Patients' Choice Act: Nice Rhetoric, Swiss Cheese Policy

by Julia Kaye, Health Policy Associate, 
National Women's Law Center 

We’ve discussed many times before the difficulties that women face accessing health insurance in the individual health insurance market. So it’s heartening to know that members of Congress from both sides of the aisle have come to recognize the severe failures of the current health care system—nowhere more obvious than in the individual market—and more importantly, are introducing legislation to reform it.

On Wednesday, Senators Coburn and Burr and Representatives Ryan and Nunes held a press conference to announce the release of the Patients’ Choice Act of 2009 (no bill’s been released yet, but a 15-page summary is available here), in which they rightly acknowledged that “the health care system in America is broken.” The heart of the bill is a new model of state-based marketplaces for individuals seeking insurance, or “state health insurance exchanges.” By requiring plans participating in these exchanges to provide coverage regardless of age or health status, to meet a minimum benefit standard, and to be subject to an independent board that will penalize companies that cherry-pick healthy patients and reward companies that seek patients with pre-existing conditions, the bill aims to create “a consistent and fair market, so that everyone can afford coverage.”

And to sweeten the deal, every individual with a healthcare plan will get a tax rebate of $2,300 for individuals or $5,700 for families. Et voila. Affordability problem…solved?

Unfortunately not. The rhetoric is nice, but the policy’s swiss cheese. Let’s poke our way through some of the holes:

1. To start with, the summary does not actually state that insurers participating in the exchanges would have to provide coverage on a guaranteed issue basis—which means that no one can be denied coverage for any reason. It says only: “Guaranteed access to care. The Exchange would require all participating insurers to offer coverage to any individual—regardless of patient age or health history.” While it’s important that insurers could not reject an applicant based on their age or health history, this provision doesn’t protect an individual denied coverage because, for example, s/he works in construction, or as a nurse. We’ll have to wait to see the bill itself to confirm…
2. As Karen Davenport, Director of Health Policy at the Center for American Progress Action Fund, notes: “their plan does not provide incentives for insurance companies to join the state exchanges, and it fails to regulate companies that decide not to join.” Right. So the basic premise that these exchanges will provide a regulated environment in which individuals can have their choice of insurance is on shaky ground. If you were an insurer, and you could choose between participating in an exchange that would require you to accept older and sicker people and possibly adhere to other rules or continuing on your merry way, what would you do? And if the individual market still exists, unregulated, outside of these exchanges, then older and sicker populations—who need the exchanges’ protections—may be the only ones to join it, thereby turning the exchanges into a dumping ground for more costly populations. Which insurers will want to join then? Ezra Klein applauds the fact that, “Unlike the McCain health care plan, the Burr/Coburn/Ryan/Nunes proposal does not leave individuals to fend for themselves on the individual market.” But if insurers are unwilling to participate in these newly-regulated marketplaces, that’s exactly what will continue to happen. And even if insurers are willing to participate, with a population composed primarily of older and sicker individuals, premiums will be sky-high. Which brings us to our next point: affordability…
3. The plan relies on tax credits to help cover health insurance premiums, but these capped tax credits do not account for differences in premiums that unfairly penalize women and older people—differences that are allowed under the new proposal. That’s right—premium rating based on gender, age, health status or any other factor are not prohibited under the proposal. So these tax rebates will do less to help a woman afford her premium than they will to help a man. And at the best of times, the proposed $2,300 and $5,700 rebates are likely to be far too little. In 2005, the average premium for an individual policy in the individual market was $3,664. In addition, the tax rebates do not help with out-of-pocket costs—which are often substantial in the individual market.

There are other serious concerns, too: for example, the plan’s promotion of high-deductible health plans (HDHPs) with health savings accounts (HSAs). HDHPs may have lower premiums, but they come with higher out-of-pocket costs. Women have, on average, less disposable income and greater health care needs than men, and are therefore generally less able to afford high out-of-pocket costs. High cost-sharing has also been shown to lead to the under-use of needed services, particularly for those with low incomes and chronic illnesses. In addition, people with less income to contribute to an HSA may lack sufficient funds in their accounts to cover their health care needs. This short-sighted remedy fails to address the real affordability challenges faced by Americans, and especially lower-income women.

Senators Coburn and Burr and Representatives Ryan and Nunes: We commend you for recognizing that our health care system is broken and taking a stab at reforming it. But the Patients’ Choice Act is not the yellow brick road to comprehensive, affordable, quality health care that meets women’s needs.

Comments

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On Wednesday, Senators Coburn and Burr and Representatives Ryan and Nunes held a press conference to announce the release of the Patients.

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There are other serious concerns, too: for example, the plan’s promotion of high-deductible health plans (HDHPs) with health savings accounts (HSAs). Enzyte