The NY Times had a pretty decent article on what a pain in the ass the individual insurance "market" is and it also reminded me of one reason why the eHealthinsurance study last week was so flawed. That study compared apples to oranges when it looked at rates for 30 year olds in New York versus California. To wit:
In some ways, Mr. Forst was lucky because he lives in New York. It is one of the few states with guaranteed-issue laws, which basically ensure that all residents can buy coverage. In New York, the law means that if you have been turned down by the big national companies, any H.M.O. operating in the state would be obligated to sell you a policy. New York also has community pricing, meaning that everyone who applies from the same part of the state pays the same premium for the same plan, regardless of age or health. So it is easy to see why insurance tends to be more expensive in New York – at least for the young and healthy – than in other states. But the flip side is that some people living in other states cannot buy insurance.
Of course the other side of that is that individual insurance in New York is so expensive that many uninsured who could afford the cheap California policies can’t buy it. (And don’t forget employer group insurance is not covered by state laws because of the wacky world of ERISA). So the free marketers (like my commenter
Greg Eric Novack) say, let them buy a California policy. (This is the basis of the AHP movement that our Dear Leader is so keen on). That would then immediately lead to the remaining healthy New Yorkers getting out of their state-regulated policies and buying cheap ones from out of state, with the result that those remaining in the New York plans — who couldn’t buy those out of state policies because they’re old or sick or both and the AHP’s wouldn’t be forced to sell to them — would be unable to afford their premiums and the plans would go belly-up.
So is community rating like New York’s a good idea? Well only if you enforce it on everyone, including groups and the uninsured — otherwise known as universal insurance. But it is a risk pool of sorts and the efforts of the so-called "free-market" lobby are helping to destroy what’s left of it, when what we need is everyone into it.
Meanwhile over at Signal Health Tom Hilliard spent the time that I didn’t in my post on the subject to really deconstruct the McKinsey study on CDHPs. And he comes to the same conclusion I did about whether it can be trusted.
UPDATE: Brian Klepper tells me that I’m being too tough on eHealthinsurance.com and should be thankful for baby steps.
I think you’re dwelling a little too much on the obvious by complaining that the eHealthInsurance study is flawed. Of course the costs are significantly different in states that have or do not have guarantee issue. And of course the market dynamics are completely fouled up by the games that every insurer plays in trying to limit exposure.Maybe I don’t get it, but I see the real value of the eHealthInsurance study in the fact that it shows clearly what the rates are for a particular type of individual. Typically, we don’t have this knowledge. You’re bellyaching because the underlying forces aren’t balanced, but that’s only a nuance to the analyst; the purchaser doesn’t have this luxury. And until we’re able to SEE the damned rates for what they are, controlled for who they target, we can’t do anything to course correct.That’s why its useful.