Kevin Counihan, CEOLast week, I testified before the U.S. Senate Health, Education, Labor and Pensions committee on the impact of insurance market reforms and new rating rules on premium rates. I was on a panel with a distinguished group of experts, including an actuary and a policy expert. The fourth panelist was a consumer from Iowa – Stacy Cook.
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Stacy told her story, which is all too familiar to many Americans. She was originally diagnosed with breast cancer in 2004 while employed in Iowa, where she received treatment under her employer's group insurance plan. In 2009, she moved to Arizona and, three years later, found another lump on her breast and was told she needed immediate surgery.
After the surgery, Stacy was informed that her insurance company would not cover her surgery or subsequent chemotherapy. Stacy applied for the Arizona State Health Insurance Program and was denied. She investigated the Pre-existing Condition Insurance Plan (PCIP) but found she had to be uninsured for six months to qualify.
As such, Stacy was forced to pay for chemotherapy treatments upfront and relied on friends and family for payment. She is now $40,000 in debt and will likely file for bankruptcy protection this year.
Stacy's story puts a human face on the need for the market reforms in the Affordable Care Act (ACA). These reforms include:
- No underwriting for health status
- No pre-existing condition limitations
- No underwriting adjustments for gender
- Guaranteed renewals for individual and small group market
- Minimum 80 – 85% medical loss ratios
Of course, these reforms come at a cost. Fortunately, there are a number of protections in the ACA that help reduce the impact of these new market adjustments on premium rates. These include:
- Risk Adjustment Program which transfers payments from carriers with lower-risk enrollment to carriers with higher-risk enrollees to adjust for risk selection
- Risk Corridor Program which limits carrier underwriting gains or losses
- Reinsurance Program which reimburses carriers for higher-than-expected utilization
As a result, much of the uncertainty over the unknown morbidity of the uninsured and the potential migration of certain employee segments from employer-sponsored insurance to the exchanges should be dampened as a result of these programs.
The hallmark of health reform has been the concept of shared responsibility – the sense that we share a common value that our nation benefits when more citizens have the peace of mind of health insurance coverage. Stacy Cook will be one of the first beneficiaries.