Is Health Overhaul Possible Without Requiring Coverage?

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WASHINGTON, D.C. — With a major health overhaul in deep trouble, some lawmakers want a scaled-back approach that targets the indisputably unpopular insurance industry, by enacting such popular ideas as requiring insurers to accept people with medical problems and barring them from canceling policies or charging more for customers with health problems.

That raises a question about a central plank of the legislation, however: a controversial requirement that nearly all Americans carry insurance. While many policy analysts say that such changes wouldn’t be effective without that mandate, other experts and advocates across the political spectrum contest that premise.

A major concern is that without a requirement that most Americans carry coverage, people would wait until they’re ill to obtain it, raising costs for everyone. The health insurance industry’s major trade group agreed to accept all applicants as long as there’s an individual insurance mandate drawing in younger and healthier people in order to spread risks and costs.

Some liberal and conservative thinkers and even some insurance company officials say that insurance revisions are still possible in the individual and small-group markets, where consumers are most vulnerable, even without a mandate.

Stuart Butler, the vice president of domestic policy studies at the Heritage Foundation, a conservative research center, said there were other ways to encourage Americans to buy coverage. "I’m always a little cynical when I hear an industry saying everyone should be required to buy my product," he said.

Jerry Flanagan, the health care policy director of the Consumer Watchdog advocacy group in Los Angeles, never bought the idea of a mandate. "The industry was crying a lot of crocodile tears. The idea that people won’t buy coverage unless it’s required is largely overblown," he says. A more modest bill that includes new limits on insurers but doesn’t force people to buy coverage will prove that "Congress can stand up to the industry."

Some longtime supporters of comprehensive overhaul legislation say that it can’t be pulled apart so easily, however, that the insurance revisions were part of a closely woven package that included the mandate and government subsidies for those who couldn’t afford to buy insurance.

One of the most outspoken defenders of the Democratic approach, Ron Pollack of Families USA, warned Congress in a letter Jan. 21 not to pursue an incremental approach, terming it "a recipe for disaster, both substantively and politically."

States that have tried such approaches, Pollack wrote, found that new insurance rules alone — without requiring expanded coverage — lead to "skyrocketing premiums as sicker, older people secure coverage and younger, healthier people don’t."


House Speaker Nancy Pelosi acknowledged the problem last week after announcing that there weren’t enough votes in the House of Representatives to pass the Senate’s version of health overhaul legislation, fueling the burgeoning debate over other options. "Well, I don’t think anybody disagrees with, ‘Let’s pass the popular part of the bill,’ but some of that popular part of the bill is the engine that drives some of the rest of it."

Yet, Pelosi said, "however we achieve it we must arrive at accountability of the insurance companies," listing "any discrimination (based on) pre-existing conditions" and "stopping them from canceling policies" when people get sick. Her list included provisions that Republicans might try to block, such as repealing the insurance industry’s antitrust exemption.

Republican lawmakers haven’t taken a formal position on a downsized bill, but Michigan U.S. Rep. Dave Camp, the top Republican on the House Ways and Means Committee, said last week that he could back a proposal that barred insurers
from rejecting the sick or charging them more. Still, any proposal would have to include medical malpractice revisions, said Camp, who’s opposed to an individual mandate.

Getting bipartisan support would be difficult if not impossible.

Timothy Jost, a law professor at Washington and Lee University in Lexington, VA., said, "Anyone who thinks the Republicans will embrace market reforms and help the Democrats out of this hole is crazy. They have a clear strategy to say no to everything."

All Republican proposals introduced last year lacked an individual mandate and stopped short of an outright ban on insurers rejecting people with health problems. One bill, for example, would prohibit insurers that participate in newly created, state-based insurance marketplaces — called exchanges — from rejecting applicants. The bill gives the insurers an out, however, by allowing them to sell policies outside the exchanges that wouldn’t be subject to the ban.

Although America’s Health Insurance Plans and the Blue Cross and Blue Shield Association, the leading industry groups, oppose separating insurance revisions from an individual mandate, a top CIGNA official said that it could work. G. William Hoagland, the vice president of public policy for the big health insurer, said there were some risks, including "premium spikes" in some cases, "but it’s not going to put (insurers) out of business."

Hoagland said that while CIGNA would prefer to have an individual mandate to help cushion the restructuring, "we could live without it" if it "means getting something done and moving along here. It’s better than nothing." CIGNA’s main business is selling insurance to employers, rather than on the individual market, where the changes would have the most impact.


Some experts cite the experiences of five states — Maine, Massachusetts, New Jersey, New York and Vermont — that require insurers to accept all people who buy their own coverage, such as the self-employed or those who work for companies that don’t offer insurance. Those states do set some rules. For example, they allow insurers not to pay for pre-existing conditions for a period of time — such as one year — if the person has gone for more than a couple of months without coverage before applying.

Only Massachusetts has a requirement that most residents carry coverage. In the four other states, premiums tend to cost more than they do in states that don’t force insurers to offer insurance to all who apply. A survey by America’s Health Insurance Plans found that the average policy for an individual in New York cost $6,630 last year, compared with $3,503 in Connecticut or $2,943 in California.

"You can’t point to a state that’s done it without premium increases as a result," said Mark Hall, a professor of law and public health at Wake Forest University, who predicts a backlash among consumers if Congress approves such a measure and then premiums rise.

Still, other policy experts such as Karen Pollitz, a research professor at the Health Policy Institute at Georgetown University, say that additional factors contribute to higher premiums in those states, including higher labor costs, whether individuals and small businesses are lumped together into one risk pool and how much authority state regulators have over premium increases.

Butler at the Heritage Foundation and others said that there were ways to encourage most Americans to buy coverage, short of a mandate. One way would be to enroll people in coverage automatically through their jobs. Employers would
sign up workers for employer-based coverage if they offer it or enroll them in the lowest-cost plan offered on an exchange.

Workers could opt out, but Butler suspects that many wouldn’t. "If you don’t have to do anything to be in something, you’ll be in it," he said, pointing to automatic enrollment in 401(k) programs as an example of how it could work.

He also suggested another way to prompt laggards: a "soft penalty." After an initial period of open enrollment, premiums would be higher for those who’ve been uninsured for extended periods. In addition, there could be high-risk pools for individuals who have serious illnesses.

Joseph Antos of the American Enterprise Institute, a conservative research center, proposes an initial one-time open enrollment period during which all Americans could sign up for health insurance without facing higher premiums for their health status, and with limited premium increases for their ages. However, if someone chose to remain uninsured after open enrollment ended or had a lapse in coverage, Antos said, that person could face higher premiums based on age, gender and health status.

Butler, among others, thinks that a bipartisan agreement that includes insurance revisions is possible, but others say that even scaled-back legislation would be difficult to pull off.

Chris Jennings, a former Clinton administration official who runs a consulting firm in Washington, said that groups such as hospitals and drug-makers that supported the cost-saving and revenue-raising provisions of the comprehensive bills wouldn’t necessarily sign on.

"From both a policy and political perspective," he said, "small-ball incremental reform can be as hard to viably construct as any comprehensive approach."

(Mary Agnes Carey and Phil Galewitz of Kaiser Health News contributed to this article.)

(Kaiser Health News, an editorially independent news service, is a program of  the Kaiser Family Foundation, a nonpartisan health care policy research organization that isn’t affiliated with Kaiser Permanente.)

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