45 replies »

  1. Do anyone know of a New York State mandate regarding no copay for any schedule well care visit? If so please advise link so I can forward to my child’s doctor.

  2. Just months before he died, I had the opportunity to ask Milton Friedman if he thought there might be any way health risk might be effectively securitized via some variant of the “cap & trade” model devised to deal with industrial pollutants.
    (background on cap & trade here: http://en.wikipedia.org/wiki/Emissions_trading )
    That is, create a mechanism to establish a more fluid market for the ‘trading’ of health risk.
    He thought for several moments, and replied: “I’m pretty sure I do not understand the question.” : – )
    health risk already is securitized on a small scale for health system receivables, but I’ve long felt there was opportunity there for undoing the highly artificial ‘compartmentalization’ of risk perpetuated by the activity of 50 state regulatory authorities.

  3. This site has a hybrid proposal for the uninsured:
    Creates 50 new state workforces of Universal Health Care Workers, at lower labor rates to provide direct health care to the uninsured vs. insuring them with health care policies. This would separate them from the current system which must raise rates to cover the 42 million who are uninsured.
    This policy does not or using Canadian style health care for everyone. Utilizes non for profit retired, college and foreign workers. The new UHC workers would not need medical policies themselves.
    It also issue a New Universal State (Part B Policies) so Current Medical Polices can be reduced from $5millon to $50,0000 or by 99%. You current $5,000,000 medical policy would no longer need to be larger than $50,000.
    This combined with the Workers will drive premiums down.
    Check out this sit http://www.mypaysaver.com.

  4. The answer is to promote individual plans, and end the group sponsored plans. Allow families to shop for and purchase direct policies on a pre-tax basis. This will bring back free the market forces. Minimal regulation is all that will be required from the States.
    Don Osborn

  5. Coverage under a health insurance plan provided by your spouse can be tricky if you also have coverage provided under your company as well. Another alternative for folks looking for affordable health care is to look for a new job that might offer great health benefits. Many people choose to not worry about medical insurance, because they or their family are not sick today; that is a big mistake.
    Find out exactly what is covered in your plan to be sure it meets all of your family’s needs. A health insurance plan that is considered affordable by most people would have to have pretty low premiums for the average person to afford.
    Dave Stoll

  6. Mr. Fembup:
    I agree with you 100%—reform of the insurance market by itself will not necessarily provide relief for high health care costs. The U.S. has fundamental problems with the way it finances health care as well as the way it delivers health care and when debating health care reform we should always distinguish between those two problems. On the other hand, certain aspects of financing systems (e.g., provider payment mechanisms) do have a profound impact (for better or worse) on delivery systems. My biggest fear about most single payer proposals is that while they could provide an effective remedy for certain market failures on the financing side of health care, they would do nothing to alleviate problems on the delivery side (and might even worsen the problems).

  7. It’s fine to seek the best & fairest way to allocate health care costs via insurance premiums. Let’s be sure at the same time to keep in mind that even the optimal manner of setting premiums won’t reduce health care costs by a nickel. Rising insurance premiums are caused by rising health care costs – the cost of health care is the deeper problem.
    This is why I think meaningful relief from the problem of high health care costs – or high insurance premiums – won’t be found thru any agreement on community rating, whether CR “works” or not. Meaningful relief will come from actually eliminating some significant part of the deeper problem – health care costs. IMO, it is not a solution simply to pay for these costs more “fairly” and it is not a solution to find clever ways to shift them to somebody else via insurance premiums. Those are aspirin tablets that pay attention to symptom (high insurance premiums) but ignore the disease (high health care costs). When one has a bad headache, an aspirin is useful. But if the headache persists for, say, FORTY YEARS, perhaps stronger medicine is needed.
    Other countries seem to be able to provide health care whose quality is roughly equivalent to the U.S. at half our cost or less. Can the U.S. do this? Yeah, I think it’s possible. Whether it’s achievable is an entirely different question. I think most Americans have little general knowledge of what other countries are doing that we aren’t doing, or don’t wish to do; or what other countries don’t have that we insist on having. I think such basic knowledge is necessary so the public can evaluate the costs, benefits, and trade-offs of moving to a system in which health care might cost half of what it costs today. I suspect achieving that level of public knowledge is technically possible and politically unthinkable. For that reason, I fear that the uninformed or the self-appointed will end up making these decisions. That worries me – a lot.

