Community rating, once the hallmark of health insurance in the United States, has been in accelerated decline since the 1980s. For the past few years, a fundamentally opposite notion of insurance, that of individual health savings accounts has been all the rage. The concept of consumer-driven health care–making consumers more aware of the actual costs of their health care, thus making them more responsible and allowing them to make more choices of how to spend their health care dollars–has been the watchword of many in the policy community.
The unfortunate phrase of “having skin in the game” has taken over as insurers, government spokespeople, and insurers have rolled out a variety of high-deductible plans paired with health savings accounts. By definition, these plans have forced beneficiaries to compute a calculus of their individual risk; would they come out ahead individually if they chose this option? The notion of a community of shared risk and common premiums seemed to be withering ever faster on the vine.
Then came the 2006 elections, the various state initiatives, and the run-up to the presidential campaign for 2008. The confluence of these events seems to have rescued community rating from its impending extinction. One of the more detailed proposals is the one unveiled by John Edwards last week.
Edwards’ plan rests on a structure of a universal community rating and national standards. He would require insurers to keep plans open to everyone and charge “fair” premiums regardless of age, pre-existing conditions, job type, or other characteristics. He also proposes national standards that would ensure that all policies offer preventive and chronic care with minimal cost sharing. Edwards foresees a “universal plan that leaves no one behind and one in which we all share responsibility.”
Not surprisingly, the Edwards plan anticipates “that it may evolve toward a single-payer approach if individuals and businesses prefer the public plan.”
In its more specific features, Edwards’ proposal depends on extensions of Medicaid and the State Children’s Health Insurance Program (SCHIP) and on a combination of sticks and carrots to employers. To get employers to offer comprehensive packages of insurance to all of their employees, he proposes that they either offer insurance or contribute to his program of health markets. He does not quite label it a “play-or-pay program.”
Edwards’ regional health markets, perhaps the most innovative feature of his plan, at first blush look very similar to the Massachusetts Connector program. The health markets would be a marketplace for all those who did not get comparable insurance from their workplace or a public program. The markets would offer competing insurance plans with comprehensive benefits, including full mental health benefits; there would be a public plan based on Medicare but administered separately, as well as competing private plans.
Where Edwards’ proposal differs from other plans like the Massachusetts Connector is that the regional health markets would not be only a marketplace but a regulator for all — not only the government — plans. The health markets would negotiate and collect premiums and take on other administrative functions like billing, claims processing, and data collection. With the health markets in place, individuals would be responsible for obtaining coverage, although the Edwards plan avoids the politically charged term “individual mandate.”
The return of community rating offers an opportunity for a reinvigorated debate both on the philosophical issues of social contract versus individual risk and on what is the best business model for health insurance. Broad-based community rating, at one time thought to represent the holdout of a few very liberal states, might end up playing an important role in the future of health insurance.