Don Brunell - Averting a national train wreck

Portions of the new national health-reform law are just now going into effect, but the impact is already being felt. Insurers are warning of higher premiums, and some companies say the law will force them to eliminate employee health insurance coverage.

Beginning Sept. 23, insurers are required to cover “children” under their parents’ policy to the age of 26, even if those children are married and live in another state. As a result, some insurers are dropping their “child only” policies. Ironically, rather than expand coverage as promised, the new law is reducing coverage.

Other changes prohibit insurers from capping lifetime benefits and ban them from requiring co-pays for preventive treatment and checkups.

The most high-profile change prohibits insurers from denying coverage to children with pre-existing conditions. Experts fear that when the provision is expanded to everyone in four years, it will lead to abuses and skyrocketing health insurance premiums, as it has in Massachusetts.

Massachusetts was the model for our national health-reform law. Everyone is required to buy insurance or pay a fine, and no one can be denied coverage due to a pre-existing condition. Increasingly, Massachusetts citizens are realizing it’s cheaper to pay small fines than carry insurance. They buy it only when they need it, then drop it when they’re well. In June, the Massachusetts Division of Insurance reported that the number of people gaming the system quadrupled from 2006 to 2008, the last year’s figures are unavailable.

As a result, the state’s four largest health insurers reported first quarter losses of $150 million, and premiums for small businesses are rising 22 percent this year to cover the losses.

The situation in Massachusetts has been called a train wreck. If the same thing happens nationwide, the private insurance industry will go bankrupt and cease to exist.

Insurance companies across the U.S. are already seeking rate increases to cover the cost of the new health-reform benefits.

Aetna Inc., some Blue Cross and Blue Shield plans and other smaller carriers have asked for premium increases of between 1 percent and 9 percent to pay for the extra benefits required under the law.

In response, Heath and Human Services Secretary (HHS) Kathleen Sebelius threatened to ban those insurers from the national insurance exchange if they continued to blame Obamacare for the premium increases. But even Secretary Sebelius’ own actuaries acknowledge the new health-care law will increase costs, not reduce them as promised.

Recently, McDonald’s warned that the law would force the company to drop its limited benefits health plan for its 385,000 employees. Administration officials quickly suggested McDonald’s would be eligible for a waiver that would allow its coverage to continue. Time Magazine reports that HHS has already issued waivers to 30 other health plans that cover nearly one million people.

3M Company says it will soon stop offering its company health insurance to its 23,000 retirees, instead giving them money to purchase insurance on the open market.

The future of the new health-reform law is uncertain at best. In a recent Rasmussen poll, 61 percent favored repealing it, and Republicans are threatening to withhold funding if they take control of the House of Representatives in November.

Is repeal the only answer or can the law be fixed? I’m not sure anyone knows at this point. Hopefully, if Congress and the administration heed the warning signs – and the will of the American people – we still have a chance to avert a national train wreck.

(Don C. Brunell is president of the Association of Washington Business)