During the signing ceremony for the health insurance reforms approved this session, Washington’s major health insurers assured Gov. Locke that, within 60 days after the rules are written, they will be back in the market selling policies for individuals.

Whether those reforms will guarantee that private insurers can survive in the market depends on people buying and keeping insurance.

Right now, it is very difficult to buy health insurance in Washington if you are not in an employer’s group plan, on public assistance or work for government. One of the main reasons is that insurers simply quit selling individual policies after suffering hundreds of millions of dollars in losses due to the ill-fated health care “reforms” of 1993.

While the intent of the reforms was good — to quickly increase the number of people with health care coverage — the 1993 legislation inadvertently encouraged people to “game” the system.

For instance, everyone was guaranteed coverage, regardless of their health or habits. The Washington residency requirement was cut to 30 days, and the waiting period for coverage of a pre-existing condition was reduced from one year to 90 days. With those conditions met, insurers had to issue policies.

Those reforms seven years ago encouraged people to change the way they thought about insurance — from a long-term investment to simply a way to pay medical bills. Under that system, people could drop their insurance after their bills were paid, then buy it again when they needed it.

For example, the average cost for a routine pregnancy and delivery is $7,500. Under the reforms, a family expecting a baby could wait the 90 days for a pre-existing condition, buy medical insurance for six or seven months, then drop it after the baby was born, sticking the insurer with the bill — as much as $5,000 to $6,000.

Faced with this economic death spiral, the health insurers had only two options: recoup their costs by increasing health insurance premiums or stop selling the individual insurance policies that consistently lost money.

For any health insurance system to survive, healthy people must continue to pay premiums over time to cover the losses incurred by claimants. If nobody pays over the long term, there is not enough money in reserve to pay the bills.

It won’t matter who runs the system — government or private insurers — it is a matter of dollars and sense. Sense enough to understand there is no free lunch and somebody has to pay.

The reforms that Gov. Locke signed into law last month require a nine-month waiting period, which will hopefully encourage people to buy and keep their insurance. But unless people change their mindset and think of insurance as a long-term part of their budget — like the electricity bill and the telephone bill — health insurance reforms won’t work.

(Editor’s Note: Don Brunell is president of the Association of Washington Business, Washington state’s chamber of commerce. Visit AWB on the Web at www.awb.org.)
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