Making Health Insurance Portable

Published September 1, 2006

One of the great things about Health Savings Accounts (HSAs) is that they are portable–if you change jobs, you don’t necessarily have to change accounts.

However, the same can’t be said for health insurance–HSA-eligible or any other type. About 65 percent of Americans have employer-provided coverage, and when they change jobs–almost every five years, on average–they have to leave one health plan and switch to another.

Many members of Congress would like to see health insurance become more portable, and two have put legislative proposals forward to jump-start the dialogue.

Limited Choice

“I had a great HSA policy from the federal government,” recalled a lobbyist who asked not to be named, at a meeting held by the Coalition for Affordable Health Coverage (CAHC) in Washington, DC on July 14, “but my new employer’s policy and the banking services for the HSA account are not as good. I wish I would have had the option to keep the old policy and financial network.”

This is a common problem. Changing policies often means changing doctors, dentists, mental health professionals, and other providers. For some families, this is simply a paperwork irritation, but for others it can involve difficult choices.

A friend whose son has serious emotional issues has used the same child psychiatrist for years. Her new health plan does not include the physician in its provider network, so her reimbursement from the insurer is now $65 for every $175 visit; before the change, the reimbursement was “significantly more.”

“I can’t put my son’s wellbeing at risk and change [psychiatrists] every time our plan changes,” she said.

Fortunately, she has the resources to pay the difference … but not everyone does.

Job Lock

Economists disagree on how big a role health insurance plays in keeping people in jobs they would rather leave. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 aimed to address the “job lock” problem by requiring some employers to continue offering coverage to former employees for 18 months after leaving the job. One study of COBRA reported that if the worker pays 102 percent of the premium in order to continue on his group policy for 18 months, it reduced job lock by 40 to 50 percent. COBRA also benefits the worker if his family health history makes buying individual insurance difficult.

But Tom Miller, senior health economist of Congress’ Joint Economic Committee, disagrees that COBRA helps much.

“Contrary to shallow conventional wisdom, the length of job tenure has not been decreasing overall,” Miller noted. That would suggest health insurance concerns have created new barriers to job changes, and American society is not as employment-mobile as many people believe.

As the Baby Boomers prepare to retire, job lock may become even more prevalent. People in their 50s and early 60s often experience health problems and therefore may be more reluctant to make job changes that could threaten or change their coverage.

Legislative Proposals

This summer U.S. Sen. Tom Coburn (R-OK) and Rep. Mike Rogers (R-MI) introduced legislation, S. 3488 and H.R. 5475, to make health insurance more portable as employees move from job to job.

“As a practicing physician, Sen. Coburn has personal experience with the problems in our current health care system and believes strongly that changes need to be made,” Coburn’s health policy advisor, Stephanie Carlton, said at the CAHC meeting. “He is definitely not shy about putting ideas on the table in order to get the discussion rolling.”

S. 3488 addresses two issues. First, individuals who already have individual insurance policies could keep them when taking jobs with small or large companies. The employer would be allowed to contribute the actuarial equivalent of what it is providing to other employees in group insurance, without subjecting the company to “group insurance” rules. Meanwhile, the employer would receive the tax deduction for any contribution made to the employee’s individual insurance policy, and the employee would have a tax deduction for his individual policy premium payment, both of which are changes from current law. Employees currently get tax deductions for their premium payments only if they are made through an employer in a group insurance setting.

The second circumstance is when individuals with group coverage from their company that they’d like to keep want to change companies. Current law prohibits this. Coburn’s bill would allow employees to contact the insurance company providing the group plan and pay an additional fee in order to convert their group coverage to an individual policy. The law would allow the carrier to refuse the individual this option.

Small Changes

Although action on the portability provisions is unlikely this year, many stakeholders believe putting the proposal on the table is an important first step.

“Fewer American workers obtain health coverage from a single employer in today’s flexible working environment,” explained Rogers, who chairs the House Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection. His bill is narrower than Coburn’s, applying only to small employers with two to 50 employees, and would create portable conditions only for those leaving small group employers with HSA-eligible policies.

H.R. 5475 addresses the problems that guaranteed issue creates in the small group market, by allowing carriers to decline to offer coverage to a small group but requiring that when they do offer coverage, they agree to offer a portability provision to existing employees. That provision would guarantee any individual in a small group with an HSA-eligible plan who wants to leave the company would be able to convert the coverage to an individual policy.

When an individual chooses to leave a company, the carrier must offer guaranteed convertibility, and the individual’s premium cannot increase more than 150 percent.

Simple Concept

“We believe that making this change will draw more of the smaller carriers into the small group market, giving businesses more options,” explained Kelly Childress, Rogers’ legislative assistant. Carriers already in the small group market will continue to do business just as they do now under guaranteed issue, but new carriers might be drawn into the small group market because they would be allowed to decline to cover some businesses in exchange for the portability provisions for the current employees of a business they accepted, she said.

Portability is a deceptively simple concept, but altering existing insurance regulations is tricky because it could trigger unintended consequences in the market. But it is definitely a goal worth pursuing, and congressmen have signaled their intent to do so.

Laura Clay Trueman ([email protected]) is executive director of the Coalition for Affordable Health Coverage and senior director at Jefferson Government Relations.

For more information …

An abstract of “Health Insurance Portability: The Consequences of Cobra,” by Brigitte C. Madrian, is available at the Web site of the American Iatrogenic Association,