No dropping coverage for seriously ill people. HIPAA does not allow insurers to drop people who have filed claims for serious illness. People with individual coverage and those in groups can’t be dropped if they have filed lots of claims. But the companies have found a way around this prohibition. If too many people in a group get sick, especially in a small group of people who have purchased the same individual policy, the company just closes off its “block of business” and sets off what’s known in the insurance biz as a death spiral. The company starts selling a new, perhaps similar product to healthy people, while sick people with the old coverage face higher and higher premiums, making the policy unaffordable. Eventually they drop the policy—which, of course, makes companies happy.
What to watch for: Lobbyists trying to sneak in provisions that would let insurers raise rates for sick people. Insurers have said publicly they would no longer charge sick people more money. Will that promise apply in these death spiral situations with policyholders already on the books, or will it apply only to people applying for new coverage? Look for companies to support language allowing flexible-benefit policies that effectively restrict what’s covered and discourage people with health problems from applying, because the policies won’t cover their conditions.
No gender discrimination. Charging women of child-bearing age more for coverage because women get pregnant “is horrific,” Kofman says. “It goes on all the time in most states because state law does not prohibit it.” Historically, companies have justified this policy because women file more claims—especially claims relating to pregnancy and childbirth, which can be expensive for insurers. Carriers have now said they will stop this practice.
What to watch for: Look for attempts made to restrict or eliminate pregnancy coverage from policies, especially in the individual or small group market. This has already been done in California. Policies sold to employers with fewer than fifteen workers are not protected by the Pregnancy Discrimination Act.
No annual or lifetime caps on coverage. That’s a critically important new protection, Kofman says. Individual market policies often cap the total amount an insurer will pay out during the life of the policy. That hurts people who need organ transplants or have other catastrophic medical expenses. One premature baby in the hospital for six months could cost over $500,000. In some states, you can also burn through a cap of $1 million pretty quickly if you have a major heart attack.
What to watch for: Again, look for lobbyists trying to limit lifetime and annual coverage. The lower the limits, the less protection people will have for truly expensive medical treatments. Flexibility will be a hard argument to counter, but reporters should dig beneath what the companies really mean by ‘more flexible policies.’ What will be excluded?
Extended coverage for young adults. The president wants companies to agree to cover young adults on their parents’ policies until they turn twenty-six. Some states have tried to extend coverage, with mixed results—especially when it’s up to employers to choose this option when they buy a policy for their workers. Insurers charge for it. While this solution makes it sound like more people can get coverage, there’s a hitch. Under IRS rules, these young folks must be listed as dependents on their parents’ tax returns. A ‘dependent child’ in the eyes of the IRS must be under age nineteen, or a full-time student until age twenty-four, and cannot provide more than half of their own support for the calendar year. Employers cannot provide tax-free benefits to adult children, so Kofman says tax rules may have to be changed to make this provision meaningful. Also, how many parents want to keep their twenty-five-year-old dependent on them rather than out on their own? So how much protection does this really offer?
What to watch for: Resistance from employers, who may not be too keen on paying more money to insure their workers’ young adult children. While it’s a good bet that insurers would relish new business and more premiums from younger and healthier people, they just might find it more lucrative to send all these young people into the individual market rather than keep them on family coverage.