Insurance reform is caught in a crossfire of phony claims - health insurance reform - Column

Business & Health, June, 1996 by Steven Findlay

Mistaken impressions and

specious arguments persist in the debate over health insurance reform, medical savings accounts and parity for mental health coverage.

Both the Health Insurance Association of America and the Council for Affordable Health Insurance argue that the legislation now in conference committee would hike premiums as much as 30 percent. They also claim it would result in fewer small businesses and individuals with coverage. No solid evidence supports either claim.

The Council, an Arlington, Va.-based lobbying group for indemnity insurers, released a report last month purporting to show that reform laws led to across-the-board premium hikes in seven states. Far from being rigorous, the study was little more than a selective gathering of anecdotal evidence.

In truth, no one has systematically analyzed the experience of the 47 states that have passed health reform laws in the last five years. In the last few months, however, three independent groups--the American Academy of Actuaries (AAA), the Hay Group and the RAND Corp.--have assessed the potential impact of the portability and pre-existing condition measures at the core of the federal bill. All found that premiums would rise 6 percent at most and probably no more than 2 to 4 percent.

That's because the legislation was crafted to avoid having too heavy an impact on the small business market. The Congressional Budget Office projects that only about 400,000 people a year would benefit directly from the new curbs on waiting periods for pre-existing conditions. Insurers and businesses would still be able to impose a 12-month waiting period for anyone who has not had coverage.

The AAA forecasts that just 150,000 people a year would take advantage of the group-to-individual portability measure when leaving a job. To listen to the HIAA, you'd think every ailing and uninsured person in the nation is ready to rush out and buy coverage. The number is small because the price of the individual policies won't change and because the bill gives the purchase option only to those who've been covered continuously for 18 months in an employer or group plan.

Advocates of MSAs also continue to ignore health insurance realities and the nuts and bolts of the House bill. Yes, the idea of letting people spend $2,000-$4,000 of tax-deferred money on providers of their choice, after which insurance kicks in, is appealing. But the legislation does not compel employers to fully fund MSAs. In fact, a growing number of experts think the premium savings from a switch to a high-deductible MSA from a managed care or low-deductible indemnity plan would not be enough to allow most small employers to adequately fund the MSA. So the money would come from employees' paychecks. MSAs are also antithetical to elements of federal insurance reform that attempt to increase pooling in the small group and individual markets. Fragmenting those markets could lead to higher premiums for less healthy groups.

The choice on mental health parity has more to do with social philosophy and ethics than with distorted facts or insurance markets. Business groups adamantly oppose the mandate, arguing it would raise costs by some $11 billion in the first year (an average of $110 per employee) and be a gross intrusion into the world of ERISA-sanctioned self-determination. The mental health community and consumer groups counter that society will never stop stigmatizing the mentally ill until mental disorders are handled exactly like cancer, heart disease or any other medical condition.

I side with the consumers on this one, because I'm convinced that business has the wherewithal to contain mental health costs under the terms of the bill--through managed care. About 120 million Americans already get mental health coverage through managed care plans, and nobody is recommending unleashing an open-ended benefit.

Unfortunately, the mental health issue didn't receive enough debate before it was slipped into the bill. And it should not be allowed to threaten passage of health insurance portability this year. If it looks like that might happen, Congress should put mental health--and MSAs--aside until next year.