Insurance Law May Lead Off Health Plan : Reforms: Sources say the measure ranks high on Clinton’s agenda. It would guarantee coverage and prohibit premium hikes after expensive treatments.

For most Americans, the first tangible encounter with health care reform is likely to be a law that guarantees them continued insurance coverage regardless of their medical condition and prohibits insurers from raising premiums after they undergo expensive treatment, informed sources said Thursday.

Intended to address the concerns of those who already have medical insurance, such “peace of mind” issues have ranked high on the Clinton Administration’s list of health care reform goals.

First Lady Hillary Rodham Clinton has repeatedly made public statements to that effect since her appointment Jan. 25 as head of the White House Task Force on National Health Care Reform.

But until now, the Administration has not expressed an intention to seek enactment of such insurance industry “market reforms” as a first step in its overall agenda.

As President Clinton and the First Lady continue to whittle down the array of reform options being presented to them by Administration health policy analysts, the latest White House thinking is that insurance market reforms should be implemented as soon as possible--even as most Americans are being organized into huge insurance purchasing alliances, sources said.

The formation of regional purchasing cooperatives is likely to take several years, sources said.

The theory behind the creation of such consumer alliances--known as managed competition--is that the cooperatives would shop among provider networks for an assortment of insurance plans that offer high quality at low prices.

Sources said Thursday that the Administration’s reform agenda also will require insurers to set premiums by using the average cost of covering an entire community as opposed to the current practice of setting rates based on the experiences of small, individual purchasing groups, whose costs can rise sharply as the result of even one costly illness incurred by a group member.

Together, the insurance market reforms could quickly drive some small insurers from the market--thus making it easier to form health insurance purchasing alliances, according to health policy analysts.

“They (Administration officials) want to have open enrollment--no restrictions. That means guaranteed access and complete portability (from one job to another),” said one health policy analyst familiar with White House thinking.

Senior task force members, including Ira Magaziner, the group’s day-to-day manager, have begun briefing members of Congress and various interest groups on the general outlines of the reform agenda.

The President is expected to unveil his proposals before the end of May.

Gordon Wheeler, a spokesman for the Health Insurance Assn. of America, said Thursday that he had not yet heard of the Administration’s apparent intention to seek immediate market reforms of the health insurance industry.

“But it makes sense to me. There’s no cost. All the rest of their plan will cost a lot of money,” he said.