Health Care Reform Odds & Ends

When it comes to health care reform, to maul Dickens: It is the busiest of times. It is the calmest of times. Or as general agent Michael Traynor put it, “These are interesting times when talk of exchanges and pre-existing exclusions have bumped Paris Hilton and Lindsay Lohan from the news.”

This coming week it will be even harder on E! News and the like. Sure, Hollywood has the Emmys, but Washington has the debate in the Senate Finance Committee over America’s Healthy Future Act of 2009. Not a contest. Add to the mix President Barack Obama’s five appearances on Sunday morning television shows (plus his stint Monday night as David Letterman’s guest) and these are strange days, indeed. 

There’s several items in the mix I wanted to comment upon, but none of them really warranted their own post. So here they are, mashed together into a single article. Think of it as clearing the deck in anticipation of all the fun news coming out of Washington in the next few days. 

1. Excluding Pre-Existing Conditions

Yes, it’s true, health insurance companies exclude individuals with pre-existing conditions. When they can carriers refuse to offer coverage to those likely to use that coverage. According to some politicians and pundits of all political stripes, instead of being a legitimate business practice, this process (called “underwriting”) is evidence of the evil nature of health insurance carriers and their executives. 

Under today’s rules, however, underwriting is necessary to keep the cost of coverage from going even higher than it is today. Imagine permitting people to buy auto insurance from the tow truck driver at the scene of an accident. Or picture homeowners buying fire insurance after the flood waters recede. The cost of these policies would be astronomical. Why would anyone buy auto or homeowners coverage before they need it if they can buy the same policy after an accident or disaster? The cost of insurance in this environment would be the cost of the claim (plus administrative expenses). Have $1,000 in damage after that wreck? The cost of the policy sold by the tow truck driver would need to be more than $1,000 because no one else’s premium would be available to cover any of the cost.

The same applies to health insurance.  Allow individuals to purchase coverage on their way to the hospital and costs will skyrocket. (Don’t laugh, one of the GOP proposals would allow consumers to buy coverage in the emergency room). In New York and New Jersey, where there’s a mandate to sell individual health insurance but no mandate to buy it, premiums are three-times higher than in California.

Which illustrates the only way to resolve this situation: require everyone to obtain medical coverage. Without this balance (both a mandate for carriers to sell and for consumers to buy coverage) premiums quickly become unaffordable. Lawmakers who propose guarantee issue without a mandate to buy – and they exist on both sides of the aisle – are either grandstanding, mathematically challenged or ill-informed.

2. Losing Coverage When You Need It

The other popular market reform concerns carriers cancelling coverage after claims are incurred by policy holders, a practice called “rescission.” Much of the furor over rescissions in Washington and elsewhere are legitimate, the result of carrier’s tone deaf, heavy-handed, and inept approach to a reasonable concern: preventing fraud. So long as health insurance is voluntary, carriers need to protect their members from being gamed by those who would intentionally abuse the system. To hear some talk about the problem, however, you’d think every claim submission is answered by a termination notice. Estimating the total number of rescissions is difficult due to disparate reporting requirements around the country. Yet in testimony before Congress three of the largest carriers claimed to have canceled about 20,000 health insurance policies over five years. Four thousand annual rescissions sounds like a lot, but it’s a small fraction of the millions of policies sold and maintained by those carriers each year.

Because the number of terminations is small does not excuse the health plans from abusing their rescission power. Change in this area is needed to restrict rescissions to only intentional misrepresentation of medical conditions. In the meantime, overstating the severity of the problem may be good politics, but it is misleading. (Of course, if underwriting is eliminated, this problem goes away: if carriers cannot charge premiums based on pre-existing conditions there’s no reason to even ask about prior medical conditions.)

