Reliance on competition among private insurers is fundamentally a weak approach to health care reform. (The reason is that to keep prices low, insurers have only two levers to pull: they can refuse to insure people at high risk for using services, and they can change the conditions of insurance. Usually that means refusing to cover certain services or charging high out-of-pocket amounts. It could also mean paying providers by other means than fee-for-service, but they tend not to do that.) Partly for that reason, the President and Congressional leaders, not to mention the general public, have focused much attention on "the public option" as a way to minimize the weakness and to "keep the insurers honest." Important as it is, however, other provisions may be even more critical.
Some of the bills contain provisions that would prohibit insurers from using some of the most hurtful methods they use now to keep down their costs. If competition among insurers is the approach to be used, it is critically important that those provisions be in the bill presented to the President for his signature. They include the following:
• Guaranteed issue, which would keep insurers from denying coverage to people with pre-existing conditions and other characteristics, like age, which increase the chances they will need services (and, thus, cost insurers money);
• Guaranteed renewal, which prohibits insurers from refusing to renew a policy for a subscriber as it expires; and
• Low or no cost-sharing when people use services, so that out-of-pocket costs do not make needed care unaffordable, as it is now for many insured Americans.
Even though the insurance industry association has garnered much favorable publicity for its "support" of health care reform, the Chicago Tribune reported recently (August 24, 2009) that insurance executives have been engaging in prodigious lobbying efforts aimed at undermining the value of the coverage the new law would require. The Tribune reported that the insurers are not content with the prospect of reaping "a financial windfall" from enrolling the millions of currently uninsured people who would be required by the legislation to buy insurance. So, in addition to lobbying lawmakers heavily to oppose the public option, they are also urging the Senate Finance Committee to require that insurers reimburse providers only 65 percent of their policyholders' medical costs.
We already know from years of research that even small amounts of cost-sharing -- co-pays as low as $10 per visit or per prescription -- keep many people who have insurance from using services their doctors recommend. Imagine what decisions patients would make faced with having to find 35 percent of the cost of an expensive surgical procedure or hospital inpatient stay! Current policies, which typically cover at least 80 percent of medical bills already deter many from using needed services. If the insurers' lobbyists succeed, however, how much will the coverage citizens must buy actually be worth if it leaves 35 percent of the costs uncovered?
For these reasons, any legislation that passes, in addition to covering a comprehensive range of services, must include guaranteed issue and renewal, low cost-sharing, and a requirement that insurers cover at least 80 percent of their medical bills -- preferably much more.
Even if the reform legislation that passes would cover all Americans, a critically important goal, unless the law also contains these provisions, many people will be shocked when they actually go to use medical care. They will understandably be angry if the coverage they are forced to buy is so limited that they still cannot afford the services they need. And they will get scant satisfaction if disappointed constituents make lawmakers pay a price at the polls in the next election.
Davidson, a Boston University professor, is author of the forthcoming book In Urgent Need of Reform: The U. S. Health Care System.