An Opportunity to Tailor Health Plans

The Spokesman-Review published this column on January 22, 2012.

Health insurance premiums have been increasing much faster than the cost of living. A new ruling from the federal government has the ability to lower these insurance premium costs.

The Department of Health and Human Services recently announced that states could determine the cost and scope of health coverage offered in the new federally mandated state insurance exchanges. This is potentially great news and a cost-saver for Washingtonians who purchase health insurance in the individual or small-group market.

State-based insurance exchanges are one of the main features of the new federal health care reform legislation (the Patient Protection and Affordable Care Act, or PPACA). Under current law, they must be in place and running by 2014. Workers earning up to 400 percent of the federal poverty level ($89,000 per year for a family of four) who purchase health insurance in the exchanges will be eligible for taxpayer-financed subsidies to help cover the cost of their insurance.

The PPACA originally gave the federal government the responsibility of determining the levels of benefit coverage sold within the exchanges. There needed to be at least four levels of benefits with a fifth high-deductible plan for young adults under the age of 30.

After the recent HHS ruling, states now have the responsibility to set these coverage levels. States, not the federal government, must determine what benefit and provider mandates should be included in the various plans offered in the exchange. Plans offered outside of the exchange must essentially be identical to plans offered within the exchange.

The PPACA also mandates that every adult in the country must purchase health insurance by 2014 or pay a fine or tax. This individual mandate will be enforced by the Internal Revenue Service. Estimates show that approximately 700,000 Washingtonians will be newly insured and will buy their health insurance in the exchange. Ultimately up to 1.5 million people in Washington will access their health insurance through the exchange.

Washington state now has 58 benefit and provider mandates required in every individual health insurance plan sold in the state. Studies show that each of these mandates adds, on average, 0.5 to 1.5 percent to the cost of any given plan. The reality is that consumers do not necessarily want or need all of these mandates.

For example, why should a 26-year-old single man be forced to pay for maternity coverage? Why should women be forced to pay for prostate cancer screening? These mandates not only increase the cost of insurance but also reduce the choice of insurance plans for consumers.

This new HHS ruling allows Washington state officials to redesign the entire list of health insurance plans offered to the public. Within a few federal guidelines, the state now has a clean slate to develop an array of affordable plans that can be tailored to the specific needs of patients – young and old, men and women, families and single people.

As required by state legislation, Gov. Chris Gregoire recently appointed an eight-member independent board to oversee creation of the Washington insurance exchange. This board will determine the plans and benefit levels people are allowed to buy through our state exchange.

The board should act in a nonpartisan fashion and should design a range of plans, from low-priced catastrophic, high-deductible plans to expensive full-benefit, first-dollar coverage. The citizens of Washington state would then have real choice in how much coverage and how much they must pay for their health insurance. Allowing multiple levels of benefit plans would hold costs down for patients and would also save money for taxpayers who must provide the subsidies for users of the exchange.