Community Rating

Back in 2003, Colorado’s health insurers fooled naive state legislators into enacting a bill that ended community rating of health insurance risks for small employers. They said rate increases would slow. They soared.

Insurance brokers and insurers are trying to roll back the reinstatement of modified community rating, which cuts their commissions and profits. Insurers want premiums to rise because they get their 4% take regardless. And apparently brokers and agents make more money when there is medical risk rating instead of community rating. It’s obvious that this isn’t about those who pay the premiums.

One of the smartest, most pro-small business moves that Governor Bill Ritter and Democrats in the General Assembly have done was the enactment of House Bill 1355. It reinstates community rating, which makes health insurance less expensive for small businesses that have older and sicker employees while increasing costs for those that have younger, healthier employees. Most small businesses are owned by people over 40, and most have older, less healthy workers. Or, as anyone who’s been in business knows, an employee can have an accident or get cancer tomorrow. And when that happens, you’re no longer a healthy employer.

Under today’s community rating system, your rates won’t go up because an employee or family member suddenly begins filing financially catastrophic claims on an insurer. Both for-profit and not-for-profit insurers want to be able to screw their consumers with medical risk rating of small groups. Even though most of the insurers’ customers in the state are small employers and their employees, insurers want to be able to take them to the cleaners.

At this point, the Democrats are the pro small business party in Colorado because they support community rating. Republicans killed modified community rating in 2003 when it passed HB03-1164, and the GOP was the anti-small business party until several Republicans supported HB 1355.

Now, Colorado’s health insurers are trying to mislead small employers and legislators again. I hope that Ritter and the GOP’s gubernatorial candidates, Scott McInnis, Josh Penry and Dan Maes, don’t take the bait.

Impact graphs and links back to 2003 on this issue:

I"ve sent this e-mail to my Senators and Rep. Mike Coffman (R-CO).

Just to get another view of the health options, please ask the CBO for a report that answers these questions:

Estimate the 5, 10 and 15 year costs increases or cost savings for the government if each health insurer were required to community rate all of its insureds by Metropolitan area or state with a minimum enrollment after a set period in business of 50k to 100k per risk pool, assuming that individuals would be required to buy catastrophic policies with no lifetime coverage caps and no or means tested tax incentives?

On Medicare, what would be the savings/costs if benefits covered only financially catastrophic (including chronic) illnesses using community rating, means tested premiums and tax deductions for out-of-pocket expenditures for prescription drugs, medical devices, office visits and wellness care?

On Medicaid, what would happen to state and federal budgets if it were federalized, benefits covered only financially catastrophic illnesses (chronic and long-term) and substantial tax benefits were granted to philanthropists who funded low-cost or free community health clinics for Medicaid enrollees only, not including illegal immigrants?

Assume no government-run health plans for the privately insured. And assume insurers would be required to update their rates and contracts on the Internet daily. Assume insurers could sell policies with no state mandated coverage of preventive, wellness or alternative health care services.

The Wall Street Journal published a PR piece about how CEOs can fix health care. I think the piece is off base and posted the following reply:

How large employers can help fix health care:

 

Posted by Donald E. L. Johnson on 07/28/09 at 07:51 PM
Books • Health insurance • Community Rating • Health Insurance Reform • Preventive Care • Small Groups • Read More

Colorado’s HB 1355 returns state to modified community rating on health insurance

Last month Gov. Bill Ritter signed HB1355, which returns modified community rating of small health insurance groups to Colorado. The bill reverses the Republican’s 2003 bill, HB 1164, which killed modified community rating at the behest of health insurers and in the face of opposition by small employers.

The GOP became the anti-small business party in Colorado after it passed the 2003 bill. And that among other things helped turn the state over to the Democrats. Now the Democrats are the pro-small business party when it comes to health insurance market regulation, at least as far as this issue is concerned.

The reason HB 1355 is pro small business is simple. I’m guessing more than a small majority of small businesses are owned by people over 40 and 50. They will benefit from the bill.

Having had people with all kinds of serious illnesses work for me as well as near seniors and seniors, I can tell you that your group can go from being healthy to unhealthy in a doctor’s appointment.

Sooner or later, all groups become unhealthy. And all groups will benefit from modified community rating. This bill makes the health insurers more honest and spreads risk among everyone.

Now we have a true health insurance market instead of one distorted by insurers’ cherry picking.

We all get sick, and we all need insurance when we face catastrophic illnesses and accidents.

