Draft Regulations Exempt High Deductible Plans From Rules On Consumer Cost, Preventive Care, Drug Coverage

Santa Monica, CA — Draft regulations issued today to exempt high deductible health plans from minimum coverage requirements would gut the quality and affordability promises of Massachusetts’ health insurance mandate. Under the regulations, the purchase of high deductible health plans (HDHPs) would satisfy the individual mandate without meeting minimum creditable coverage (MCC) rules that limit consumer cost, provide coverage of preventive care and require inclusion of prescription drugs.

“We can only imagine that the Board is considering an HDHP exemption in response to criticism that health plans recently approved by the Connector are still unaffordable for many,” wrote Carmen Balber, consumer advocate with the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR), in a letter to the board implementing the Massachusetts law.

“Affordability should be achieved by regulating the insurance industry, not by encouraging insurers to cut back on benefits when patients are required to purchase insurance. HDHPs require patients to pay more out of pocket before coverage kicks in, defeating the purpose of minimum coverage and the individual mandate,” the letter continued.

Research compiled by the RAND Corporation has found that sicker and poorer patients are those who suffer most under so-called “consumer driven” high deductible plans. Such plans pose greater financial risk to sicker and poorer patients as well as creating big barriers to entry in the health care system, delaying treatment to the point where it becomes less effective and more costly.

“An HDHP exemption to minimum coverage rules is a tacit admission that these plans cannot be made affordable without regulating private insurers,” said Balber.

High deductible plans mean patients who are now insured with better coverage are likely become underinsured in the future, wrote FTCR, and small employers may also gravitate to such low benefit policies. This could create even more serious problems for Massachusetts by diluting insurance risk pools and setting up adverse selection that would prohibit older and sicker patients from finding affordable coverage in the future.

Under the draft regulations, HDHPs would be allowed to ignore deductible, drug, preventive care and other MCC rules, meaning they could:

– Raise deductibles as high as new out-of-pocket maximums of $5,500 per individual, and $11,000 per family;
– Require patients to meet the full deductible before any benefits are covered;
– Set annual or per benefit maximums;
– Exclude drug coverage

“The goal of universal health coverage is incompatible with high deductible health plans that force patients to bear big burdens and discourage preventative medicine,” concluded the letter. “Creating this exception to MCC requirements will make minimum coverage meaningless and puts the integrity of the entire health care system at risk.”

The regulations issued today would also allow insurers to erode benefits in plans that meet minimum coverage requirements by imposing a lifetime cap on benefit payments.

READ THE LETTER:

March 20, 2007

Board of Directors, Executive Director
Commonwealth Health Insurance Connector Authority
via e-mail

Re: Minimum Creditable Coverage

Dear Connector Board Members and Executive Director Kingsdale:

Draft regulations to allow the purchase of high deductible health plans (HDHPs) to satisfy mandatory coverage requirements without meeting minimum creditable coverage (MCC) standards would gut the quality and affordability promises of the state’s health insurance mandate.

To date, the Connector’s discussion of minimum creditable coverage has centered around the cost and array of benefits that will qualify as minimum coverage under the law.

The Connector Board explicitly acknowledged the need for a minimum definition of insurance when it approved health plans with annual out of pocket maximums for patients, no annual or per-sickness benefit maximums, preventive care coverage prior to the deductible and prescription drug coverage. You have been lauding Massachusetts as the first state with such requirements. An HDHP exemption is a loophole the size of an elephant that would allow insurers to escape those protections entirely.

A classic race to the bottom will ensue. The Massachusetts health insurance market will be flooded with low-benefit plans that do not adequately cover patients’ health needs. If one plan is exempted, you may as well eliminate minimum coverage standards altogether.

HDHPs would be allowed to ignore deductible, drug, preventive care and other MCC rules, meaning they could:

– Raise deductibles as high as new out-of-pocket maximums of $5,500 per individual, and $11,000 per family;
– Require patients to meet the full deductible before any benefits are covered;
– Set annual or per benefit maximums;
– Exclude drug coverage

We can only imagine that the Board is considering an HDHP exemption in response to criticism that health plans recently approved by the Connector are still unaffordable for many. For example: A 56-year-old individual living in Boston and earning $30,000 a year could end up paying 30% of her income on health costs if she bought the cheapest Connector-approved policy from Neighborhood Health Plan.

Affordability should be achieved by regulating the insurance industry, not by encouraging insurers to cut back on benefits when patients are required to purchase insurance. HDHPs require patients to pay more out of pocket before coverage kicks in, defeating the purpose of minimum coverage and the individual mandate.

Research compiled by the RAND Corporation has found that sicker and poorer patients are those who suffer most under so-called “consumer driven” high deductible plans, the very patients Massachusetts needs to cover. Such plans pose greater financial risk to sicker and poorer patients as well as creating big barriers to entry in the health care system, delaying treatment to the point where it becomes less effective and more costly.

The danger of allowing such high deductible plans to qualify as minimum creditable coverage also means that patients who are now insured with better plans are likely become under-insured in the future. Small employers may also gravitate to such low benefit policies. This could create even more serious problems for Massachusetts, with insurance risk pools diluted and adverse selection prohibiting older and sicker patients from finding affordable coverage in the future.

The goal of universal health coverage is incompatible with high deductible health plans that force patients to bear big burdens and discourage preventive medicine. Universal coverage is about creating a big risk pool that spreads risk over the entire population. High deductible plans and medical savings accounts dilute risk pools and divide the sicker from the healthier, the poor patients from the wealthier, the younger from the older.

Creating this exception to MCC requirements will make minimum coverage meaningless and puts the integrity of the entire health care system at risk.

Sincerely,

Carmen Balber
Foundation for Taxpayer and Consumer Rights
(310) 392-0522 ext. 324