Insurers Seek To Use Benefit Designs To Cherry Pick Younger Applicants

The Affordable Care Act prevents health insurers from cherry picking only the youngest and healthiest applicants by requiring insurers to accept anyone who applies without regard for prior conditions and charge applicants a modified community rate. But the industry is now trying to work its way around this goal and is lobbying the government for more flexibility in designing benefit packages:

America’s Health Insurance Plans and the Blue Cross Blue Shield Association both said in their comments that HHS should tread lightly when defining essential benefits, saying an overly broad policy could raise costs and make the process more confusing for consumers. “General principles and criteria should allow for plan innovation and flexibility to meet evolving market and consumer needs,” BCBSA stated. And AHIP said HHS should “only seek to identify general categories of care, rather than specific health care services.” […]

But a health policy expert who reviewed the industry groups’ comments said too much flexibility could lead to adverse selection. If the regulations on essential benefits are too lax, the source said, insurers would be able to design their plans to appeal to healthy patients. She said that if HHS only sets broad principles for an essential benefit, leaving it largely to individual plans to determine which services meet those principles, plan design would become a tool for the same type of underwriting that health reform otherwise curtails or prohibits.

Indeed, if one designs a health plan without coverage for an expensive treatment or condition, patients who suffer from that particular ailment will go elsewhere for coverage. Conversely, a plan that offers discounts for gym memberships and focuses on primary care and prevention and is light on everything else, will likely appeal to healthier (read: less expensive) individuals. Given too much latitude, insures have an economic incentive to design the more profitable plan.

As the Center on Policy and Budget Priorities’ Edwin Park put it, “While there is a reasonable argument on the part of insurers that they continue to retain flexibility to design benefits that can improve quality while lowering costs (i.e. value-based insurance design based on comparative effectiveness research), you don’t want them to have so much flexibility that they can continue to compete based on risk-selection, rather than price and quality as intended by the ACA and what is critical for a better functioning health insurance market. ” He added that beneficiaries “wouldn’t want a particular plan claiming it covers one of the enumerated essential benefits like inpatient care and only cover one hospital day, or cover prescription drugs except for all the drugs used by people with HIV/AIDS, cancer, severe heart disease, or certain chronic illnesses like diabetes, etc, or charge much higher co-payments or co-insurance for certain higher cost services required by people in poorer health.”

Of course, all of this is a ways away, but it’s worth reiterating that while the legislative fight may be over, the various interest groups are now gearing up for ways to shift the law in their favor. For their part, insurers are already lobbying to, among other things, delay lowering rates for older people.