Good for the Democrats and Governor Bill Ritter on this one.

Posted by Donald E. L. Johnson on 07/18/09 at 10:27 AM
Colorado • Legislation • Health insurance • States' Health Legislation • Community Rating • Health Insurance Reform • Permalink

Insurers and employers cannot change our lifestyles or make us exercise

A Wharton professor of risk management, Scott E. Harrington,  writes in today’s Wall Street Journal that health insurers should be allowed to cherry pick healthy enrollees and should be encouraged to give their enrollees financial incentives to eat right and exercise.

Nonsense. Harrington’s attack on community rating and advocacy of medical risk rating of individuals parrots the health insurance industry’s party line, and he’s just wrong. The literature on preventive and wellness care is coming around to the point I’ve been making for years. That is, other than prenatal care and some screening for cancer and heart disease, most preventive doesn’t work, and it doesn’t contain health care costs or expenditures.

Financial incentives in the form of lower premiums for healthy people can’t change lifestyles. Even bariatric surgery, which makes the stomach smaller and initially helps people lose a lot of weight, can’t change a person’s eating habits. You have to be born with the right genes and luck to be a person who eats right and loves exercise.

If you’ve had or know someone who’s had bariatric surgery in the last seven or eight years, you know that financial incentives don’t change behavior and that many overweight people are obese because of their genes. You also know that while bariatric surgery is beneficial, over time, the benefits wane and weight returns. Surgery doesn’t change eating and lifestyle habits for many people. I happen to know a bunch of people who’ve gone through this, although I haven’t.

The idea that employers or insurers can design benefits that change lifestyles is simply absurd. Yes, initially, people will respond to an employer’s wellness program, but sooner or later, they fall off the wagon.

What drives people to healthy lifestyles is their desire to be healthy and live longer, more functional lives. Those are strong motives, but almost everyone falls off the wagon many times over their lifetimes, and no good intentions or financial incentives will change that.

What the professor, who apparently is good with numbers but knows little about lifestyles or human nature, is missing is that lifestyles are beyond the grasp of employers and insurers. Their incentives are too remote to have an effect.

I strongly oppose the public option and Kennedy’s HMO-style cost containment barriers to access to care.

But I do believe that community rating, which is what Harrington is writing about, makes a lot of sense. The young pay more while they’re young and healthy and less than they otherwise would when they’re older and less healthy. These would be easy reforms to implement along with mandates that everyone buy insurance in the individual markets, not in the group markets.

HIgher taxes on sugar, corn syrup and other fatteners would cause the makers of foodstuffs and soft drinks to use healthier ingredients, but slightly higher prices probably wouldn’t dampen consumer demand much. And the sugar and corn lobbies won’t let it happen anyway.

More important, fix our education system so that people learn to make better financial and lifestyle decisions. You have to get kids to like exercise and healthy lifestyles very early in life, but you can’t do that when schools sell kiddies banana cream pies and other fattening foods.

Posted by Donald E. L. Johnson on 06/29/09 at 07:26 AM
Health insurance • Community Rating • Health Insurance Reform • Risk Rating • Permalink

How to reform health insurance markets

For years, a few people have been pointing out that there are only 6 to 8 million uninsured American citizens. As George Will pointed out on “This Week” Sunday, millions have not signed up for programs for which they are eligible. Millions (14.5 million to be exact) earn more than $50k a year but don’t buy insurance. Some 10 to 15 million of the so-called uninsured are not American citizens. The left’s lame reply is that “we have to pay for them anyway,” but that’s not true.

When uninsured illegal immigrants and

Posted by Donald E. L. Johnson on 06/15/09 at 05:50 AM
Health insurance • States' Health Legislation • Community Rating • Health Insurance Reform • Risk Rating • Small Groups • Read More

Elections no big deal for health industries; McCain will talk about health care costs this week

Health industry executives have few reasons to worry about the so called health care reforms, or health insurance industry reforms, being proposed by the presidential candidates.

Sen. John McCain, the presumptive GOP presidential nominee, is focusing his attention on heath care cost containment this week, but a report in this morning’s Wall Street Journal shows that he doesn’t understand the problems any better than Senators Clinton and Obama. Americans need regulatory changes (no laws are “reforms”) that make health insurance something consumers can use to protect themselves against catastrophic losses and let individuals buy their policies directly from insurers instead of buying policies selected by their employers. And consumers should pay for their primary care and preventive care services out of their pockets, or, at the least, buy unbundled insurance for those services instead of buying bundled insurance that is unaffordable for so many.

