The AP moved a story yesterday afternoon reporting that members of two health insurance trade associations, America’s Health Insurance Plans (AHIP) and the Blue Cross and Blue Shield Association, are now willing to phase out the practice of charging sick people more for their coverage in the individual market. AP health reporter Ricardo Alonso-Zaldivar wrote that the move could prove to be “a potentially significant shift in the debate over reforming the nation’s health care system.” Insurance companies giving up the right to charge sick people more? Wow! That does seem like big news. But wait a minute: there’s more that reporters eager to explore the story should know.
For starters, there’s a big if involved. Insurers are willing to do that only if all Americans are required to have insurance. In other words, they’ll give up a little extra dough if the government mandates that everyone goes out and buys insurance from these carriers if they are not covered by their employers, or under a public plan. What they will lose will be more than made up by all the new business that will come their way. It’s also an open question whether the public even knows what an individual mandate is. If they do, are they in favor of the government telling them they must buy a policy from Aetna or Blue Cross?
Second point—and this one requires a bit of knowledge about how the individual insurance market works. Insurers have four choices when an applicant shows up at the door. They can accept the person and charge standard rates. They can deny coverage if the person’s health conditions look like expensive trouble down the road. They can accept the applicant but slap a rider on the policy excluding coverage for that person’s very illnesses. If, say, someone has high blood pressure, a carrier could exclude coverage for all conditions related to high blood pressure. They might even exclude coverage for all diseases of the circulatory system. Or they can simply charge more based on how much risk the person presents. Forgoing higher rates still leaves options that get them off the hook. So what is the industry really giving up?
Reporters need to ask those questions before writing puff pieces praising the industry’s latest move. Take another look, call some experts, and explain to your audiences what is actually behind the insurers’ proposals. Is the industry Mr. Nice Guy, or is it just doing business as usual with a good story to give it cover?