Australia's "Community Rating" system gets top marks

healthalerts.com.au article posted on:  Monday 30th March 2009

Australia’s private health insurance model, which boasts community rating as one of its key features, represents international best practice.

Community rating facilitates affordable access to private health care for all Australians. It means that everyone pays the same premium for their health insurance and health funds are prevented from discriminating against members on the basis of health status, age or claims history.

The new United States administration is working with US health funds to overhaul the existing “risk rated” system in favour of a model which resembles the Australian example.

US health funds are working on a set of proposals to make health insurance more affordable.

Health Insurers Offer to Drop 'Risk Rating'
Boston Globe
March 25, 2009

Trying to head off a proposed government insurance plan that would compete with them, health insurers yesterday offered for the first time to curb the controversial practice of charging higher premiums to people with a history of medical problems.

The offer from America's Health Insurance Plans and the Blue Cross and Blue Shield Association is a potentially significant shift in the debate about overhauling the nation's healthcare system to rein in costs and cover an estimated 48 million uninsured people.

In a letter to key senators, the two insurance industry groups said their members are willing to "phase out the practice of varying premiums based on health status in the individual market" if all Americans are required to get coverage.

"The offer here is to transition away from risk rating, which is one of the things that makes life hell for real people," said health economist Len Nichols of the New America Foundation, a public policy center. "They have never in their history offered to give up risk rating."

Insurers are trying to stop the government insurance plan, proposed by many Democrats and advocacy groups, to offer consumers another choice for affordable care and to increase competition.

"This letter demonstrates that insurance companies are open to major insurance reform, and are even willing to accept broad consumer protections," said Senator Jeff Bingaman, a moderate Democrat from New Mexico. "It represents a major shift from where the industry was in the 1990s during the last major healthcare debate."

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To try to win political support, the industry has already made a number of concessions, including offering to end the practice of denying coverage to sick people and pledging support for a national goal of restraining cost increases.

The latest offer goes beyond that.

Insurance companies now charge very high premiums to people who are trying to purchase coverage as individuals and have a history of medical problems, such as diabetes or skin cancer. Even if such a person is offered coverage, that individual is often unable to afford the high premiums. About 7 percent of Americans buy their coverage as individuals, while more than 60 percent have job-based insurance.

"This changes everything," said Karen Ignagni, president of America's Health Insurance Plans, the leading trade group. "When you have everyone in the system, and you can bring [financial] assistance to working families, then you can move away from health status rating."

The companies left themselves several outs, however. The letter said they would still charge different premiums based on such factors as age, place of residence, family size, and benefits package.

"If the goal is to make healthcare affordable, this concession does not go far enough," said Richard Kirsch, campaign manager for Health Care for America Now, a group backed by unions and that is trying to build support for sweeping healthcare changes. "It still allows insurers to charge much more if you are old."

Also, the industry did not extend to small businesses their offer to stop charging the sick higher premiums. Small employers who offer coverage can see their premiums zoom up from one year to the next, even if just one worker or family member gets seriously ill.

Ignagni said the industry is working on separate proposals for that problem.

"We are in the process of talking with small business folks across the country," she said. "We are well on the way to proposing a series of strategies that could be implemented for them."

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