Yesterday in Colorado, a senate committee approved a bill that would prohibit health insurance companies from using health status and claims history to set premiums for small groups (fewer than 50 employees). Since 2003, small groups in Colorado could have a discount of up to 25% or an increase of up to 10% on their premiums, based on the overall health of the group. This bill would do away with those rating adjustments, and prices would be based on things like zip code, age of employees, and the number of dependants a group has.
A person with a genetic disorder should not be penalized with higher premiums for health insurance. Nor should someone who was hit by a drunk driver and is paralyzed, needing expensive recurring medical care. Nor should a child born with fetal alcohol syndrome. But some serious distinctions need to be made between bad luck and self-inflicted ailments. The current bill and the 2003 provision that allowed insurers to adjust prices based on the health of a group both failed to address a fundamental flaw in the pricing structure of group health insurance. Enrollees with medical conditions that are attributed to lifestyle factors – obesity, type 2 diabetes, hypertension, and high cholesterol are some good examples – as well as anyone who uses tobacco, should be paying considerably more for their health insurance. A 10% increase is not enough. And the burden should not be spread to the healthy employees in the same group. For enrollees with genetic disorders, accidental injuries (not caused by their own negligence), and illnesses that are not self-inflicted, the higher premiums should be spread to the group. It is not right to make everyone in a group pay more for health insurance because a few people in the group have chosen to ignore their health, are obese, have diabetes, high blood pressure, and take 5 different medications every day. The majority of illnesses are caused by lifestyle factors, but many of them would fall into a grey area that would be tough to prove. So some basic guidelines would need to be put into place, denoting which conditions would be considered “self-inflicted.” Group health plans – large and small – would still cover enrollees with these conditions, but at a higher premium, which is not spread to the group.
Removing the health-based rating factor entirely is also not the solution. This does away with the discount (currently up to 25%) that a group can get if its enrollees are healthy. According to the Colorado Division of Insurance, nearly two thirds of small groups currently get some level of discount on their premiums based on the health of their employees. This can be a size-able chunk of money each month, and is an incentive for employers to help their employees stay healthy. Taking away a financial motivator would be a step backwards, especially since so many groups currently qualify for a discount.
