Published in POLITICO
They may not be able to charge sick people more money — but what if insurers just charged healthy people less money instead?
That’s one of the scenarios that’s getting attention as health care experts uncover new ways that insurers could get around one of the main goals of the health reform law: protecting patients from being treated differently if they have health problems.
The health reform law is supposed to close the door on insurance companies charging more or denying coverage to sicker people. But consumer advocates warn that could open windows for insurers to achieve the same goal by other means — unless regulators close potential loopholes before they finalize new insurance rules.
The Affordable Care Act specifically bans the door to “underwriting,” setting premiums based on an individual’s health conditions. But insurance experts say there are other ways for insurers to identify which patients are more likely to become ill and to “risk select” by discouraging higher-cost people from enrolling, even if they can’t deny coverage outright.
There was even a heated debate in — of all places — The Actuary magazine about a technique that some saw as a blueprint for identifying people at risk for future health problems.
“As we move further into implementation we need to be very vigilant about this,” said Stephen Finan of the American Cancer Society.
“Historically a lot of insurers have survived and thrived by underwriting and risk selection — that behavior’s not going to change immediately,” he said.
Insurers and employers counter that there are plenty of safeguards in the ACA to take away the profit motive for risk selection. It puts in place a risk-adjustment system that will give bonus payments to insurers who wind up with disproportionately sicker enrollees, offsetting their added cost.
But many experts believe that risk adjustment isn’t perfect enough to completely remove the incentive for plans to cherry pick, and HHS may be leaving some loopholes as it implements the system that make that more likely.
An article in the October/November magazine of the Society of Actuaries hinted at a creative alternative to underwriting that insurers might consider, using the same kind of commercially available consumer data used to microtarget direct-mail campaigns — such as magazine subscriptions or shopping history — to predict consumers’ health risks.
It turns out that 3 percent of avid fishermen and more than 4.5 percent of passionate gardeners have cardiovascular disease, according to the article’s author, Milliman’s Ksenia Draaghtel. Gamblers are more likely to develop diabetes, and golfers are more likely to get skin cancer.
Draaghtel was careful not to suggest that the technique be used as an end-run around the ACA’s ban on underwriting. She advocates that plans use this approach to identify patients with the diseases they are most expert at managing, like diabetes, so that both the consumer and the insurer win by delivering more efficient care.
But her article sparked a heated response on The Actuary’s pages from experts who saw this approach as a step toward underwriting by other means.
“Discriminating between customers based on their current and potential future health status … is clearly contrary to the intent of health care reform,” wrote Tia Goss Sawhney of the Illinois Department of Healthcare and Family Services.
“I fear that someday we may wake up to a headline in a national publication that states, ‘Actuaries Undermined Health Care Reform,’” she added ominously.
The health reform law also allows for employers to offer “wellness incentives,” a provision that has spooked consumer advocates since before the law was passed.
Insurers will be allowed to reduce premiums by as much as 30 percent to enrollees who meet healthy lifestyle targets, like a certain weight or cholesterol level. But consumer advocates see this as a backdoor way to charging more to people in poorer health.
While the desire to motivate people to take care of themselves may be laudable, said the Kaiser Family Foundation’s Gary Claxton, it could have the effect of simply penalizing less healthy people. To avoid that outcome, he said, there would have to be meaningful rules requiring plans to set realistic goals and insurers and employers to offer real supports for people to meet them.
“It’s possible that in a group plan what employers or insurers [will do] … is just charge much higher contributions to people who have certain attributes,” Claxton said.
But Larry Boress, president and CEO of the Midwest Business Group on Health, argued that using wellness incentives simply to hike premiums for some workers would be counter to employers’ interest.
“I don’t think employers are looking to penalize people who are not healthy,” Boress said — but employers do need employees to take responsibility for their health if their companies are going to be on the hook for their costs. “The employer shouldn’t have to pay for their decision to not be healthy,” he said.
Another possibility that keeps consumer and patient advocates up at night is the possibility that insurers could use their flexibility to tweak benefit packages to discourage more costly individuals from enrolling in their plans.
Though the federal and state rules will spell out what categories of services and what portion of health costs must be covered, policy statements issued so far by HHS suggest that insurers will still have a lot of latitude.
For example, HHS guidance suggests insurers will have to cover many categories of drugs, but will only have to cover one drug in each class. By dramatically limiting their formulary, a plan could keep out a lot of patients with complex conditions requiring very specific drugs, such as those with HIV, cancer, or psychiatric disorders, insurance experts say.
And depending on how regulations are written, insurers could also design their networks of providers to technically fulfill “adequacy” requirements but still make it impractical for patients needing certain specialists to enroll. They also could potentially increase cost-sharing for some services needed by high-cost patients, while still meeting the coverage rules by adding more generous coverage in other areas.
Consumer and patient advocates want HHS to tighten the rules to prevent this from happening. But insurers contend that reining in flexibility will only hurt consumers in the long run.
“Not everybody has the same health care needs — not everybody wants to have the same policy,” said Robert Zirkelbach, press secretary for America’s Health Insurance Plans. Leaving insurers latitude, he said, is “good for consumers, it’s good for employers, and it helps keep their costs down.”