Nevada insurers back key portions of plan


Health insurers say they mostly agree with the insurance mandates President Barack Obama reeled off in his Wednesday health reform speech to Congress.

You read that right: Despite widespread belief that insurers remain resistant to new industry regulations, insurers with Nevada operations said they conditionally support some of Obama's biggest priorities, including a cap on out-of-pocket expenses for patients and a ban on denying coverage to people with pre-existing conditions.

But they add such rules won't be fiscally sustainable unless they are balanced with strict mandates requiring all Americans to buy health insurance. Insurers also bristled Thursday at the notion that their multibillion-dollar profits mean they can endlessly absorb new coverage costs, and they fret that a government-run option could still be in play.

For now, Nevada's largest managed-care insurer is avoiding the fray.

Peter O'Neill, senior vice president of public and community relations for UnitedHealthcare-Nevada, said the company, which provides coverage or care to about 800,000 Nevadans, won't comment on health reform at this point. O'Neill directed the Review-Journal to Washington trade group America's Health Insurance Plans for comment.

Karen Ignani, the association's president and chief executive officer, released a statement after Obama's speech saying the group agrees that "the status quo is not sustainable."

Ignani said the trade group has offered solutions similar to Obama's, including guaranteed coverage for all Americans, the elimination of pre-existing condition exclusions and no longer basing premiums on a person's health status or gender. But those modifications would be affordable only if paired with "an effective coverage requirement to get everyone in the health care system," Ignani stated.

Mohit Ghose, a spokesman for Aetna, added that the insurer recognizes that health care reform needs to happen in 2009, and Aetna officials have more agreements than disagreements with the plans Congress is considering.

"We need to move to a system where you have an individual coverage requirement in terms of personal responsibility," Ghose said. "As a consequence, we recognize that once everyone is in the system, we will be able to provide guaranteed-issue coverage without regard to pre-existing status or health conditions."

Mike Murphy, president of Anthem Blue Cross and Blue Shield's 300,000-customer Nevada operation, agreed with the trade group's and Aetna's take.

"I think there's a mischaracterization that the health industry is not supportive of reform," Murphy said. "But it is something we are very supportive of. It just has to be done in a responsible way."

What's not responsible, said Murphy and other insurers, is a law that would pile on new mandates while capping what insurers and providers could charge for care. Such a system might encourage people to skip health insurance until they fall ill.

If an insurer no longer can deny a prospective customer because of a pre-existing condition, what's to stop anyone from dodging insurance until the day after they're diagnosed with cancer? That kind of dynamic could break the insurance industry's bank.

A new study backs up insurers' concerns.

The Obama plan would impose new costs on insurance companies, which probably would raise the prices customers pay for coverage, said a report from the University of Michigan. Employers also probably would pass on some of their higher costs to employees.

An individual in a typical plan might have to pay up to $780 more for the same coverage in the first year of Obama's plan, estimates Erik Gordon, a health care analyst and assistant professor at Michigan's Ross School of Business.

Gordon said employees now typically pay 20 percent to 40 percent of the premium for a typical health care package costing about $13,000 a year for a family of four, with employers picking up the rest.

Obama's plan would raise insurers' costs as much as 15 percent if reform doesn't provide other savings, Gordon estimated. He thinks employers would stick employees with perhaps 40 percent of the higher premium, or $520 to $780 more.

The solution, said Murphy: serious mandates ordering harsh penalties for any American without health insurance. Coverage can't be optional, or insurers will see a disproportionate share of higher-cost clients entering the system, Murphy said. If healthy people participate, they'll spread risk and defray the cost of caring for the unhealthy. And right now, proposed reforms don't contain stringent-enough rules to lasso the healthy into the system.

"The reality is, in a risk pool, there's a certain amount of dollars to go around. If you are going to charge less to folks who are using care -- which is fine -- you need other dollars paying for the care that's being used," Murphy said. "Those dollars must come from people who are not using as much care."

Nor do handsome profits among health insurers mean they can absorb more costs for care, industry executives say.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said health insurance ranks 35th out of 53 industries Fortune magazine gauged for profitability, with an average profit margin of 2.2 percent in 2008. For every $1 of health care expenditure in America, less than 1 cent goes to insurers' profits, he said.

Murphy added that Anthem spends more on taxes and administration than it does on profits, which amount to 3 cents or 4 cents of every dollar in the company's bottom line. Anthem spends 87 cents of every dollar on care, whether it's through pharmaceuticals or providers.

"We wish the discussion would focus more around improving the quality of health care and focus less on the mischaracterization of insurance companies," Murphy said.

And though Obama said that a public-insurance option is only a means to an end and that Congress should consider other ideas for promoting coverage, insurers say they're unconvinced the proposal is dead.

"We believe there's full support of a public option from the president and the administration in the final plan," Murphy said. "We just do not believe that is the responsible endgame to reducing costs and improving care."

Ghose wouldn't speculate on whether Obama's comments meant the president would drop his push for a public option. But he did say Aetna executives don't consider such a program a positive innovation.

"We don't see a way to have a truly competitive marketplace with a public option involved simply because we don't believe the government can be both a regulator or referee and a player in the same game," Ghose said.

Plus, the nation has 1,300 health insurers, Murphy said, so it's incorrect to suggest a government plan would inject heretofore-nonexistent competition into the system.

Competition already pushes insurers to practice some of the nostrums Obama said a public option would encourage, including focusing on evidence-based medicine, paying doctors for outcomes or performance and emphasizing preventive care, Murphy added.

Lawmakers have yet to settle on any single plan. But several ideas could be a boon to private insurers, especially if the eventual reform does not include a public plan.

The stocks of several health insurers performed better than the broader market Thursday. Shares of Cigna rose more than 5 percent, and Humana, Anthem parent WellPoint and Aetna all climbed at least 2 percent.

Investors are "coming more and more to the conclusion that it's really not going to hurt," said BMO Capital Markets analyst Dave Shove.

Shove said that many insurers already operate profitably in states with restrictions similar to those in reform proposals. These include limits on profitability and laws that guarantee coverage for individual insurance.

Reform without a public option "would be fantastic" for insurers, said Robert Laszewski, president of Health Policy and Strategy Associates, a Virginia consulting firm.

"They're going to get millions of new customers and more than a trillion in new premiums over a 10-year period," said Laszewski, a former industry executive. "There's a reason they aren't running any negative ads."

The Associated Press contributed to this report. Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

 

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