HEALTH PLANS/POLICY: Health insurance for individuals is a big mess, and HSAs won’t help, probably.

Right.  A little housekeeping. I’ve been under the cosh the last week or so, and you’ll see some evidence of the massive project I’m working on showing up in TCHB over the coming weeks. I can’t tell you exactly what it is but suffice it to say that it concerns looking into the inefficiencies of our "health care system" and, whatever viewpoint you come from, they are legion.

My various contributors in the Crestor/A-Z/Pfizer/Lipitor conversation are all alive and well. I’ll be getting back to that later, but apparently the Industry Veteran agrees with me about Chomsky but thinks that the Lancet /Pfizer relationship is too blatant to be as compromised as the Anonymous Cardiologist has suggested. I’m glad that some of you are enjoying this spontaneous series, and I’m sure that it’s continuing at least to confirm the complexity of the pharma marketing world. And it is complex.

But as Monty Python says: Now for something completely different. If you didn’t know this already, let me confirm it for you–the small group and individual insurance market is in a mess. I know this because as a solo operation I have to shop there. Because of a prior surgery, even though the same affected area is excluded from my first 6 months of coverage as a pre-excluding condition, for a $2,000 deductible and $4,000 max out of pocket, my insurance company wanted to put my rates up 350% over what they first quoted when I tried to buy the policy (when they didnt kno about the surgery). Instead I bought a temporary insurance plan at 30% of the cost (ironically enough from another division of the same company).  But those plans don’t cover people with systemic chronic illnesses, who are SOL.  Even in California I have friends who have been intermittently unemployed long enough that they have outlived COBRA and, due to various ailments, cannot get individual coverage at less than $1,000 a month for an individual. This is a broken market, and now the data is coming in to prove it.

The folks at the Center for Studying Health System Change (HSC) have a new report out in Inquiry on Health and the Cost of Nongroup Insurance. To quote the pres realease:

    They found that people with deteriorating health are about half as likely to purchase individual, nongroup insurance as people in excellent health. Furthermore, when adjusting nongroup premiums for selection bias based on health status, individuals in fair or poor health face premiums that are 43% to 50% higher than people with no health problems. "The results suggest that medical underwriting may be more extensive and, in fact, may shut some people out of the nongroup insurance market," the authors say.

No shit Sherlock. In fact some analysis last year in Health Affairs from market-apologist Mark Pauly at Wharton, who’s always felt that health care spending grows as it should and damn the consequences, suggested that the small group market worked relatively well–for 80% of the participants.  But "its performance for the remaining 20 percent of low-income or high-risk persons is controversial." To me that’s like saying 80% of Iraqis are happy the US army’s there but 20% are trying to blow our boys’ heads off. Whatever Pauly and the Bush administration may want to say in both cases, it’s with the 20% that we’ve got a problem.

Funnily enough, while market failure continues in the small group market, for the last few years and especially the last year, what’s left of the managed care industry has been making out like bandits. Overall earnings rose 81% and earnings from Medicare went up over 118%.  How do health plans make their money?  It’s the same joke I used to tell in 1995–the easy part of managing care is not insuring sick people.  Oh, and it helps if you are at the top of the underwriting cycle.  Sadly for plans we are now somewhere near the top.  At least HSC also reports that, in the first half of 2003, health costs only went up 8.3%  as opposed to 10% for the last half of 2002. Given that health plans the last few years have mostly been "cost-plus" actors, there’s slightly less "cost" to "plus" onto. Although a poll of health plans earlier this month showed that while costs were slowing, it instead showed that increases were still well into the double digits.

Finally if you really believe (as Robert Prather does–we’ve respectfully butted heads over this issue in DB’s Comments a while back) that the solution for all this mess is to give everyone a HSA and have them spend their own dollars at the doctors, you might consider this. There’s a small problem, as David Durenbeger, former Republican Senator and wise old man of health care, shows–no one in health care has a clue what the actual transaction price for any service should be.

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