Last week’s passage of key state health reform implementation legislation mostly focused on the bills–SB900 and AB1602–setting up the California exchange, the new purchasing pool where many Californians–especially those not getting coverage through large employers–will be getting their coverage. California may well be the first in the country to pass a law, post-reform, to create an exchange, in accordance with the new federal law.
But health reform’s transformation of how individuals buy coverage should not solely be within the exchange. Many of the consumer protections–from prohibiting denials for pre-existing conditions to setting standard benefits–need to be in the overall market for individuals and small businesses who purchase coverage. In this vein, SB890(Alquist/Steinberg) address the structural flaws in the overall individual market.
Right now, buying coverage as an individual is complex and confusing: it is impossible to know what a plan covers and doesn’t; it is impossible to make apples-to-apples comparisons between plans.
This bill, SB890, implements many of health reform’s consumer protections early, from a strong medical loss ratio so premium dollars go to patient care rather than administration and profit, to basic benefit standards, including maternity coverage.
By standardizing the benefits in the insurance market, consumers can make real apples-to-apples comparisons, forcing insurers to compete on price and quality rather than avoiding sick people. It ensures people know the kind of coverage they are buying, and what that plan actually covers. It prevents consumers from finding out too late that what their ailment isn’t covered. It prevents the worst forms of “junk” insurance, where patients are paying premiums and finding little value in return.
This reform has broad support, from consumer groups like Health Access California, but also including the Medical Association, Hospital Association, and insurers like Kaiser Permanente who believe they can compete under the new rules of reform.
How is this different from bills from previous years, like SB1522 (Steinberg) or the still pending AB786 (Jones)? It builds on the experience in Massachusetts and with Medi-Gap: it has ten specific products, five HMO and five PPO, rather than broad categories. Why? To prevent insurers from using the design of products to select healthier consumers and to discourage consumers with chronic conditions. Think about two similar products, one with generic only drug coverage and one with comprehensive drug coverage. Guess which one the healthy people buy? And which one people with asthma, diabetes, heart disease, etc buy?
Despite what opponents will say, standardizing the benefits actually enables choice. Focus groups and other research shows that too many choices, especially that are complex and poorly understood like the existing marketplace, is paralyzing for the consumer. There’s no basis for choice, especially when there are so many variables that are different, and even the terminology is different with distinct definitions.
Standardizing the benefits allows consumers to make meaninful comparisons and choices between health plans from different companies–from Anthem Blue Cross to Aetna to Kaiser–and make a real choice, based on price and quality.
Health reform helps move away from a world where insurers compete based on avoiding taking care of sick people. What SB890 does is take a step to help us closer to the world where they compete based on providing the best value, lowering costs, and encouraging health and prevention.