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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
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The Future of Private Insurance

With former Massachusetts Governor Mitt Romney now the presumptive Republican nominee, this is shaping up as possibly the most unusual presidential race in history when it comes to health care.

Larry Levitt, MPP

Although health care is rarely a deciding issue in campaigns, it has almost always been a major point of contention. Every candidate for president in recent memory needed to have a health care “plan,” and typically the Republican and Democratic versions of these plans presented starkly different visions for the future. But they were always just visions, outlines (more or less detailed) of plans that never came to fruition.

Until 2010, that is, when the Affordable Care Act (ACA) passed. Now, for the first time, a President is truly running on his health care record. We don’t need to wait for President Obama’s health care plan: it’s the ACA. Although the ACA is not fully litigated (literally or figuratively), it is the law and as such represents a detailed platform the President will have to advocate for and defend.

Perhaps ironically, the Massachusetts health reform legislation Governor Romney signed into law in Massachusetts is quite similar to the ACA. But while Romney continues to support the Massachusetts approach for Massachusetts, he has clearly stated that he does not support it as a matter of national policy and indeed argues for the repeal of the ACA. So far, we have only the barest outline of Romney’s official position on what he would replace the ACA with, so we need to read a bit between the lines.

The overarching differences between the candidates on health reform and public programs like Medicare and Medicaid have received more attention, but they also envision divergent futures for private insurance. There’s no one right way to create a fair insurance market, but different choices have consequences. How accessible will coverage be for people with preexisting health conditions? What benefits will insurance provide and at what cost to patients?

President Obama and Private Insurance

The basics of the ACA’s private insurance provisions are by now reasonably well known:

  • Beginning in 2014, all insurers would be required to take anyone, including those with preexisting health conditions. Premiums could vary to some extent by age but not by sex or health status.

  • All insurers selling coverage to individuals and small businesses would be required to include a set of “essential health benefits” (which could vary state-by-state), as well as preventive services.

  • The generosity of coverage (as measured by the amount of cost sharing patients face) would be standardized into so-called “metallic tiers” (bronze, silver, gold, and platinum). A bronze plan, which is the minimum that people would be required to buy, would pay for 60% of the cost of covered services on average. An analysis the Kaiser Family Foundation just released found that bronze plans would likely have very high deductibles, meaning the minimum coverage people would have to purchase would provide only catastrophic protection, along with up-front coverage of preventive services with no patient cost sharing. However, anyone would be free to buy more comprehensive coverage, and many probably would do so.

There’s little question that these changes would result in a more accessible insurance system, providing guaranteed access to coverage for those with preexisting health conditions, along with subsidies to make insurance more affordable. However, to make these reforms work, the ACA also includes the politically divisive individual mandate to buy insurance, which the Supreme Court will soon pass judgment on.

Governor Romney and Private Insurance

Instead of the additional rules for insurers in the ACA, Governor Romney proposes to “limit federal standards and requirements on both private insurance and Medicaid coverage.” He also says that consumers should be allowed “to purchase insurance across state lines.” This would have the effect of diminishing insurance regulation at the state level, as insurers would seek to sell coverage in loosely regulated states. According to the Congressional Budget Office (CBO), this could result in an “erosion” in the availability of coverage for people with high health care needs. However, the CBO also notes that the cost of individual health insurance could be reduced by 5% if all states had mandated benefits equal to those in states that now impose the least expensive requirements.

To provide access to coverage for people with preexisting health conditions, Governor Romney proposes “flexibility to help the chronically ill, including high-risk pools, reinsurance, and risk adjustment.” High-risk pools—which segregate people with expensive health conditions from the rest of the insurance market—are, in theory, a viable strategy. But to make them effective, the coverage needs to be adequate and the premiums affordable, which would require a significant infusion of subsidies. It’s not yet clear whether Romney is prepared to make such subsidies available.

As with previous Republican presidential candidates, Governor Romney also places a strong emphasis on high-deductible insurance plans paired with health savings accounts (HSAs), proposing to “unshackle HSAs by allowing funds to be used for insurance premiums.” This would likely accelerate the shift to higher deductibles and more patient cost sharing, which he argues will “drive quality up and cost down.”

The insurance market is already moving in that direction. The percentage of insured workers with a deductible for single coverage of $1000 or more increased from just 10% in 2006 to 31% in 2011. That, along with the lingering economic downturn, may be part of the reason why utilization of physician services has fallen substantially. These trends are likely to continue, regardless of how this year’s election turns out.

But this election could be a turning point for the future shape of private health insurance.

About the author: Larry Levitt, MPP, is Senior Vice President for Special Initiatives at the Kaiser Family Foundation and Senior Advisor to the President of the Foundation. Among other duties, he is Co-Executive Director of the Kaiser Initiative on Health Reform and Private Insurance.
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