Over the years, we’ve written several times about how guaranteed issue could become a reality in the individual health insurance market, as long as it went hand in hand with a mandate requiring that everyone obtain health insurance. Today we’re pleased to host a guest article in our “Open Mic” category from John Martie, President of Anthem Blue and Cross Blue Shield in Colorado. John writes about how guaranteed issue coverage could work in conjunction with mandatory coverage and government subsidies to help people afford premiums.
As Congress debates health care reform, it is clear that access has emerged as a major issue. And rightly so. Everyone agrees it is unacceptable that 46 million Americans live day-to-day without health insurance.
The first item on the President’s health reform agenda requires insurance companies “to cover pre-existing conditions” so all Americans regardless of their health status or history can get comprehensive benefits at fair and stable premiums.”
Anthem Blue Cross and Blue Shield agrees that we need to move to a system where all Americans – including those with pre-existing conditions – have access to health insurance. In fact, the health insurance industry announced its support for the elimination of pre-existing conditions as a barrier to eligibility for individual and small group coverage in November of 2008.
But in order for health insurers to offer what is known as “guaranteed access,” Congress must first adopt a comprehensive plan that would require all individuals to keep and maintain health care coverage. The simple truth is that the health insurance system cannot provide guaranteed coverage for pre-existing conditions unless there is an effective, enforceable individual mandate in place.
Understanding why this would be necessary requires a basic understanding of how insurance markets function.
As readers of the Colorado Health Insurance Insider know, Insurance markets pool risk. An insurance system will only work if the exposures of low risk individuals are pooled together with the exposures of higher risk individuals. Life insurance, homeowner’s insurance, auto insurance; they all work the same way. If health insurers are required to offer guaranteed access without an effective mandate requiring all Americans to maintain coverage, there would be a clear disincentive for healthy people to secure or maintain coverage.
Why? Because such a system would allow people to sign up for health insurance only when they get sick or need care. This would be the same as allowing people to obtain auto insurance after they have had an accident or secure homeowner’s insurance after their house has burned down. Health insurance premiums would skyrocket for those who keep their coverage leading to a widespread cancellation of policies, ironically, leading to higher levels of uninsured individuals.
Obviously, this won’t work. It’s not sustainable. Guaranteed issue will require some form of enforceable mandate.
While there has been a great deal of discussion – and a growing acceptance – that full guaranteed issue in the individual market cannot be enacted without an effective individual mandate, there has been little discussion on the details of how an individual mandate would be structured and enforced.
As we see it, an effective individual mandate must have three essential components:
(1) subsidies to ensure coverage is attainable for everyone,
(2) checkpoints to verify that every individual has coverage, and
(3) a penalty for noncompliance.
Given the fact that 82% of the uninsured are in families with a family income below 300% of the Federal Poverty Level, government subsidies will be needed to help lower-income Americans maintain their coverage.
Checkpoints would have to be established to make sure all individuals are carrying coverage on a continuous basis. To ensure there are no “free riders,” the checkpoints would have to be structured in a way that is designed to capture 100% of the population that is eligible for “guaranteed issue.” The tax filing process could be one checkpoint, but others must also be employed such as renewal of a driver’s license, school enrollment or applying for a federally-backed student loan or mortgage.
A new federal health insurance database (or databases at the state level) would need to be established that has the capability to confirm the coverage of every person eligible for “guaranteed issue” coverage.
And lastly, there must be a significant penalty for noncompliance. The penalty must be greater than the cost of coverage and applied for each month where coverage lapsed.
Anthem and other private insurance companies are committed to working with government leaders and stakeholders to improve America’s health care system. As this process begins in earnest, it is important to make sure that the efforts to reform are more than just well intended; they need to be effective. We want to make sure that all Americans have health security and access to quality affordable health care. We must make sure that the reform measures do not lead to unintended consequences.
Maintaining a balanced individual market in a “guaranteed issue” environment is especially challenging. Guaranteed issue must be paired with a well-structured, effective individual mandate and sufficient government subsidies to assure that premiums remain affordable.
To take action, please visit: www.healthactionnetwork.com
John Martie, President
Anthem Blue Cross and Blue Shield in Colorado