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Reading the tea leaves of health reform

The fact of the matter is that community rating is a bill of goods that increases health care insurance costs.

By Jeffrey Spiers | Updated on April 14, 2010

While health reform advocates are still taking victory laps, a look back at previous health reform measures seems appropriate. After all, national health reform was modeled after other states’ own health reform measures. What happened there provides striking insight into what the country is in for over the next few years. States like New York, Massachusetts, and Colorado share common reform measures with the new national health reform law and hold keys to understanding what lies ahead.

Health insurance reforms have most often been based on a pair of mandates targeting the individual and small group markets. The first is an underwriting method known as “community rating.” The second is “guarantee issue.” Under these new rules insurance carriers are forbidden to rate health plans by using actual group demographic and claim experience, known as “experience rating”, and are required to take all applicants, regardless of existing health condition, gender, occupation, or age. The intent is to expand access to insurance by forcing carriers to accept all applicants. The thinking is that by community rating with guarantee issue, costs will be stabilized over a larger group of policyholders because insurers would be prohibited from cherry picking preferred-risk individuals and groups. Thus, access is expanded while costs are stabilized and ultimately reduced.

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