UP FRONT
employees and government-subsidized health coverage programs
such as Medicaid, Medicare, CHIP
and the Veterans Health System.
Standards for the most effective
programs have been developed by
URAC, and would provide
benchmarks for best practices in this
area. We also believe that private
employers should be provided with
legal protection, tax incentives and
premium incentives for
implementing smoking, drug, alcohol
and other wellness programs to
encourage their employees and their
families to adopt healthier lifestyles.
A second effort toward cost
containment would be to identify
ways to avoid duplication of
procedures and overuse of high-end
procedures in situations where they
add little value. Both patients and the
provider community should focus on
identifying less expensive but equally
efficacious alternatives. In addition, preventable mistakes by providers of
medical care not only drive up health care costs, but also cost lives.
We believe incentives should be provided for doctors and medical facilities to
improve system efficiencies and eliminate errors with pay for performance, best-practice guidelines and support for evidence-based medicine. And although we
are greatly encouraged by the funds included in the stimulus bill for creation of
electronic medical records, they will be of little use unless standards for
interoperability are created to unify the health care system, reduce errors and
duplicative procedures, and improve patient satisfaction.
Access for All
Although we are strong supporters of employer-sponsored coverage, it is
important to include solutions to help those accessing health insurance
through the individual health insurance market too. Controlling cost in this
market is more difficult than in an employer-sponsored plan, not because of an
inability to pool like policies together – all insurers pool their individual market
business – but rather because individuals may voluntarily enter the system
whenever they want to, and because they pay for coverage on their own, with
after-tax dollars and with no employer contribution. For this reason, the market
is prone to a phenomenon known as “adverse selection.” Adverse selection
occurs when a person delays buying an insurance product until he or she
anticipates an immediate need for the benefit. Since individuals always know
more about their own health status than anyone else does, and because all of
the cost of buying individual health coverage is borne by the insured, the
amount of adverse selection occurring in the individual market is very high.
This has a direct impact on the pricing of individual-market policies and is the
reason why most states today use medical underwriting for individual health
insurance coverage.
From a pure access perspective, it would seem that one of the simplest ways
to get individual-market buyers covered would be to require that all individual
health insurance policies be issued on a guaranteed-issue basis without regard
to pre-existing medical history. However, in addition to being accessible to all
Americans, individual coverage also must be affordable. As you are aware,
America’s Health Insurance Plans and the Blue Cross Blue Shield Association
have recently announced that they would be able to guarantee-issue coverage
in the individual health insurance market and rate without regard to pre-existing conditions IF everyone is required to carry coverage. It is important to
note that this is distinctly different from our voluntary system today. If such a
purchase mandate is passed, enforcement will take time to become effective.
Without near-universal participation, a guaranteed-issue requirement in this
market would have the perverse effect of encouraging individuals to forgo
buying coverage until they are sick or require sudden and significant medical
care. It is very important that some type of financial backstop or risk adjuster
be used to ensure that the result of market reform is not the exorbitant
premiums we currently see in states that already require guaranteed issue of
individual policies but do not require universal coverage or have a financial
backstop in place.
As we look at premium stability and the demonstrated importance of an
adequate risk-adjustment mechanism, one good model to look at for both the
individual and small-employer market is New York with its Healthy New York
program. Small employers, sole proprietors and uninsured working individuals,
regardless of health status, who meet set eligibility criteria and participation
rules can purchase a limited range of comprehensive coverage options offered
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