What Insurers Are Trying to Get Out of Health Reform

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For much the same reason, another focus of insurers is the provision to provide federal subsidies to lower-income Americans to help them afford coverage. If subsidies are not sufficiently large enough, insurers say, many Americans would opt not to buy coverage. AHIP favors subsidies to Americans earning up to 400% of the federal poverty line, the same level of subsidies in both the House and HELP bills. The Senate Finance Committee, the lone remaining committee with jurisdiction over health care yet to produce a bill, hasn't announced which subsidy level it will support. But in an effort to win bipartisan backing and scale back the cost of the bill, it is reportedly considering limiting subsidies to Americans earning just up to 300% of the poverty line.

Looking only at reform elements like age bands, universal mandates and subsidies, one can easily see just how potentially fragile the insurance companies' support really is. "It's like a ball, and when you start pulling on one piece of string, a lot of it unravels," says Diane Rowland, executive vice president of the Henry J. Kaiser Family Foundation, a nonpartisan, nonprofit health-policy research organization.

One doesn't have to peer too far back at previous health-reform efforts to realize that "the devil is in the detail," as Rahm Emanuel, President Obama's chief of staff and a veteran of health-reform efforts under Clinton, recently said. Emanuel helped work on the 1996 Health Insurance Portability and Accountability Act (HIPAA), one of several incremental changes made after Clinton's comprehensive reform failed to go anywhere in 1994. HIPAA was intended to ensure that Americans would not be denied coverage on the basis of pre-existing conditions when they switched coverage while moving from one job to another or from employer-based insurance to an individual plan.

"I remember all the high-fiving each other [after passage of] portable health care in 1996," said Emanuel before adding, "It's been empty." Although HIPAA prohibited insurers from denying coverage on the basis of pre-existing conditions, it didn't limit how much insurers could charge in premiums. The result: insurers in states without premium caps were charging those with pre-existing conditions as much as 464% of standard premiums, according to the Government Accountability Office. (Other researchers found examples that were even more egregious, including a Colorado insurer charging premiums as much as 2,000% of normal rates.) In addition, the federal and state governments were unprepared for the oversight required to enforce HIPAA, another concern of health reformers this time around. In 1998, for example, federal and state officials discovered that in an effort to discourage compliance with the law, some insurers were withholding commissions to agents who wrote policies for HIPPA-eligible applicants with pre-existing conditions.

"The problem with health insurance," says Karen Pollitz, a health-policy expert who has studied the shortfalls of HIPAA, "is it's really complicated and fixing it part way almost never works." Some skeptics of the insurers' support this go-round believe that's what the industry is counting on, even if its advocates and defenders insist that's just what they are working to avoid.

— With reporting by Karen Tumulty / Washington

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