June 1, 2012

M.D. Harmon: State's health insurance law a step in the right direction

Maine lawmakers have made significant changes in the way individual Mainers buy health insurance, so that many people not eligible for group coverage will see substantially lower costs.

Joel Allumbaugh, an insurance consultant with National Worksite Benefit Group in Augusta and an outspoken backer of the new law, thinks Mainers don't know enough about it, he said in an interview this week.

The changes, contained in "Public Law 90," don't affect group insurance, typically provided and substantially paid for by employers. But Allumbaugh said PL90 offers substantial advantages to people buying coverage as individuals (usually the most expensive policies).

He said the state Bureau of Insurance prepared a comparison of 200 potential "new book" policy choices available to individual Mainers from Anthem Blue Cross/Blue Shield under PL 90 and found premium decreases in 187 of them, or 93.5 percent of the options.

The average decrease was 34 percent, he said, and the largest was 60 percent. Critics who point at the few examples where rates did increase are just "cherry-picking" the data to make political points, he said.

Once, there were a dozen insurance companies offering health insurance in Maine. However, as state mandates increased and profit margins declined, most of them pulled up stakes, leaving just three.

However, Allumbaugh noted, only Anthem is a major player. Harvard Pilgrim runs the remnants of Dirigo Health Care, which is being phased out, and a third firm offers limited indemnity coverage.

The new policies add some coverages and drop others, but people with policies from Anthem now can still renew their current coverage (under what's called "the closed book") and get lower rates than they would have gotten under the former law (though costs will increase for most coverage plans). Anthem's overall rate increase request this week was a mere 1.7 percent for current individual policies.

Allumbaugh said that new insurers are preparing to enter the market but will not be able to offer products by July. More competition would drive rates even lower, he said.

The old system, Allumbaugh noted, labored under requirements for "guaranteed issue (covering everyone who applied) and community rating (spreading costs over all applicants) that limited rate variances among different applicants. These two laws increased rates and destabilized the markets by dramatically increasing rates for younger applicants and creating a safety net where they can get guaranteed coverage when they eventually need it."

The latter condition let people avoid buying insurance when they are well. Waiting until they are sick means they push their costs off onto everyone else.

That was the problem the Democrats' Patient Protection and Affordable Care Act, also called "Obamacare," tried to solve by requiring everyone to buy coverage, a mandate whose constitutionality will soon be determined by the U.S. Supreme Court.

But the big problem with Obamacare, as Allumbaugh sees it, is that it "simply requires more coverage, which by default increases premiums in an already very expensive insurance market. The ACA also continues to exacerbate the disconnect between patients and the cost of care, arguably the root cause of our current expensive and inefficient delivery system."

But PL 90 took advantage of options offered to states in the first stages of the federal law, which doesn't take full effect (or impose its full costs) until 2014.

The new Maine law, Allumbaugh says, "aims to re-establish rating rules that will reverse the current death spiral (of constantly increasing costs and rates) and grow the private insurance market by aligning rates with demographic profiles.

"For example, he said, "PL 90 enables an insurer to charge a lower rate to a young applicant who generally uses very little health care services," thus drawing more of them into the market. And it "injects money into the individual market via a reinsurance pool which helps to lower rates across all demographics."

In sum, Allumbaugh said, "PL 90 more broadly attempts to use market forces to improve prices," via more competitive rates and incentives and methods for insurers "to inform patients about cost and quality discrepancies when making decisions regarding where to seek care. This is an important shift toward increased transparency in health care which begins to apply market forces on the health care delivery system."

Obamacare, however, "pushes us further down a path that disconnects patients from the cost of care and creates a new entitlement class, none of which addresses the root cost of health care."

But Obamacare could soon be overturned or repealed. If that happens, Allumbaugh said, "I honestly think the best help the feds could provide is to get their fiscal house in order and allow maximum flexibility for states" via such changes as state-by-state block grants for Medicaid.

In the meantime, he concluded, PL 90 "is incredibly good news and the best story about individual insurance rates that we have seen literally in decades."

M.D. Harmon, a retired journalist and military officer, is a freelance writer. He can be contacted at:

mdharmoncol@yahoo.com

 

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