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200,000 may need to get more insurance

State healthcare law sets higher minimums

More than 200,000 people with health insurance would have to buy additional coverage to meet proposed minimum standards under the state's new health insurance law, according to a count completed by insurers yesterday.

Most of the individuals do not have coverage for prescription drugs or have drug coverage that is more restrictive than the minimum proposed by the state board implementing the law. The Commonwealth Health Insurance Connector board is scheduled to vote on the standards in March. Individuals would face a fine of about $200 next year and more in future years, if they do not have insurance that meets the standards.

"It's very troubling," said Richard Lord, president of Associated Industries of Massachusetts and a member of the Connector board. "The new law was about expanding access for people without any health insurance. I don't think we should be forcing people who do have some coverage to spend more."

The number of residents whose insurance would not meet the minimum standards is more than four times the estimate made by the board's staff earlier this month before the board altered the proposed standards. And the new number includes only those covered by the five largest Massachusetts insurers. It does not include tens of thousands more who have policies that set dollar limits on coverage, policies that the board also said were inadequate.

The minimum standards are still very much in flux. The board postponed a final decision last week because of concern about the cost of the basic plans. Many of the initial bids from insurers who hope to offer the plans carried premiums that the board considered unaffordable. Based on bids from insurers, the board estimated that a rough average premium would total $380 a month, far above the $200 cited by Governor Mitt Romney, before the health law was passed. The board added more requirements and then asked insurers to submit new bids with lower price tags.

Under the law, adults must obtain coverage that meets the minimum standards by July 1 or pay a penalty, unless they get a waiver by proving they can't afford insurance. The first-year penalty, a loss of the personal tax exemption, wouldn't kick in until after people file their 2007 taxes.

The proposed standards would require insurance plans to provide "reasonably comprehensive coverage," including primary care, emergency services, hospitalization benefits, mental health services, and prescription drugs. The proposed standards would limit annual out-of-pocket expenses to $5,000 for an individual and $10,000 for a family and hold deductibles to no higher than $2,000 per individual and $4,000 per family. The board also proposed that the plans cover generic drugs and three medical visits per individual before the deductible kicks in. Insurers would not be allowed to set limits on coverage per sickness, year, or lifetime, nor could they set a dollar maximum for any medical service.

Jon Kingsdale, executive director of the Connector, said the new estimate of underinsured individuals would be useful when the board revisits the issue of minimum standards.

Another board member, Jonathan Gruber, said: "It's a hard issue. There's a trade-off between making sure we have real coverage and minimizing disruption to the market."

Gruber, an MIT economics professor, said he was pleased with the board's proposal on drug coverage. But "we're very far away from finalizing this," he added. "My mind is still open."

The figures were compiled by the Massachusetts Association of Health Plans, based on a survey of five Massachusetts insurers, who control about 90 percent of the insurance market, according to the association: Blue Cross Blue Shield, Harvard Pilgrim Health Care, Fallon Community Health Plan, Health New England, and Tufts Health Plan. The survey focused on drug coverage and on plans with health savings accounts.

Federal tax rules governing health savings accounts set limits on out-of-pocket expenses and deductibles that are different from those suggested by the Connector, the association said.

The numbers do not include individuals insured by national companies such as United HealthCare Insurance Co., Aetna, and CIGNA or by other companies that offer policies with limits per sickness or per hospital visit.

"We think this is taking healthcare reform backwards," said Dr. Marylou Buyse, president of the association. "These are products that people have had for years. People who buy them think they're good plans."

She likened the board's proposed minimum requirements to "forcing everybody to buy a Cadillac. There are a lot of people who don't pay for high-benefit plans. They don't want them, and they don't want to pay for them."

Lord said he was also worried that the proposed standards might lead businesses to drop insurance coverage, rather than offer their employees more extensive and expensive plans.

Alice Dembner can be reached at Dembner@globe.com.

(Correction: Because of an editing error, a Page One headline yesterday incorrectly said that the state's new health insurance law has set higher minimum standards for insurance coverage. The Commonwealth Health Insurance Connector board is considering higher minimums but has not voted on them.)

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