OPINION: reform will help level premium costs

Introduction

Recently I was one of three witnesses to testify before a House committee hearing on whether the cost of health insurance will be higher or lower for people who cannot obtain it through their employer when important provisions of the Affordable Care Act go into effect in a few months.

I cited studies that indicate the overall cost of coverage — premiums plus out-of-pocket obligations — will be lower. The others on the panel — Douglas Holtz-Eakin, who was director of the Congressional Budget Office during the Bush Administration, and Christopher Carlson of the actuarial firm Oliver Wyman, cited their own studies that indicate costs could be higher for some young adults who have benefited over the years from the prevalent insurance industry practice of charging older people up to 10 times as much as they charge younger folks.

Insurers will not be able to do that much longer. Beginning January 1, they’ll be prohibited from charging someone more than three times as much for insurance as anyone else for the same policy.

Congress would have been better served, in my opinion, if the witness list had included Jim Elder, a retired small business owner from Florida who I interviewed last week as I was preparing for my testimony and this column.

He would have been a better witness than all three of us combined, hands down. That’s because his story would have served as a real-world reminder of just how unaffordable — and even unavailable — health insurance has become for average middle-class Americans who have done nothing wrong other than get sick.

Jim Elder might not be a widower today had premiums for the health insurance coverage he was providing for his family and his employees not become so unaffordable after his wife was diagnosed with breast cancer that he had no option but to drop coverage for everybody.

Elder became a victim of a common but little known practice in the health insurance business called purging. That’s a term insurance executives use behind closed doors (and during conversations with shareholders and Wall Street financial analysts) to describe what they do to small businesses after an employee or dependent gets sick: jack premiums up so high that the employer either has to shift far more of the cost of coverage to workers or stop offering coverage altogether. In many cases, they are not offered a policy at any price.

Purging explains why far fewer small businesses offer health insurance to employees than a decade ago. And it’s one of the reasons I decided to leave my insurance company job. I couldn’t in good conscience continue working for an industry in which coverage for life-saving medical care was priced beyond the ability of millions of Americans to pay for no reason other than to meet profit goals.

Jim Elder’s wife, Leslie, died an untimely death at age 63 last summer, uninsured and facing foreclosure because no insurance company was willing to sell the Elders an affordable policy because of her age and, ultimately, her serious but treatable illness, Hodgkin’s lymphoma.

I learned of the Elders from a CNN report that described the nightmarish roller coaster they were on. Until Leslie got sick, they had what they thought was good medical coverage with stable premiums. Soon after her initial cancer treatments, they had no coverage at all because Elder Auto Repair was purged by Jim’s insurer. And in between: skyrocketing insurance premiums, high deductibles and stacks of unpaid medical bills. The Elders had to deplete their IRA and savings account to pay for Leslie’s care and were ultimately forced into foreclosure.

The Elders could not find affordable health insurance, and from the industry’s perspective, it’s easy to see why: insuring Leslie would not have been profitable. This is the dilemma we face as Americans, as we try to balance the demands of a health insurance industry driven by money against the needs of friends, family and loved ones who require insurance to survive and be productive citizens.

I know firsthand that insurers are eager to avoid the expense of providing coverage for people who, because of their age and health status, might need costly medical care. In a 2009 policy paper, America’s Health Insurance Plans, the industry’s biggest trade group, acknowledged that almost a third of people in Leslie’s age group were denied coverage every year.

One of the reasons for the congressional hearing was the industry’s massive PR and lobbying campaign to try to get Congress to change Obamacare so that states can decide how much insurers can charge people based on age. That would enable them to maintain the very profitable status quo. By restricting the amount insurers can charge older Americans, however, the Affordable Care Act will foil their attempts to deny coverage to people they want to avoid by charging exorbitant premiums. People who need medical care the most. People like Leslie Elder.

This new restriction is one of the most important consumer protections in the reform law. It would be a tragedy if Congress guts it.