by Andrew J. Manuse
Summary Talking Points
- Health insurance is expensive, and recent state and federal laws are going to make it more so. Thankfully there are things that government can do at the state and federal level to lower costs and increase access to care. In most cases, government would help you more by repealing many of the current laws regulating the health insurance industry.
- The health care overhaul Congress passed this year is unconstitutional specifically because it forces every American to buy health insurance, it forces every business to offer it as a benefit and fines us if we refuse. The 10th Amendment to the constitution, however, gives states authority to invalidate (nullify) unconstitutional federal laws, and I believe New Hampshire must act as soon as possible to do just that for this health care overhaul.
- Through coverage mandates and other legislation, government has transformed health insurance companies into third-party payers managed by bureaucrats rather than true health insurance firms operating in a free market. This has removed most competition from the health insurance market, decreased choices for patients, and put insurance company administrators between doctors and patients. The true solution is to remove government barriers so patients can work directly with doctors to find the solutions that are best for them.
- By offering tax benefits to employers who offer health benefits, government has unjustly skewed the market against the unemployed and underemployed and has made it nearly impossible for individuals and small businesses to acquire affordable health insurance coverage.
- In New Hampshire, the 1994 Legislature passed a number of regulations and mandates that caused the individual insurance market in New Hampshire to implode. The State of New Hampshire began requiring insurance companies to sell individual health insurance policies and it imposed price controls, prohibiting companies from setting market-rate premiums based on a person’s health status. As a result, only a handful of health insurance companies remained in New Hampshire. This degraded consumer choice, reduced the quality of insurance products available and significantly increased costs.
- Pass legislation to invalidate the unconstitutional requirements of Obamacare in New Hampshire.
- Eliminate government mandates on insurance companies and allow the people to decide what kind of coverage they want.
- Enable insurers to provide catastrophic-only coverage, wherein a person could choose to pay for routine care out of pocket and get coverage only when it is truly needed.
- Allow New Hampshire residents to buy insurance policies written in other states and allow insurance companies in other states to sell their plans in New Hampshire.
- Allow New Hampshire residents to create health insurance pools so they can receive the same discounts as large companies.
- Limit claims on medical malpractice.
General Background: Government mismanagement of health care
What’s often lost in the debate about the cost of health care is the reason why there is a cost at all, and why that cost should be set by market forces instead of the government through regulations on health insurance providers. Another thing that’s lost is who should ultimately pay for health care goods and services. Isn’t it only fair that the person who receives a good or service in a voluntary exchange should then pay for that good or service?
Health care is delivered either as a good or service. It is a good when it comes in the form of a cardiac stent used to prop open clogged arteries, a bone growth stimulator used to help people who suffer from skeletal degeneration, or Aspirin, the simple painkiller that’s also known to prevent heart attacks. Health care is a service when someone has to implant that cardiac stent, when someone has to meet with a patient to determine whether his or her problem might be fixed by a prescription to that bone-growth drug, or when junior has his annual checkup to measure his height, weight and reaction time.
There are companies that make medical devices and others that make pharmaceutical drugs. These companies typically spend millions of dollars developing these devices or drugs, and many times, their efforts to follow through on what seemed like a good idea come up empty. When companies develop a successful product, they have to recoup all the money they spent on the previous three or four failed products as well as the money it spent developing the successful product, or else they go out of business. Thus, in an ideal world, they would charge a rate for their successful product that would allow them to recoup all that cost over time with enough money to spare for future development work. Employees at these companies are motivated to keep working on these products—yes, in part because they want to help people—but mostly because they want to take home a fairly large salary that rewards them for their work on the product. Such salaries are supported when these companies make profits.
In addition, there are other companies that provide health care services, such as medical tests, diagnoses and surgery. Again, the people providing these services want to help people, but they also want to take home a nice chunk of change to pay the mortgage, feed the family and maybe even buy a yacht. They can only do that if the company they work for continues to make profits. They make profits by selling their goods and services to other people who can pay enough for them to cover the company’s expenses and then some.
