up in the ambulance and take you to the hospital.  Upon arrival there, doctors and nurses will pour their hearts into trying to restart yours.  What if you wake up a few days later in ICU, alive, but very much in debt?  Will you declare bankruptcy, leaving the hospital to write off the bill?  That leads to higher premiums for the people who do carry health insurance, as hospitals charge more to cover their overhead – which includes bad debt.

The fact is, no matter how careful we are, no matter how healthy we keep ourselves, no matter how many veggies we eat and miles we walk, we never really know what is around the bend when it comes to our health.  Accidents can happen to even the healthiest people.  Freak illnesses can strike otherwise healthy people.  And when these situations arise for people who are uninsured, the cost is eventually borne by those who have health insurance.  Yes, the people who take excellent care of themselves are less likely to need medical care.  But less likely doesn’t translate to never.

From a personal perspective, we work hard to keep our family healthy.   Because we know that we’re very unlikely to need our health insurance for illness, we have a high deductible HSA qualified policy.  We’re willing to gamble a bit when it comes to our health care.  If something happens to one of us, we’re on the hook for the first $5000.  And because we know that our chances of needing health care are low, that’s a gamble we’re willing to take.  But our chances of needing healthcare are not zero, no matter how hard we try.  Which is why I consider opting out of health insurance all together to be a bit on the irresponsible side (unless you’re wealthy to the point that a policy that covers $5 million in claims isn’t any better than your own bank account).

Chris’ article was in the Health Wonk Review this week, hosted by Healthcare Technology News.

In doing some research, I discovered that Colorado had a co-op, called the Colorado Health Insurance Purchasing Cooperative (CHIP) back in the 90s.  It was formed in 1995, and only lasted a few years.  Its members were large and small employers in Colorado, individuals were not allowed to join the co-op.  Eventually, health insurance companies just started offering lower premiums directly to businesses, and by-passed the co-ops.

People who are familiar with co-ops (credit unions and electricity co-ops are good examples) tend to like them, and this idea is probably less of a lightening rod for political tension than a public health insurance plan.  Although it has drawn plenty of criticism for being a weak answer to a big problem.

One of the criticisms of the private health insurance industry is that there isn’t much real competition.  Proponents of the co-op idea believe that co-ops would increase competition and thus drive down costs.  I’m sure that this is the case in some markets, but here in Colorado we have a pretty robust health insurance market, with lots of companies competing with each other.   Initial underwriting can result in higher premiums based on a person’s medical history.  But after that, future annual premium adjustments are based on claims history for everyone who has a particular policy, thus the risk is spread across a large population.

In the small group market in Colorado, HB 1355 took away the ability of health insurance carriers to adjust premiums based on the health of a group.  So rates for small groups are determined without regard for each specific group’s medical history.  Instead, all groups are rated the same, based on claims history for all of them combined.  The small group market in Colorado includes many of the same carriers who offer individual health insurance here, and there are several options from which an employer can choose when shopping for a group plan.

Co-ops might very well be able to bring down costs by introducing an additional element of competition to the health insurance market.  But premiums for small groups in Colorado are already determined based on aggregate claims, rather than individual histories, and annual premium adjustments for individual policies are also based on aggregate claims.  The idea of individuals banding together to purchase health insurance as a group is often touted as a solution, but group health insurance is actually more expensive than individual insurance (because of the state mandates for group policies, such as maternity coverage, and because group health insurance is guaranteed issue while individual health insurance is medically underwritten).  Co-ops might be a beneficial addition to the health insurance market, but I think that there are a lot of misconceptions that would need to be cleared up before any realistic dialog could take place around this issue.

I agree with Henry here.  There is no reason why employees who get health insurance through their employer should get a tax break, while those who purchase individual health insurance don’t.  There are currently two tax mechanisms working in favor of employer-sponsored health insurance.  First, the employer gets to deduct the premiums as a business expense, and second, the employees are not taxed on the value of the health insurance.  So if an employee is earning $40,000/year and also receiving health insurance benefits worth $10,000/year, he’s only taxed on the $40,000 salary, and not the value of the health insurance.

Contrast this with an employee who works at a company that does not provide health insurance, and also earns $40,000/year.  Let’s say he takes the frugal route and purchases an HSA-qualified health insurance plan for his family for $5000/year.  Not only is he on his own to pay the premium, but he has to pay it with after-tax dollars.  He can save pre-tax money (if he has any left over) in the HSA to help cover future medical expenses, but the actual premiums aren’t tax-deductible for him.  (note that the employee described above is also free to set aside pre-tax dollars in an HSA if his employer offers and HSA-qualified health insurance policy).

