November 15, 2013

Updated: Let People Keep Their Old Swiss Cheese Policies

(Originally published 11/12; Update, 11/15, at bottom)
Just a quick post before other duties.  Some thoughts based on my 2 years of blogging on health care.

President Clinton has opened a helpful topic, which from the short NPR news summary I will paraphrase as: Change the ACA (Affordable Care Act) and let people keep their old policies.

I think this is actually a good idea.  There's little harm in letting people keep Swiss cheese health insurance policies by their own choice.  They can transition to better policies over time, by their own choice.

The premiums on those Swiss cheese policies will still rise due to health care inflation, and yes they will have less-than-complete insurance, but that's by their choice, without financial penalty.

And give these old policies the same premium subsidies according to the ACA income level subsidy formulas!

In fact, giving them the subsidies helps encourage them to eventually upgrade to better insurance.

It won't hurt the new ACA in any pronounced way I can see, at the moment. 

While insurers will need to raise some premiums for their new ACA-compliant policies now on the exchanges, since they provide maternity care and will have somewhat fewer enrollees, this won't likely be a huge increase.  And, lower income enrollees will still get subsidies to make their insurance affordable anyway.

There's little difference on that end, but a lot of difference politically, and in terms of choice.

Choice is always good.

It's a great opportunity for the President to show he's non-partisan while accomplishing some good -- choice helps people in subtle ways.


Update 11/15

Insurers are said to be concerned about not having enough young enrollees.   Since insurers will be required to notify those keeping an old-style (Swiss cheese) policy of what that old policy lacks in coverage vs a new comprehensive policy, most younger people choosing to buy insurance at all would make the rational choice to buy the new comprehensive coverage since the cost of premiums is fixed vs their income by subsidy.

Insurers should be allowed to increase premiums mid-year.  Policy holders with subsidies would see no increase.  Insurers net profits are still limited by the payout loss ratio requirement, so they could not use this as a windfall.

If there is legal barrier to insurers raising prices in this way, new provision should simply give them that freedom across the board, across the nation.

Finally, a much smaller group -- higher-income policyholders seeing higher premiums in a few months for their new, comprehensive policies without any subsidy -- these households can typically afford to pay a little more, although that increase could be reasonably limited by law for this single year, perhaps to 5%, as a safety cap, and with required notification to policyholders that should the increase be larger than needed, the law requires the insurer to rebate excess premiums at year's end. They would be simply seeing the "true cost" of coverage, with less subsidy.  Insurers would be fine in each scenario, as the majority of their increased costs will be covered to begin with via subsidies.  The key being that they are allowed to increase premiums mid-year.

No comments:

Post a Comment