Rod St. Aubyn: States Should Have Taken The Lead On Health Insurance Reform


In last week’s post, I brought up the failures of the Affordable Care Act (ACA or as many refer to it as “ObamaCare”) in controlling health care costs in addition to many other failures.

As I indicated, I prefer that health care reform be a state solution versus the power grab by the Federal government. As a strong advocate for state’s rights, I firmly believe that any state solution would have been much better than the disaster that we currently have in the ACA. In fact, I am surprised that the National Association of Insurance Commissioners weren’t more vocally opposed to the Federal takeover of many functions which were part of the ACA, but historically handled by state insurance commissioners.

What benefits must be included in policies (Essential Health Benefits), minimum loss ratios (percentage of premium that must be applied toward health care claims), and other regulatory functions were historically left to state legislatures and insurance commissioners. However, insurance commissioners were faced with a loud public outcry for health care reforms and their opposition to the ACA may look like they were opposed to health care reform. In addition, many of the insurance commissioners were Democrats and they felt obligated to support this Democratic reform package.

The passage of the ACA had a significant impact on election losses for ACA-supportive congressional members in 2012 and I suspect will still have some impact in the 2014 election once premiums for 2015 are announced shortly before the November election.

Many of the abuses that were identified by the proponents of the ACA did not occur in ND, but everyone was painted by the same broad brush. Health insurers were demonized and accused of gouging the general public. While this may have been the case in some situations, it certainly was not true in our state. ND had some of the highest loss ratios (percentage of premiums used to pay actual health claims) in the country. The political rhetoric that insurers could drop you if you got cancer or some other traumatic medical condition was already prohibited in ND and was totally false in our state.

In addition, generally ND medical facilities and personnel provided some of the best and cheapest care in the entire country. Yet ND insurers and medical providers were lumped into the same basket as some of the aberrant insurers and providers outside of ND. So ND had to accept this disastrous Federal health care solution.

One of my pet peeves is when people criticize something, but offers no solutions. If we were offered the ability to provide an ND-centered solution we could have kept our existing system prior to the ACA with only a few tweaks. Some of the more popular features of the ACA could be adopted with a minimal actuarial impact on the premiums, such as elimination of the lifetime limit and the adoption of appeal processes.

ND actually had a pretty good system before the advent of the ACA. In the individual market it is true that you had to medically qualify for an insurance product. The unhealthy people or others who had significant preexisting medical conditions could be denied, but those people would automatically be eligible for CHAND (Comprehensive Health Association of ND) which is ND’s high risk pool. The premiums are higher (not to exceed 135% of a premium for a comparable product in ND) and with these higher premiums CHAND still lost several million dollars each year because of the higher medical utilization of this high risk pool.

That loss was accessed to all insurers operating in the state who have $100,000 or more of premium business. CHAND is governed by a board comprised of the Insurance Commissioner, the state health officer, the director of OMB, one State Representative, one State Senator, and a representative from the top 3 insurers within the state. The key is that it is governed by North Dakotans who have an interest in maintaining a strong state insurance market.

Not every state has/had a high risk pool option. One “tweak” that ND could have considered is to provide subsidies for the higher premium costs for CHAND applicants on some type of income means based system. In addition, if public policy dictated it, ND could have provided some type of premium assistance for all lower income individuals similar to those subsidies provided by the ACA. In addition, some incentives could be developed to encourage wellness.

For example, perhaps some financial incentives could be provided for individuals participating in wellness programs, successfully managing chronic health conditions such as diabetes, etc. In addition, ND could consider some types of incentives for medical providers for activities and processes that actually reduce long-term health care costs. Whether there is a need for the individual mandate to maintain health insurance coverage is up for public debate by the state legislature, but is a decision best left up to the state and NOT the federal government.

Despite what many may believe ND generally has much lower health insurance premiums compared to other states. Many factors affect that including lower medical reimbursement to providers for medical services and pharmaceuticals and also the number/type of health insurance mandates. In short, health insurance mandates generally increase health insurance costs. ND has far fewer mandates compared to states like New York and most other states. Health insurance benefits should be based on evidence based medical policies and not be based on emotional and popular mandates. I will talk more about the issue of health insurance mandates in my next post.

The main point that I want to emphasize is that ND is well suited to develop its own best practices for health care reform and would be far superior to the “one size fits all” approach adopted by the ACA.

The determination of the Essential Health Benefits should be a state function and not by the Secretary of HHS as specified within the ACA. If something in the health care area is not working North Dakotans are not shy about talking to the Insurance Commissioner or their legislator to further “tweak” the system. A North Dakota solution is what we need, not this gigantic takeover by the Federal government.

With the federal deficit I fear that the level of support for federal subsidies and funding to maintain other provisions are unsustainable in the long run. The result will either be a higher deficit or even higher health insurance premiums. The promised reduction in health care costs is doubtful.

Time will tell, but I am not optimistic based on what has happened so far.