Offer made to level health premiums

WASHINGTON – The country’s leading health insurers Tuesday offered to end their long-standing practice of charging sick customers higher premiums, proffering a significant concession in the face of mounting criticism of the industry here.

The offer from America’s Health Insurance Plans and the Blue Cross Blue Shield Association, whose member companies cover more than 200 million people in America, comes as lawmakers on Capitol Hill debate a new proposal to create a government-run insurance program.

And it underscored the pressure the industry faces from Congress and the Obama administration as policymakers move ahead with plans to reshape the nation’s health care system.

The industry’s underwriting policies are widely criticized for driving millions of people into the ranks of the uninsured.

Nationwide, the number of uninsured has increased by nearly 9 million since 1994, reaching 45.7 million, according to a study released Tuesday by the Robert Wood Johnson Foundation. The study also found that nearly one in five working adults is now uninsured.

Karen Ignagni, who heads America’s Health Insurance Plans, said Tuesday insurers want to help reverse that. “The private sector can rise to the challenge of solving these problems,” she said.

Ignagni and Blue Cross Blue Shield Association President Scott P. Serota made the offer in a letter to senior senators. But it came with a catch: The insurers said all Americans must first purchase health insurance to boost the size of the risk pool, a concept opposed by many consumer groups.

“By enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe we could guarantee issue coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market,” they wrote.

The two industry leaders said insurers would still need to vary rates based on age, family size and geography.

And they called for permission to offer discounts for people who engage in healthier behaviors such as quitting smoking and adhering to treatment programs for chronic diseases.

CRT Capital Group analyst Sheryl Skolnick, who follows the insurance industry, said the offer to forgo medically underwritten premiums may be a recognition by insurers that they need to “do what it takes” to get people back into the insurance market.

“I’m sure they want this to be seen as a major step forward in promoting reform,” Skolnick said. “I just want to know what the catch is.”

She said insurers have no doubt decided that they have more to gain by dropping variable pricing than by fighting to maintain it.

Ignagni would not say Tuesday if revenue lost by equalizing premiums between sick and healthy customers could be recouped by insurers in a larger market in which all Americans have to buy insurance.

Also unclear is whether insurers will be able to head off calls for a government-run insurance program with their proposal.

After years of horror stories of Americans denied coverage, many congressional Democrats are committed not only to stepping up regulation of the insurance market but also creating a so-called “public plan” to bring down the number of uninsured.

Such a plan, which liberal Democrats and interest groups say is required, would compete directly with private insurers.