Two health wonks I very much respect are debating health insurance reform. Joe Paduda and Hank Stern have very different ideas on this topic, both presented in a well-thought-out fashion, and I had to weigh in.
Joe starts off by saying “Congress could pass and the President could sign legislation prohibiting medical underwriting in the individual market, requiring insurers to cover pre-existing conditions, mandating community rating, and establishing a basic benefits plan.” He then goes on to describe some mechanisms for implementing his ideas, including a provision to allow insurers to charge additional premiums to those who don’t sign up within a specific time frame – thus guarding insurers and insureds against people who would “cheat” the system by waiting until they are sick before enrolling in coverage.
Hank responds by noting that community rating tends to drive health insurance premiums higher, and that prohibiting underwriting in individual health insurance would mean that “healthy folks pay an undeserved penalty“. From my personal perspective, as a healthy person (with individual health insurance) who works very hard to stay that way, I will admit that I would be frustrated if my health insurance premiums were to rise even higher because my insurer suddenly had to treat my application the same as that of a smoker with 100 extra pounds on her frame. It’s easy to say that a person who is overweight or using tobacco is making choices that adversely impact her health. And that means that it’s easy for those of us who do not fall into that category to justify higher health insurance premiums for those who do. But where do we draw the line between health problems that are self-induced and those that are bad luck? A person diagnosed with Type 1 diabetes as a six-year old will be denied individual health insurance in Colorado, as will an obese Type 2 diabetic (whom a lot of folks would say caused his own illness to some extent). Is it fair that both people are ineligible for individual health insurance in almost every state because of medical underwriting? Hank’s view is that “risk isn’t just “spread,” it’s managed, and there’s no way to manage risk if everyone’s treated the same. This goes against the whole premise of insurance. An interesting thought, for sure. But I would argue that the health insurance industry is bound by a moral obligation not present in other insurance industries.
When someone insures a car, there is a specific value assigned to the car. We can each choose what sort of car we drive, and thus choose to pay higher or lower auto insurance premiums depending on the value of our cars. We can also control our liability insurance costs to some extent, by driving safely and avoiding tickets and accidents. If your rates are higher because of an at-fault accident or a ticket, it’s a pretty fair assumption that you were indeed responsible for your own rate increases.
The situation is not nearly as cut and dried when it comes to health care and health insurance premiums. Pre-existing condition exclusions and underwriting that results in rate increases or denials can be the result of bad decisions (eg, smoking), bad luck (eg, lupus), or a combination of both (eg, Type 2 diabetes). So I would say that the “whole premise of insurance” is a little different when it comes to health insurance. We can’t put price tags on lives the way we can on cars. And we can’t easily ascertain fault when it comes to medical history the way we can with driving history. Nor can we say with certainty whether higher premiums are “deserved” or “undeserved.” So although community rating and lack of underwriting do increase prices for healthy individuals, health care is a necessity in any society, and I believe that we have a responsibility to provide all Americans with access to quality health care (without bankruptcy courts getting involved).
There are lots of other points to consider in the articles that Hank and Joe have written. They encompass ideas from both sides of the health insurance debate, and are well worth the read.