The country’s leading health insurers Tuesday offered to end their long-standing practice of charging sick customers higher premiums, a significant concession in the face of mounting criticism of the industry in Washington.
The offer from America’s Health Insurance Plans and the Blue Cross Blue Shield Assn., whose member companies cover more than 200 million people, comes as lawmakers on Capitol Hill debate a proposal to create a government-run insurance program.
It underscores the pressure the industry faces from Congress and the Obama administration as policymakers move ahead with plans to reshape the nation’s healthcare system.
The industry’s underwriting policies are widely criticized for driving millions of people into the ranks of the uninsured.
The number of uninsured people in the U.S. has increased by nearly 9 million since 1994, reaching 45.7 million, according to a study released Tuesday by the Robert Wood Johnson Foundation. The study also found that nearly 1 in 5 working adults is uninsured.
Tuesday, Karen Ignagni, who heads America’s Health Insurance Plans, said insurers want to help reverse that. “The private sector can rise to the challenge of solving these problems,” she said.
Ignagni and Blue Cross Blue Shield Assn. President Scott P. Serota made the offer in a letter to senior senators. But it came with a catch: The insurers said all Americans must first buy health insurance to boost the size of the risk pool, a concept opposed by many consumer groups.
“By enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe we could guarantee issue coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market,” they wrote.
The two industry leaders said insurers would still need to vary rates based on age, family size and geography.
And they called for permission to offer discounts for people who engage in healthier behaviors such as quitting smoking and adhering to treatment programs for chronic diseases.
CRT Capital Group analyst Sheryl Skolnick, who follows the insurance industry, said the offer to forgo medically underwritten premiums may be a recognition by insurers that they need to “do what it takes” to get people back into the insurance market.
“I’m sure they want this to be seen as a major step forward in promoting reform,” Skolnick said. “I just want to know what the catch is.”
She said insurers had decided they had more to gain by dropping variable pricing than by fighting to maintain it.
Ignagni would not say Tuesday whether revenue lost by equalizing premiums between sick and healthy customers could be recouped by insurers in a larger market in which all Americans have to buy insurance.
Also unclear is whether the insurers’ proposal will head off calls for a government-run insurance program.
After years of horror stories of Americans denied coverage, many congressional Democrats are committed not only to stepping up regulation of the insurance market but also to creating a so-called public plan to bring down the number of uninsured.
Such a plan, which liberals and interest groups say is necessary, would compete directly with private insurers.
Industry representatives vehemently oppose it, saying it would drive insurers out of business and lead to the creation of a single-payer system akin to those in Canada and Britain.
Ignagni and Serota reiterated their opposition Tuesday in the letter.
“Creating a new government-run plan would thwart the ability of the healthcare sector to implement meaningful delivery system reforms, exacerbate the cost shifting from public programs to consumers in the private market, and destabilize the employer-based system,” they wrote.
But industry leaders, who 15 years ago were blamed for scuttling President Clinton’s health reform campaign, are also being careful not to appear too recalcitrant.
Late last year, America’s Health Insurance Plans said insurers would no longer reject people with pre-existing conditions if Washington policymakers created a mandate requiring all Americans to get insurance.
And Tuesday, Ignagni emphasized again the industry’s commitment to remaining at the negotiating table.
She said her group would release a proposal within a month to address problems that many small businesses face when one of its employees gets sick, resulting in dramatic premium hikes for the business.
“We’ve been working with a number of small-business organizations and small businesses themselves,” Ignagni said.
The industry groups’ letter was greeted with mild praise by several lawmakers Tuesday.
But an aide to Senate Finance Committee Chairman Max Baucus (D-Mont.), who is a leader in the effort on Capitol Hill to overhaul the healthcare system, said he would not back away from creating a new government insurance program.
The White House declined to comment on the offer. A spokeswoman for Iowa Sen. Charles E. Grassley, the senior Republican on the Senate Finance Committee, dismissed the letter as simply reiterating the industry’s positions.
Richard Kirsch, who heads Healthcare for Americans Now, a leading consumer group in Washington, blasted the letter as cynical ploy.
“It’s a sign of their desperation,” Kirsch said. “They are still looking to find out how they can charge us as much as they want and have no competition from a public plan.”