The real question is how much could a President McCain do about health insurance costs with a Congress controlled by Democrats, and would he pay much attention to the problem if it were clear that Congress would mark his proposals dead on arrival?

Fortunately, the presidential candidates’ wild and undeliverable promises of comprehensive health insurance reforms and universal health insurance are being questioned by Congressional Democrats as well as by the policy wonks quoted by the wsj.com. No wonder health industry executives aren’t worried about who’s elected in the fall. They apparently have decided it won’t make a difference for them or their stocks. The impact and concluding graphs from wsj.com and some of my comments follow (click on headline):

Posted by Donald E. L. Johnson on 04/28/08 at 06:50 AM
Health insurance • Community Rating • Health Insurance Reform • Individuals • Risk Rating • Read More

Individual health insurance market needs community rating, big pools

Matthew Holt at The Health Care Blog discusses the dysfunctional individual health insurance market, which is only slightly better or worse that the small group market, depending on the state.

 

Posted by Donald E. L. Johnson on 12/23/03 at 04:24 AM
Health insurance • Community Rating • Health Insurance Reform • Risk Rating • Read More

Risk rating leaves people without health insurance; shows need for community rating

Thirty states offer poorly funded high-risk insurance pools for people with pre-existing medical conditions who can’t get insurance from companies that risk rate those they insure in an effort to avert expensive claims and keep health insurance premiums as low as possible. The Bush administration is backing inadequate grants to states to help fund their risk pools, and it offers $1,000 tax credits to help the uninsurables buy insurance that is unavailable at any price. It is hard to see how a tax credit will help a person who probably is unemployable as well as uninsurable because of pre-existing medical conditions such as diabetes, cancer and heart disease.

Posted by Donald E. L. Johnson on 05/19/03 at 07:32 AM
Colorado • Legislation • Health insurance • States' Health Legislation • Community Rating • Health Insurance Reform • Risk Rating • Read More

Mark Hillman bill rigs market for Anthem Blue Cross

The Mark Hilllman bill (or, the Anthem protection act of 2003), HB03-1164, is a form of socialism and anti-competition legislation because the legislature is being used by the insurance industry to rig the market in its favor.

 

Posted by Donald E. L. Johnson on 05/02/03 at 08:07 AM
Colorado • Legislation • Health insurance • States' Health Legislation • Community Rating • Health Insurance Reform • Risk Rating • Small Groups • Small Business • Read More

Colorado fight over small business health insurance and community rating continues

Colorado’s legislators are doing a better job of sorting out a raft of poorly conceived health care reform measures than the editorial page of The Rocky Mountain News, which appears totally confused in this editorial, “Small-group insurance market still ill.”

Posted by Donald E. L. Johnson on 02/28/03 at 02:54 AM
Colorado • Legislation • Health insurance • Community Rating • Health Insurance Reform • Small Groups • Small Business • Read More

Florida’s new risk rating system fails to help small employers

Florida dropped its modified community rating system in favor of rate bands and risk rating by health insurers, but this has failed to help small businesses buy insurance for their employees, according to the Palm Beach Post. In its news report, fewer Florida firms offering health insurance, the Post reports on a Chamber of Commerce survey that shows premiums are rising and more employers are being forced to drop coverage.

 

Posted by Donald E. L. Johnson on 02/11/03 at 01:26 AM
Health insurance • States' Health Legislation • Community Rating • Health Insurance Reform • Risk Rating • Small Groups • Small Business • Read More

Risk rating health insurance premiums increases costs

When health insurers set premium rates for individuals and small employers by taking the health status of the insured people into account, they frequently price high-risk individuals and small employers out of the market, according to an article in the May-June 1999 issue of Health Affairs.  Download the article here.

 

Posted by Donald E. L. Johnson on 02/01/03 at 02:26 AM
Colorado • Legislation • Health insurance • States' Health Legislation • Community Rating • Risk Rating • Small Groups • Small Business • Read More

NFIB’s Jackson opposes HB03-1013 risk rating bill

Colorado National Federation of Independent Businesses opposes health insurance rate flexibility and rate banding

 

Posted by Donald E. L. Johnson on 01/31/03 at 06:24 PM
Colorado • Legislation • Health insurance • States' Health Legislation • Community Rating • Risk Rating • Small Groups • Small Business • Read More