OPINION by Insurance Commissioner Jim Donelon
Insurance Commissioner Jim Donelon currently serves as President of the National Association of Insurance Commissioners. As insurance commissioner, I’m often asked by individuals what they can do to lower their insurance premiums. My response often is to advise consumers to take a more proactive role in assessing their insurance needs to determine what coverage they require and to compare several companies to see who can offer the best coverage at the best price. In no area has this been more important than in the field of health insurance which can be expensive and complicated and yet, absolutely necessary. There is no question that our health care system has been in need of an overhaul. Health care costs have been outpacing inflation for decades. According to an August report by the Kaiser Family Foundation, since 2003 annual health insurance premiums have increased 80 percent, which is three times as fast as wages (31 percent) and inflation (27 percent). The Affordable Care Act was promoted as a way to address some of those rising costs. However the bill itself was rushed through and because of that it had a lot of inconsistencies within itself that are still being addressed. With the Affordable Care Act, or the ACA, we are certainly in a new day in which more guaranteed health benefits for all and more subsidies for a larger income group will result in higher premiums for many. With health insurance, the healthy are often footing the cost for the unhealthy – now to a larger degree. The real cost driver is the guaranteed issue component. Once you promise individuals they can get coverage regardless of their health condition, you have to find a way to pay for it. This requires the largest pool of individuals possible and the ACA accomplishes that via a “penalty” or “tax” for those opting out of the pool. Success of the Affordable Care Act will rely heavily on participation of the “young invincibles” who often do not buy health insurance because they need little in the way of medical care. These young and healthy adults help offset the costs for insuring older and sicker individuals, but if they opt to stay out of the health insurance pool then the cost for everyone rises because there are fewer people to spread that risk across. Also, by mandating certain coverages or “essential health benefits” the Affordable Care Act has made the government assume part of the responsibility for making decisions best made by the consumer. A requirement of the new “Obamacare” policies is no lifetime limits on essential health benefits within 10 categories including hospitalization, maternity, mental health and prescription drug coverage. These and other essential health benefits are now standard, regardless of whether a person actually wants such benefits. This is another factor driving up costs. As a way to curtail rising health care costs and to empower consumers, I would encourage expanded use of health savings accounts which encourage consumers to make their own choices about how high a deductible they can pay, what doctors they want, and how much copay they are willing to take in order to get a cheaper premium. I believe taking that decision out of the hands of others (such as employers) and putting it in the hands of consumer to the greatest extent possible is a critical step towards lowering costs overall and raising customer satisfaction. Health savings accounts (HSAs) should be used in conjunction with the principle of increasing the choice in coverage options for consumers. For example, a man might not need maternity coverage in his policy, and a woman may not need to pay for prostate cancer screening. Expanded use of HSAs would enable the consumer, not bureaucrats, to decide what risks to insure. HSAs, when they can be used as each person best believes, could be maintained in conjunction with catastrophic health insurance plans, which would bring health insurance back into the realm of insurance, rather than what it is now—a government mandated benefits program that is partially publicly and partially privately funded, and administered with little input from insureds and health care providers. Used in this way, HSAs could have the effect of reducing expenses on health care services by making consumers aware of the costs of those services. Today, consumers have limited knowledge of the costs of health care because the patient and the provider rarely have a conversation about costs. This has the effect of encouraging consumers to consume more health care services than they may need, which in turn drives up the costs of care and the costs of insurance. In short, health insurance should function like “insurance”, meaning it covers mainly “catastrophic” or “large dollar” illnesses. And the market for health care services should function like a “market”— the buyer and seller should be aware of costs and necessity, which are largely absent from the market now. Insurance is about helping individuals cope with the risks they face on a daily basis. Traditionally, health insurers have paid for the financial consequences of major injury or illness. With the Affordable Care Act, the coverages are expanded and insurers will pay for more health care services, ultimately at a cost to the consumer. The ACA marks a shift away from consumer-driven choices, mandating which coverages they must have instead of giving them the ability to select what they want or need. Unfortunately, until consumers are more informed about the actual costs of the health care decisions they are making, it is unlikely that we will see costs come down.
