Path to Insurance Reform Laid Out in Health Bills

WHEN Congress reconvenes to consider health-care reform for the last time this session, the rambling debate over employer mandates and universal coverage will again return. But members will likely take solace in one element of the final package that has been common ground since the beginning: insurance reform.

Two aspects of this reform are common to the four major bills before Congress: portability - the assurance that changing jobs will not make significant gaps in coverage; and community rating - premiums based on age and geographic area, not individual health history.

The aim of insurance reform, explains Mark Hall, author of ``Reforming Private Health Insurance,'' is to bring more security and rate equity to current policyholders. Yet such reforms will do little to achieve universal coverage. ``It addresses equity issues, not numbers issues,'' Mr. Hall says.

Despite broad consensus in the bills, there are significant differences in the details.

Portability

Two elements comprise the concept of portability: limiting preexisting health-condition exclusions (penalties for illness), and requiring standard-benefits insurance packages that every company must provide.

Soon after her husband started a software company, Becky Geisel of Tucker, Ga., began looking for new insurance. Says this mother-of-one: ``I'm extremely healthy with one exception,'' - a condition which could complicate a second childbirth. ``Few companies would insure me, she says, and none without a permanent rider barring any coverage of my reproductive system.''

The plan introduced by House majority leader Richard Gephardt (D) of Missouri would abolish preexisting condition penalties - higher premiums or prohibitive riders.

Other bills are less restrictive, including one by Senate majority leader George Mitchell (D) of Maine, another by Senate minority leader Robert Dole (R) of Kansas, and that of the Senate ``Mainstream Coalition,'' led by Sen. John Chafee (R) of Rhode Island.

Under these bills, if Mrs. Geisel were treated for her condition in the three months prior to joining a plan, penalties could apply, but only for six months. If she was not treated in the three- months prior to joining, no penalties would be allowed.

Overall, preexisting condition exclusions do add considerable security to policies - but, says Brookings Institution scholar Joseph White, ``the maximum definition of portability is a standard benefits package which can be carried from job to job.''

Tom Miles' sheet-metal company in Lusby, Md., recently cut his paycheck by one-fifth. Yet because his son, Robert, receives expensive epilepsy treatment, Mr. Miles refuses to seek another job, fearing premium hikes or permanent loss of insurance.

``We're locked into the job even if they cut back to three days,'' explains his wife, Kate Miles.

The Miles family is concerned about being bankrupted by high premiums during the six month pre-existing condition penalty period. But, the Mitchell bill, the Gephardt plan, and the Mainstream Coalition proposal could create more relief by requiring standard benefit packages.

Under these plans, as long as epilepsy coverage was a part of the standard package, the Miles family would be entirely secure in changing jobs. But, if not, says White, ``They're in trouble,'' - and might pay significantly higher premiums for a plan that covered the condition.

Community Rating

Upon starting his own consulting company in Charlotte, North Carolina, Jay Robinson was startled at being dropped by his old insurance company.

Furthermore, the least expensive monthly premiums elsewhere were $700 - a $510 jump in rates. The reason: his medical history - four years before, a heart attack had prompted expensive surgery.

Although in excellent health now, Mr. Robinson says, ``for 53 years the insurance company gladly took my money, but when I actually cost them something, they booted me out in a skinny minute.''

Under community rating, insurance companies could no longer consider Robinson's medical history. Instead, he would be put into a rating band according to his age and geographic location. His premium would become the average cost of insurance for everyone in his band.

But his rates would depend on the number of rating bands in the system. The Dole bill has three rating bands, Mitchell's two, Gephardt one; the Mainstream Coalition is undecided.

The difference for Robinson: with one band, his premiums would be subsidized by the many more-healthy, typically young people in his group, and therefore would be comparatively lower. More bands would mean higher premiums as his band contained fewer typically healthy young people.

But there is a systemic danger that young or healthy people may opt out rather than pay high premiums.

Rates would then rise, forcing even more people to desert. The spiral might continue, leaving only the unhealthy and medically expensive on insurance rolls and bankrupting insurers.