By Ronald E. Bachman
There is much talk about the number of Georgians who would like to purchase health insurance but cannot afford it. There is less talk about Georgians who can afford health insurance but are “uninsurable” due to a pre-existing condition. A high-risk pool has been proposed to solve this problem in nearly every legislative session in the past 10 years. Unfortunately, the bill fails each year due to cost concerns and questions over who should pay for it. There is a better solution.
A new approach is now possible to establish consumer-driven health insurance plans as the basis for providing health insurance to individuals who are uninsurable (cannot meet insurer underwriting standards). “Truly uninsurables” represent a relatively small percentage (2-3 percent) of the population.
Uninsurable individuals do not come from any one set of employer plans or from any particular sector of society. Mostly, they are hard-working individuals and families seeking to provide for and pay for their own health insurance, but who through no fault of their own find themselves in a situation where they are unable to obtain coverage at any price.
No one wants to legislate underwriting standards. Companies should be able to continue to develop proprietary internal standards. However, a viable individual market cannot exist if only the young and/or healthy can purchase insurance. One approach to resolve this dilemma is to establish a private/public partnership that reviews rejected applications to determine whether the applicant is among the 2-3 percent of the population that is truly uninsurable. If the applicant is truly uninsurable, they will be offered coverage in the state high-risk pool. If not, they will be assigned to a private market carrier.
Carriers rejecting applicants will be required to accept an equal number from the screening process for the high-risk uninsurable pool. Carriers rejecting relatively good risks may find that they get a much worse risk in return. When market forces are used thus, carriers will begin to accept more applicants and underwriting standards will be moderated in favor of the consumer without state laws or regulations setting company underwriting procedures. This process will maximize private market coverage of health insurance and minimize the number of lives qualifying for the high-risk pool. In an ultimate system of expanded access to insurance in a competitive market, there will be no uninsurable Georgians because everyone will have coverage that is portable and sustainable as an individual policy.
In addition, a Health Savings Account / High-Deductible Health Plan (HSA/HDHP) model can be implemented. This type of model could include deductibles from $2,700 to $5,250 per person, a deductible credit of $250 for maintaining certain levels of body-mass index (BMI), blood pressure, cholesterol and nicotine use, along with compliance awards based upon improved health outcomes and “shared savings.” When incentives for staying healthy are applied, the costs for these previously uninsurable individuals could be reduced.
Following these ideas could lead to a different insurance product market in which individuals could apply for coverage knowing they would at least qualify for some type of high-deductible plan provided by insurers directly or through a federal or private subsidized high-risk pool. Citizens would no longer avoid the application process because an agent informed them they are unlikely to pass strict carrier underwriting and/or have to worry that any poor health characteristics would become a part of a national Medical Information Bureau database that could affect other personal or business needs.
With this new approach, the costs should be lower than the traditional high-risk pool. The best policy is to spread the cost of the high-risk pool as broadly as possible. Rather than constant debate over which segment of the market to assess, the solution is to fund the plan with general tax revenues. The benefit of a stable health insurance market and avoiding excessive regulation will more than offset the cost of the pool to the state.
Ideally, with true transformation over time and affordable multi-year products, everyone would become covered at a young age so that very few individuals would be without coverage and locked out of the insurance system. Until that time, a bridge to the future could utilize a high-risk pool for those currently uninsurable and encourage through market forces a greater underwriting acceptance rate.
Ronald E. Bachman is a Senior Fellow at the Georgia Public Policy Foundation and a Senior Fellow at the Center for Health Transformation, an organization founded by former U.S. House Speaker Newt Gingrich. The Georgia Public Policy Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (October 5, 2007). Permission to reprint in whole or in part is hereby granted, provided the authors and their affiliations are cited.