A recent article from the Associated Press, "Insurers offer to stop charging sick people more" is welcome news for everyone. To accomplish the goal, however, it is important to understand why the insurance industry is asking that everyone be required to purchase health insurance also known as an individual mandate.
Without an individual mandate, people who don't need medical care and view themselves as healthy won't participate. As a result, the costs for those buying health insurance is higher for two reasons. First, those who want health insurance are often those who need medical care. Since their costs are often higher than the insurance premiums they pay, these additional costs must be borne by someone else (that would be those paying for health insurance but not requiring medical services). Second, if those healthy non-participants do require medical care, like emergency room services, because they don't have insurance and usually cannot afford the costs, hospitals and doctors don't just absorb this free care, they also pass it on to those with insurance.
Understandably there will be complaints from many who don't wish to be mandated to purchase health insurance, however, for the insurance mechanism to work properly, like Medicare and Social Security, it requires participation by all to work. As a result, those individuals with pre-existing conditions who are currently offered unaffordable coverage may in the future get their own insurance plan.
Although the theory of insurance makes sense, time will tell whether insurers do what they are supposed to do, make insurance affordable when everyone pays into the system.
The complete article follows:
Insurers offer to stop charging sick people more
By RICARDO ALONSO-ZALDIVAR, Associated Press Writer Ricardo Alonso-zaldivar, Associated Press Writer Tue Mar 24, 7:08 pm ET
WASHINGTON – The health insurance industry offered Tuesday for the first time to curb its controversial practice of charging higher premiums to people with a history of medical problems. The offer from America's Health Insurance Plans and the Blue Cross and Blue Shield Association is a potentially significant shift in the debate over reforming the nation's health care system to rein in costs and cover an estimated 48 million uninsured people. It was contained in a letter to key senators.
In the letter, the two insurance industry groups said their members are willing to "phase out the practice of varying premiums based on health status in the individual market" if all Americans are required to get coverage. Although the letter left open some loopholes, it was still seen as a major development.
"The offer here is to transition away from risk rating, which is one of the things that makes life hell for real people," said health economist Len Nichols of the New America Foundation public policy center. "They have never in their history offered to give up risk rating."
"This letter demonstrates that insurance companies are open to major insurance reform, and are even willing to accept broad consumer protections," said Sen. Jeff Bingaman, D-N.M., a moderate who could help bridge differences on a health care overhaul. "It represents a major shift from where the industry was in the 1990s during the last major health care debate."
Insurers are trying to head off the creation of a government insurance plan that would compete with them, something that liberals and many Democrats are pressing for. To try to win political support, the industry has already made a number of concessions. Last year, for example, insurers offered to end the practice of denying coverage to sick people. They also said they would support a national goal of restraining cost increases.
The latest offer goes beyond that.
Insurance companies now charge very high premiums to people who are trying to purchase coverage as individuals and have a history of medical problems, such as diabetes or skin cancer. Even if such a person is offered coverage, that individual is often unable to afford the high premiums. About 7 percent of Americans buy their coverage as individuals, while more than 60 percent have job-based insurance.
"When you have everyone in the system, and you can bring (financial) assistance to working families, then you can move away from health status rating," said Karen Ignagni, president of America's Health Insurance Plans, the leading trade group.
The companies left themselves several outs, however. The letter said they would still charge different premiums based on such factors as age, place of residence, family size and benefits package.
"If the goal is to make health care affordable, this concession does not go far enough," said Richard Kirsch, campaign manager for Health Care for America Now. "It still allows insurers to charge much more if you are old." His group, backed by unions and liberals, is trying to build support for sweeping health care changes.
Importantly, insurers did not extend to small businesses their offer to stop charging the sick higher premiums. Small employers who offer coverage can see their premiums zoom up from one year to the next, even if just one worker or family member gets seriously ill.
Ignagni said the industry is working on separate proposals for that problem.
"We are in the process of talking with small-business folks across the country," she said. "We are well on the way to proposing a series of strategies that could be implemented for them."
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On the Net:
America's Health Insurance Plans: http://www.ahip.org
Blue Cross and Blue Shield Association: http://www.bcbs.com/
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