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May 15, 2013
Guest Opinion: Legislature must close health insurance loophole

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(May 15 -- By Janet Widmann, Special to The Bee)

With the main provisions of the Affordable Care Act set to take effect Jan. 1, we are about to transform the way people buy health insurance. At the heart of the reforms is a new social contract: healthy or not, everyone has the right to buy coverage and pay the same rate for it. With a strong majority of the public and political leaders in both parties supporting this concept, we have broad agreement that it is the right thing to do.

But two months ago, federal regulators opened a seemingly small loophole that violates this principle by allowing health insurance rates to be higher for less healthy people for almost a full year after the health reform law takes effect. This would be a blow not only to those with pre-existing conditions, but also to California's new health insurance exchange. Fortunately, legislators have the power to close the loophole in our state, but they need to act quickly.

Under new federal rules for health insurance purchased by individuals, regulators made it possible for existing policies that don't meet the new health reform requirements to stay in effect until December 2014. This means insurers would be able to extend policies that deny coverage to people with pre-existing conditions and don't provide the essential health benefits required under the new law for almost a year past the starting date for health reform.

Since these loophole policies will enroll only those who are healthy enough to obtain coverage under the current discriminatory system, policies that meet the requirements of the new law will be left to cover a disproportionate number of less healthy people. As a result, premiums for coverage offered through the insurance exchange will be significantly higher. Even insurers that have supported reform and want to see the exchange succeed will be pressured to sell the loophole policies to avoid losing healthy customers to competitors.

This loophole was created to allow people who already have coverage to keep those policies a little longer. For those healthy enough to be accepted for coverage, this is unquestionably a good deal. But it comes at the direct expense of the less healthy. Eliminating the inequality between how the healthy and less healthy are treated in insurance was one of the principal objectives of health care reform. Now, on the eve of realizing that moral objective, we shouldn't be acting to perpetuate it.

The loophole is especially unfair since the health reform law was enacted three years ago and everyone had ample notice that the rules were changing. Moreover, the law included a provision to enable those who had coverage when the law was passed to keep it. These grandfathered policies that people have maintained since the law's enactment in March of 2010 are exempt from most reforms and can be held indefinitely.

This provision was the balance that Congress struck between the interests of those who wanted to keep their existing coverage and those who have been locked out of coverage or forced to pay higher rates because of health conditions. With this new loophole, regulators have shifted the balance further in favor of the healthy and against the less healthy.

The federal law, however, gives states authority that they can use to plug the loophole. The fix is simple. Our legislature could enact a law requiring all non-grandfathered policies to comply with health reform requirements beginning Jan. 1.

California has won praise for its embrace of reform and leadership in implementing the law to its fullest extent. We need our legislators to exercise that same leadership now to guarantee that the new reforms will reaffirm the fundamental principle of equality between those who are healthy and those who are not.

Janet Widmann is executive vice president of markets for Blue Shield of California.

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