Greater risk-sharing promises lower costs with more security

A key indicator of the health crisis facing our nation is the rising number of Americans who lack quality health coverage. This year nearly one in four individuals will either be underinsured or without any health plan whatsoever — and we know the devastating consequences of that.  Prevention isn’t addressed, diagnoses are missed, and care is deferred. This contributes to more severe illness, long-term disabilities, higher costs, medical bankruptcies, and — too often — lives shortened or lost.

Most of us recognize that health insurance simply isn’t working properly in America today. The fact is that coverage is most difficult to obtain when the need is greatest. Yet we know that, for example, auto insurance would not work if one could obtain coverage to repair damages the day after an accident, and health coverage is no different. Insurance is fundamentally about sharing risk — and if we all participate, each of us can have a greater level of health security at lower cost.

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Many are now recognizing that fundamental principle. For insurance cannot function if both plans and individuals work to “game” the system, and we now see a new balance emerging in which individuals will no longer need to worry that their health status will block them from obtaining reasonably priced coverage — and at the same time, insurers can anticipate that risk can be spread more affordably as individuals take personal responsibility to purchase coverage. This balancing of access and responsibility represents a watershed moment in moving towards universal coverage.

This is but one of a set of reforms that demonstrate a balancing of costs and benefits that is a model for changing the status quo. The fact is, reform of health insurance is long overdue. When an individual is forced to study both law and medicine before navigating the purchase of a health insurance policy, something is terribly wrong. So too, the assessment and rating of coverage based on health status has left the actual reduction of risk largely ignored. When is the last time your insurance plan notified you of a needed screening or preventive visit?

It is clear — especially as we discuss requiring an individual mandate — that we reconsider the concept of health insurance. Poor health often can be anticipated and prevented. And a health plan — while it must provide insurance against the unforeseen — must also provide more value in terms of prevention and risk reduction.

I am pleased to see that many people now recognize that fact, because it is one key factor to help reduce costs. Yet we must do far more, for the scale of the problem is seen in the rapid escalation of health insurance premiums — up a staggering 89 percent since 2000 — far outpacing inflation and wage gains. In Maine, the annual premium for the most heavily subscribed policy in the small group insurance market is $5,400 for individual coverage, and over $16,000 for a family plan. And if a family of four must purchase a policy in our individual market, they can expect an annual premium of over $24,000!

A major factor in such pricing is the lack of competition that exists today. Last March, the Government Accountability Office (GAO) released a report that I requested, along with Sens. Kit Bond (R-Mo.), Dick Durbin (D-Ill.) and Blanche Lincoln (D-Ark.). The GAO’s report highlights an alarming trend of consolidation in small group insurance markets. The combined market share of the five largest carriers represented 75 percent or more in 34 of 39 states surveyed, and 90 percent or more in 23 of these states, including my state of Maine.

The result of that market consolidation and rising premiums should come as no surprise. Today, a majority of our nation’s uninsured — 52 percent — are self-employed, or work for a small business with fewer than 100 employees (or are economically dependent on someone who does). And today, while 99 percent of large firms offer health coverage, fewer than half of our smallest businesses are able to provide this critical benefit.

One way to address this dysfunctional market is to develop larger, more diverse “pools” and increase the number of competitors.  That’s precisely what I am working to do with Sens. Durbin and Lincoln in our Small Business Health Options Program (SHOP) Act legislation. This bill would implement the critical reforms to health status and rating which are broadly recognized as key to achieving more affordable coverage. But our legislation would also facilitate efficient national plans which would comply with both the health insurance exchange standards and be subject to state oversight — and would help spur the competition and efficiencies needed to help reduce costs. Incorporating these reforms — together with providing our smallest businesses with tax credits — will be critical to reaching the majority of the uninsured today.

It is clear we have a difficult task ahead of us to provide the health system which Americans want — including a choice of affordable coverage options. Substantial commitments will be made in this effort, as individuals take personal responsibility to obtain coverage, as government assists those of modest means, and as employers work to provide workers with the quality health benefits they expect. So Americans should rightly expect that the health insurance industry will respond with a variety of affordable options for quality coverage. I believe that with as many as 70 million new customers for comprehensive coverage — and millions more seeking higher quality, lower cost options — the response to comprehensive health reform will be overwhelming.

Yet some propose that government must play a much greater role. Not simply as standard-setter and regulator — not just in providing assistance to those struggling to afford a policy, but as a provider of coverage to all. That should give us pause.

The fact is, embarking down that path before even implementing reforms could compromise the competition and innovation that we are pressing to enhance. Providing a government plan raises a number of questions about how to realize benefits from such a plan without the many adverse effects a public plan can create.

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This certainly explains why so much controversy surrounds the issue of a public plan. I think it is clear a public plan is no panacea to the problems of health insurance today. We are on the cusp of seeing broad reforms enacted — for the first time — to assure that health plans better serve the public. That can preserve both choice and innovation.

Yet when we enact those reforms — and extend subsidies to those in need — Americans must find that affordable coverage is available to them. That is why the application of a carefully designed public plan option can play a role if private plans fail to provide competitive pricing. A fallback provision can ensure that the health insurance industry delivers the affordable plans Americans need. And by requiring private plans to provide pricing in a timely manner, we can ensure that — where it may be required — such a fallback plan is available to a state’s residents from day one.

There should be no mistake about it: Successful health reform relies on far more than spending. It requires a commitment to broad reform of the insurance plans on which we rely to preserve life and health. And we must strive to see that every American can obtain that coverage.

Snowe is a senior member of the Senate Finance Committee.

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