THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Sunday, September 11, 1994 TAG: 9409090047
SECTION: COMMENTARY PAGE: J4 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 60 lines
``Comprehensive'' health-care reform as proposed by the Clinton administration is now said to be off the table in Congress this year. At most, Washington players on both sides of the aisle are saying, a few insurance reforms are all that can be expected in the three-week session that is set to begin this week. Innocuous as that might sound, however, there is still plenty of time to do serious damage to the health-insurance industry.
Both Democrats and Republicans are talking about a mix of insurance reforms. These include mandated benefits, guaranteed issue of insurance regardless of pre-existing conditions, pricing premiums according to ``community'' risk rather than individual risk, subsidies for the working poor and several others.
These proposed reforms are presented as mere tinkering with the insurance market to provide better access and lower cost, but many analysts are worried that the effect would be to socialize risk and destroy the insurance business as it exists today.
Community rating: This is a term that means insurance companies would base their premiums not on the likelihood of a policyholder making a claim, as is usually the case with insurance, but on where the policyholder lives, regardless of the individual's health status. Sen. Robert Dole's bill would limit charging the elderly more than three times what it charges the young. Sen. George Mitchell's bill sets the ratio at 2-to-1.
Community rating thus forces younger and healthier people to pay more for their coverage than older and sicker people. In New York state, where community rating has been instituted, rates shot up and many younger people dropped coverage because they could no longer afford it.
Guaranteed issue: This means that no one could be denied health insurance, no matter how old or how sick. What incentive then would anyone have to purchase health insurance before he actually needed it? That could lead to spiraling prices and reduced quality of care, unless everyone were compelled to buy.
Subsidies: No one has any idea how much these would cost and how they would be paid for. In both the Dole and Mitchell plans, the subsidy would be phased out after the family reached 100 percent of the poverty level. Upon reaching that level, however, the individual would have to buy his or her own coverage, an expense that would amount to the equivalent of a high marginal tax rate, according to the Congressional Budget Office study of the Mitchell plan.
Cutting Medicare and Medicaid, a feature of the Mitchell and Dole plans to pay for the subsidies, might save the government money, but it would simply transfer the costs of covering the people already under those plans to the private-insurance market. That would push up rates for everyone else.
So ``tinkering'' with the private-insurance market is a lot trickier than it sounds. There are elements of Sen. Dole's bill that could be implemented without such risks, such as health-care IRAs. Unless Congress can be assured of following the medical adage ``first, do no harm,'' then it would be advised to do nothing at all until next year. by CNB