(“HR”) executives, for example, stood to lose much accumulated power,
and possibly their jobs, if there was a transition away from EBHI. In the
early postwar years, employers’ provision of health insurance had been
simpler, with most employers choosing Blue Cross/Blue Shield (“BC/BS”)
coverage. Unlike “the Blues,” which were limited by their enabling statutes,
for-profit insurers (“the commercials”) could “experience-rate” their group
business.35 That is, they could assess the risk exposure of a given company
(or group of companies, such as an industry sector) and offer to that
company or group a lower premium reflecting its better health risk and
healthcare cost experience.36 The commercials sought out, aggressively
marketed to, and, with their lower premiums, successfully wooed away
companies with better risk exposure and cost statistics, leaving BC/BS
plans’ community-rated risk pools with poorer risks and higher costs.37 As
more and more companies with favorable risk characteristics migrated away
from the community-rated pools, the quality of those pools decreased and
their premiums increased, prompting a further migration. Significantly
disadvantaged by the competition from experience-rated group insurance,
the Blues campaigned for and eventually won, on a state-by-state basis, the
right to experience-rate their group insurance business.38 As community
rating gave way to experience rating across the nation, the era of early
idealism in private insurance had ended. The natural tendency for
companies (and people generally) to pursue their own self-interest at the
expense of the interest of the larger collective is, on a broader scale, as good
an explanation as one can give for our country’s long-term inability to
35. CONSUMERS UNION, BLUE CROSS BLUE SHIELD A HISTORICAL COMPILATION 5-6
(2007), available at http://consumersunion.org/wp-content/uploads/2013/03/yourhealthdollar
.org_blue-cross-history-compilation.pdf (citing ROBERT CUNNINGHAM III AND ROBERT M.
CUNNINGHAM JR., THE BLUES: HISTORY OF THE BLUE CROSS AND BLUE SHIELD S YSTEM, (1997),
and defining experience rating as “the practice of setting insurance premiums on the basis of
the actual loss experience of a given employee group,” as distinct from community rating,
which is the “concept of creating rates for a large pool of subscribers”).
36. See Jessica L. Roberts, “Healthism”: A Critique of the Antidiscrimination Approach
to Health Insurance and Health-Care Reform, 2012 U. ILL. L. REV. 1159, 1168-69 (2012)
(defining experience rating as examining “the actual claims histories of the individual
groups” and then using that information to calculate future risk and make a premium
adjustment based on the claims history).
37. See id. at 1170 (discussing how group and individual markets are disadvantaged by
health insurance practices that cause individuals with chronic health conditions to increase
their out-of-pocket expenses by 70 percent). See also NYS Health Maint. Org. Conference.
v. Curiale, 64 F.3d 794, 796 (2d Cir. 1995) (stating that the disintegration of nonprofit
insurance organizations is due to the experience rating utilized by commercial insurers to
price insurance premiums, leaving nonprofit insurers with the sickest members of the
population and very few healthy subscribers to offset the costs).
38. Katherine Pratt, Funding Health Care with an Employer Mandate: Efficiency and
Equity Concerns, 39 ST. LOUIS U. L.J. 155, 205 (1994).