Health Care Reform Compromise: Unsolicited Advice Part I

As noted in my previous post, there’s rumor of a compromise on health care reform swirling around Sacramento. One element of the purported package is to require carriers to accept all applicants regardless of their health condition (something called “guarantee issue”). Assembly Speaker Fabian Nunez and Senate Pro Tem President Don Perata are willing to enact guarantee issue without a corresponding mandate that all Californians buy coverage (a “buyer’s mandate”). This position is shocking in light of the experience of other states that have done something similar. Those states have all experienced substantially higher insurance premiums and an erosion of competition in the marketplace (for example, see this earlier post on the topic).

Meanwhile, the Governor’s staff claims they will agree to legislation only if it includes an “enforceable” buyer’s mandate. Of course, what’s enforceable is open to debate. And while the staff is extremely bright, the fact is that what looks good on paper often disappoints in reality. (For example, only about 75 percent of drivers comply with the “enforceable” mandate to have auto insurance or post a bond.) Nonetheless, the Governor is likely to hold out for guarantee issue with a program aimed at achieving a buyer’s mandate.

No one asked for my opinion, but here’s how to get guarantee issue right: prove the buyer’s mandate is working before implementing guarantee issue.

We already have a program in place to insure the “uninsurable.” It’s called the Major Risk Medical Insurance Plan (“MRMIP”). At times it’s been plagued by long waiting lists. And coverage through MRMIP isn’t cheap. So create subsidies for low- and middle-income Californians. Then implement a buyer’s mandate. If an individual is turned down for coverage, the subsidy can be applied to the MRMIP coverage. At the same time, expand the number of Californians eligible for existing state programs like MediCaid and Healthy Families. And spend the time and creativity necessary to create an effective outreach program for those programs (today as many as one million Californians eligible for the programs fail to enroll). 

These efforts, along with a package of incentives and penalties to encourage enrollment in health insurance, should dramatically increase the number of insured in the state. Once the state can document 90 percent compliance with the buyer’s mandate then carriers should be required to guarantee issue coverage. This means the need for the MRMIP program will go away, freeing up more money for subsidies or other important health programs.

Even after this 90 percent threshold is reached, there will be some folks who fail to meet the requirement to purchase coverage (by defintion, 10 percent, initially). If these individuals are permitted to buy coverage on their way to the doctor’s office or hospital, without a penalty, the result will be higher premiums for those who have played by the rules. So carriers should be permitted to apply pre-existing condition exclusions and premium adjustments for a limited time. The amount of time these penalties, and the amount of the premium adjustment, should be proportional to how long the individual has gone without coverage. If these individuals qualify for a state subsidy they should still receive it.

The guarantee issue and the buyer’s mandate provisions could be approved by the Legislature by a majority vote. The funding for premium subsidies and expansion of MRMIP would be part of the funding intiative. The implementation of the guarantee issue and buyer’s mandate provisions would be contingent on passage of the initiative. In this way, the resources and the legal framework must both be in place before the state can honestly claim to be on the road to true universal coverage.

This proposed compromise isn’t new. It’s actually a part of the California Association of Health Underwriter’s Healthy Solutions health care reform proposal and I first suggested it in a post back in March.

Like all compromises, this version of guarantee issue won’t please everyone. It will be called a cop-out by opponents who think carriers are being let off too easy. However, failing to demonstrate an enforceable buyer’s mandate will only lead to disasters of New York and New Jersey proportions. Other critics will claim the 90 percent threshold is unreachable. Yet nearly 80 percent of Californians are already insured by public or private programs. An effective outreach program could bring a million more people into public programs. Premium subsidies will help millions more obtain coverage. The fact is, the 90 percent target is well within our reach.

This compromise offers lawmakers to go beyond promising universal coverage. It allows them to actually achieve it. To me, that’s a compromise worth making.