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.

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.

Specifically forbidding the practice of denying coverage to domestic violence victims is also part of the House bill, and will likely receive widespread support from both women and men alike.  But in the eight years since we started selling medically underwritten health insurance, I can’t remember a single time that an applicant was declined for being a victim of domestic violence, nor have I ever seen a question on any application asking if the applicant has been abused.  So while this provision makes sense, and will no doubt be beneficial for a few people, I imagine its strongest impact will be in helping to rid us of “blaming the victim” mentality.

The woman-friendly part of the House bill that will likely have the biggest impact on premiums is a provision that would require all plans in the health insurance exchanges – and eventually even plans outside of the exchanges – to cover maternity care.  While this sounds like a good idea in theory, it could have a significant impact on premiums.  If mandates requiring everyone to have health insurance are effective, and the pool of insureds grows to include the entire population, it will be easier to work maternity care into the cost of coverage.  But it remains to be seen how effective the mandate will be.  In Colorado, there are only a few individual health insurance policies that offer maternity coverage as an optional benefit – and they do so at a pretty high price.  The premium is high because the only people who add maternity coverage to their policies are people who intend to use the coverage.  Having maternity coverage on all policies – whether a person intends to use the coverage or not – would spread the cost, but the net result would likely be an overall increase in premiums.  I’m curious as to whether anyone has crunched the numbers and calculated how much premiums will increase if this provision becomes law.  I’m also curious as to whether people like Jay and myself, who choose to have a homebirth with a licensed midwife, would still have to pay for our maternity care out of pocket, while also paying for maternity coverage (that we wouldn’t use) as part of our health insurance premiums.  And most of all, I’m curious about whether this addition to the House bill was tacked on because it makes good financial sense for the overall population, or because it’s a feel-good provision that will help to sway the female vote.

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.

Dialysis does not remove phosphate, so my father has to be on a drug that prevents phosphate from building up in his blood.  In 2002, he was on PhosLo, a brand name drug, because the generic wasn’t available.  At that time, a three month supply cost $108.25.  Now, seven years later, he takes the generic version (calcium acetate) and a three month supply is $528.29 (a 488% increase in price).  Humana, his Medicare D carrier, picks up the tab, but we all know that claims costs are eventually passed along to insureds in the form of higher premiums or reduced benefits as time goes by.

Let’s not forget about the double digit percentage of revenue profits that most of the big pharmaceutical companies rake in.   Nor about the fact that part of Medicare D specifically disallows government negotiation with pharmaceutical companies when it comes to drug prices.  PhosLo is only indicated for patients on dialysis, the vast majority of whom are also on Medicare.  The makers of PhosLo are likely well aware that the majority of patients who take their drug will either be paying for the medication out of pocket (if they don’t have Medicare D), or they will be covered by a drug plan that prohibits the government from negotiating with the drug maker to lower the cost.

My father’s story is just one of many.  Over the last few years, the majority of the individual health plans available in Colorado have added separate  prescription deductibles or started offering plans with no prescription coverage at all.  It’s not hard to see why, when we consider the increasing cost of prescription drugs, combined with increasing utilization.

But it is frustrating to see data that appears to be supported by tangible evidence from other states being skewered as “fatally flawed”.  In New York, health insurance companies can’t decline applicants because of pre-existing conditions.  Policies are community rated, with pricing variations only for the number of people in a family and zipcode where they reside.

I tried searching on google to find a brokerage like ours, serving NY, but I wasn’t able to find one.  So I used the big box store of health insurance – ehealthinsurance – and got quotes for my own family, but with a NY zipcode.  Three quotes were returned.  Three.  They varied in price from $304/month for a policy that looked like it only covered expenses relating to a hospital stay (and had no out-of-pocket maximum), to $2572 for an HMO with all the bells and whistles.  Only two companies were represented (GHI and Empire Blue Cross Blue Shield).  To say the pickings were slim would be an understatement.  Not to mention that if we wanted anything more than an indemnity hospital plan, our health insurance premium would be more than our mortgage.

For comparison’s sake, when I get quotes on our website for our family here in Colorado, I get 459 options from eight reputable carriers, ranging in price from $133/month, to $991/month.  True, we have to be relatively healthy in order to qualify for any of those plans, but if we weren’t, we’d have Cover Colorado as a fallback option.

In NY, individual policies are guaranteed issue, but people are not required to have health insurance.  The result is that policies are much more expensive than they would be in other states, and most health insurance companies don’t do business in NY anymore.  Healthy people who want to purchase a policy find that they can’t afford to do so, and the population of people with individual health insurance in NY is dramatically smaller than it was before guaranteed issue became law.

