No one should go without health insurance because it’s too expensive

With health insurance costs growing by roughly 10% each year, one of the biggest stumpers for national reform is how to make health insurance affordable. There are a few options on the table that we support:

Subsidize premiums for people who can’t afford market-rate plans

The current proposals on Capitol Hill subsidize people who make less than 300% of the federal poverty level to buy private insurance. That’s $32,490 for an individual and $66,150 for a family of four. This is a great first step. In most states, Medicaid only covers working parents who make less than $10,000/year, and in 43 states, single adults don’t qualify for Medicaid (PDF) at all, no matter how little they make. Though these subsidies will help a lot of people, they won’t solve the whole problem. What about the working people who won’t qualify for a subsidy, but still can’t afford health insurance at market rates (and remember, in states like New York, individual rates are four times higher than those offered through associations like Freelancers Union)?

Cover people, don’t maximize profit

To bring costs down, the private market needs actors whose goal is to cover people, not maximize profit. That is the idea behind the public plan, the health insurance co-operatives, and Freelancers Insurance Company, which wholly owned by Freelancer Union. In each case, profits aren’t the guiding factor in the insurance company’s operations. We believe that health insurance reform needs these actors to put downward pressure on market prices.

Bring down premiums in the individual market

Social-purpose plans may have some effect on the market, but they won’t do much unless we bring down rates in the individual market altogether. The fact is, a plan can’t sustain itself, public or not, if it offers benefits that are significantly more comprehensive than other plans in the market. If it does, that plan will attract many more sick people, which will drive up medical costs, forcing premium prices up, and pushing the healthy people out. As a social-purpose insurance company, we struggle with this tension every year. That’s why bringing down prices in the individual market is essential to any health reform.

Everybody in the pool

Many people hope that we can reduce premiums by reforming the individual health insurance market and requiring everyone to obtain coverage. The goal here is to get everyone, healthy and sick, into the group (again, the advantages of the group come into play). To make sure sick people can get coverage, we should prevent insurers from denying coverage (community rating) or setting prices based on health risks or pre-existing conditions (guaranteed issue).

Avoiding the “death spiral”

These insurance market reforms are already in place in New York, but without a requirement for everyone to buy coverage, prices on the individual market go through the roof. Because insurers can’t ask about your health risks, they assume the worst and set high prices. Healthy people then opt out, increasing the average medical costs of the group. Then premium prices increase to compensate, which pushes more healthy people out, and we end up with an unpleasant cycle known in the industry as a “death spiral.” And yes, that’s the technical term. The “death spiral” is why individual plans in New York cost so much more than plans through an association like Freelancers Union. Requiring everyone to buy coverage ensures that there will be enough healthy people in the market to keep prices down.

Invest in preventive care and realign the flow of money

As a country, we need to invest more money in preventive care to bring down our overall health care costs. We need to invest in more primary care doctors and nurse practitioners, and reorient our health system away from one-off treatments and extreme specializations, and toward a holistic view of a patient’s health needs. Instead of paying a doctor for each procedure or test performed, we should move towards a salary-based system, where doctors are rewarded for positive health outcomes and best practices. As studies have shown, more expensive care does not mean better care.