Discrimination by Insurers Likely Even With Reform

Original Link: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/03/AR2009100302483.html

By David S. Hilzenrath

Any health-care overhaul that Congress and President Obama enact is likely to have as its centerpiece a fundamental reform: Insurers would not be allowed to reject individuals or charge them higher premiums based on their medical history.

But simply banning medical discrimination would not necessarily remove it from the equation, economists and health-care analysts say.

If insurers are prohibited from openly rejecting people with preexisting conditions, they could try to cherry-pick through more subtle means. For example, offering free health club memberships tends to attract people who can use the equipment, says Paul Precht, director of policy at the Medicare Rights Center.

Being uncooperative on insurance claims can chase away the chronically ill. For people who have few medical bills, it is less of a factor, said Karen Pollitz, research professor at the Georgetown University Health Policy Institute.

And to avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania's Wharton School.

By itself, a ban on discrimination would not eliminate the economic pressure to discriminate.

"It would probably increase the incentive for cherry-picking," Pauly said. "I'm strongly motivated to try to avoid you if I'm not allowed to charge you extra."

Cognizant of the threat, lawmakers are trying to neutralize it. For example, the bill advanced by Senate Finance Committee Chairman Max Baucus (D-Mont.) calls for creation of complex mechanisms to essentially raise or lower compensation to insurers, depending on whether they attract disproportionately sick or healthy populations.

The bill assumes the problem would be greatest during the first few years; after that, part of the machinery to compensate for variations would go away.

A straightforward way to reduce gamesmanship is to standardize benefit packages, Precht wrote in a July report. One issue lawmakers must resolve is how much latitude to leave insurers over what they cover and how.

Unless lawmakers tackle the problem effectively, a reformed health-care system could continue to reward insurers for avoiding rather than treating illness. It also could perpetuate existing economic penalties for health plans that do a better job of covering the sickest patients. They tend to attract costlier members, which can force them to raise premiums, fueling a cycle that can make it harder for the severely ill to get affordable coverage.

"In a competitive market, a good-guy insurer is a patsy," Pollitz said. "The race is to the bottom."

America's Health Insurance Plans, a lobbying group for health insurers, has endorsed the idea of guaranteeing individuals access to coverage regardless of their medical history -- if that guarantee is part of a larger plan to help the uninsured pay for coverage and bring everyone into the insurance market.

At a more nuts-and-bolts level, AHIP has been trying to shape the legislation in ways that could help insurers attract the healthy and avoid the sick, though it has given other reasons for advancing those positions. In a recent letter to Baucus, AHIP President Karen Ignagni said benefit packages "should give consumers flexible options to meet diverse needs."

There are myriad ways health plans can attract healthier members, from the messages they advertise to the overall level of coverage they provide and the smallest enticements they add to their benefits packages.

Anthem Blue Cross markets a line of insurance called Tonik that is explicitly aimed at young adults. "You're young. You're healthy. You're in shape," the Tonik Web site says, addressing its target market. Tonik policies bear such names as "Part-Time Daredevil" and "Thrill-Seeker." The latter is for people who "live life on the edge, and happily go over it," says the Web site, whose graphics and color scheme bring to mind an ad for the Apple iPod.

At the other end of the age spectrum, ads for private health plans serving senior citizens on Medicare seldom feature people who are sick, said Tricia Neuman, who has studied the ads for the Kaiser Family Foundation. Many of the plans have offered benefits such as health club memberships, help buying eyeglasses, and preventive dental care, which may be more likely to sway healthy seniors than seniors who have severe and complex medical needs.

Some private Medicare plans have offered relatively inexpensive enticements while requiring members to pay more out of pocket than they would under conventional Medicare for major expenses, said the Medicare Rights Center's Precht. In 2008, a quarter of the private Medicare plans charged members more out of pocket for Part B medications, which include chemotherapy drugs for cancer patients, according to a March study for the AARP Public Policy Institute.

The government has been cracking down on those practices. As a Medicare official put it in a March 2008 letter to health insurers, charging beneficiaries more out of pocket than conventional Medicare for Part B drugs, dialysis and time spent in skilled nursing facilities "may be considered discriminatory."

In response to questions about the risk of continued cherry-picking under his legislation, Baucus provided a statement that "the difference in the market will be like night and day" compared with today's "wild West." But he also offered a qualification.

"These regulations are the first step to a market where consumers can be confident in the coverage they purchase," he said.