So for people who are crying foul over the Wellpoint premium analysis, I would urge them to consider what’s happened to health insurance in places like NY.  Yes, companies like Wellpoint are in business to make a profit.  But that doesn’t mean that everything they say in the health care reform debate should be dismissed.  And if we don’t make sure that everyone becomes part of the health insurance pool (via a strong, enforceable mandate), we’ll likely be looking at fewer health insurance companies and far higher premiums after a few years of guaranteed issue policies.

Wellpoint actuaries – the people who are responsible for setting premiums – have crunched the numbers and come up with their best estimates as to how premiums would be impacted in the 14 states where Wellpoint operates.  Colorado is one of those states, and for the first time we’re able to see a detailed analysis of what would likely happen to premiums for people here, both the old and the young, the sick and the healthy.  All health insurance providers operating in Colorado have to follow the same rules as far as state mandates and regulations, and they all have to compete with each other.  So it’s reasonable to assume that the data is also indicative of what would happen to premiums on policies offered by most of the health insurance carriers in Colorado.

With the current proposed legislation, it looks like we would see a huge premium increase for young, healthy people in the individual market in Colorado (about 140%).  For average age policyholders in average health, premiums would likely increase by 52%.  Older, sicker individuals would get a break though, and would see a premium decrease of about 22%.

The bulk of the increase in premiums stems from the fact that the requirement that everyone carry health insurance has been greatly eroded over the last several weeks.  If the penalty for not having health insurance is dramatically less than the cost of coverage, it makes sense that healthy people who are trying to save money might opt for the penalty instead of the premiums.  And if health insurance is guaranteed issue anyway, why wouldn’t they?  If they started to feel sick, they could sign up for health insurance at that point, knowing that their pre-existing conditions would be covered.  The obvious result would be ever-increasing loss ratios for health insurance companies, followed by even higher premiums to try to make up the difference.  Higher premiums would mean more healthy people – who otherwise would still like to have health insurance coverage – being forced to drop their policies.  There is no possible way that guaranteed issue health insurance is sustainable unless everyone is required to be in the health insurance system.

The penalty for opting to not carry health insurance is currently proposed to start at $200/year in 2014, and would gradually increase to $750/year in 2017.  This is not even close to what health insurance actually costs, which means that people who are healthy might very well choose to pay the penalty rather than buy health insurance.   Another problem with the proposed method for enforcing the mandate is that is would work via the tax system.  That leaves millions of Americans – those who don’t file taxes, or who have no tax liability – outside of the mandate-enforcement system.  If we truly want to make sure that all Americans are insured, we need to have a better way of enforcing the mandate.  We need penalties that are approximately equal to the cost of premiums, an enforcement system that is more broad than the IRS (perhaps a combination of schools, the DMV, hospitals and clinics, and any government office), and increased subsidies for lower income families.

Health insurance for everyone, regardless of pre-existing conditions, is possible.  But it’s not possible if the system is essentially set up to encourage only unhealthy people to buy health insurance.  Insurance works by spreading risk.  We need to make sure that young, healthy people are paying into the insurance pool in order to offset the claims made by older, sicker individuals.  Without a strong, widely enforced mandate, guaranteed issue health insurance isn’t a  sustainable proposal.

1.  It’s important to know that each health insurance carrier has its own underwriting guidelines.  Just because you’ve been declined by one carrier, does not necessarily mean you’ll be declined by all of them.  We can give you an idea – based on your specific health history – of whether you might have better luck with a different carrier.

2.  Cover Colorado is available for most people who have been declined by a private health insurance carrier.  Cover Colorado is the state high risk pool, and has been providing health insurance for people with pre-existing conditions since 1991.   They offer premium discounts if your household income is below $50,000/year.  Applications must be received by the 15th of the month in order to qualify for a 1st of the following month effective date.

3.  Are you self-employed?  You may qualify as a business group of one.  You must have been in business for at least one year in order to qualify as a business group of one.  The state mandated Basic and Standard health insurance plans are guaranteed issue for a group of one during specific open enrollment periods, defined as 31 days from one of the following events:  the one year anniversary of the opening of your business, your birthday, or the loss of other coverage.  You can contact the Colorado Division of Insurance for more information about group of one regulations.  Like most group policies, group of one coverage is more expensive than most individual policies.  The notable exception is in the case of large families.  Individual health insurance premiums are calculated on a per-person basis, whereas group premiums have “family” rates that don’t vary with the number of children.  Group of one policies are offered by all carriers that offer group health insurance policies in Colorado.  The state mandated benefits in the Basic and Standard plans are the same regardless of what carrier you choose, but the price varies from one carrier to another.

