Yesterday’s post discussed how requiring individual health insurance carriers to issue coverage to all applicants (called “guarantee issue”) was so dangerous if done wrong. So how can it be done right?
CAHU’s Healthy Solutions health care reform plan has a common sense approach (full disclosure: I helped write it). To oversimplify the proposal, it puts the horse before the cart: before the state creates a mandate to sell, it first must demonstrate it can enforce a mandate to buy.
CAHU calls for guarantee issue in the individual insurance marketplace once 90% of the state’s population has obtained basic health care coverage either through state programs, from their employer, or on their own. CAHU would expand the existing the state’s Major Risk Medical Insurance Program (“MRMIP”) to serve as an insurer of last resort until the threshold is reached. But once the state demonstrates its ability to enforce the mandate to buy, carriers would be obliged to accept everyone applying for coverage.
This doesn’t completely inoculate the system from adverse selection (people waiting until after they need insurance to obtain it). After all, 10% of the state — roughly 3.5 million consumers — would still be uninsured. CAHU’s Healthy Solutions plan is one of the few, if not the only proposal which mitigates the negative impact this population could have on the overall premiums. CAHU enables carriers to increase the rates and exclude preexisting conditions for these late-applicants. The amount of increase and the duration of the exclusion varies with how long the applicant has been uninsured.
Previously Uninsured for: Rating Band Preexisting Exclusion Period:
More than 24 months: +/- 30% for 3 years 36 months
19-to-24 months: +/- 25% for 3 years 24 months
13-18 months: +/- 20% for 3 years 18 months
12 months or less: +/- 20% for 2 years Equal to number of months uninsured
An interesting aspect of the CAHU Healthy Solution health care reform plan is the “right of return” it provides late-applicants. It doesn’t punish people who stayed outside the system until they needed the coverage forever. Just for a time commensurate with their dereliction. Once they’ve done their time, their premiums are reduced and preexisting conditions are covered. The result is a guarantee issue system which can actually work.