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Insurers: Added Regulations Through Health Reform Will Increase Plan Costs

Les Masterson, for HealthLeaders Media, July 1, 2009

For those who see private health insurance as a major problem in the healthcare system, reform is a chance to get insurers in line. But insurers and their supporters say added industry regulations will simply increase healthcare costs.

The health insurance industry has already come forward to say that it will accept certain regulations if the federal government requires all Americans to have health insurance. America's Health Insurance Plans said health plans will accept everyone regardless of preexisting conditions and not charge women more for individual insurance if an individual mandate is part of healthcare reform.

Health insurers will allow these two changes without a fight because an individual mandate would flood the system with an influx of millions of newly insured (including young people with low health costs).

"Guaranteed issue can only work if everyone–the young and healthy, as well as higher-risk individuals–purchases coverage. This would help keep premiums affordable," says Justine Handelman, executive director of legislative and regulatory policy at the Blue Cross and Blue Shield Association.

As long as everyone is required to have health insurance coverage, Handelman says, the BCBSA supports new rating rules, including phasing out the practice of varying premiums based on health status. She added the change must be phased in gradually state by state "to avoid major disruptions and large premium increases for current enrollees. It would still be critical for insurers to adjust premiums based on age [and] wellness factors, such as non-smoking and geography."

But there are other regulations being discussed in Congress that health insurers are not ready to accept, such as benefit design requirements that include removing lifetime benefit limits and limiting premiums based on differences in age, community, and family size; guaranteed issue without the individual mandate; and coverage mandates. Private insurers say these kinds of requirements would increase premiums and have the biggest effect on the less-regulated states.

Rather than finding ways to regulate insurers, Joseph Antos, Wilson H. Taylor Scholar in Health Care and Retirement Policy at American Enterprise Institute for Public Policy Research, says lawmakers should look to reduce healthcare costs. Focusing on insurance regulation does not improve "a very inefficient healthcare system" or address the "fundamental cost drivers," says Antos.

"The question is how onerous do we want those regulations to be and do we want regulations that will substantially increase costs of insurance?" says Antos.

"If you tell insurers that they have to take on all comers regardless of their cancer diagnosis they just got and now they want to buy insurance, that means the average premiums will have to go up to account for the fact that they are taking on people they were not taking on before," says Antos. "That means average cost of insurance goes up. That means young healthy people will buy insurance less and it will have less value to them."

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