Want A Reason To Strike Down The Whole Health Care Law? Look At Washington State
by Andy Adams on April 9, 2012 at 1:35 PM
Massachusetts has been the prime example for the pitfalls of health care reform mandates. However, Washington State provides the perfect example of what we might expect if the Supreme Court strikes down the mandate but leaves the rest of the law in place. The original reform was passed in 1993 based on the Clinton Health Care plan. It was mostly repealed by the 1994 Republican takeover of the Washington State congress. However, the Republicans did not have the political will to repeal the bar on preexisting conditions (guaranteed issue) or the community rating rules (prohibiting premium pricing based on the health of the applicants). Avik Roy describes what happened next:
As Carol Ostrom describes in the Seattle Times, Washington State residents quickly learned how to game the system, dropping in and out of insurance plans when they needed to pay medical bills, kind of like “buying fire insurance after your house is on fire.”
"What happened next is starkly summarized in a 1995 letter sent to Premera Blue Cross by a woman in Eastern Washington.
A few months before she gave birth that year, the woman bought an individual policy from Premera. As soon as the insurer paid her hospital expenses, the woman canceled the policy, telling Premera “we will do business with you again when we are pregnant.”
True to her word, in 1996, she bought insurance, Premera said, once again canceling after the insurer paid for the delivery of her next child.
Altogether, she paid in $1,807 in premiums. Premera paid out $7,024.68 in medical bills.
You don’t have to be a business genius to recognize the problem with those numbers when multiplied by thousands of customers.
Claims went up. Premiums rose. Pretty soon only sick people thought insurance was worth the cost. Premiums rose even more.
Healthy people, like the Eastern Washington woman, waited until they needed insurance to buy it. At the time, Gov. Gary Locke likened it to buying fire insurance after your house is on fire."
As Peter Suderman described in a 2009 op-ed, the impact of these changes on the insurance market was swift. Some premiums increased by as much as 78 percent in the first three years after the law was enacted. Enrollment in the individual health-insurance market dropped by 25 percent. Within four years, no major insurer in the state was offering maternity coverage. More than 30 insurers left the state altogether. Premera Blue Cross, who insured the pregnant woman in the Seattle Times article, lost $120 million in the state before deciding, in 1998, to pack it up and drop out of the market.
Finally, in 1999, under Gov. Gary Locke (D.), the state government started to pick up the pieces. The state repealed the insurance commissioner’s authority to approve premium rate increases with a guaranteed medical-loss ratio of 72 percent. They kept the ban on pre-existing condition exclusions, but allowed insurers to wait nine months before picking up coverage.
Let's hope the SCOTUS is wise enough to know it cannot pick and choose which parts of Obamacare to keep and which to preserve.