Health reform: what's insurance got to do with it? Recognizing health insurance as a separate species of insurance.

I. INTRODUCTION Health reform debates in the United States are typically conducted using the language of insurance.1 President Barack Obama described his hopes for expanding access to care as "health insurance reform."2 Both proponents and opponents of reform debated the merits of reform proposals leading to the Patient Protection and Affordable Care Act of 2010 in insurance terms.3 Yet, disagreements over the structure of reform reveal deep differences in, what proponents and opponents of reform mean by insurance and the role it should play in mediating access to health care. Scholars of insurance law are likely to describe insurance somewhat narrowly as a risk spreading device.4 Industry representatives, among others, often view conventional indemnity insurance as the norm.5 From this perspective, reforms that move too far beyond underwriting risks can be seen as undermining actuarial fairness, threatening the very idea of insurance and possibly the industry itself. 6 In contrast, most reform proponents discuss insurance as though it were simply a mechanism for financing health care: Health insurance ought to be universally available (on affordable terms, if not free), because health care ought to be universally available,7 perhaps a human right.8 From this perspective, most underwriting techniques are incompatible with the goals of reform.9 I have argued elsewhere that such conflicting conceptions of health insurance can impede agreement on a unified structure of reform.10 Here, I argue that it is possible to reconcile these conceptions if we recognize health insurance as a separate species of insurance - distinct in function, and therefore content, from conventional indemnity insurance models. Both regulation and industry practices already have moved health insurance a long way toward becoming an identifiably separate species by limiting some risk classification methods, but universal coverage requires purging or greatly circumscribing most tools of conventional insurance. In addition, health plans no longer limit coverage to fortuitous losses, as does conventional indemnity insurance; by covering preventive care, they have added a service component to pay for regular care. This is a familiar concept in social insurance systems, which are more concerned with financing care than spreading risk. The role of insurance in such systems, especially in Western European countries, offers a model for integrating insurance plans and actuarial expertise into a financing mechanism for universal access to care.11 Thus, health insurance can be, and to a large extent already is, a separate species of insurance. Little conventional insurance remains in today's health plans,12 and there is little reason to believe that conventional insurance is necessary to provide access to health care. 13 However, even our hybrid species of health insurance is not likely to be universally affordable without ensuring participation by virtually all Americans.14 II. CONVENTIONAL INSURANCE RISK CLASSIFICATIONS ARE INCOMPATIBLE WITH EXPANDED ACCESS A key goal of health reform is to give everyone access to health care. Health insurance is simply a means to that larger end: appropriate, affordable health care regardless of employment, residence, health status, age or other factors that currently inhibit access. To use insurance to pay for care, insurance must be available to everyone. Thus, as reform proposals recommended, the 2010 Act requires plans to pay for health care in ways that necessarily limit the scope of conventional insurance techniques. President Obama and members of Congress stressed that reform legislation should prohibit insurers from classifying people according to their risks in order to refuse coverage or greatly increase insurance premiums.15 The 2010 Act,16 as well as the Affordable Health Care for America Act,17 which the House of Representatives passed on November 7, 2009, and virtually all the reform bills seriously considered by Congressional Committees, prohibit insurers18 from refusing to cover preexisting medical conditions,19 refusing people coverage because of their medical history,20 dropping coverage after illness occurs,21 discriminating on the basis of health status,22 discriminating in benefits on the basis of age or disability,23 charging much higher premiums on the basis of age,24 providing less coverage for mental health and substance abuse disorder benefits than for medical conditions,25 capping the dollar amount of coverage, 2b and charging high out-of-pocket expenses. …