CU's Lisa McGiffert

Sacrifice health coverage in the name of choice? (May 2003).

by Lisa McGiffert

Cutting costs through the use of smoke and mirrors is becoming a way of life in Texas. In the name of "consumer choice," the citizens of Texas often get far less value at a higher cost.

Homeowners insurance is a good example. Texans today get less coverage -- albeit more policy choices -- than they did a year ago due to new water damage limitations. But premiums have continued to escalate. Now a bill moving fast through the Texas Legislature threatens to do something similar to your employer-sponsored health insurance plan.

The latest insurance scheme embraced at the capitol is so-called "consumer driven" health plans. Employers love them because they can bring down their costs and health insurers love them because they hold their costs down and boost their profits. But how about the consumers who "drive" these plans? Consumer driven simply means consumers pay more. It's all about cost shifting, from the employer and insurer to the consumer. In most cases, consumers will pay more for less coverage.

Consumer driven plans were developed out of the belief that if consumers pay for more of their health care costs, they will use fewer health services. Consumers choose which services they want covered. The fallacy of this arrangement is that health insurance is designed to protect us from unexpected occurrences - events that are not predictable. In most cases, employers will choose which services the plan will cover, without regard to their employees' needs.

These plans typically cover catastrophic health care needs and include high deductibles and co-payments at the point of service as a disincentive for using services. People who cannot afford the out-of-pocket costs probably will seek less health care.

Wipes out 20-30 years of coverage

SB 541 by Sen. Tommy Williams, R-The Woodlands, creates a new "consumer choice" product by allowing insurers to sell plans without many of the coverage requirements the legislature has added over the past 20 to 30 years. These "mandates" include benefits that insurers historically denied, such as complications of pregnancy; immunizations; screening for osteoporosis and breast and prostate cancer, oral contraceptives; and surgery for craniofacial abnormalities.

According to the business and insurance lobby, state laws that require certain benefits are the culprit in rising health insurance premiums. But SB541 does not guarantee that health plans without mandates will lower insurance premiums. And, there is no regulation of rates to protect against insurers overcharging for bare-bones coverage.

Supporters argue that allowing insurers to bypass current laws will reduce the numbers of the uninsured by providing more affordable health insurance coverage. That's a laudable goal considering that more than 4 million Texans are uninsured. But these new "choices" are tailored for the healthy and wealthy, and are not likely to help typical uninsured Texans with modest incomes or pre-existing conditions.

Mandates are not the major insurance cost-drivers. Numerous studies over the past decade have estimated that collectively, mandated benefits account for less than 8 percent of the cost of premiums. And, the Texas Department of Insurance is now in the middle of assessing the actual cost of mandated benefits, using premium and claim data from Texas insurers. We should wait for those results before throwing mandates out.

Hospital care, prescription drugs are culprits

The real cost drivers are hospital care and prescription drugs. Even though these items are not typically on the hit list of the anti-mandates crowd, they could be subject to severe limitations under these "design your own" plans. When a catastrophic illness occurs, consumers will incur huge out-of-pocket costs. Health care providers will have uncertainty about what is covered and may begin demanding payment up front from their patients.

These benefits required by law help consumers. They guarantee that coverage is comprehensive and can positively impact the long-term costs in our health care system. Insurance coverage used to be linked to a stay in the hospital, the most expensive setting for health care. Gradually, new laws were added to catch disease and treat conditions early and to cover services delivered by an array of less costly professionals.

If SB 541 passes, more Texans will be underinsured - insured, but not for the care they need. Anyone at risk of spending more than 10 percent of their income on health care bills is, in our opinion, underinsured. Under so-called consumer driven plans, many people will put off needed care because they cannot afford the deductibles or the services not covered, leading to more expensive health care needs later.

Consumers Union supports the concept of spreading the risk of health care coverage among the healthy and sick, young and old. SB541's consumer driven plans fragment our risk pool and pull us further away from achieving our goal of access to high quality and affordable health care for all.

Lisa McGiffert is a senior policy analyst with the Southwest Regional Office of Consumers Union, publisher of Consumer Reports.