In both scenarios, the people who produce life-saving drugs or devices, or the people who use the drugs, devices and their skills to diagnose and treat others have spent a lot of time and money developing the knowledge and ability needed to do that job. In fact, the skills they’ve developed are more difficult to acquire than, say, the skills needed to scrub toilets or even the skills needed to write this paragraph. It is for that reason that these people tend to demand more money for delivering their goods and services than others who don’t have them. And they deserve that money, really—every bit of it, in fact.
Now for some reason, we’ve allowed government to step in and pass all kinds of regulations concerning the sale of health care goods and services, even though government arguably doesn’t even have that authority. In the last 68 years, government has created company structures to cover the costs of health care. Health insurance companies have never really been completely autonomous—not since 1932 anyway. Before that, maybe there was a decade when health insurance companies truly operated in a free market, and truly provided insurance. But since Herbert Hoover was president, health insurance companies really don’t provide “insurance.”
When you buy a car, most of the time you also buy car insurance for that car. Should you get into an accident, the insurance covers a certain amount of damage to your car and the medical expenses of people who might have been injured. But insurance doesn’t cover new tires, new brakes or new windshield wipers, because these things are considered maintenance that are part of the regular cost of car ownership.
When you buy a house, you’re pretty much going to buy home insurance for it. That insurance will most likely pay for the unlikely possibility of a tree falling on your house, a thief taking some of your more valuable possessions or something of the like. Separate insurance may cover flood damage. Another program might pay for damage if your house burns down. However, if your home insurance coverage doesn’t include fire insurance, you probably won’t have much luck securing your policy during or after the day your house catches fire. In addition, it should be common sense that you can’t get your insurance company to pay for a new paint job on your house or new kitchen cabinets.
Why should health insurance be any different?
The truth is, it really wasn’t different at first. Most people bought health insurance for that odd chance that they might fall down on a hike and break a leg or suffer from some serious type of pneumonia. They didn’t expect insurance to pay for their regular doctor visits or the Aspirin the doctor recommended to cure those headaches. They paid regular expenses out of pocket. It should still be that way.
But in 1932, government started getting involved with health insurance. Congress gave favors to some insurers over others, causing competitive imbalances in the market that have yet to be corrected. Then Congress created incentives for employers to offer health insurance as a benefit, which codified the idea that health insurance is some kind of right. With the urging of labor unions, Congress forced employers to start paying for regular doctor visits and the like, which increased the cost of coverage. Later, Congress created its own health insurance program for senior citizens and those folks arbitrarily deemed to be poor. As a result of that, Congress started setting prices for some health care services and not others. Even if the government prices were too high or too low when compared to the market price, the doctors, hospitals and suppliers had to accept those prices, which led to adjustments in how they charged for their goods and services to regular payers. Government also started to monitor the products that health care companies produced, preventing some from reaching the market that would have saved lives, allowing others to reach the market that might have significantly harmed lives.
In every way, government took over the free market system for health care and turned it into the regulated industry that it is today. In every way, government is responsible for the cost increases that stemmed from ever-increasing regulations and led to the current crisis.
Instead of recognizing its failures and reversing the onerous regulations that have caused health care prices to skyrocket, government has decided to make the American people believe that health care is a right that everyone should have access to, regardless of their willingness to pay for those goods and services. What incentive does such posturing give drug developers or doctors to continue working? Why should a developer spend 12 hours away from his kids trying to make the next breakthrough if the government is just going to tell him how much he can sell the final product for? Why should a doctor spend 12 years in school studying for a job that pays her a meager wage not much higher than the unskilled laborer who doesn’t attend college a day in his life? Goods and services cost money to produce, and the people who produce them quite simply deserve to be paid for their work. The current health care and health insurance industry, as it is regulated, is no longer providing much of an opportunity for health professionals. That needs to change.
Before we can explore the possible solutions for solving the problems of the health industry, we must first look at the history of government health industry interventions and their result, both in the United States and in New Hampshire.
