QHBPs will be required to offer plans that pay 70 and 85% of the actuarially projected costs of the population. They may also offer a plan that pays 95% of the projected costs. The Commissioner can adjust premiums among plans to compensate plans that experience significant adverse selection.

Individual subscribers will make an informed choice about what plan to purchase through the healthcare exchange. Initially, people who have utilized the healthcare system at a high rate will purchase a plan providing a high level of benefits if they can afford the monthly premium. People, who are healthy or choose minimal healthcareintervention will choose the plan that has the lowest premium and lower benefits. In other words, the plans providing the highest level of benefits will naturally experience adverse selection. If the premiums become too expensive for these plans, sick people who cannot afford these premiums will have to consider plans with lower benefits and higher out-of-pocket costs. They will be between a rock and a hard place.

It appears that the House Bill will give the Commissioner the power to address the above problem. The Commissioner can adjust the premium revenues from one plan that has healthier/lower utilizing patients to another plan that is covering sicker patients. How this determination will be made is anyone’s guess. How often the Commissioner will use such power is also hard to project. If he or she is aggressive in the use of this authority, the individual decision regarding the benefit-premium tradeoff may become meaningless. Choosing a 70% benefit plan with premiums that are adjusted upward to cover the higher utilization of the people who choose the 95% plan will not make any sense. Purchasing the higher benefit plan will be the better value.

In the scenario described above, a large percentage of the population could eventually be covered by plans that virtually protect them from paying any of the costs of their utilization of healthcare services. Utilization and costs will increase as a result. The current projections for the cost of this healthcare reform could be tremendously understated.

                The Unintended Consequences of Healthcare Reform – #1
                The Unintended Consequences of Healthcare Reform – #2
                The Unintended Consequences of Healthcare Reform – #3 Part 1
                The Unintended Consequences of Healthcare Reform – #3 Part 2
                The Unintended Consequences of Healthcare Reform – #4