As Colorado’s Commission on Health Care Reform continues to travel throughout the state discussing its proposals and preparing for a January deadline to report to the legislature, research shows that similar efforts in other states have significant “unintended consequences.”
A study by Milliman Inc. reveals that other states have had to repeal or change their health care initiatives because of these consequences.
The report looks at eight states that enacted various forms of health care reform — from guaranteed issued insurance to community ratings for insurance — during the 1990s. The report found that initiatives in Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont and Washington had negative consequences for consumers and actually limited access to insurance coverage.
“This report offers important lessons,” said Karen Ignagni, president and CEO of America’s Health Insurance Plans, a nonprofit and lobbying group that represents the nation’s insurers. “It demonstrates that insurance reforms without universal access drives up health care costs for consumers and encourages individuals who have health insurance to drop insurance and take the financial risk of being uninsured.”
Guarantee issue requires that insurers sell an individual health insurance policy without regard to a person’s health. Community rating requires that all consumers pay the same or similar premiums without regard to age or gender.
According to the report, these initiatives have the potential to cause individuals to wait until they have health problems to buy insurance. This causes premiums to increase for all policyholders, increasing the likelihood that lower-risk individuals leave the market, which could lead to further rate increases. If that trend continues, the pool or market essentially collapses or shrinks to include only the high-risk population.
“While these reform goals were laudable, they frequently had unintended consequences that disrupted the individual marketplace,” said Leigh Wachenheim, principal and consulting actuary at Milliman.
Overall, the report found that states that implemented guarantee issue and community rating saw a rise in insurance premiums, a reduction of individual insurance enrollment and an exodus of health insurers from the individual insurance market. In addition, the report found no significant decrease of the uninsured population in states that implemented these initiatives, often a stated goal of legislators.
As a result, states that implemented guarantee issue and community rating have repealed or modified their laws, with the intent of stabilizing the insurance marketplace and providing consumers more choice and access to coverage.
The proposals being considered by Colorado’s 208 Commission range from a single-payer system to guaranteed coverage for all residents. The proposals require that individuals have health insurance and create a pool to purchase individual coverage.
Those watching the 208 Commission are hoping to avoid the mistakes made in other states.
Plans should be both efficient and cost-effective, said Sheila Carlon, an associate professor of health services administration at Regis University.
“When we looked through these plans, I tried to look at good coverage that’s efficiently driven,” she said. “That’s what will make or break these plans — how well it will be run, how it will be paid for. There are a couple of plans that would set costs and quality standards and oversee budgets.”
Making sure the plans are sustainable over the long-run is another way to avoid problems within the insurance industry, she said.
“Some of them are controversial and will provide coverage to non-English speakers, migrant workers,” Carlon said. “Some clinics already exist that provide health care to them. These clinics can be efficiently folded into the new system, which would address the access part of the problem.”
Bill Lindsey, chairman of the 208 Commission, said the group is focused on expense and access.
“We’re looking at the big picture, through the lens of what we need to do to get everyone covered, and reduce the costs,” he said.
Three of the programs have some points in common: adding government subsidies to insurance premiums that are tied to the federal poverty level. One is a single payer system. And the commission developed a fifth proposal that will cover 85 percent of the uninsured population and require residents to have insurance or face tax penalties.
Amy Gillentine covers health care for the Colorado Springs Business Journal.