6a00d8341c909d53ef01157023e340970b-pi

A reader asks: “If the current bill passes are my health insurance costs likely to go up, down, or remain about the same?”

If the form that I believe most likely to pass actually passes (insurance reforms, individual mandate, weak or no public option or co-ops), I believe that they will continue to go up. There simply is nothing in the bill that would make things more affordable. In health care markets, for a convoluted nest of reasons, more competition causes prices to go up, not down.

Despite the concern and interest in health plan profits and executive salaries, most of what dictates the cost of health care insurance consists of:

  1. How effective are they at lining up providers willing to take a discount? That willingness depends on the ability of the health plan to say, “We’ve got many or most of the people in your market. If you   want a lot of patients to amortize your fixed costs, you have to deal with us, and you have to cut us a good deal.” Small, new insurers cannot say that.
  2. How effective are they at limiting what they cover?
  3. How effective are they at not covering sick people, either by not covering them in the first place, or by kicking them out?
  4. How good are they at avoiding paying the bills that people do run up?

Look these over. Health insurance reform closes the last three of these (at least somewhat). This will drive up the cost of providing insurance, since they are providing for more people, and sicker people, and being forced to pay their bills, as well as being forced to provide some minimal coverage (such as preventive and maintenance matters) for no co-pay.

The first one means that if any new mechanism is just competing for provider networks at market prices, they will pay more, not less.

And there is nothing in the bill about capping profits, or putting a minimum on medical loss ratios (the amount of the premium dollar that is paid out in health care resources), or capping executive salaries. So though everyone is talking about “affordable” health care, all the reforms actually being contemplated mean higher costs, not lower.

With nearly 30 years’ experience, Joe Flower has emerged as a
premier
observer and thought leader on the deep forces changing healthcare in
the United States and around the world. As a healthcare speaker,
writer, and consultant, he has explored the future of healthcare with
clients ranging from the World Health Organization, the Global Business
Network, and the U.K. National Health Service, to the majority of state
hospital associations in the U.S.  He has written for a number of
healthcare publications including, the Healthcare Forum Journal,
Physician Executive, and Wired Magazine.  You can find more of Joe’s
work at his website, www.imaginewhatif.com, where this post first appeared.

More by the same author:

Fear and Loathing over the Stimulus BillHealthcare as a Complex Adaptive System

Share on Twitter

4 Responses for ““Reform” Means Higher Costs, Not Lower”

  1. Although it’s arguable that any “reform” that cost more isn’t reform at all, the bigger issue here is that, as the President said two weeks ago, the insured are already paying a whopping “hidden tax” in the form of higher premiums to support care for the uninsured. The aggregate size of that tax — $1.9 Trillion over the next 10 years — is more than adequate to cover the cost of any of the current reform proposals moving through Congress. So, where is that money going and why is anyone asking Americans to pay more?

  2. Frankly speaking, I am not convinced that our healthcare is so outrageously expensive because we “subsidize” the uninsured. I blogged on that on http://betterhc.blogspot.com/2009/09/healthcare-reform-are-we-looking-in_16.html . Take a look if you are interested.

  3. Anonymous says:

    Your response to the reader’s question chooses to focus on the macro level impact on commercial premiums, and I assume you are talking about individual policies. I agree that premiums will increase in a macro sense (in reality they’ll increase at an alarming rate even if no reform passes.) But, if you wanted to answer the personal question of what happens to “my” premiums, the answer is much more complicated. The impact will be felt differently depending on if you are younger or older. It matters what underwriting regulations your state has currently and how they’d change under the new bill (unless the bill grandfathers old policies’ underwriting pools.) Ultimately, there will be winners and losers, but I agree that in aggregate there will be more losers.

  4. Whats interesting here is that Obama stood in the White House back in May with leaders of insurance, hospitals and other medical industries, and promised savings of $2 trillion over the next decade. So if this form does pass, then its really not a step in the right direction.

Leave a Reply

FROM THE VAULT

The Power of Small Why Doctors Shouldn't Be Healers Big Data in Healthcare. Good or Evil? Depends on the Dollars. California's Proposition 46 Narrow Networking
MASTHEAD STUFF

MATTHEW HOLT
Founder & Publisher

JOHN IRVINE
Executive Editor

JONATHAN HALVORSON
Editor

JOE FLOWER
Contributing Editor

MICHAEL MILLENSON
Contributing Editor

ALEX EPSTEIN
Director of Digital Media

MICHELLE NOTEBOOM Business Development

MUNIA MITRA, MD
Clinical Medicine

Vikram Khanna
Editor-At-Large, Wellness

THCB FROM A-Z

FOLLOW US ON TWITTER
@THCBStaff

WHERE IN THE WORLD WE ARE

The Health Care Blog (THCB) is based in San Francisco. We were founded in 2004 by Matthew Holt and John Irvine.

MEDIA REQUESTS

Interview Requests + Bookings. We like to talk. E-mail us.

BLOGGING
Yes. We're looking for bloggers. Send us your posts.

STORY TIPS
Breaking health care story? Drop us an e-mail.

CROSSPOSTS

We frequently accept crossposts from smaller blogs and major U.S. and International publications. You'll need syndication rights. Email a link to your submission.

WHAT WE'RE LOOKING FOR

Op-eds. Crossposts. Columns. Great ideas for improving the health care system. Pitches for healthcare-focused startups and business.Write ups of original research. Reviews of new healthcare products and startups. Data-driven analysis of health care trends. Policy proposals. E-mail us a copy of your piece in the body of your email or as a Google Doc. No phone calls please!

THCB PRESS

Healthcare focused e-books and videos for distribution via THCB and other channels like Amazon and Smashwords. Want to get involved? Send us a note telling us what you have in mind. Proposals should be no more than one page in length.

HEALTH SYSTEM $#@!!!
If you've healthcare professional or consumer and have had a recent experience with the U.S. health care system, either for good or bad, that you want the world to know about, tell us about it. Have a good health care story you think we should know about? Send story ideas and tips to editor@thehealthcareblog.com.

REPRINTS Questions on reprints, permissions and syndication to ad_sales@thehealthcareblog.com.

WHAT WE COVER

HEALTHCARE, GENERAL

Affordable Care Act
Business of Health Care
National health policy
Life on the front lines
Practice management
Hospital managment
Health plans
Prevention
Specialty practice
Oncology
Cardiology
Geriatrics
ENT
Emergency Medicine
Radiology
Nursing
Quality, Costs
Residency
Research
Medical education
Med School
CMS
CDC
HHS
FDA
Public Health
Wellness

HIT TOPICS
Apple
Analytics
athenahealth
Electronic medical records
EPIC
Design
Accountable care organizations
Meaningful use
Interoperability
Online Communities
Open Source
Privacy
Usability
Samsung
Social media
Tips and Tricks
Wearables
Workflow
Exchanges

EVENTS

TedMed
HIMSS South x South West
Health 2.0
WHCC
AHIP
AHIMA
Log in - Powered by WordPress.