Three ways states can lower insurance premiums and increase consumer choice
For at least the last decade, the national health policy debate has centered on expanding access to coverage, with a limited focus on the underlying reasons that healthcare costs so much for consumers and taxpayers alike. As a result, we’ve made significant strides in expanding access to health insurance, but the price of coverage is still too expensive for many Americans.
As a nation, we urgently need to address causes like the prevalence of chronic illness and the escalating cost of prescription drugs, which make healthcare more costly in the United States than anywhere else.
But first we need to put our marketplace on sound footing – particularly for those who purchase coverage on their own.
After years of debate, Congress has unfortunately been unable to settle differences on how to move forward. That’s why I’m encouraged to see states stepping up — as they should — to promote a competitive private health insurance market for their residents that offers consumers more affordable options.
Because healthcare is delivered locally, states best understand their healthcare markets and are in the best position to protect consumers and ensure insurance plans meet their needs. They should take three key actions to stabilize their individual insurance markets, lower premiums and increase choices for consumers.
Implement a Reinsurance Program to Lower Premiums
Claims data show that people who get their coverage in the individual market tend to have higher rates of significant illnesses such as hypertension, diabetes, depression, coronary artery disease, HIV and hepatitis C, compared with those who receive insurance through their employers. In fact, five percent of people who buy coverage in the individual market represent almost 60 percent of healthcare claims’ costs.
Reinsurance programs provide funding to support the cost of caring for those with significant medical needs and are essential to make premiums more affordable for everyone. Several states are already taking steps to reduce premiums by creating their own reinsurance programs. Three states (Alaska, Oregon and Minnesota) have programs in place, two (Wisconsin and Maryland) enacted legislation this year, and nine others are working on legislation.
Reinsurance works. For example, premiums in Alaska were 26.5 percent lower on average in 2018 than in 2017 due to the state's reinsurance program.
Provide Robust Protections for Consumers
Besides proper funding to stabilize the individual market, it’s important that policymakers avoid steps that will disrupt it even further. For example, allowing the extended sale of slimmed-down policies that can discriminate against people with pre-existing conditions and attract only the healthiest people could divide the market in two, leaving those with greater medical needs in plans offering comprehensive coverage where rates will increase. Consumers enrolled in the individual market ultimately will have fewer choices when looking for a healthcare plan that fits their needs.
It’s important for consumers to be fully informed about what they’re buying so they understand what is — and what isn’t — covered so they are not surprised. States should regulate short-term plans, which often do not cover important benefits such as prescription drugs or mental health services, to prevent confusion and help protect consumers from financial hardship if they get sick. Likewise, regulators should closely scrutinize Association Health Plans to ensure adequate oversight and avoid scam operations that have left consumers with millions of dollars in unpaid claims in the past.
By taking steps now to protect consumers, states can avoid future harm.
Advance State-led Reforms
As responsibility flows back to the states, lawmakers should look to the full range of tools at hand to make the individual market more stable and competitive. With the federal penalty for not obtaining insurance now repealed, some states are enacting their own laws to ensure people obtain and maintain continuous coverage — measures that will draw healthier people into coverage and help balance the costs of those who need significant care, lowering premiums for everyone. Other states may wish to use new flexibility the Administration is allowing to re-work essential health benefits, while remaining within the parameters of the Affordable Care Act. Federal officials should encourage and embrace these efforts, speeding approvals where needed.
As policymakers take these steps to put the individual market on better footing, I am confident that local Blue Cross and Blue Shield companies will continue to work together with states, as they always have, to provide stable, quality, affordable coverage for consumers.
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