Federal Health Insurance Reform Likely to Increase the Cost in California

Tomorrow, June 1, 2009, Senator Kennedy is supposed to release the report of the Senate Health, Education, Labor and Pension (HELP) Committee’s recommendations for comprehensive reform of the health care & health insurance system. Word has it that the Obama administration wants to pass health insurance reform legislation in 90 days. That does not give people much time to evaluate these complicated proposals that will have massive financial implications for everyone in our country.

To get an idea of what might be proposed, we can look at the Senate Finance Committee, led by Senator Baucus. This committiee has been releasing reports on various reform efforts. The Senate Finance Committee’s Policy Options paper on health insurance reform suggests many dramatic changes, including:
* Combining a individual and “micro-group” (companies with 2-10 employees) market;
* Offering “Guarantee issue” health insurance to this market segment;
* Requiring “modified community rating” for rates to this market segment;
* Creating a “national exchange” run by the government to sell health insurance to this market segment;
* Creating a “public/government” health insurance plan.

For an excellent summary of the Senate Finance Committee health care options report, see the report by the National Association of Health Underwriters, the health insurance agent organization, of which I have been a long time, active member.

Implications for California

All of the ideas listed above by Sen. Baucus’ Committee would dramatically increase the cost of health insurance in California. As difficult as it is to believe, in the high cost state of California, individuals pay the least amount for their health insurance according to this report by America’s Health Insurance Plans (AHIP.) Table 2 in this report shows that Californians pay about 1/3 the amount individuals pay for health insurance in New Jersey and Massachusetts and about half the amount paid by individuals in New York.

The really frightening thing is that media reports state that Senator Ted Kennedy wants to model the nation’s health insurance system after Massachusetts – the second highest cost state in the country.

In California we have age-banded rates, not community rating. This allows younger (likely healthier) people to purchase health insurance at a lower cost than older people. We have medical underwriting and not guaranteed issuance in the individual market. Medical underwriting prevents people from purchasing coverage only after they are sick and forcing them to pay for coverage while they are healthy. It may be unfair to the unhealthy but all must agree that this keeps the cost of medical insurance low for the millions of people who qualify for coverage in California’s individual market. California’s got an “exchange” in every health insurance agent who sells coverage. To see an excellent example of a health insurance exchange, click here and get a quote from BenefitsCafe.com.

All of the private sector provisions that keep health insurance affordable in California will likely get thrown out the window. So, Californians, get ready, you are about to pay about 2-3 times more for your health insurance.

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