The Plank

Health Insurance Industry: We Can Play Nice (updated!)

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Could the health insurance industry support universal health insurance? For a few months, industry representatives have been telling reformers both on and off Capitol Hill that they'd consider it, subject to certain conditions. On Wednesday, they said it publicly.

Their position is pretty simple. They would be willing to change their business practices--and stop discriminating against people with pre-existing medical conditions--as long as the government required everybody to obtain health insurance. To put it in wonky terms, they'd offer community rating (charging everybody the same rate) and (see update below) they would practice guaranteed issue (selling a policy to anybody willing to buy one) as long as there is an individual mandate (a legal requirement that everybody get coverage). The idea would be to do all of this through some kind of purchasing pool, modeled on the system federal employees use.

Without a requirement that everybody buy coverage, the insurers say, people could just wait until they got sick before getting their policies. Insurance pools would lose a lot of their healthy members, driving up premiums for those who remain, and insurance would become more and more unaffordable--much as it has in states that currently have community rating and guaranteed issue rules. (The exception is Massachusetts, which is the one state with an individual mandate.)

As readers of this space know, I happen to agree with the insurers on this position, as do Paul Krugman, Jonathan Gruber, Ezra Klein, Len Nichols, and most of the health care policy community.  

Obama, regrettably, has proposed a health care plan that lacks such a mandate--a subject of no small controversy during the presidential primaries. But it would be a mistake to see this announcement as a worrisome political development.

Congress, not Obama, will end up writing the actual plan. Senator Max Baucus, who will (along with Ted Kennedy) lead his chamber's reform effort, has already indicated he supports an individual mandate. Senator Wyden's biaprtisan bill for universal coverage has an individual mandate, as well. The insurance industry's positioning, therefore, is perfectly in line with these efforts. And it sets up a scenario under which Obama could, as a final compromise, "reluctantly" agree to an individual mandate in order to get a package passed.

If anything, this announcement is the latest sign that health care reform has serious political momentum heading into 2009. The insurance industry wouldn't be taking this position if its representatives didn't believe that the odds of universal health care passing are pretty good--and that they are better off trying to shape the plan from the inside than fight it, unsuccessfully, from the outside.

Of course, they could change their minds. In 1993 and 1994, many lobbying groups indicated they would support President Clinton's bid to create universal health insurance. But once it became clear the plan was losing political momentum, most of them backed off. Still, every day that the insurance industry is saying charitable things about reform is a day it's not using its resources to knock it down. And that has to help the overall effort.

Going forward, the real question is what other positions the industry will take--and how hard it intends to fight. Will insurers tolerate regulation of their marketing practices, pricing, and benefits packages? Will they allow for a decent "risk stabilization scheme"--a scheme that transfers money from companies enrolling lots of healtlhy people to companies enrolling lots of sick people? And will they accept the creation of a public insurance plan designed to compete with them for business?

The latter, at least, seems unlikely, as they've made it pretty clear that--at the moment--they consider that a dealbreaker. Yet it's a feature of both Baucus's and Obama's bill--and something liberal reform groups (rightly) consider important.

Update: Ezra had the good sense that I didn't: He contacted America's Health Insurance Plans, the lobbying group for insurers, and confirmed a very important wrinkle in their position. They are not endorsing community rating, only guaranteed issue. That's not to say they wouldn't embrace community rating at some point down the road; people close to the industry have hinted as much. But they're not doing it now. And that's a big deal. If the only policy you're willing to offer somebody costs three times the normal policy, because that person has diabetes, then you're not really offering them affordable coverage. 

--Jonathan Cohn  

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