Health Insurers Propose End to ‘Risk Rating’ in Individual Market

In a letter sent Tuesday to leaders of the Senate Finance Committee and the Senate Health, Education, Labor and Pensions Committees, America's Health Insurance Plans and the BlueCross BlueShield Association said that their memberships would be willing to end the practice of charging different premiums based on individuals' health status if all U.S. residents were required to obtain coverage, CongressDaily reports (Edney, CongressDaily, 3/25).

The proposal would apply to the individual health insurance market, which provides coverage for about 5% of insured U.S. residents younger than age 65, according to CQ HealthBeat (Adams, CQ HealthBeat, 3/24). The letter stated that the groups still would vary premiums based on other factors, such as members' age and place of residence (Alonso-Zaldivar, AP/Houston Chronicle, 3/24).

Insurers traditionally have said that without the ability to raise premiums for sick members, they would have to charge higher premiums to young, healthy people, but the new proposal indicates that they are considering "ideas to prevent such sharp increases by spreading the risk and costs broadly across a larger population, including the healthy and unhealthy," the New York Times reports (Pear, New York Times, 3/25).

In the letter, AHIP President and CEO Karen Ignagni and BCBS President Scott Serota wrote, "By enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe we could guarantee issue of coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market" (Levey/Girion, Los Angeles Times, 3/25).

At a Senate HELP Committee hearing on Tuesday, Ignagni said, "When you have everyone in the system, and you can bring (financial) assistance to working families, then you can move away from health status rating" (AP/Houston Chronicle, 3/24). She also said, "This is a major step, and it changes everything about how the market works" (Wolf, USA Today, 3/25).

The letter also stated that insurers would be willing to accept increased regulation of their benefits, underwriting practices and other elements of their businesses, which they believe would eliminate the need for the type of public insurance option President Obama and many Democratic leaders support (New York Times, 3/25).

Ignagni and Serota wrote, "Creating a new government-run plan would thwart the ability of the health care sector to implement meaningful delivery system reforms, exacerbate the cost shifting from public programs to consumers in the private market and destabilize the employer-based system" (Los Angeles Times, 3/24). Ignagni added that "what we have proposed is an aggressive system of government regulation that would supervise private sector competition, and the competition I think people want" (CongressDaily, 3/25).

Public Option

Other health insurance industry officials at the hearing said that one of their main goals is to prevent a new public insurance plan, which they see as a detriment to the private insurance market.

Ronald Williams, chair and CEO of Aetna, said that a public plan cannot co-exist and compete on an even plane with private insurers. The public plan would be able to leverage its size to set rates that providers must accept, similar to the way Medicare sets payment rates. He noted that providers charge private insurers higher rates to account for lower rates paid by Medicare and other public programs.

Karen Pollitz, a professor at Health Policy Institute at Georgetown University, said an expanded public coverage system, which would accept individuals that private insurers deny, is "absolutely essential" (CQ HealthBeat, 3/25).

Reaction

Sen. Jeff Bingaman (D-N.M.), who chaired the hearing in the absence of HELP Committee Chair Edward Kennedy (D-Mass.), said, "It was a significant step for [the insurers] to take," adding, "That's certainly not been their position in previous years. I hope it moves us closer to something that we could label a consensus."

Senate Finance Committee Chair Max Baucus (D-Mont.) said, "It indicates that we may be able to have health care reform this year because the major players are stepping up and saying they are willing to play" (New York Times, 3/25). He added that while the insurers "don't agree with everything ... at least they're proponents in the sense they want to work positively and constructively in terms of a solution," and "they think something is moving, and it is moving, and they want to be on the train."

HELP Committee ranking member Mike Enzi (R-Wyo.) said, "This is a good sign that a bipartisan deal is possible if everyone comes to the table with an open mind and an eye toward solutions" (CongressDaily, 3/24).