Peril Seen in Reform Limited to Insurance : Health care: Analysts warn that Congress would be shortsighted to focus only on coverage discrimination.

It sounds so simple: Ban insurers from jacking up rates on sick people and force them to accept all applicants, offering the same rates regardless of age or health status.

No single health reform proposal enjoys broader support among the public or members of Congress. And no wonder.

Ending discriminatory insurance practices would instantly allay deep-seated fears of middle-class Americans that they might lose coverage when they change jobs or be priced out of the market when they become seriously ill. In poll after poll, 60% to 80% or more of respondents favor such reforms.

But there’s a big hitch.

Unless accompanied by a requirement that everyone be insured, insurance reforms would mean higher premiums for the insured and actually increase the ranks of the uninsured.

That’s because such reforms would enable the sick and the vulnerable to buy insurance, often for the first time. Their high health costs would force insurers to increase premiums across the board.

What’s more, the young and the healthy--confronted by rising rates--might drop coverage, secure in the knowledge that they could buy insurance when they needed it. That in turn would increase premiums for everyone else.

Thus would begin a vicious cycle that, experts say, would hasten the deterioration of the nation’s health care financing system.

The prospect is growing that Congress will abandon comprehensive health care reform this year and instead do little more than try to remedy the apparent shortcomings of today’s insurance system.

That approach could do more harm than good. Dire warnings of the unintended consequences of insurance reform are being sounded by such disparate analysts and advocates as conservative hospital lobbyist Michael Bromberg and First Lady Hillary Rodham Clinton, architect of President Clinton’s agenda for change.

“Insurance reforms will solve many of the problems that the insured, voting middle class is worried about. But it won’t control costs or insure the uninsured--the two biggest challenges we face,” said Drew Altman, president of the Kaiser Family Foundation, a health care philanthropy based in Menlo Park, Calif.

“You buy some time, but costs will continue to escalate,” added Edward F. Howard, executive vice president of the Alliance for Health Reform, a nonpartisan educational group here. “So you lay the groundwork for a bigger explosion in a few years.”

Yet, as Congress prepares to begin floor debate on health reform, the appeal of insurance reforms may prove all but irresistible.

Almost every health reform bill introduced in recent years contains such measures--including all four bills reported out recently by two committees in each chamber.

Insurance reforms “solve real problems for real people. And it can happen without turning the system on its head,” said Gail Wilensky, a health expert in former President George Bush’s White House who now advises congressional Republicans.

Wilensky, former head of the Health Care Financing Administration, said that “it’s important for Congress to say to the American people: ‘We can do something, and here’s one piece, signed, sealed and delivered.’ ”

She and other advocates of incrementalism acknowledge that insurance reforms alone will do little for the estimated 38 million uninsured Americans. But they say that such measures are a good and realistic beginning.

Opponents argue that insurance reforms alone are doomed to fail unless they are accompanied by a requirement leading to universal coverage, such as Clinton’s controversial proposal to require all employers to pay at least 80% of workers’ insurance premiums, with individuals picking up the rest.

Insurance reforms alone “just won’t work,” said Marvin B. Hall, president of the Hawaii Medical Service Assn., the largest insurance company in that state. “You’d push costs even higher.”

“Insurance reforms by themselves will increase premiums substantially because you’d be allowing back into the group people who have been excluded primarily because of costs,” said John Rother, legislative director of the American Assn. of Retired Persons. “And you haven’t done anything at all about the cost of health care.”

Among the winners of insurance market reforms, at least in the short term, would be small businesses. Most such reforms being contemplated by Congress would give them a choice of health plans by pooling them into large, voluntary purchasing groups, thus affording them lower rates enjoyed by large groups.

The biggest losers would be younger people, whose rates would rise sharply. “You’ll see a bunch that’s going to drop out,” said Richard I. Smith, an analyst at the Assn. of Private Pension and Welfare Plans. “And what problems are we solving if we end up just producing more uninsured?”

Willis D. Gradison Jr., head of the Health Insurance Assn. of America, agreed, saying that insurance reforms “could easily have just the opposite effect of what is intended.” He cited the experience of New York state as a prime example.

There, a law took effect in April of 1993 that barred insurers from setting premiums based on age, sex or health status and required them to guarantee coverage to all.

After just nine months, 40% of policyholders at Mutual of Omaha, the largest underwriter of individual policies in New York, saw their premiums drop, according to Medicine & Health, a weekly newsletter. But 60% experienced increases of as much as 60%.

Meanwhile, the number of uninsured grew by more than 25,000.

Hoping to pave the way for national insurance market reforms as a first step toward broader reforms, Reps. J. Roy Rowland (D-Ga.) and Michael Bilirakis (R-Fla.) have introduced just such a bill, saying that it is “designed to re-establish the health reform debate on a foundation of agreement rather than one of divisiveness.”

“Some members have made clear that that’s as far as they are willing to go,” said Martin Corry, AARP’s director of federal affairs. “But we think that’s pretty shortsighted.”

Wilensky, the Republican consultant, worries that insurance reforms could sap the will of Congress to press on with more comprehensive reforms, such as expanding coverage to the uninsured.