Enzi’s bill – the Risk Selection Act of 2006

Bob Laszewski is one of the most insightful observers of health policy matters inside the Beltway, and his recent comments on Enzi’s proposed AHP legislation continue that record. Bob has noted that the bill now before Congress is a far cry from the original AHP legislation, and has potentially far-reaching consequences for the health insurance industry.
AHPs were health insurance plans set up by trade associations who used them to generate fat commissions. Back in the eighties and early nineties, trade association members signed up for these programs in large numbers. While they did not have much in the way of managed care or “cost containment”, many AHP type programs thrived even after the initial entry of managed care programs into the market, on the basis of their ability to select the best risks and price accordingly.
As HMOs and health plans became more sophisticated, the AHPs’ advantages in these areas declined significantly, and their cost management capabilities were overmatched by those of the managed care experts in HMOs and larger health plans. Faced with very tough competition, AHPs all but died out in the late nineties.
For those that can afford them, small employers’ helath insurance costs are significantly higher than their larger competitors’. This additional cost is in large part due to higher administrative expenses; fewer premium dollars go to pay health care costs because it costs more on a per-person basis to bill premiums, issue cards, set up computer systems, track elgibility, etc. This differential has led Sen. Enzi, at the behest of the Chamber of Commerce, NFIB and others, to try to come up with a way to make insurance “affordable” for the small employer.
Enter the Enzi bill, titled, with much editorial license the “Health Insurance Marketplace Modernization and Affordability Act”. A product of the “sausage-making” that is our legislative process, the bill seeks to eliminate most state mandates, thereby allowing both insurance companies and associations to offer stripped-down plans.
While that sounds great, the likely effect of the bill, if it is passed, will be to allow insurers to do a much more effective job of risk selection, thereby avoiding the less healthy (i.e. more costly) people. I’m not blaming the insurance companies; insurance is about avoiding avoidable risk.
What Enzi’s bill will not do is make health care more affordable for small businesses. It will certainly make insurance more affordable for some businesses – those with healthier employees and lower risks. The rest will be even worse off than they are today.
What does this mean for you?
More health policy by folks without any health policy expertise equals no solutions to our health care cost problems.