More Health Insurance Regs Without an Individual Mandate would Raise Health Costs

While stumping for healthcare reform, President Obama often trumpets the idea of more health insurance regulation. A topic he isn't as keen on mentioning is an individual mandate to require all Americans to have health insurance.

That was evident during his prime-time news conference last week in which he took aim at private insurers while remaining mum on requiring Americans to buy health insurance. The president, who opposed the individual mandate during his campaign, has not spoken as much about the individual mandate as he has about more health insurance regulation and the areas of improving quality, cutting Medicare Advantage payments, creating a public insurance option to make private insurers "honest," and bundling payments to hospitals and doctors.

Health insurers, led by America's Health Insurance Plans, say an individual mandate and added regulations go hand-in-hand. AHIP says it is willing to guarantee insurance for all Americans regardless of pre-existing conditions and stop using gender rating to charge women more for individual insurance. In exchange, they demand an individual mandate, which would mirror the Massachusetts model.

"Market reforms without a mandate are not sustainable in the long run," says Robert Zirkelbach, director of strategic communications at AHIP in Washington, DC.

Health insurers say the reason for the individual mandate is clear: The healthcare system would not work without an individual mandate if insurers are required to accept all members regardless of health status.

Justine Handelman, executive director for legislative and regulatory policy at the Blue Cross and Blue Shield Association in Washington, D.C., which is a national federation of 39 independent and locally operated Blue Cross and Blue Shield companies, says a three-pronged approach is needed:

• A "strong and effective mandate"
• A requirement that insurers accept everyone regardless of health status
• Subsidies to help those who cannot afford health insurance pay for coverage

"Only with a strong individual mandate will we be able to keep premiums affordable in a guaranteed issue market. As state experience has shown, guarantee issue can only work if everyone—the young and healthy, as well as higher-risk individuals—purchases coverage. Otherwise, individuals will wait to buy insurance until they are sick and need coverage, which not only undermines the goals of reform but will drive up costs for everyone," Handelman says.

Health insurers predict adding health insurance regulations without requiring everyone to have insurance would simply pass costs from the new sicker members, who were not accepted previously because of pre-existing conditions, to other members.

Requiring everyone, most notably the so-called "young invincibles," who often don't buy health insurance because they don't believe they need it, would help offset the added costs of the new sicker members.

Bob Coli, MD, a physician in private practice and healthcare entrepreneur who is the founder, chairman, and CEO of the Diagnostic Information System Company, says any legislation mandating guaranteed issue will fail unless everyone is mandated into the system.

He adds it's hard for him to believe that "enacting new private insurer regulations (such as gender ratings and excluding pre-existing conditions), without an offsetting individual mandate, can avoid further increasing annual private health plan costs and premium increases and eliminate any ability to compete with a new public health plan option."

However, Marty Trussell, senior vice president of First Horizon Msaver in Overland Park, KS, a health savings account financial administrator, says an individual mandate without underwriting and pre-existing condition exclusions could conceptually work, but the reform would need a mechanism that "would allow carriers to underwrite those individuals who did not become insured during some designated enrollment window. Without this type of protection, the system would invite individuals to hold off on purchasing coverage until such time as they need it. This is sort of like selling someone an auto policy after they wrecked the car," Trussell says.

Though Obama has not been an outspoken supporter of an individual mandate, there is still good news for insurers and individual mandate supporters. The fact is that the individual mandate remains an important piece of the healthcare reform proposals on Capitol Hill.

It's true that the individual mandate is in every major reform proposal, but that doesn't mean it's going to happen. And with the president not making the idea a major part of his healthcare speeches, you have to wonder if Democrats will ultimately look to strip out that critical piece of reform, while adding new regulations, such as guaranteed issue.

That's something all health insurers should watch closely in Washington.