A Brief History of [Federal] Government Intervention in Health Care
By Docs4 Patient Care, with contributions by Andrew J. Manuse
Before we can discuss what state lawmakers have done to harm the health care and insurance markets in New Hampshire, or what state legislators can do to improve these markets and drive down the costs to consumers for both, it is important to know and understand the historic federal intrusions into the health market and how they have caused the problems we’re facing today. After reading the following summary, it will be clear that our health markets are not free and have not been free for a long time. It will also be clear that government regulations have not solved health insurance cost and health care availability problems; instead, these regulations have repeatedly exacerbated the problems they were supposed to address.
First of all, any federal intrusion into the health marketplace is unconstitutional since nothing in the Constitution allows the federal government to regulate this industry. Big government supporters cite the commerce clause (Article 1, Section 8, Clause 3) for regulation of industries, but the original intent of the constitution meant no such thing. The clause actually states that Congress has the power to “regulate commerce … among the several states.” According to Robert Bork and Daniel Troy in their “Locating the Boundaries: The Scope of Congress’s Power to Regulate Commerce,” the two gentlemen indicate “commerce” has no other meaning than “the act of trade” itself, as James Madison noted in The Federalist Papers. “Regulate,” as it was known by founders Madison and Alexander Hamilton, meant “to make standard.”
Thus, in common English, the commerce clause simply gives Congress the power to ensure trade between parties in different states is conducted in the same way across the nation. This understanding was commonly understood for the first 100 years of the American Republic. As the Supreme Court said in 1888, “the object of vesting in Congress the power to regulate commerce with foreign nations and among the several States was to insure [sic] uniformity of regulation against conflicting and discriminating state legislation.”
It wasn’t until President Franklin Delano Roosevelt threatened in 1937 to increase the number of Supreme Court Justices from 9 to 15 so he could stack the court with fellow progressives that any other understanding of the commerce clause took root. President Roosevelt’s “Court-Packing Plan” intimidated the court and encouraged its consent to the president’s unconstitutional New Deal laws that included some of the first government health care interventions.
Since the first federal government intervention into the health care and health insurance markets in 1932, which was actually during President Herbert Hoover’s Administration, the free market for the health industry has been slowly dismantled, resulting in many of the problems we face today. It is important to understand where the federal government went wrong so we can have a real conversation about what we can do as state legislators to restore a free-market for health care and health insurance. So here is a brief timeline of the history of America’s health care industry, followed by an explanation of what problems resulted from each intervention.
1932 – Blue Cross was established. The American Medical Association and the American Hospital Association lobbied Congress for their exemption from normal insurance regulations and taxes. When Congress capitulated, this gave Blue Cross an unfair competitive advantage in the marketplace.
Congress also established “cost-plus” and third-party reimbursement procedures, which developed “reasonable and customary” definitions for paying health care providers that were in conflict with the actual cost of health care services. This led to inflationary health care costs.
1942 – World War II government wage and price controls led to employer-paid health insurance to increase compensation.
After the income tax was established, the IRS ruled health insurance a “legitimate cost of doing business” and allowed employees to receive health insurance benefits tax-free. This action essentially institutionalized employer-provided health care, as more employees demanded the tax-free benefit or companies used the benefit as a way to attract better talent.
1948 – The National Labor Relations Board (NLRB) argued that health benefits could now be the subject of collective bargaining, which reinforced employer-provided health care and encouraged the growth of this behavior. The government further encouraged employer-provided health insurance increases via tax incentives to employers and employees.
The third-party payer system, usually an employer providing health insurance as a benefit to its employees, increased the prevalence of routine-care coverage. Previously, insurance usually only covered unexpected catastrophes, such as a broken limb or a serious condition. This led to rising health care costs because employers paid a bulk rate and didn’t manage employees’ individual health care decisions, such as how often they visited the doctor or the reason for their visits. Individuals didn’t manage their decisions either, since they had no idea how much their health care services were costing them or their employers. This also led to cost increases for those without employer-provided health insurance as the risk of covering one person is higher than the risk of covering many people.