3. Non-Profit Doesn’t Mean Cheaper

Liberals demanding that reform legislation include a government-run health plan usually claim it will reduce the cost of coverage by introducing a non-profit health plan into the market. Here’s how Senator Jay Rockefeller put it on MSNBC, “There’s got to be some discipline to other insurance companies, that make them take seriously, not just competing with each other, but competing with somebody who because they are non-profit … and don’t have to please their shareholders because they don’t have any, that they can offer premiums at lower prices” (this sound bite begins at about the 2:35 mark). Yet there are already non-profits operating in most states. In California, for example, Kaiser Permanente and Blue Shield of California are two. In some parts of the state, these plans do offer the most affordable plans; in other regions the lowest cost plans are available from their for-profit competitors. Experience indicates little correlation between a carrier having shareholders and their premiums. Claiming it does may sound good, but anyone taking the time to see what’s happening in the real world will realize this is a false argument.

4. Ugly Language is Dangerous.

House Speaker Nancy Pelosi raised the possibility that the angry rhetoric prominent in the health care reform debate could turn violent, comparing it to the situation in San Francisco over gay rights in the 1970s. The link between the anti-gay rhetoric and the murder of Mayor George Moscone and Supervisor Harvey Milk is legitimate. So is the Speaker’s concern. Words can motivate. Passions can lead to horrendous acts – from terrorist bombings to the murder of doctors who perform abortions.

What’s hypocritical about Speaker Pelosi’s comment, however, is that she has contributed to tenor of the debate. When Speaker Pelosi, the individual third-in-line to the presidency calls opponents “immoral” and describes them as”the villains” in America’s health care reform system she loses the ability to complain when others claim her policies are socialist. The fact that Speaker Pelosi is guilty of what she rails against should not mean her warning is ignored. America’s health care system will be reformed by thoughtful deliberation. Depicting President Obama as Hitler, painting swastikas on the offices of lawmakers, pastors praying for the death of President Obama, or calling opponents “traitors” inspires ugly emotions and provides cover for crazies who take the law (both governmental and ecclesiastic) into their own hands.

Speaker Pelosi hopes for a more responsible tone in the health care reform debate. Her greatest contribution to achieving this goal would be to moderate her own rhetoric.

2 thoughts on “Health Care Reform Odds & Ends

  1. “President Obama’s speech last week really moved me. Despite what my colleagues think of me. If what he says is what will EXACTLY happen, how can I not hope and work towards that cause”? Mike Oliphant runs a small Utah health insurance website http://www.benefitsmanager.net/SelectHealth.html and http://www.dentalinsuranceutah.net whom deals with hundreds of people on a day to day struggle to be approved for health insurance. “I get hopeful that I can finally tell people they can qualify for coverage REGARDLESS of their pre-existing medical condition”. Mike’s concern is that Obama’s people won’t deliver what he urges on areas within his speech. “I really have been moved by this guy and wish we could just talk so he could understand the frustration of a health insurance agent. I have been involved on a political level within the state of Utah and their struggle for health care reform. I have seen and regrettably been part of politics at work. I have learned lessons through baptism of fire with politics. For instance, I struggled against House Speaker Clark and H.B. 188 because that was what I was urged to do from our industry (that was all I knew). But after awhile and countless meetings with state and private carriers in Utah, I began asking myself if I was doing the right thing. I realized over time that House Speaker Clark really means what he says and is hard nose about getting reform done in Utah. I got that there wasn’t any behind the scene conspiracy scheme or personal objective of Mr. Clark. His bill makes allot of positive changes in the “health insurance reform” world of Utah. He claims that reform just doesn’t stop there, it must continue through “health care reform”. You see, there is a major difference between the two reforms. Clark “gets it” but I really worry that Obama’s administration doesn’t because if you have noticed the subtle language change of dropping “health care reform” and going to “health insurance reform”. See more about what Utah has accomplished here which utilizes private carrier involvement with true reform. If you can believe it, they reached it with an objective of $500,000. Perhaps the feds should take a look at Utah and House Speakers Clark’s bill 188. http://www.prweb.com/releases/utah_health_insurance/health_care_reform/prweb2614544.htm. Now I find myself on the “other side” of the fence furthering Utah’s cause. Let’s hope we don’t all have a mental breakdown nationally and just take a honest look at the proposals.

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