TCS Daily

The Barriers Don't Exist

By Radley Balko - June 4, 2004 12:00 AM

Editor's note: This is Radley Balko's third installment reporting from the obesity summit in Williamsburg, Va. Read his first two installments here (installment 1) and here (installment 2).

When I was originally asked to write the designated dissent piece for TIME's special issue on obesity, I went back and forth with a fact-checker over my assertion that state and federal governments prevented health insurers from tying health insurance premiums to risk -- the same way car and life insurers do. Charging everyone within a group plan the same amount for health insurance removes an important financial incentive to stay healthy, and forces fit people to subsidize health care for the not-so-fit. Allowing folks who keep the weight off and the blood pressure and cholesterol down to pay less for health insurance (and allowing health insurers to provide it to them) would also strike a needed blow for personal responsibility in the obesity debate.

The problem is that though several health care policy experts told me they were certain health insurers were barred from such "medical underwriting," no one could say exactly why. In fact, I talked to several health insurance companies themselves, and none could point to any specific law, regulation, or case law laying out the prohibition. I even called tort king John Banzhaf, who -- believe it or not -- is actually on record supporting lower premiums for fit health care consumes, though only as it applies to obesity and blood pressure.

Banzhaf told me the bar stems from a mid-1980s ruling by the Department of Health and Human Services at the request of health insurance commissioners. The commissioners had asked HHS to allow higher premiums for smokers, overweight and obese people, and those who don't take basic steps to reduce high blood pressure. HHS, Banzhaf said, okayed the smoking provisions, but balked on obesity and blood pressure.

The problem is that I couldn't find any independent confirmation of Banzhaf's explanation.

That in mind, I sought out and got a few minutes to speak with HHS Secretary Tommy Thompson after he spoke to the Obesity Summit on Wednesday evening.

"Do you know why it is that health insurers can't charge lower premiums to reward people who stay fit?" I asked.

"No," Thompson said. "I absolutely support the idea. I think they should do it."

"There's no law preventing it?"

"Not that I'm aware of. We'd heard there might be something preventing it when I first took office. But I had my counsel's office look into it, and we don't see any reason why they can't do it. And we think they should."

On Thursday, there was a panel here in Williamsburg called "The Shift Toward Prevention." One of the panelists was Dr. William Popik, the Chief Medical Officer for Aetna, Inc. Aetna has just launched an interesting new anti-obesity program for the people it insures, featuring counseling and nutrition advice. On the panel, however, Popik mentioned that the health insurance industry may, someday, give discounts on group plans to corporations that adopt and implement fitness and anti-obesity programs, but that "we're a couple of years away from that." He explained that because America is still primarily a third-party-pays system, we won't be ready for carrot-and-stick health insurance until we move more toward a consumer-driven system, where we as individuals begin to see just how much health care costs.

After the panel, I asked Popik why Aetna and other insurers hadn't even considered moving beyond corporate incentives, and moved toward individual incentives. That is, charging individuals different premiums -- even within group plans -- based on risk.

"Because it's illegal," he said.

I told him about my conversation with Secretary Thompson.

"That's very interesting," he said. "Our lawyers have told us it's not legal. If HHS says otherwise, maybe our people need to call the people at HHS."

There seems to be a serious disconnect between actual health care policy and the advice the health insurers are getting from their legal teams.

After my conversation with Popike, I called the general counsel's office at HHS. Deputy General Counsel Paula Stannard walked me through every possible federal barrier to medical underwriting, and explained why they don't apply.

In fact, in 2001 the Depts. of HHS, Labor and the Treasury (in predictable federal bureaucratic confusion, the three agencies share jurisdiction over the issue) proposed a regulation (66 Fed. Reg. 1421) insisting that the convoluted HIPAA (Health Insurance Portability and Accountability Act) regulations be interpreted to allow health insurance companies to underwrite risks.

In fact, Stannard said that Title III of the Americans with Disabilities Act (ADA), the section addressing public accommodations, explicitly allows health insurers to make distinctions in writing premiums, exempting them from the ADA's purview. And an Equal Employment Opportunity Council (EEOC) interim guidance issued in 1993 says the ADA isn't applicable to employer-provided health insurance.

Stannard added that despite what you hear about outrageous ADA lawsuits, the relevant case law has not included obesity among ADA-protected disabilities.

So HHS, the EEOC, the Departments of Labor and Treasury, and the courts have all said our health insurers should be free to assign risk in the same manner car and life insurers do.

Yet the health insurers, for whatever reason, still seem to think they can't.

There of course may be barriers at the state level. But leadership at the federal level (I'd recommend via the bully pulpit, not through superseding federal law or regulation) might convince those states that would bar medical underwriting to change their minds. Another way around state barriers would be to introduce federal legislation allowing residents of any individual state to purchase health insurance in a state with a regulatory scheme more to their liking.

The important point here is that it's time we tailored health insurance to health risk, just as we do with every other variety of insurance. Health insurance companies have been reluctant to do so due to perceived barriers from the federal government. Those barriers don't exist.

We can make strides toward better health by allowing the free market to incentivize the kind of lifestyle that brings it.


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