The proposal President Obama released on Feb. 22 calls for the establishment of a new Health Insurance Rate Authority. This agency will provide federal oversight of proposed health insurance rate increases. If the new federal agency determines that a rate increase is “unreasonable and unjustified,” it can require health insurers to “lower premiums, provide rebates, or take other actions to make premiums affordable.”

We are concerned that the new agency creates a one-size-fits-all approach to rates and ignores unique cost drivers in each state’s insurance market. Because state regulators will not have control, plans may not have adequate funds to pay claims.

Read more about how the Rate Authority could undermine the security and stability of your health insurance.

We support enacting effective health care reform to extend coverage to all and rein in costs. However, we are concerned several provisions in the President’s proposal would:

1. Create a highly politicized federal rate regulator resulting in plan insolvencies and rate caps;
2. Significantly increase premiums for many people; and
3. Cause other problems and major disruptions in people’s coverage.

We are concerned that many in Washington want to create a new government-run insurance plan option. We believe this would undermine the real goals of healthcare reform and ultimately lead to a government-run system.

Employers already pay $1,788 more per family each year because of cost-shifting, according to a recent Milliman study. This occurs when providers charge the privately insured more to make up for underpayments by Medicare and Medicaid. A new government plan would worsen this problem, causing employer premiums to increase and employers to drop coverage. As two thirds of the population move into a government plan, the employer system will evaporate and leave people with no choice but a government plan.

These proposals are a stepping stone to “one-size-fits-all,” single-payer, government-run healthcare.

A government-run plan would also make it harder to achieve delivery system reforms that are critical to controlling costs and improving quality. Private plans are free to innovate, whereas a government-run plan would have difficulty due to political pressures. For example, Medicare’s ability to provide physician and hospital quality incentives has lagged behind that of private plans.

We believe comprehensive reform can be achieved by building on the strong foundation already laid by private insurance plans. Providers and health plans have led the way in implementing quality programs, centers of excellence, pay-for-performance, and chronic care management programs. They have also worked to control costs with fraud prevention and detection programs. These much-needed innovations would be lost under a government-run plan.

Some have proposed to require insurers in the individual market to accept all individuals regardless of health status (guaranteed issue) and to charge everyone the same premium, regardless of health status (community rating).

We strongly believe everyone should have health insurance. We support guaranteed issue, but only with a mandate requiring everyone to have coverage. This would require some federal subsidies to make it affordable. In this case, insurance would still work as it should — spreading risk across a large population and avoiding the problems that occur when only those who need insurance buy coverage.

Without an effective mandate, guaranteed issue and community rating would:

• increase premiums for current subscribers
• result in more uninsured
• reduce choice for consumers

If anyone can get insurance at any time without worrying about pre-existing conditions, people will likely wait until they are sick to buy coverage, which will create a system that is unsustainable. Higher premiums that would affect the ability of most people to purchase insurance would be the likely result.

We continue to maintain that healthcare reform can only work when we address the rising costs of healthcare. Reform will not be sustainable if it is aimed only at getting more people into the system without a mandate to ensure there is a balance of healthy people whose premium payments can offset the costs incurred by heavier users of healthcare services.

Community rating is when an insurance company charges everyone in the community the same premium.

Various healthcare reform proposals currently being debated in Congress include some community rating guidelines. While not “pure” community rating, the guidelines limit how insurers can vary their premuim rates for factors such as age, gender, health status and lifestyle factors such as smoking.

In Louisiana, we have a modified community rating system. This system limits how much insurers can lower premiums or raise premiums based on a person’s health status. This law protects people who get very sick or injured from getting dramatic premium increases that would make keeping coverage difficult. This Louisiana law also allows insurers to vary their rates based on lifesytyle choices such as smoking. Insurers also can offer lower rates to younger people if this age group has lower claims costs.

If Congress passes a healthcare reform bill that includes the community rating guidelines currently under consideration, the youngest, healthiest individuals and groups would see an increase in premiums from 30 to 40 percent, while the older, sicker individuals and groups could see premium decreases.

The obvious result is that the youngest, healthiest groups and individuals will be driven out of the insurance market. This means we’ll have fewer people paying for care, and as a result, the costs for everyone left will skyrocket.

Another effect of community rating would be a sharp decline in the value of wellness – that is, efforts to live healthier and keep from getting sick. Blue Cross has been a leader for many years in promoting preventive medicine and helping our customers stay healthy. And, our own Blue Cross employee group has shown much lower claims costs since we launched our in-house wellness program. The bottom line is that employers and individuals cannot be motivated to invest effort and money on wellness if they can’t see a benefit in lower premiums.

An important trend that could be negatively affected by community rating would be the “accountability” movement that private insurance companies like Blue Cross have been building for the past few years. Accountability means giving the insurance customer more power over his or her own healthcare and providing the information and tools he or she needs to use that power.

The accountability trend began with the introduction of Medical Savings Accounts and continued with Health Savings Accounts – two tax-favored money-saving tools that help consumers save money for future medical care. MSAs and HSAs have slightly different rules, but they have helped people become better healthcare consumers. The insurance policies that go hand-in-hand with these accounts usually have much lower premiums and come with consumer education tools, behavior modification programs, pricing rewards for healthier lifestyles and more.

We support maintaining the current community rating laws in force in Louisiana. These laws provide a successful balance. They limit too much variation in rates while providing a fair value for consumers who work hard to make healthier choices.

In an effort to pass some form of healthcare legislation without a Democratic majority in the Senate, a number of options are being considered. A series of smaller bills or scaled-back versions of current bills are being discussed.

We are concerned about some provisions from the original Senate bill that may be included in the final legislation such as a ban on pre-existing exclusions. Based on an independent report by Oliver Wyman’s Actuarial and Health and Life Sciences, these Senate bill provisions will:

• discourage people from buying insurance until they are sick
• charge insurers fees that may be passed on to consumers
• increase premiums for the youngest third of the population
• require the insured to obtain higher-than-average benefits
• actually increase healthcare costs and decrease the choices consumers have in coverage plans