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"Affordability Waivers: Why They Matter" by Bruce Bullen

This week the Connector Board will address an issue that is the linchpin of the Massachusetts health reform effort, namely how to determine who should be exempt from the individual mandate that requires everyone to purchase health insurance.
Deliberations will focus on the criteria for deciding whether or not Connector products are affordable given individual economic circumstances. The challenge for the Connector will be balancing the need to recognize individual economic hardship against the need to ensure that the health reform risk pool remains sound. This is a delicate balance, because the viability of the health reform program itself is at stake.

If too many uninsured are exempt from the mandate, we will have more uninsured persons than intended, and product prices will go up for those who actually purchase. This is because we know that those who apply for waivers will tend to be young and healthy. Those who need the insurance are the ones most likely to buy it. While it is still too early to draw definitive conclusions, it appears that this is already starting to happen in the CommwealthCare program. If this trend continues and also carries over to the unsubsidized market, the insured population will be more expensive than projected, and prices for coverage will rise. Higher prices will only add to the numbers of uninsured, as more and more affordability waivers are granted.
Fortunately, the need for waivers at the outset should be relatively low. A recent study by MIT economist and Connector Board member Jonathan Gruber found that most individuals earning less than 300% of the poverty level can afford Commonwealth Care’s subsidized premiums and most individuals earning more can afford the minimum creditable coverage plans that will be offered through the Connector.
While most individuals can afford coverage, there will be instances of clear economic hardship that must be addressed. This should be done on a case-by-case basis and, to that end, Chapter 58 requires the Connector to have an appeal process. There will also be tremendous pressure on the Connector to adopt automatic or broad-based waiver policies based on income. If adopted, these policies will surely cause the risk pool to deteriorate. The Connector must balance the long-term viability of the program and its benefits against well-intentioned but self-defeating attempts to exclude large segments of the uninsured population.
The integrity of the individual mandate is crucial to the success of health reform. Without it, we will perpetuate the current problem of a system that allows those who are healthy to remain uninsured while ignoring the fact that those who are not healthy are obligated to purchase insurance. The modest penalty for non-compliance in the first year will make it a challenge to convince the healthy to purchase coverage. Granting broad-based exemptions would make it next to impossible.
The Connector Board needs to establish a fair and just exceptions policy based on economic hardship. The policy adopted should let health reform work and not create a spiral of increasing affordability problems.

Bruce Bullen is COO of Harvard Pilgrim Health Care

This program aired on April 9, 2007. The audio for this program is not available.

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