Expanding Insurance Coverage: Two Key Questions

Itâs Cover the Uninsured Week, and the Robert Wood Johnson Foundation is working to âhighlight the fact that too many Americans are living without health insurance and demand solutions from our nationâs leaders.â

Concern about uninsurance is growing as more people lose jobs that provided them with health insurance. But most of the factors behind our countryâs high uninsurance rates preceded the current economic downturn. According to Cover the Uninsured, average costs paid by an employee for an individual health insurance premium have risen nearly eight times faster than average U.S. incomes. Skyrocketing premium prices have forced some employers to stop offering insurance; other employers ask their workers to shoulder more of the costs of the premiums, which many canât afford.

Those who donât get insurance through their employers and donât qualify for a public plan can try to get insurance on the individual market, but youâll have a hard time finding an affordable plan if youâre getting on in age or have a history of health problems. Being a woman of childbearing age may mean even higher premiums, and/or exclusion of coverage for maternity care.

Congress and the Obama administration have expressed the intention to expand insurance coverage, and recent announcements by the insurance industry put the focus on two questions.

One questions is whether there will be an individual mandate â that is, whether everyone will be required to have health insurance. If the government is going to require that everyone have insurance, theyâll need to do something to make insurance more affordable and widely available than it is now. The second question is whether the government will seek to make coverage more affordable and available by offering a public health insurance plan, which would be open to anyone (meaning you couldnât be denied for having a history of health problems) and would aim to keep premiums affordable. A public plan could be modeled on Medicare, which gets high marks for patient satisfaction and has kept its rate of cost growth below that of private insurers.

On Tuesday, the insurance industry offered lawmakers a deal: insurers will stop charging higher premiums to people with a history of medical problems if everyone is required to have health insurance. An individual mandate means more customers for insurers, so theyâre willing to give up some of what they make by charging higher premiums based on an eventful medical history. Premiums will still vary based on the applicantâs age, location, and family size, and different benefits packages will be offered, but individuals will no longer have to worry that a single diagnosis will make it effectively impossible to buy an individual insurance policy.

This is a major shift from the insurance industry, but so far theyâre not budging on their opposition to a public plan â and a public plan is probably crucial to getting enough political support for an individual mandate. Itâs hard to ask the public to accept a new requirement without offering them a new benefit in return.

The New York Timesâ Reed Abelson explains the insurance industryâs opposition to the private plan option:

But the insurance industry and others wary of too much government intervention vehemently oppose the idea. They say the heavy hand of the government will eventually push out the private insurers, leaving the government option as the only option. That is why the industry seems unwilling to give ground on the issue, even while making other concessions to national health reform â like the industryâs announcement on Tuesday that it might be willing to stop charging sick people higher rates than healthy customers.

The debate is over how best to provide coverage to the nearly 50 million people in the United States who do not have health insurance, while also trying to rein in the nationâs galloping health care costs. While the details of a federal insurance plan remain vague, a central question is whether it would function like Medicare â wielding the governmentâs size and clout to essentially dictate the prices it pays for medical care.

If so, the governmentâs main advantage over the private sector would be to demand much lower prices from doctors and hospitals than private insurers are able to negotiate. It could then pass those savings along to consumers in much lower premiums than the private plans might be able to offer. Critics say such a system would eventually force private insurers out of business.

Many hospitals and healthcare providers are already unhappy with Medicareâs reimbursement rates, but they continue accepting Medicare because it represents such a big slice of the market. Even if a public plan were to agree to higher reimbursement rates, though, it could still keep its costs lower than private insurers because it wouldnât need pay for marketing or be expected to turn a profit.

We'll be seeing many more proposals and counter-proposals in the weeks to come, and the questions of an individual mandate and a public plan will be key.