Would passage of health reform require quick changes in insurance plans?

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Millions of Americans recently engaged in a familiar ritual: signing up for next year’s health insurance coverage.

Pick a plan. Pick a premium. Make sure choices are submitted and approved on time.

But roughly half of those millions, according to a recent survey, are worried. They think the health care reform plan now working its way through Congress may force them to make major changes in their health plans quickly ? perhaps within weeks ? if it passes.

With one important exception, they can probably relax. Many of the major components of health reform won’t take effect until 2013.

That means the structure of existing plans won’t dramatically change Jan. 1, even if President Barack Obama signs a bill before Christmas as Democratic lawmakers want. It also means major spending on insurance subsidies for the poor and middle class are years away.

Premiums, though, are another matter. While the exact language isn’t known, experts expect the final measure to place new regulations on insurance companies almost immediately ? while postponing for three years the requirement that everyone have insurance.

That’s a recipe, they say, for higher costs for you and your employer, perhaps as early as 2010.

“You aren’t going to have to throw everything out the window,” said Ed Haislmaier of the Heritage Foundation, a conservative think tank in Washington. “But there’s a lot that can be done prior to 2013 on the regulatory side that will have the effect of driving up costs.”

A lobbying group called America’s Health Insurance Plans made the same point in a letter to House members before the Nov. 7 approval of a health reform plan.

“These reforms would force the reopening of existing contracts and increase the cost of coverage for American families by promising new benefits that cannot be supported by current premium levels,” the lobbying group wrote.

The House bill, for example, requires health insurers to allow individuals through age 26 to remain on their parents’ health insurance ? if their parents want ? beginning next year.

Under current practice, most parents’ policies cover students, but students are dropped when the child is no longer a dependent or reaches age 21.

The higher age limit is a simple and popular part of the package, but because revenues from the individual insurance mandate won’t start until three years later, insurance companies say they would have no choice but to reopen policies and raise rates as early as next year if the plan passes.

“These reforms need to be paired with a requirement that everybody purchase coverage,” said Robert Zirkelbach, America’s Health Insurance Plans spokesman. He recommends that the plan either mandate that everyone have insurance immediately or that it postpone the new insurance regulations until the mandate takes effect.

Broadening family plans to cover people in their early and mid-20s isn’t the only short-term change now under discussion. In 2010, the House bill would:

? Create a $5 billion national high-risk health pool, with caps on premiums and out-of-pocket costs, to cover individuals with pre-existing conditions until health insurance “exchanges” can be set up.

? Expand COBRA coverage for those who lost insurance when laid off.

? Prohibit insurers from canceling policies if you get sick.

? Prohibit lifetime caps in insurance payouts.

? Require a national review of health insurance premium increases.

? Restrict pre-existing condition exclusions in group policies (full ban takes effect in 2013).

? Remove antitrust exemption for health and medical malpractice insurers.

? Phase in expanded Medicare drug benefit to close “doughnut hole” that leaves a gap in drug coverage

But the bill proposes waiting until 2013 to:

? Fully implement new regulations requiring insurers to cover almost everyone.

? Open a national health exchange to individuals and small employers for comparison shopping for insurance.

? Create a public insurance option in the exchange.

? Expand Medicaid to families earning less than 150 percent of poverty level and phase out the State Children’s Health Insurance Program, known as SCHIP, in 2014.

? Provide credits and subsidies to families purchasing private insurance on a sliding scale up to 400 percent of poverty level.

? Require everyone to have insurance, and most employers to provide it or pay penalties.

House members and other supporters say delaying some of the requirements of health care reform for three more years is unavoidable.

“The full-functioning public option would not be set up until 2013, as the basic infrastructure needed to deliver it does not yet exist and will take some time to develop,” said Rep. Dennis Moore, a Kansas Democrat who supported the House bill.

Critics, though, say there’s another reason for the delay.

Most of the tax increases needed to pay part of the cost of expanding coverage would take effect Jan. 1, 2011. That allows the government to collect $80 billion, according to the Congressional Budget Office, before any major spending on expanding coverage and subsidies for the poor and middle class.

That, critics say, means the government will have 10 years’ worth of revenue but only seven years of spending ? disguising the actual cost of the measure.

“It means that the full cost of the program is underestimated in the 10-year window,” Gail Wilensky, who ran Medicare for former President George H.W. Bush, said last month. “It’s not like we’ve never seen this before, but people need to understand what’s going on.”

All of this has led to major confusion among voters and consumers, said Claudia Deane, a public opinion analyst with the nonpartisan Kaiser Family Foundation.

“People who are expecting immediate help probably are going to experience some sort of letdown,” she said. “The flip side of this is, as long as the help and pain go hand-in-hand … you tend to not have as much concern.”

But Congress and the White House have done a poor job explaining the timeline, Haislmaier said, and may face the wrath of those confused voters in 2010 and beyond.

“The way they’re going about this is politically totally tone deaf,” he said.

“It’s going to hurt them in terms of passage and implementation.”

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THE RULES

The House bill insurance mandate for individuals, effective Jan. 1, 2013, requires all individuals to have “acceptable health coverage.”

Those without coverage pay a penalty of 2.5 percent of their adjusted income above the filing threshold up to the cost of the average national premium for self-only or family coverage under a basic plan in the Health Insurance Exchange.

Exceptions are granted for those with incomes below the filing threshold (in 2009, the threshold for taxpayers younger than 65 is $9,350 for singles and $18,700 for couples), religious objections and financial hardship.

(c) 2009, The Kansas City Star. Source: McClatchy-Tribune Information Services.