In all but a handful of states, if you have a pre-existing medical condition, you’re going to have a hard time buying individual insurance. You might get turned down completely, or be charged very high premiums and probably also have to wait as long as a year (paying those very high premiums the whole time) before the health plan covers your condition’s treatment.
So it’s no surprise that one of the most popular components of the Congressional health-reform bills is the part that says insurance companies would have to accept all comers regardless of pre-existing conditions. So popular, in fact, that some politicians and pundits have suggested that we should just ban pre-existing condition exclusions and forget about the rest of the legislation.
Would that work?
Probably not, say insurance experts we consulted.
"Think about it from the insurer’s perspective," said Thomas Buchmueller, professor of risk management and insurance at the University of Michigan. "If somebody says you have to cover everybody from day one, well, that creates an incentive for consumers to wait until they’re sick or pregnant to buy insurance. That’s like buying homeowner’s insurance after your house burns down. The plan has to collect enough money to pay everyone’s health care bills, and if they are all sick, you have to collect a lot of money."
The logical solution, then, is another component of the reform legislation—the individual mandate that says everyone has to have health insurance or pay a fine. That way, the risk pool includes healthy people whose premiums can subsidize the care of the sick. It’s the underlying premise of all types of insurance: spreading the cost of big-ticket catastrophes across a large pool of people.
But there’s a problem with that when it comes to health care. In the U.S., we spend more than $7,000 a year on health care for every man, woman, and child. "Even if you had every person in America in the risk pool, a family of four would have to pay $28,000 for health care," said Karen Pollitz, an insurance expert at the Georgetown University Health Policy Institute. "That’s why you’ll never expand coverage without subsidies."
You can see where all this is headed. Banning pre-existing conditions won’t work without making sure the risk pool includes healthy people, and you can’t do that without helping lower-income families afford the premiums. And before you know it, you’ve ended up with the health-care bills now stalled in Congress.
—Nancy Metcalf, Senior Program Editor