Obviously, if we do away with the tax break that employers get for providing health insurance to their workers, they might stop providing it.  But if the workers have reasonable, affordable, quality options for purchasing health insurance on their own, it isn’t necessarily a bad thing that health insurance would no longer be tied to jobs.  There are, however, benefits to group health insurance that aren’t currently available in the individual market.  In Colorado, very few individual health insurance policies cover maternity, whereas all group plans do.  And while group plans are guaranteed issue (for groups of 2 – 50 employees), individual health insurance is medically underwritten.  So we wouldn’t want to just do away with group health insurance and send people out into the individual health insurance market the way it is today.  But with all of the reform on the horizon, I imagine that there will be plenty of changes to individual health insurance over the next decade or so.

I do hope that we eventually see a change in the tax code so that if there’s a tax break for having health insurance, it’s available to everyone who has health insurance, and not just those who have policies that are tied to their jobs.

I found Henry’s article in the Health Wonk Review, hosted last week at  The New Health Dialog Blog.

This is a big step forward for health insurance, and one that I hope we’ll see in other areas and from other carriers. Boulder is a great place to start something like this, as Boulder residents do tend to utilize alternative health care more than the average Colorado resident.  But over the years, we’ve had inquiries from people all over the state who are looking for a health insurance policy that will allow them to utilize alternative care.

The Boulder Chamber plan is a good start.  It’s currently available to Boulder Chamber of Commerce members who have between 1 and 50 employees.  Eventually I’d like to see alternative care available as an option for people throughout Colorado, regardless of where they live or work.  On a personal note, I’d also like to eventually see plans that offer maternity coverage include midwifery and homebirths in their benefits package.

It’s great to see Anthem Blue Cross Blue Shield recognizing the importance of alternative medicine for some people.  Obviously this would not be a benefit for everyone, but no one health insurance benefit will be utilized by everyone who has a particular policy (and the Boulder Chamber is offering several other Anthem plans with various designs, so the alternative care isn’t being forced on anyone who doesn’t want it).  Choices and options are important, as everyone has different views on health and wellness.  And with the advent of this new plan, a small business owner who is committed to alternative medicine and turned off by traditional health insurance policies might get on board with health insurance for her employees – and that’s a good thing.

Duncan Cross is very familiar with the health care system in the US.  He’s been through more than his fair share of medical procedures.  And he’s not impressed with a recent WSJ editorial that calls for Americans to take on more of the cost of their health care.  I can absolutely see his point.  He’s had to self-ration health care because of money.  He struggles to afford COBRA.  He’s already paying a good chunk of his income for health insurance and health care.  And his chronic illness means he’ll have to keep doing so indefinitely.

But I think that the WSJ editorial might have been aimed at a different sector of the population.  Although there are plenty of people like Duncan Cross who pay all of their own health insurance premiums and then have to continually pay out additional amounts for treatment of chronic illnesses, there are others who pay little or nothing for their health insurance premiums (thanks to employee benefits) and have very low copays when they seek care.  I was talking recently with a friend who is pregnant.  She had a baby a few years ago, and spent a total of $200 for the pregnancy and delivery.   She mentioned that her new health insurance plan is “nickle and diming” her, because she had already spent $200 for prenatal care and ultrasounds, and was going to end up paying another few hundred dollars by the time the delivery (a scheduled c-section) is complete.  This is the sort of person that I think the WSJ editorial is aimed at.  I honestly don’t think that she knows or cares how much her prenatal care and surgical delivery cost.  Her portion is a tiny fraction of the total, and yet to her it seems like a lot of money.  It’s all relative.  I have a friend who paid $7000 for her c-section delivery – and yes, that was with health insurance.  Both women had employer sponsored health insurance, but with drastically different coverage.

Proponents of HSA qualified, high deductible health insurance plans say that they make people think twice before utilizing health care.  The jury is still out on whether this is the case.  I know that a lot of our clients in Colorado request HSA qualified plans, mainly because the premiums tend to be lower.  Jay and I have an HSA qualified plan, and it has worked well for us.  But we’re healthy, with no chronic medical issues, and we’re the sort of people who would think twice (or six times) before utilizing health care anyway.  Even when we had fancy group health insurance coverage with $15 copays, we never went to the doctor.   I have a feeling that a lot of our clients who request HSA qualified plans look at health care the same way.  We don’t mind shouldering a potentially hefty chunk of our health care costs, because we typically don’t have much in the way of health care costs.  I have a suspicion that the people who wrote the WSJ article are probably in a similar position.  But the perspective probably looks a whole lot different if you’re not only paying for your own high deductible health insurance, but also facing the prospect of meeting that deductible year after year.

I found Duncan’s article in this week’s Grand Rounds, hosted at ACP Internist.