Health insurance: Spread the risks

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The House Energy and Commerce Committee provided more ammunition to supporters of comprehensive healthcare reform last week, issuing a startling report about the market for individual insurance policies. The report found that the four top for-profit health insurers in the U.S. denied coverage to 1 of every 7 applicants from 2007 to 2009 based on their medical histories. This selectivity, which was intended to reduce the companies’ costs and protect profit margins, makes sense from a business perspective. But it contorts the definition of insurance, which is to spread risk across a pool of customers.

The healthcare reform law enacted this year prohibits this kind of cherry-picking. Starting in 2014, it requires insurers to offer coverage to every applicant, and it bars them from charging higher premiums to those with preexisting medical conditions. Such guaranteed coverage is a double-edged sword: It protects consumers’ access to a vital service, but it could also encourage healthy people not to buy policies until they need expensive treatment. To deter that kind of gamesmanship, the law requires all American adults to obtain insurance, with subsidies to make coverage more affordable to the working class.

The subsidies are costly and the mandate is hotly disputed, both in court (where attorneys general from across the country are challenging its constitutionality) and on the campaign trail. But while Republicans have pledged to try to repeal the law next year, they say they still want to stop people with preexisting conditions from being denied coverage.


In its “Pledge to America, proposes to require insurers to cover people with preexisting conditions if they’d previously been insured. For the uninsured with preexisting conditions, the GOP would expand state-sponsored “high-risk pools” — taxpayer-subsidized programs for the people insurers don’t want to cover.

The effect, though, would be to encourage insurers to deny coverage to more people who are likely to need care, driving up the costs shouldered by the pools. That, in turn, would either force states to kick in larger sums to support the pools and their disproportionate expenses or cause more people to go uninsured. Or both — the temporary high-risk pools that the healthcare reform law created to provide coverage until 2014 are reporting surprisingly few applicants, possibly because of high premiums.

The best approach is to spread risks, not concentrate them. That’s why the coverage guarantee in the healthcare reform law makes sense. Congress may not have found the perfect mechanism to provide that guarantee without driving healthy people out of the system, but the right response is to keep working on the new law rather than abandoning it.