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What would the best bill look like?

Making sure health insurance policies are actually affordable for those who must buy them is our top priority in the coming weeks, and should be Congress' top priority as well.

What would the best bill look like?
Health insurance must be affordable for American families if we are all to buy it. With the proposed public health insurance option in doubt, we could end up with no mechanism to slow insurance price increases, and there’s no cap on how much prices could rise. Making sure health insurance policies are actually affordable for those who must buy them is our top priority in the coming weeks, and should be Congress’ top priority as well.
For millions of Americans, affordability is mainly secured through the discounts that will be available on a sliding scale to families earning under 400 percent of poverty (about $43,000 for an individual and $88,000 for a family of four). The discounts will save qualifying families thousands of dollars–a huge improvement over the status quo. But each proposal leaves some families facing bills they might not be able to pay. In particular, the Senate’s more meager discounts likely could leave many lower-income Americans without health insurance and paying penalties instead.
To ensure affordability we recommend that negotiators:

  • raise Medicaid eligibility to 150% of the Federal Poverty Level (FPL) and accept the House’s improved payments for Medicaid primary care providers. This will improve care and allow more very low-income people to get it without having to purchase policies on their own;
  • adopt the House discounts for lower income families who will still not qualify for Medicaid (up to about 250% of the federal poverty level);
  • adopt the Senate discounts for middle income people (earning from 250% to 400%);
  • review in 2015 the affordability of health insurance for all families (up to 500% of the federal poverty level) and add or increase discounts if necessary.

For millions of middle class families who currently don’t get insurance from an employer, there will be a new mandate and no discounts. So we must do more to get the underlying price of the insurance itself under control.
Rather than directly limiting private insurance costs, both the House and Senate bills limit the difference insurance companies can charge between young and old. They also require insurance companies to spend a certain amount of every premium dollar on medical care. The Senate bill discourages unjustified rate increases, but doesn’t define that term.
Requiring insurers to direct the bulk of your premium dollar to medical care will make sure we all get some medical “value” for our insurance dollars (something we don’t necessarily get right now). But it does not necessarily keep prices down. Insurance companies always claim their rate increases are related to increases in the underlying costs of care, and state regulators vary a lot in how aggressively they question those claims. And to be fair to insurance companies, doctors and hospitals are always pressing for higher fees.
So any effort to address the constantly rising cost of health insurance must look at both fronts–how we determine whether a rate is justified under the new standard, and how we actually reduce the underlying cost of care.
To address escalating insurance rates and out-of-pocket costs, we recommend that negotiators:

  • set the acceptable medical loss ratio (the ratio of money spent on care to total premium dollars) at 85% for all plans (the House version);
  • allow plans to charge older people no more than twice what younger people pay;
  • adopt language from the Senate manager’s amendment to stop unfair billing based on miscalculated “usual and customary” charges;
  • require states to collect and pass to the HHS Secretary basic information about plan rates and rate increases by company and policy, and annually publish it online so that buyers can see the rate history associated with a policy they might be considering;
  • provide states clear guidance on the minimum standard for an unjustified rate increase so that insurance companies won’t “game” the rate approval process in the states;
  • increase the “lifespan” of the ”risk adjustment” payment system (designed to spread medical costs across all policies) to at least 2020, and add a review process that can further extend the system if needed; and
  • if an insurance company wants to participate in the “Exchange,” where millions of people will shop for policies, then they need to provide good service at reasonable rates. Unjustified rate increases should clearly mean rejection from the exchange.

A key component to getting costs under control is the insurance exchange – the proposed ‘insurance mall’ where companies would compete for customers, and customers could easily shop and compare on price and quality. But if Congress instead creates 50 state exchanges, as proposed in the Senate bill, and allows companies to sell policies outside the exchange (and outside the minimum standards), consumers will lose much of their bargaining power, and companies will have little incentive to hold premium rates down.
It’s vital Congress creates a strong, competitive insurance marketplace with understandable insurance plans that meet minimum standards for value and quality. This way, consumers can easily pick and choose the best deal, and insurers will realize they finally have to compete to get customers.
To create strong competition we recommend that negotiators:

  • adopt the National Exchange system outlined in the House bill;
  • prohibit the sale of individual insurance outside the Exchange;
  • require each insurance company to offer one standard plan that is the same across all companies to maximize comparability;
  • give consumers in the exchange the kind of buying information laid out in the Senate version of the bill–standard definitions of insurance and medical terms, readable formats, and the presentation of ‘scenarios’ to show how well a plan will cover certain common conditions;
  • give consumers their estimated annual total cost of a plan, based on their self-estimated health status or their past medical usage, information that can help people make the best choice for their own health needs.

If the insurance reforms and a competitive exchange succeeds and prices stabilize, there will still be people who simply can’t afford to pay health insurance premiums. The final bill should be very clear that there will be hardship exemptions so people will not lose their home or be forced into bankruptcy if they cannot pay the insurance premium. Installment payments for coverage must also be available. The clear goal of the legislation is to provide insurance, not generate new government revenue by imposing onerous penalties, and this should be made very explicit in the final language.
But all that only addresses the cost of insurance. We also need to address the cost of high quality care. In this area, we ask that the final bill pick up the strongest components of both measures with respect to patient rights, patient safety and prescription drug pricing. Safer care that meets patients’ needs, with fewer side effects, is also less expensive care. Drug prices must come down, and selected FDA reforms in both the House and Senate bills will help do that.
To bring safer care at lower costs we recommend that negotiators:

  • pick up provisions from both bills in the areas of hospital infection control, error reduction and quality;
  • maximize the financial incentives to healthcare providers to improve quality and reduce errors;
  • make public  infection and error rates so consumers can choose the best care;
  • reject the Senate’s bonus payments to Medicare Part C plans that have below-average ratings for the quality of their care;
  • accept the Senate Manager’s amendment (Sec. 10332) allowing Medicare claims data to be used for developing public quality reports that will help consumers;
  • support the House device registration provision (sec. 2571);
  • stop brand-name drug manufacturers from paying generic manufacturers not to bring a generic to market (House sec. 2573);
  • help bring generics more quickly to market (Senate sec. 10609 and Senate sec. 3507);
  • enact a Patients’ Bill of Rights from the Senate proposal to give consumers long-sought protections: choice of doctor even if people change insurance plans, access to needed specialty physicians, and the right to appeal coverage denials.

As we implement these reforms, insurance companies may invent new ways to get around these reforms and cherry-pick the healthiest customers to improve their profits. We witnessed that recently in the credit card market, as banks immediately developed new schemes to increase their profits after Congress passed a major credit card reform bill. It’s vital we get the best possible final bill now, and continue to track its implementation closely to make sure everyone can get the quality healthcare they need at truly affordable prices.