1965 – Congress created Medicare and Medicaid, and the federal government became the largest single buyer of health care services. This extended the flaws of regulated private insurance because the reimbursements paid to health care providers were based on “reasonable and customary” fees, rather than the true cost of health care services. Patients still had no incentive to control costs and used health care more often for routine care rather than its original purpose to cover only catastrophic health incidents, such as a broken limb or serious condition. Around this time, new government regulations made it extremely beneficial for the medical industry to increase adoption of Medicare and Medicaid by hospitals.
Here’s some relevant statistics that resulted from government’s hand in health care in this era:
- The rate of increase in hospital spending averaged 8.8 percent from 1960 to 1965 and nearly doubled to 15 percent from 1965 to 1970.
- Personal health care expenditures rose from $82 in 1950 to $2,511 in 1990.
- Medicare spending in constant dollars rose from $25.2 billion in 1978 to $87.6 billion in 1988 to $111.2 billion in 1990.
- Medicaid spending in constant dollars rose from $18.9 billion in 1978 to $54.7 billion in 1988 to $75.2 billion in 1990.
1973 – Congress passed the Health Maintenance Organizations Act, creating HMOs “to address rising costs of health care.” This new law further distorted the private health insurance market by adding new layers to existing controls, incentives and restrictions that had caused the problems. The law required all companies with 25 or more employees to offer an HMO plan in addition to any other plan they offered. The HMO Act was repealed in 1993, but by then the market for affordable individual health insurance had essentially been eliminated because traditional health insurers couldn’t compete with the new government mandated industry.
1983 – Social Security legislation established a “prospective payment system” (PPS) for hospital reimbursement when dealing with Medicare, which basically set prices for hospitals based on the diagnosis of health care providers. Treatments were centrally planned, designated by 475 “diagnostic related groups” (DRGs). This system essentially encouraged hospitals to cost shift diagnoses not covered by the PPS to one of the diagnostic related groups, which inflated Medicare costs faster than the rate of inflation.
At the same time, many states started passing mandates—laws enacted as the result of lobbying from health care providers and advocates—that forced insurers to cover additional diseases. This led to cost increases as insurance companies worked to mitigate the risk of covering additional medical problems.
According to the National Center for Policy Analysis, the cost increases caused by state and federal regulations made health insurance too expensive for some people, and as many as one in four people were uninsured. Another set of state laws prevented competition and portability, because state lines determined which insurance carriers state residents could legally shop. Only insurance companies that covered the mandated diseases for a state could sell their plans in that particular state. Incidentally, the commerce clause to the U.S. constitution was intended to prevent this very type of state regulation.
1992 – The Resource Based Relative Value Scale (RBRVS) created a “relative value” of doctors in such specialties as family practice, internal medicine and obstetrics, and lower fees for surgeons and radiologists. The law also limited “balance billing,” or the amount doctors can charge above what Medicare allows. These types of price controls skewed the demand for various types of physicians. Because the law required higher payment for doctors in family practice, internal medicine and obstetrics, more students became family practitioners and fewer became surgeons. This led to a shortage in certain areas of the health care industry.
2010 - Obamacare passed despite an outcry from the majority of Americans, who fully opposed the plan. The behemoth law adds a federal mandate for individuals to purchase health insurance, among other mandates that are completely unrelated to health care. The law did nothing to remove government controls, regulations and tax code incentives that created the health care crisis, and it actually added new ones.
Now that the history of government health care interventions is clear and the resulting cost impact is unmistakable, it will be important for us to consider some general federal health care reforms that will actually lower costs and increase the availability of care over time.
In a free market, competition drives down costs and increases the quality of goods or services. Usually, competition also increases the propensity for other competitors to enter the market, which increases choices for consumers. Regulations that give advantages to one insurance provider over another decrease competition, because unsubsidized or nonexempt firms cannot keep up with the favored companies and often fail.
The federal government must act first to remove regulations that benefit one insurance provider over another, and create a level playing field for all insurance carriers under the law. State governments can remove state mandates that prevent insurance companies from offering insurance across all 50 states. Again, the actual purpose of the commerce clause was to prevent one state from creating barriers to businesses from other states. State mandates violate the commerce clause as well as force consumers to purchase products they don’t want in order to get the product they need—that’s government coercion at its worst.
