Community rating - an approach that works.

Opponents of community rating insurance systems have often argued that, when insurers are forced to accept everyone and to charge one price for all subscribers (the community rate), those who are young and healthy unfairly subsidize the health care of those who are older and more likely to require medical care. This perspective contends that community rating increases premiums for young people who cannot afford to pay higher insurance rates.

Community rating supporters assert that many health insurance companies use methods such as "redlining" or "cherry-picking" in order to insure primarily healthy, low utilizing subscribers while avoiding covering those individuals or groups who are more likely to require health care resources. Furthermore, age rating and experience rating can be viewed as discriminatory practices that make health insurance unaffordable and unavailable to growing numbers of individuals. Although a small business might be able to afford insurance for a few years under experience rating, if it should experience one or two catastrophic illnesses in the insured group, health insurance could rapidly become unaffordable in future years.

Although some may believe that community rating requires the healthy to subsidize the sick, the spreading of expenses over a large number of people is one of the fundamental principles of insurance.

While community rating is not a widespread practice throughout the United States, the health care system of Rochester, New York, has had a positive experience with this insurance methodology as a public policy and business practice. Although community rating alone is not the only reason for this success, it has certainly played a major role in keeping health care insurance affordable and accessible for most individuals living in the area.

Over 90 percent of all health insurance policies issued in the Rochester area are community rated. This means that small businesses and individuals alike can purchase the same level of insurance coverage as the largest corporations for the same premium price. Furthermore, insurance is available without medical underwriting during year-round open enrollment; no one is denied coverage or charged a higher price because of age, occupation, medical history, or employer's group experience.

As a result of community rating, "job lock" is not an issue in the Rochester area; community rating allows an individual with a medical condition to change jobs or insurance policies without fear of losing coverage.

How well has Rochester's community-rated health care system worked? The proof is in the numbers. The cost of health insurance premiums in the Rochester area in 1991 averaged less than $2,400 per employee. The national average for the U.S. at that time was nearly $3,600 per employee, and New York had an average cost of more than $4,300 per employee. Insurance rate increases in the Rochester area were less than half the national average from 1980 through 1991.

Access appears to be significantly greater under this system. A study conducted by Louis Harris and Associates found the uninsured rate in the Rochester area to be 6 percent, compared with a national uninsured rate of 14 percent. Beyond this, customer satisfaction remains high. Blue Cross and Blue Shield of the Rochester Area, with a market share of more than 70 percent, has found that both national and local surveys have demonstrated that greater than 90 percent of its subscribers in the Rochester area are satisfied or very satisfied with their health insurance.

Rochester has not maintained its commitment to community rating by accident. It has been a result of the leadership of the local business community and the cooperative spirit that exists among Rochester-area businesses, hospitals, physicians, insurers, and health planners. The community has sponsored studies that have shown that, if Rochester were to abandon community rating, there would be a significant increase in health care costs for the entire community. If experience rating were to replace community rating, health insurance would become unaffordable for high-risk groups, individuals, and many small businesses. This, in turn, would increase the rolls of the uninsured. With more people uninsured, providers and hospitals would experience increased bad debt, which would then be passed on to the community through higher rates. Thus, the general consensus has been that community rating benefits everyone in the community.

Experience rating is clearly a gamble, especially for small group employers. It does not take much for a healthy, low-cost employer to become a high-risk, high-cost group. For small groups and individuals in Rochester, community rating has been a guarantee that health insurance cannot be canceled or priced beyond reach because of either a perceived risk or a catastrophic medical claim. Large employers in Rochester see community rating as their contribution to the community in keeping the cost of health insurance and health care affordable for everyone.

Is community rating the panacea that we seek in solving our health care crisis? Hardly. However, it is one insurance methodology that might play an important role in a comprehensive approach in solving the problems with our present health care financing and delivery system. Whether the approach in Rochester can work for the rest of our country is worthy of further consideration.

How our current system works and what changes need to be made are the subjects of intense scrutiny by policy makers today. One of the primary areas of concern with our present health care system is its accessibility to the average American, in terms of both price and ability to obtain insurance. With an estimated 37 million Americans without health care insurance, and countless others severely underinsured, this issue will lie at the core of any health care reform that results from the current debate. One possible approach to the uninsured problem that might alleviate the situation is community rating. This column is produced for the journal by the College's Society on Insurance. Norman J. Schroeder II, MD, MBA, Chair of the Society, serves as editor for the column.

Joseph a. Stankaitis, MD, MPH, was Medical Director, Blue Choice, Blue Cross and Blue Shield of the Rochester Area, Rochester, N.Y., at the time this article was written. He currently is Vice President for Physician Profiling, HealthChex, Fairport, N.Y.