Ignagni: Beware Unintended Consequences

By Brian Friel  

Karen Ignagni

President, America's Health Insurance Plans

NJ: Since the legislation passed, there has still been a lot of anti-insurance-company villainization. Have you talked with the administration about working together?

Ignagni: We have, in fact, talked with different folks about what we in the industry can do, because we will be the implementers of this legislation. That is going to be a very serious and significant undertaking for us. On the villainization, there was a decision made last July to find a villain and run against them. That continues today. What we're going to do is focus on what the working men and women of our industry can do to make sure that the people that have coverage right now aren't disrupted and the people coming into the system have the service they expect to have.

NJ: A lot of Republicans are talking about a campaign of repealing and replacing the legislation. Is AHIP going to be part of that effort?

Ignagni: We're focused on the issues that we have identified that need to be fixed right now and the issues with respect to the implementation questions.

NJ: Are there any lessons you've learned from this effort in terms of the lobbying strategy that AHIP pursued?

Ignagni: The primary lesson is that Congress has a reluctance to confront costs. I think that that is an issue that members of Congress are going to have to go back to. There are a number of changes that will go into effect starting next year, but we're still in a voluntary market. Embedded in the legislation, as you know, is doing away with lifetime limits, and the secretary will develop regulations about annual limits and no pre-existing conditions for children. Those are benefits that individuals want. At the same time, this is a voluntary market, and we already see a number of people in this bad economic situation the country is in drop individual coverage, leaving in coverage the people who are older and sicker. We're very concerned about people making the decision that they'll continue to drop coverage because they can't afford it.

NJ: So is it unavoidable premiums will go up for people?

Ignagni: Any increases in costs in the individual market could have unintended consequences. So it's going to be very, very important for members of Congress to continue to focus on what can be done to bring overall health care costs under control, because that could help mitigate that situation.

NJ: So higher premiums and more uninsured are unintended consequences --

Ignagni: It's a potential.

NJ: Are there other unintended or short-term consequences that people maybe haven't thought about?

Ignagni: I think that the largest, perhaps, unintended consequence is that I think that a number of the people who have coverage today, in listening to the debate, think their costs are going to be brought under control, and Congress really took a pass on that. There are a number of very important demonstrations and programs and experiments that will be started, but it's not nearly as aggressive as necessary to meet the scale and the scope of the cost problem we have nationwide.

NJ: Should the industry have argued more forcefully in the public sphere about problems with the legislation, or was it the right thing to work with the administration and Congress?

Ignagni: From our members' perspective, they felt they had an obligation to play a leadership role in suggesting the changes that were necessary in terms of health reform. At the same time, they believed that it was important for Congress to do its part to tread into this politically difficult area of cost containment, which Congress over the last hundred years has never been successful in doing, to make sure that what was ultimately enacted would be sustainable. As we have more experience as a country with the impact of the provisions that are embedded in the legislation, more of that will become apparent.

NJ: When you've talked about the insurance industry being only 4 percent of health care costs, and in the fall when you released the Pricewaterhouse study on premiums, the response was that's just the insurance industry opposing reform.

Ignagni: That's head-in-the-sand thinking because we see the actuarial analyses associated with each of these areas. Now that we have a bill passed, people will begin to see the impact of these provisions that we have been talking about. It's a no-brainer to get the import of what happens when you add to the costs of coverage. By adding taxes, it adds to the cost of coverage. It's very simple to do the analysis of how much that adds to the cost of coverage.

We have over 40 states now that have rating procedures that are very different than the procedures that are embedded in this legislation. The procedures that are embedded in this legislation mean that we take ratios of 5:1 in most states, which is the relationship between what older workers pay to younger workers -- we immediately contract that in this legislation to 3:1. That will occur overnight from 2013 to 2014 when everything goes into effect. So young families will immediately see in more than 40 states a very significant increase. Then the question is whether or not the mandate penalty is strong enough for them to feel that they want to participate in the system. If the penalty is $95 or 0.5 percent of income, whichever is higher in that first year, for example, they may just decide to stay out.

NJ: There's a natural tendency on the Hill after legislation passes for members to want to move on and not look at health care again for a while. When will they have to?

Ignagni: The first thing that happens this year for next year is that in the individual market there are changes made that will increase the costs of benefits. Then the question is whether or not individuals themselves -- because we still have a voluntary market in 2011 and 2012 and 2013 -- whether they decide they want to pay those additional costs. If they decide they don't want to pay those additional costs, then you have more people uninsured. That's the ultimate unintended consequence.