Second, the government also has to level the playing field among businesses and individuals. Whatever tax incentives are given to businesses to purchase health insurance should be extended to individuals, or groups of individuals. This will increase portability, as one person’s health insurance plan won’t be tied to his or her job. This allows increased cost control as the individual is encouraged to keep an eye on the reimbursement the insurance carrier provides.
Third, states should allow insurance companies to sell and people to buy catastrophic care insurance with pay-as-you-go for routine care. Just like auto insurance doesn’t cover our oil changes or home insurance doesn’t cover paint, health insurance shouldn’t cover regular doctor visits or typical prescriptions. Perhaps it shouldn’t even cover the tests doctors order, which would reduce the instances that people actually decide they want to take a test. Simply making this fix would save a lot of money. In addition, states should allow direct pay between patients and doctors to further control costs as medical offices will bill actual costs versus “reasonable and customary” fees.
Fourth, the federal government and the states should phase out federally run Medicare and Medicaid. Each state should determine how best to care for its uninsured, even if it means some states leave such coverage up to charity. People would be much more charitable if they could keep more of the money they earn. Each additional level of bureaucracy increases cost without any increase to benefits received.
Fifth, the federal government must remove regulations that distort the number of providers in the various medical specialties. This will normalize availability of providers over an extended period of time, which will improve our availability of care.
Finally, Congress must repeal Obamacare, and if that doesn’t work, the states should use their 10th Amendment authority to nullify the unconstitutional federal act. Another option is to encourage New Hampshire to join an existing federal lawsuit that is challenging the constitutionality of the law. This legislation only degrades the already overregulated and controlled health care industry, and the states must act to stop and reverse the ever-encroaching federal government.
Where there is a provider able to fill a need, a consumer willing to pay that provider and an absence of unnatural interference, the free market will see to it that the consumer’s needs are met. Since the inception of health care insurance, there have only been a few years in the late 1920s that it operated in a free market system. Since Blue Cross received its first favorable regulation in 1932, the free market ceased to determine how health care insurance is provided. Let’s give the free market a chance to solve the health care crisis, since it was never really given that chance. It would be our quickest path to affordable health care for America and the only Constitutional option.
Jeanne Shaheen’s Health Care Policy Disaster in New Hampshire
(The following article is published almost exactly as it appeared in the policy report, Destroying Insurance Markets, by Conrad F. Meier, senior fellow in health policy for The Heartland Institute, published originally by the Council for Affordable Health Insurance.)
On January 1, 2004, key provisions of a reform measure aimed at deregulating New Hampshire’s small group health insurance market went into effect. The new law also affirmed reforms implemented two years earlier to the Granite State’s individual medical market, allowing insurers to refuse to write or issue coverage based on an applicant’s health status, medical underwriting for individual health coverage, and exclusion of pre-existing conditions for nine months (up from three months under previous law).
In testimony to the House Commerce Committee on April 23, 2003, Gov. Craig Benson (R) said, “SB 110 is a great step forward in the health care reform process. It will lower costs and give consumers choice by increasing competition among insurers.”
How the Granite State came to see deregulation as the solution to the problems of rising health care costs and declining choices for consumers is a story worth telling, particularly so the trend will continue as new lawmakers and policymakers take to the House and Senate floor in Concord and work to further reduce the chains of regulation on the health industry.
Biggest Insurer Cried for Help
Benson’s “great step forward” could also be described as a “great step backward,” back to the time before the national debate over the failed Clinton Health Security Act and the poorly crafted reforms that New Hampshire and other states adopted in response to that debate.
In 1993, Blue Cross Blue Shield (BCBS) of New Hampshire (acquired by Anthem in 1999) began suffering financially from the guaranteed issue and community rating practices it was required by law to adopt. BCBS was the “insurer of last resort” in New Hampshire, and as such was more heavily regulated by the state than other insurers. In return, BCBS was exempted from paying the insurance premium tax (set at 2 percent of net premiums) levied on the rest of the state’s private health insurance market. BCBS complained the guaranteed issue and community rating mandates made it unable to compete with firms permitted to use standard health insurance underwriting practices. Rather than seek freedom from the mandates, BCBS lobbied the New Hampshire Legislature to adopt rules that would force guaranteed issue and community rating on all state-regulated insurance companies.
