Prepare for inevitable underwriting challenges

October 1, 2007

There are as many as 75 million Americans who are either uninsured or underinsured, and the rate will continue to grow. Access to healthcare for all Americans was a hot topic during the early years of the Clinton administration, and has resurfaced recently in anticipation of the 2008 presidential election.

As our economy shifts to services industries, healthcare costs have begun to dramatically affect corporate bottom lines. No state or federal initiatives proposed in recent years, such as consumer-driven healthcare options, offer long-term solutions specifically for rising costs.

With healthcare costs being discussed so frequently, the topic is likely to take center stage during the 2008 election. The debates that will ensue will likely influence changes to our current system, and the underwriters of health insurance will see significant modifications in the way they are regulated.

The piecemeal efforts to narrow the gap of uninsured and underinsured Americans have not been successful. These efforts have included the expansion of Medicaid, Medicare reform, the Children's Health Insurance Program, and consumer-driven plans.

If universal healthcare is ever fully pursued, the most fundamental question is whether it will be financed and administered by a single public source or by a combination of private and public sources. A single-payer system would eliminate or dramatically reduce the role of the current private health insurance industry; however, a multipayer system would continue the role of private insurers and increase the population base to be insured.

The perceived trade-off between the two systems is that the single-payer system would reduce administrative costs; whereas, a multipayer system would enable greater choice.

Democratic candidate John Edwards appears to be the only candidate offering a comprehensive plan. His plan would retain in part the current employer-financed system of coverage, but would allow employers, as well as individuals, to buy coverage from vehicles he calls "health markets," which are similar to state risk pools. Senator Edwards suggests that this eventually may morph into a single-payer system. The Edwards plan also would mandate that businesses either cover or contribute to the cost of coverage purchased through the health markets.

GUARANTEED ISSUE

Senator Hillary Clinton has outlined several principles that she wants to include in a national healthcare plan. One of the main tenets of her plan would be to limit an insurer's ability to vary premium rates based on age or health status. She would also require all plans to be guaranteed issue, as well as guaranteed renewal. In her view, private insurers would need to demonstrate that marketing and administrative expenses were reasonable in relationship to the cost of healthcare services.

On the Republican side, the Bush administration and congressional Republicans prefer to stick with the current system of tax incentives as the means for confronting rising health costs. Former Massachusetts Governor Mitt Romney is the only Republican candidate who can demonstrate any particular expertise in this area.

Barry Senterfitt is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP in the firm's Austin, Texas, office.

This column is written for informational purposes only and should not be construed as legal advice.