by James A. Bacon
Insurance companies participating in Virginia’s Affordable Care Act health exchanges are asking to increase rates by an average of 14% next year. In making presentations to the State Corporation Commission yesterday, they said the increases reflect (1) general health care inflation that affects everyone, and (2) and an imbalance in sick versus healthy participants in the plans.
Under state law, the SCC is required to review and approve premium rates for all types of health plans, reports Katie Demeria with the Richmond Times-Dispatch. If an insurance company’s rate filing has met the state’s minimum loss ratio requirements and all assumptions are defensible from an actuarial perspective, it is virtually impossible to turn down the rate-hike request.
“Some of these rate increases are more than what people would want and, in some cases, could be more than what some people would bear,” said Commissioner Mark Christie. “But we also have an obligation to ensure that these companies remain in business so that the can pay the claims they’re obligated to pay by the people who pay their premiums.”
Bacon’s bottom line: There is not much that the Commonwealth can do about the imbalance between sick and healthy participants. The Affordable Care Act (widely known as Obamacare) anticipated the problem by taxing people who fail to enroll. The incentive, as stiff as it is, is not sufficient to induce as many healthy people to enroll as are needed. This design flaw in the federal legislation is beyond the power of Virginia lawmakers to fix.
But the General Assembly does influence how health care markets operate in Virginia, and lawmakers can affect the general cost of delivering health care. Not only do legislators have a political responsibility, they have a moral responsibility to create the conditions for Virginia health care markets to become more affordable and accessible.
Existing state-level laws and regulations muck up the efficient functioning of health care in many ways. First and foremost is the Certificate of Public Need (COPN) law that thwarts competition from newcomers and ossifies the existing delivery system in place. Legislators are on top of that one, and they’re not letting go.
But there are many other areas that need reform. The most glaring is state-mandated benefits for small-group insurance policies. Employers big enough to self-insure can structure their policies packages any way they want. Small employers who have to band together to create a viable risk pool don’t have that option. Insurers must package some 30 state-mandated benefits into their policies, whether those benefits are desired or not. These include everything from “newborn children” to “reconstructive breast surgery” and “colorectal cancer screenings.”
While any one of these benefits may not seem unreasonable in itself, the collective package severely limits the ability of insurers to offer affordable, trimmed-down plans. For example, one plan that I think would sell well (because I would buy it) would have two main features: (1) negotiated rates so I don’t have to pay the outrageous nominal fees that hospitals and doctors charge, and (2) catastrophic coverage if medical bills exceed, say, $20,000 in a year. In other words, I would pay all bills out of pocket up to $20,000 but at negotiated, discounted rates, and I would be protected from catastrophic loss. Such a plan, as I understand it, is illegal. That’s why you cannot find it in the Virginia marketplace.
A third way the state could help is increase price transparency so patients can exert consumer pressure on health providers for discretionary procedures. Consumer pressure has kept down the cost of Lasik eye surgery and cosmetic surgery, which are not regulated or funded by government. Consumers could exert downward pressure on many other procedures as well if they had easy access to the price data.
There’s much more, but those are the big three. As a nation and a state, we can continue to fixate on the zero-sum question of “who pays?” — transferring wealth from Peter to Paul — or the win-win question of how we make the system function better for everyone. The wealth-redistribution approach has not worked well for anyone. It’s time to try win-win.