4.  Have you recently left a job?  You may qualify to continue your coverage under COBRA or Colorado state continuation regulations.  COBRA applies to people who worked for a company with 20 or more employees, while state continuation applies to people who worked for a company with 2 – 19 employees.  In both cases, you’re allowed to continue your group coverage for up to 18 months (or more, depending on some specific circumstances), but you will be required to pay the entire premium, including the portion that your employer was paying on your behalf.  If you’re covered under COBRA regulations, you have 60 days to elect to continue your policy after you leave your job.  In the case of state continuation (if you were working for a company with fewer than 20 employees), you have 30 days to elect to continue your coverage.

5.  Depending on your income, and several other factors, you or your dependents may qualify for Medicaid.  In addition, children and pregnant women in Colorado may qualify for Child Health Plan Plus (CHP+) if their household income is less than 200% of the federal poverty level.

6.  Do you work for a small company that does not provide health insurance?  You could discuss the issue with your employer, and see if you can convince them to enroll in a small group plan.  Groups of 2 – 50 employees are guaranteed issue in Colorado, and with the passage of HB 1355, small group premiums cannot be adjusted either up or down during enrollment based on the medical history of the group members.

Thankfully, we live in a state where there are several options for people who are unable to qualify for private individual health insurance.  This is not the case in all states, although maybe the ongoing health care reform debate will eventually add options where there currently are none.

This will no doubt cause some consternation among workers who see reductions in benefits and increased out-of-pocket exposure, but with the state of the economy and the rising cost of health care, it’s the only avenue that really makes sense for employers.  Most companies that offer health insurance benefits do so as a way to attract and retain the best workers they can find, so limiting benefits and increasing the employees’ share of the costs is likely the option of last resort.

But maybe it makes sense, regardless of how well the economy is doing.  There’s no doubt that a co-insurance based system, where employees pay a percentage of the charges, rather than a flat copay, would make people more aware of what health care actually costs.  Nobody should have to devote their life to trying to obtain coverage for a serious medical problem, but on the other end of the spectrum, perhaps nobody should be paying only $15 to see a doctor, and a deductible of a couple hundred dollars a year.  Health insurance plans that cover nearly all costs for their members have the effect of insulating consumers from the true cost of health care.  This is especially so if the premiums for the health insurance policy are mostly paid by the employer.

When it comes to things like housing and vehicles and food, most people expect to pay those expenses – which are often quite significant – without assistance from anyone else.  It seems to me that health care is equally as important as transportation and shelter, but because we’ve grown accustomed to the idea of someone else paying the lion’s share of the bill (ie, health insurance companies and our employers), we don’t expect our own health care expenses to be as much as we spend on other life necessities like housing and groceries.

For self-employed people, and those who have been buying their own health insurance because they don’t have access to a group plan, high deductibles and annual premium increases are already a fact of life.  Most of our clients here in Colorado opt for deductibles in the $1500 – $3000 range, and often choose HSA qualified plans as a way to lower their premiums – with the understanding that they will be taking on an increased portion of the claims if they get sick.  But most working Americans get their health insurance through their employers, and have thus been largely shielded from the actual costs of health care and health insurance.  Perhaps that is changing now.  And perhaps the changes will increase pressure on the health care industry to do something about spiraling costs.

One of the major aspects of health care reform that has gained a lot of traction this year involves doing away with medical underwriting on individual health insurance policies, and would require health insurance carriers to accept all applicants, regardless of health history.  Obesity is considered a pre-existing condition by all of the individual health insurance carriers in Colorado.  Obviously applying these standards to a healthy, breastfeeding baby is ill advised, but I believe it makes sense for adults.

The guidelines are currently pretty lenient when it comes to weight.  Most carriers start to increase the premiums on their policies if an applicant has a BMI of around 30 – which is the cutoff for obesity, according to the CDC.  Being overweight, but not obese (BMI of 25 to 29.9) doesn’t result in a rate increase at all with many carriers.  So a 5′5″ female can weigh up to 180 pounds and still qualify for a standard rate with many of the individual health insurance carriers in Colorado, assuming she is a non-smoker and doesn’t have any other pre-existing conditions.

I’m curious to see what happens to underwriting regarding obesity and tobacco use as health care reform moves forward.  Both of these factors are known to increase health care costs.  They’re also factors that each person can control – not saying that it’s easy, but it can be done.  I can see the benefit to making sure that everyone gets accepted for health insurance, regardless of weight, as it’s counterproductive for society as a whole to have people who are uninsured.  But I believe that it makes sense for obese applicants, and tobacco users, to pay more for their health insurance in order to offset the higher claims they are statistically likely to have.

I’m curious to hear what our readers think about this topic.  Should obese applicants pay more for their health insurance than normal weight applicants?  What about smokers?  Does this amount to something akin to a regressive tax, since lower income people are more likely to be overweight, and also more likely to be smokers?  Should income then be taken into consideration when setting health insurance premiums?