Insurers Will Do Just About Anything to Avoid Public Plan

Health insurers are so concerned that a public insurance option could destroy their business that they have made concessions over the past few months that would have seemed impossible only a year ago.

Last week, Karen M. Ignagni, president of America's Health Insurance Plans, told the Senate Finance Committee that insurers planned to end the practice of charging women higher premiums than men in individual health plans.

While gender disparity in insurance premiums is not allowed in employer-based and government-sponsored health plans, most individual health insurance plans do not follow those laws. In fact, individual plans, which cover about 18 million Americans, are subject to state laws and only about a dozen states have limits on gender ratings, according to Claire Miley, member of the healthcare practice area of Bass, Berry & Sims law firm in Nashville.

In addition to concern about the healthcare reform train barreling down the tracks in Washington, DC, insurers have also taken notice of Sen. John Kerry's (D-MA) recently proposed bill to outlaw the practice of setting premiums in individual insurance based on gender.

Lawmakers are looking at individual health plans closely because they are the only area of growth for health insurers. Newly unemployed are turning to individual health insurance as a safety net, but individual plans are quite different from the employer-based system that most know. These differences, including charging higher premiums for women and individuals who are sicker, have caused some lawmakers and advocates to take a closer look at individual plans.

Moving away from gender-based ratings is just the latest move by the insurance industry, which has gradually tweaked its fundamental foundation of charging members based on risk.

In the public's view, uneven gender ratings are unfair and call to mind earlier controversial industry practices. "The insurance industry abandoned ratings based on race decades ago, even though race-based ratings were once justified on the basis of actuarial statistics," says Miley. "And some commentators have noted that, while women are the only gender capable of bearing children, healthy children benefit society as a whole and therefore society as a whole should support the costs."

The latest proposal to end higher premiums for women follows on the heels of the insurance industry's recent announcement that it would not charge higher premiums to sick members and would accept all Americans, regardless of illness or disability, if the feds mandated that everyone have health insurance coverage.

The bottom line is that health insurers think they could be in trouble if the Congress and president create public competition. Part of the problem is that Obama and Congress have not developed a specific public insurance plan. Without knowing the specifics and how to compete against a public plan, health insurers are making concessions in hopes that policymakers will remove a public option off the table.

It appears to be working. While a public option seemed like a real possibility two months ago, the likelihood is less today. I spoke to Robert Laszewski, president of Health Policy and Strategy Associates, LLC, in Washington, DC. Laszewski, one of the leading healthcare thought leaders in Washington, DC, offered me a surprising view on healthcare.

While many outside of the beltway think a comprehensive healthcare reform package will pass this year, Laszewski says there simply isn't the money to fund Obama's $1.2 trillion reform package over 10 years. Instead, he believes lawmakers may pass smaller reforms that won't tackle the major issues.

But Miley is not so sure. She sees the public option as a "realistic possibility." Nevertheless, health insurers are playing defense and view the public option as a threat to their survival. In turn, they are using the logic of the great philosopher Mick Jagger—You can't always get what you want; you get what you need.

Insurers have opposed changes to gender ratings in the past. However, if cutting this kind of bedrock practice means they don't have to face a public option, health insurers are willing to change the way they do business.