Questions Linger on Affordability of Health Coverage Under New Plan

WASHINGTON — When President Clinton signs health reform legislation today, he will be sure to trumpet the bill’s guarantee of health insurance “portability”: ensuring that workers can take their health insurance with them when they change employers even if they have preexisting medical problems.

But he probably won’t mention persistent doubts about what the legislation will do to insurance “affordability.”

Indeed, many insurance industry experts say the bill, by mandating the availability of certain coverage without imposing price caps, may actually drive up insurance costs for many individual buyers or employees of small companies.

Moreover, the bill does nothing to reduce the growing ranks of employers that offer no health coverage to their workers because of its cost.

“I can’t help but be cynical,” said Diane Warren of Columbus, Ohio, whose health insurance bill quadrupled between 1989 and 1993 after she developed cervical cancer.

“If the insurance costs too much money, it doesn’t matter if it is available,” she said.

Warren, the owner of Katzinger’s delicatessen, testified before Congress and enlisted backing from other small-business owners in support of Clinton’s ill-fated plan to make health insurance mandatory at all companies. She decried the reluctance of insurers to offer coverage to small companies, relating how after a worker was shot and accumulated massive medical bills, she was unable to persuade any new company to bid on her insurance business.

The bill that finally emerged from Congress this year, she said, is a shadow of the original plan.

The new federal law will be only “a modest victory for those fighting to make the system more fair and more stable for consumers,” said Alan Katz, chief executive of Centerstone, a Woodland Hills- based agency offering health insurance for small firms.

The bill says insurers cannot refuse to sell policies to small companies (those with two to 50 workers) or to individuals. But it leaves to the states the thornier job of trying to make insurance affordable for those customers.

Moreover, insurance professionals say overall costs could rise for individuals if states require insurers to charge similar or equal rates to all individual policyholders regardless of their health status.

That’s because insurers would probably try to spread the additional cost of covering serious medical conditions over the entire pool of individual customers. Current individual policyholders’ bills could rise 15% to 25% because of the cost of covering the newcomers, the industry predicts. (No estimates exist for the potential rise in small-company costs.)

Still, insurance trade groups say that preventing individuals from being penalized for their preexisting ailments would give up to 1.5 million additional Americans new access to health coverage.

Moreover, the bill to be signed by Clinton--it will become effective for most insurance policies Jan. 1, 1998--does give workers some important new protections.

The bill’s biggest potential benefit comes from its portability provision, which eliminates the waiting period in which workers with preexisting health problems remain ineligible for insurance coverage.

Currently, workers changing employers often find that their new company’s insurance policy won’t cover an existing medical condition such as cancer, heart disease or diabetes for as long as six months or a year after the start of work. At any given moment, as many as 3 million people may be going through this waiting period.

Under the new law, workers can be forced to satisfy the waiting period for an existing health problem only once. After all subsequent employment changes, the condition must be immediately covered.

There is one catch. If a worker’s coverage lapses for more than 63 days--whether because of a job change or a period of unemployment--the new employer can impose the waiting period again.

This means workers on long-term unemployment will have to keep up their health insurance on their own. That can cost hundreds of dollars per month for comprehensive family coverage, according to industry statistics.

Industry observers say California is the only state that provides both the guaranteed access to insurance and the rate protections missing from the federal bill. The state law, which covers companies with three to 50 workers, says such employers can’t be forced to pay more than 10% above the premiums charged to an employer with normally healthy workers regardless of its employees’ health conditions. Conversely, a firm with particularly healthy employees cannot be offered more than a 10% discount.

However, the state law does not apply to large corporations, which are typically self-insured and thus governed only by federal regulations. Workers at these companies will get portability guarantees for the first time under the new law.

Another group that will be helped by the new bill is the self-employed, whose permissible federal tax deduction for health insurance premiums will rise in stages to 80% of premiums from the current 30% between now and 2006.

That provision has won special praise from small-business owners.

“Why should Bill Gates be able to deduct 100% of the cost of coverage for thousands of workers at Microsoft while I can only deduct 30%?” said Lynn Hoopingarner, a business consultant in West Hollywood.

The bill also allows the self-employed and small companies to join in health insurance pools to seek better rates.

Hoopingarner hopes the opportunity to join with others will produce savings for her. She now pays $130 a month for an insurance policy with a $1,000 deductible and what she describes as “all kinds of exclusions and limitations.”