Excerpts from article in the Denver Post:
Colorado insurance executives, cautious supporters of health care reform throughout the past year, are now warning that current proposals could cause a “system collapse.”At issue are what insurance companies consider absurdly low penalties for people who choose not to buy health insurance.Their concern: People will buy insurance only when they desperately need it, such as after they’re diagnosed with cancer or heart disease.
Healthy people might choose to pay the penalty, now proposed at a few hundred dollars per year, because it is far less expensive than buying insurance. Insurance companies, under that scenario, would end up spending more to treat patients than they would receive in premiums. Rates would rise even faster than they do now.
“People would come in, pay premiums for a few months while they were getting their cancer treatments,” said John Martie, president and general manager of Anthem Blue Cross Blue Shield of Colorado. “If enough people did that, the whole system would collapse. “I would hope it wouldn’t get that far. Ultimately, it would lead to rationing of care.”
In the health care bill passed Tuesday by the Senate Finance Committee, adults who do not purchase health insurance would face an excise-tax penalty of $200 a year starting in 2014 and rising gradually to $750 in 2017. The tax would be prorated if an individual has health insurance for part of a year.
The insurance industry incited an immediate and passionate backlash after saying the Senate bill would cause insurance premiums to increase. Critics accused the industry of using scare tactics to derail reform.
Reform advocates say it is farfetched to assume people who can’t afford insurance — and might qualify for government subsidies — would opt to pay a penalty instead. “They are assuming that people would game the system,” said Denise de Percin, executive director of the Colorado Consumer Health Initiative. “They are looking at the worst-case scenario. People aren’t stupid — they are not going to pay a penalty and get nothing,” de Percin said.
Supporters of the legislation from the Senate Finance Committee also point out that the proposed penalty is only a proposal. Congress likely will refine the legislation, aiming to strike the right balance between government subsidies and penalties for violating the insurance mandate. But Ben Price, executive director of the Colorado Association of Health Plans, said the proposed penalty is way off the mark. It is so low, “we can’t really call it a mandate,” he said. “Without a mechanism for enforcement, people will wait until they are sick to get coverage,” Price said. Premiums, he said, would “go up for individuals, small business, everyone. Congress needs to create a strong mandate in order to make an ‘all-in’ system work.”
Full article at: http://www.denverpost.com/ci_13591564