Hopes have been high for the Commonwealth Connector as an “exchange” through which individuals could purchase health insurance on a pre-tax basis, carriers could offer more affordable products, and consumer choices would be expanded. Although more individuals now purchase on a pre-tax basis and have more affordable options than were previously available to non-group subscribers, opportunities for more choice exist.
A few recent product and pricing decisions by the Connector have narrowed rather than created options. Instead of allowing individuals to make coverage choices, the Connector has mandated that all policies must include drug coverage. Instead of encouraging product diversity, the Connector has required that alternatives to their Bronze offerings must be tiered or select network products rather than low-cost HSA plans. Most recently, the Connector asked carriers simply to cap their rates.
While these policies may be understandable in isolation, taken together they narrow options and make it more difficult to meet affordability expectations, like the 5% cap on premium increases set by the Connector for July 2008. With limited ability to innovate in a market where medical cost trends are running at roughly twice the rate of premium increase sought by the Connector, the affordability challenge will be greater in the future.
After a start-up phase most new programs entertain modest course corrections. Building on its track record of careful deliberation, necessary adjustments, and balanced policies, the Connector might ask whether the possibilities inherent in the “exchange” model have been exhausted.
Bruce Bullen, Chief Operating Officer
Harvard Pilgrim Health Care
Mr. Bullen: One might ask the same question of “health plans” (i.e., Revisit private health insurance?)if all you can offer as options for achieving more affordable products is increasing deductibles through HSAs and and axing drug benefits. And based on what I’ve read, the “5%” premium increase for the Connector products is really more like 8-10% once you take into account the benefit reductions in the products–not much of a cap when overall inflation is 2-3%. The Connector has certainly made it easier to buy health insurance and gotten better prices and more product choice for individuals than existed in the market before. But it’s still relying on private health plans to make coverage affordable. The flaw in the model is that even big plans like HPHC seem to have little ability (or resolve) to control rising costs, other than by “innovations” like cutting benefits. So our cost problems are much deeper than the Exchange model. The question is: what can we do about the root causes of our cost problems (e.g., provider monopolies, drug prices, uncontrolled proliferation of technology, destructive competition among providers, fee for service payment, and high administrative costs), and do we have the courage to really take this on? So far, I see little evidence. And pretending like all would be well if only we had more “choice” from the Connector doesn’t give me much hope for the future.
What we don’t need is either the Commonwealth Connector or private insurance companies because they are the ones causing all the problems.
Peter: I agree with much of what you say about the need to control costs and would argue that health plans have addressed many areas of cost. When free choice of provider and open networks are the market norm however prices rise. All the more reason to give health plans the freedom to offer a full range of product choices.