Congress is on a Health-Reform Path that will Raise Premiums

Health-care reform is necessary, but what is unfolding in Washington, D.C., is the wrong solution to a legitimate problem. Legislation currently on the table will result in dramatically higher premiums based on costly, above-market minimum benefits and a weak requirement that people purchase and maintain coverage. Both of these policy choices by Congress would mean more expensive premiums for consumers.

Much attention is nevertheless being given to high-profile topics such as the government-run public plan or the latest developments in Congress — such as the recent passage of a bill in the House. I remain greatly troubled by the long-term fiscal impact of this legislation, with its large spending increases inevitably adding to an already huge deficit. But in the short-term, too little attention is being given to the real impact of reform proposals on premiums for everyone who has health-care coverage they want to keep.

Congress is specifically addressing two important issues in this debate in a wrongheaded fashion. First, the bills under discussion dictate benefit packages higher than many consumers choose today. That can’t be done without raising premiums.

Second, Congress is taking the easy way out — especially in the Senate — by weakening the individual mandate to purchase insurance that must go hand-in-hand with requiring health plans to offer coverage regardless of pre-existing conditions. Without a strong mandate, many people will logically avoid purchasing insurance until they need medical attention, thus driving up the cost of insurance for everyone else.

The concept of insurance doesn’t work if people don’t obtain and maintain coverage. For example, you would never allow someone to purchase homeowners insurance once their house was on fire. People opting into the system only when they are in need of coverage is unsustainable, yet that’s what Congress is proposing.

If that concept sounds vaguely familiar to longtime residents of our state, it should. Washington has had direct experience with well-intended reforms that had catastrophic impact on consumer access and affordability. Flawed state legislation in 1993 created a system where people could purchase health-care coverage only when needed. The result was healthy people opting out of coverage while those in need stayed in the system.

That “adverse selection” cratered the marketplace for individual coverage, shattered consumer access to coverage, and sent premiums skyrocketing. Equilibrium was only restored in 2000 when Gov. Gary Locke and the Legislature stepped in to fix the “reforms.” We should not repeat that mistake at the federal level.

A number of voices are now raising concerns that flawed provisions in current legislation will have a profoundly negative impact on premiums. Locally, Premera Blue Cross has analyzed the impact of proposed reforms, in addition to expected increases based on recent trends in medical costs. Here are the estimated impacts of health-care reform on premiums for Premera members in 2013, when legislation would take effect:

• A 53-percent increase in the individual market. Meaning annual premiums for a 40-year-old individual would rise from an estimated $4,430 in 2013 to $6,790.
• A 36-percent increase in the employer-based, small-group market. Meaning annual premiums for a family plan, for a couple ages 40 and 37 with two children, would rise from an estimated $19,930 in 2013 to $27,150.

This is not an acceptable outcome. Yet the impact of current reform proposals on premiums is being cavalierly dismissed by many in Congress — even as proposed legislation will certainly send average premiums soaring. There are many flaws with what Congress is doing on this important issue. Some issues such as the government-run public plan and tax increases to fund a painfully expensive proposal receive more headlines than others. But, everyone with health-care coverage right now should be concerned that Congress is on the wrong track.