“Despite having provider discounts no other carrier could match and favorable tax treatment to boot, BCBS was losing market share to other carriers,” said Lee Tooman, vice president of Golden Rule Insurance Co. “Why? Because we had better products, prices and service. But Blue Cross prevailed in the Legislature, convincing elected officials that the problem was with us ‘cherry pickers’.”
During the 1994 legislative session, Democrat Jeanne Shaheen, then a State Senator, responded to BCBS by sponsoring SB 711, which passed and went into effect January 1, 1995. Among other provisions affecting the state’s insurance industry, the measure:
- Required insurance companies to guarantee issue individual health insurance policies. Companies were prohibited from denying coverage to any person or eligible dependent;
- Imposed price controls, in the form of modified community rating, on individual health insurance premiums. Premiums could be modified or adjusted only for age, not health status; and
- Prohibited insurers from increasing premiums by more than 25 percent until January 2000.
Individual Insurance Market Imploded
Aimed primarily at easing the burden on BCBS by encumbering other insurers, Shaheen’s SB 711 had no positive effect for health insurance consumers. According to the U.S. Census Bureau:
- In 1995, when SB 711 went into effect, 10.0 percent of the New Hampshire population was uninsured. In 2003, the uninsured rate stood at 10.3 percent;
- In 1995, 80.1 percent of the New Hampshire population had private health insurance. In 2003, 79.3 percent did; and
- In 1995, 9.8 percent of the New Hampshire population “directly purchased” health insurance, primarily in the individual market. In 2003, 7.1 percent did.
While health insurance coverage was little affected by Shaheen’s reforms, consumer choice was badly damaged. By 1997, the number of commercial health insurers serving New Hampshire dwindled to five from a previous high of 12. Those remaining in the market reduced their insurance offerings to cover only high-deductible, catastrophic-type health insurance plans.
By 1997, even BCBS threatened to drop out of the individual health insurance market, complaining once again that its losses were unsustainable. The company followed through by quitting the state’s market altogether and terminating all in-force business in January 1998.
The announcement “that [BCBS] would no longer participate in the individual market that they had done so much to define, heightened the growing concern of the remaining five carriers,” testified attorney Paula Rogers on behalf of the Health Insurance Association of America at a hearing before the state insurance department on October 31, 1997.
“Since the Blue Cross Blue Shield announcement, we have seen our number of new policies issued in New Hampshire increase substantially,” testified Cecil Bykerk, executive vice president and chief actuary for Mutual of Omaha. “We have also seen a significant increase in our anticipated loss ratio and this appears directly related to the influx of former Blue Cross Blue Shield policyholders. Our individual block of business, and indeed the entire remaining individual market in New Hampshire, is not broad-based enough to Shield block of business.”
The New Hampshire Department of Insurance engaged the Washington-based Center for Health Economics Research to investigate the effects of the Shaheen reform. The group’s report, submitted on December 17, 1997, warned, “Blue Cross and Blue Shield’s withdrawal from the nongroup [i.e., individual] market could lead to a market collapse if nothing is done to avoid a disorderly migration of this high-risk book to other insurers.” Anthony Juliano, executive vice president of the Independent Insurance Agents of New Hampshire (IIANH), shared at the October 31 hearing the results of an IIANH membership poll on the availability of individual health insurance products after SB 711 was implemented. According to Juliano, “There was a significant reduction in the availability, and what was available was coming in with extra-high deductibles. It now appears that circumstances have not changed and are certain to worsen with the withdrawal of BCBS from the market.”
Back to the Drawing Board
On November 26, 1997, the Department of Insurance issued a “Findings and Final Order” with respect to the condition of the state’s individual health insurance market. Insurance Commissioner Charles Blossom found, among other things, that “the quality of products available in this market is worsening,” “the cost of available products in this market is increasing,” and “the loss ratios of the writing carriers has increased.”
