The last couple of posts have dealt with the guarantee issue requirements in the individual health insurance market, a central component of several health care reform proposals. What I’ve suggested is that guarantee issue, which simply means health insurance carriers have to accept all applicants regardless of their health risk, if done right can lead to universal coverage, but if done wrong can lead to disaster.
The line between right and wrong in this context concerns requiring consumers to be insured. If it’s required, and that requirement is effective, guarantee issue can work. In systems where consumers can wait until after a need for insurance develops you wind up with a mess. The poster children for disaster are New York and New Jersey. Consider the results of a 2005 study conducted by the America’s Health Insurance Plans (AHIP):
Average Annual Individual Health Insurance Premiums:
New Jersey New York California
Single Coverage: $ 6,048 $ 3,743 $ 1,885
Family Coverage: $14,403 $ 9,696 $ 3,972
New Jersey and New York have guarantee issue (and community rating) without a mandate to purchase coverage. California does not — at least, not yet. The result: a consumer in New Jersey buying coverage just for herself pays surcharge for the state’s misguided health care reform of over $4,100. If she moves to New York, the surcharge falls to approximately $1,850.
Families suffer more when health care reform goes bad. A family in New Jersey buying their own coverage pays over $10,400 more than a California family; New Yorkers pay over $5,700 more.
Think of the impact of a 350% surcharge on a family’s budget — or on a state’s economy. Promoting guarantee issue in the individual market as a key to achieving universal health care coverage is both noble and reasonable — if it’s done right. If done wrong, the state and its citizens will pay the price.