Here comes the compromise
Weeks of closed-door meetings with members of the Senate Finance Committee may be coming to a head this week. Apparently the public plan and an employer mandate are not in the Finance Committee’s compromise bill and co-ops and certain insurance market reform are in. The details regarding inclusion of an individual mandate are still unclear.
As the details come out—and finally there are some specifics from Kent Conrad—it may be worthwhile to review what we know about healthcare co-ops, specifically how they behave in the presence or absence of a mandate. This is excerpted from a recent Q&A with Milliman principal Jim O’Connor on the topic:
Q: How would co-ops be affected by the presence of an individual or employer mandate?
A: It is probably valuable to first clarify some language. An “individual mandate” is a requirement that everyone obtain health plan coverage. An “employer mandate” is a requirement imposed on employers. Neither should be confused with a “benefit mandate,” which requires that health plans cover certain types or levels of benefits.
Individual and/or employer mandates, if constructed correctly, would likely bring a positive impact on the healthcare market overall, compared to a guaranteed issue environment without any such mandates. Contrary to popular opinion, a proportionately large number of the uninsured are relatively healthy. Bringing all of these uninsureds into the market would not only result in a positive impact on insurers overall in a guaranteed issue environment, but also help redirect people to more appropriate and less costly healthcare provider settings (e.g., uninsureds would no longer need to go through a hospital emergency room to get to see a doctor for routine and non-urgent care). However, it should be noted that although the uninsured utilize considerably fewer healthcare services (partially because they tend to be healthy, but also because they defer treatment as long as they can), when they get coverage they are likely to utilize an increased level of services, at least temporarily. This additional utilization would need to be anticipated.
If open enrollment periods were required, a sound mechanism to pool high risks of the unhealthy would help stabilize the market and financial operations of both co-ops and traditional commercial insurers. This could be done through high-risk pools or through a risk-adjuster mechanism similar to that used by the Medicare Advantage program. Depending on the effectiveness of the risk-adjuster method, health plans might not need to increase rates in anticipation of biased adverse selection. A mandatory high-risk pool might have a similar effect, especially if consistent government support were used to help fund the pool. By contrast, a voluntary high-risk pool, funded only by the insurers participating, would likely not be as successful in lowering rates.