By Matthew Holt

In the comments on my piece on Michael Cannon, Michael has replied here and I’ll reply back on Monday), everyone’s favorite insurance broker Nate asked me to describe a bit more the process of a small group buying health insurance. I’m not quite ready to do that yet, but instead I will point you towards this piece I wrote about buying individual insurance in 2006. It’s called A Tale of Two Underwriters and it explains how screwed up the process is.

If you want more, here’s some nitty gritty on the actual process of dealing with eHealthInsurance.com the largest online broker which—for those of you interested in small group insurance—told me last year is encouraging employers to give their employees a lump sum and kick them into the individual market. And I guess for those healthy employees that’s good news, and if you’re not…..

Of course that attitude has been taken several steps further by big insurers, notably Aetna which basically dumped all its money losing groups in the early part of this decade by ramping up their prices to the level where they had to drop off. That’s story’s been well told including back in 2004 by me but it got retold this week by ex Cigna & Humana flack Wendell Potter who also explained how rescission works and how smaller groups get kicked off the rolls.

He also explains how damn hard it is to do an apples to apples comparison between plans, and that’s what I was struggling with last week when I wrote this:

Last night I was busy spending two hours of my and my business partner’s time buying health insurance for our massive 4 person company. That means doing a multi-factorial equation between premiums, co-pays, deductibles, out of pocket maximums, & in & out of network costs. It’s no wonder that no one understands their health insurance, especially when eHealthinsurance.com still doesn’t bother putting half of the important variables on its front page.

None of this is new news but Potter’s testimony last week (PDF) is a quick and entertaining read that pulls many of these threads together. Potter also made some remarks in an interview with Trudy Lieberman about travel costs at insurers. I too once had a conversation with a former insurance exec who moved to a job with potentially less travel involved. I commiserated with him possibly having to give up super frequent flyer status on the airline of his choice. Oh, he said, I haven’t had that in years. I just used one of the corporate jets!

The obvious answer (which Potter has got to now) is that if we are going to have a functioning insurance market we need a defined benefit package with identical co-pays deductibles, et al AND no ability to refuse insurance AND mandatory purchase of insurance (as Charlie Baker points out in his post here yesterday, it doesn’t work if people can opt in and out when they’re sick & healthy) AND a defined & equal total amount (not % of cost) provided by the funding entity (government, employer, consumer) to the consumer so that the consumer can make and apples to apples comparison. Something Enthoven laid out in the NY Times last week, although I don’t see why he’s backed off his 1980s position of putting everyone in the pool the way Zeke Emmanuel/Vic Fuchs want to.

Anyone who says anything different is just covering for the right of unscrupulous insurers to manipulate the market. And there’s lots of them on both sides of that sentence.

Of course, at best we’re instead going to get incremental reform which will not stop the kind of thing Potter’s complaining about.

Why is that? Well in Harpers last month (in a fabulous article about why Obama is the next Herbert Hoover not the next FDR) Kevin Baker writes this:

More frustrating has been the torpor among Obama’s fellow Democrats. One might have assumed that the adrenaline rush of regaining power after decades of conservative hegemony, not to mention relief at surviving the depredations of the Bush years, or losing the vestigial tail of the white Southern branch of the party, would have liberated congressional Democrats to loose a burst of pent-up, imaginative liberal initiatives.

Instead, we have seen a parade of aged satraps from vast, windy places stepping forward to tell us what is off the table. Every week, there is another Max Baucus of Montana, another Kent Conrad of North Dakota, another Ben Nelson of Nebraska, huffing and puffing and harrumphing that we had better forget about single-payer health care, a carbon tax, nationalizing the banks, funding for mass transit, closing tax loopholes for the rich. These are men with tiny constituencies who sat for decades in the Senate without doing or saying anything of note, who acquiesced shamelessly to the worst abuses of the Bush Administration and who come forward now to chide the president for not concentrating enough on reducing the budget deficit, or for “trying to do too much,” as if he were as old and as indolent as they are.

Senate Majority Leader Harry Reid—yet another small gray man from a great big space where the tumbleweeds blow—seems unwilling to make even a symbolic effort at party discipline. Within days of President Obama’s announcing his legislative agenda, the perpetually callow Indiana Senator Evan Bayh came forward to announce the formation of a breakaway caucus of fifteen “moderate” Democrats from the Midwest who sought to help the country make “the changes we need” but “make sure that they’re done in a practical way that will actually work”—a statement that was almost Zen-like in its perfect vacuousness. Even most of the Senate’s more enlightened notables, such as Russ Feingold of Wisconsin or Claire McCaskill of Missouri or Sherrod Brown of Ohio, have had little to contribute beyond some hand-wringing whenever the idea of a carbon tax or any other restrictions on burning coal are proposed.

Of course, when the President decides that we need reform in a bi-partisan 70 vote manner and won’t crack the heads of the “aged satraps from vast, windy places,” we’re just not going to get the kind of insurance reform we need. To do that he has to go on an offensive and connect the dots between the stories on his campaign website and who was in the room at his ABC prime time special.

It was notable that when Ron Williams, CEO of Aetna, was introduced, Obama praised Aetna as a well run company (and in terms of the current market and regulations it is). But he never mentioned the impact of Aetna’s corporate turnaround on those who were thrown off its rolls in the early 2000s.

I happen to think that Aetna could probably perform very well in the kind of regulated market I’d propose, but I’m not sure Aetna shareholders or executives would do quite as well. But to me the defining part of his strategy was that every time Obama talked about taxing rich people he mentioned himself (around $4m from his book) and Charlie Gibson who makes $8m a year. But he never mentioned the fact that Ron Williams was by far the richest and best paid person in the room.

If Obama isn’t going to line up some firepower against the insurers to counteract the bribes they’re paying the moderate Democratic senators, then modest incomplete and ineffectual insurance reform is the most we can expect

And as I’ve said many times, in the long run this will be worse for the insurers than comprehensive reform because it will increase the chances that there will be no health insurance business in the long run. When I gave this message to a big meeting of insurers in my Three Inconvenient Truths talk, many of the rank and file came up to me agreeing with what I’d said. The problem is the boardrooms don’t share their view or their long-term outlook. And so if we want to “hope” for “change”, Obama needs to make them. But apparently he won’t.