Blossom imposed a temporary risk-sharing plan, developed by the industry, to subsidize the losses experienced by the individual health insurance carriers. Insurers actively marketing in the individual market were eligible for a subsidy, paid for by assessments on all commercial insurance companies and HMOs.
The plan was widely perceived as necessary, but acceptable only as an interim measure. William Sterling, vice president and senior associate counsel for group insurance carrier John Alden, testified at the October 31 hearing, “The inability of a guaranteed issue, community rated individual health market to provide a sufficient, internal spread of risk and cost is apparent.
“The imposition of a risk-sharing plan by regulatory action is an acceptable and necessary solution to the problem at hand,” noted Sterling. “However, at the earliest possible opportunity, a permanent solution should be sought through legislation.”
Movement toward a legislative solution began in 1998. In legislation that went into effect July 1, 2002, the guaranteed issue requirement was repealed and a high-risk pool for the medically uninsurable launched. The measure also allowed for more flexibility in premium rating:
- Insurers were permitted to use medical underwriting to determine eligibility for insurance coverage and initial determination of rates;
- Premiums could be surcharged up to 50 percent for health status; !Premiums could be surcharged up to 50 percent for smokers; and
- Premiums were permitted to vary for age by a factor of 4 to 1.
The New Hampshire high-risk pool, New Hampshire Health Plan (NHHP), is a cooperative state and private-sector insurance plan for the medically uninsurable. While eligibility under certain state and federal regulations immediately makes one eligible for NHHP, for the most part, enrollees must have been declined for private health insurance coverage and must have been diagnosed with one of 16 “pre-qualifying” medical conditions, among them HIV/AIDS, juvenile diabetes, multiple sclerosis and paraplegia/quadriplegia.
Two indemnity and two managed care options are offered through NHHP. Rates are higher for tobacco users than for those who do not use tobacco. Coverage is provided through private insurance companies at rates not higher than 150 percent, and not lower than 125 percent, of the standard market rate for the coverage offered.
Scot Zajic, a director for government relations at Assurant Health, said his company is a strong supporter of high-risk pools for persons who cannot get health coverage elsewhere. “Having a risk pool is a good way to provide access to health coverage for those who need it,” Zajic said. “We would, however, like to see the funding base broadened to include federal and/or state funding. Finding coverage for medically uninsurable persons warrants a societal solution.”
State of the Market Today
Zajic said two companies under the Assurant corporate umbrella serve the individual medical insurance market today: Fortis Insurance Co. and John Alden Life Insurance Co. “The recent reforms have allowed us to re-enter the New Hampshire market, and to offer more products that will benefit more consumers.”
Golden Rule Insurance’s Tooman disagreed with Zajic’s assessment of competition in the state. “In 1994, Golden Rule had a thriving business in New Hampshire. We insured a lot of people and paid millions of dollars of claims expeditiously and accurately. But Blue Cross complained that carriers like Golden Rule were doing great harm in New Hampshire. In fact, the only entity suffering harm was Blue Cross.
“Jeanne Shaheen’s 1994 reforms ended up freeing Blue Cross of its money-losing business and handed it a virtual monopoly in the individual market,” Tooman continued. “Blue Cross returned to the individual market, able itself now to ‘cherry pick.’ But it still has the provider discounts no one else can touch. “Ten years after ‘reform,’” he said, “the market has not recovered.”
(For more information on New Hampshire’s attempt to cripple private health insurance under Gov. Jeanne Shaheen and the ensuing part recovery, please read: “Health Insurance: So What’s the Problem?” and “Health Insurance: Treating the Problem,” by Sonia Pearsall, Advanced Benefit Design, in Natural Entrepreneur, and “How Shaheen Destroyed Insurance Markets in NH,” an article by the New Hampshire Tea Party Coalition, which is based on the study, “Destroying Insurance Markets,” by the Council for Affordable Health Insurance and The Heartland Institute.)