  8. Mr. Paduda, thanks very much for your feedback. But at the risk of repeating myself, I must respectfully disagree with you—even in a market where there is universal coverage, community rating is problematic. The following quote explains the nub of the problem (you can substitute “individual mandate” or “employer mandate” for “managed competition” and the essential meaning of the quote does not change):
    “It is sometimes said that community rating is essential to managed competition because it forces insurers to stop competing on the basis on how well they select risk. Just the opposite is true. Community rating greatly intensifies insurers’ incentives to engage in risk selection for the very reason that it precludes them from adjusting the premium to reflect individual risk. The need to control incentives for biased selection on the part of both insurers and subscribers creates formidable problems in administering a community rated market.”
    —“Is Community Rating Essential for Managed Competition?” by Mark A. Hall (The AEI Press, 1994), p. 9.
    I am not knowledgeable about how the German sickness funds work, so I regret I can’t respond intelligently to your comment about those funds. As for the New York state, I concede Mr. Fembup’s basic point that even without universal coverage, community rating has not destroyed the individual and small employer health insurance markets in New York. However, as explained in my previous posts, the evidence is pretty clear that community rating has imposed a large cost on many young people who do buy insurance in New York, and I suspect it has discouraged lots of healthy, young, non-affluent individuals (who are self-employed or who work for small firms) in New York from even attempting to purchase insurance. For those reasons, I don’t think its reasonable to declare community rating in New York an unqualified policy success. Furthermore, there are other examples (e.g., Washington state) in the literature describing states that have mandated community rating with much worse results than New York—in other words, it certain other states community rating has effectively destroyed the individual and/or small group markets.
    Please understand that I do think it is technically possible to devise public policies which minimize risk selection problems in insurance markets—I think you and I would agree that an individual mandate, along with appropriate tax subsidies and restrictions on certain types of underwriting practices could help bring this about. I would like to think that the architects of the Wyden proposal have something like this in mind (I think the same applies to the recently enacted Massachusetts reform plan). In other words, if some modified form of community rating (e.g., a limited number of rating categories) could be combined with the right kinds of tax subsidies and other controls on biased selection, perhaps I would find it acceptable—in that case, however, I don’t think it could be labeled “community rating” because it would no longer resemble the “pure” or “classic” type of community rating system.

  9. “Actually, it will ONLY work with universal coverage – therefore comparisons to NY and other states that have partial community rating are not germane.”
    You must be referring to some kind of community rating I’m not familiar with. The kind of community rating I have encountered e.g., in New York, certainly dos work in the absence of universal or even statewide coverage, and the NY small-group market is a perfectly germane example.

  10. Skeptic – kudos for your considered and thoughtful comments.
    That said, I still must disagree with your observations re community rating will not work. Actually, it will ONLY work with universal coverage – therefore comparisons to NY and other states that have partial community rating are not germane. You note that insurers will attempt to “increase profits by avoiding individuals expected to generate high health care costs.” That’s true. But community rating and elimination of medical underwriting will eliminate insurers’ ability to do just that. Insurers CAN’T avoid risks they don’t want by underwriting or policy limits or benefit design.
    I would point you to the health care system in Germany, which uses community rating. All are covered, no one is excluded, and the sickness funds (equivalent to our health plans) compete on the basis of brand, delivery of ancillary services, and customer service.

  11. re: The recent posts by B. Carol, J. Fembup, and JD:
    Response to Barry Carol: your compromise approach (i.e., one rating tier for under age 40 and one for age 40-64) is an interesting idea. I might find it acceptable if it could be combined with generous tax credits linked to income so that it doesn’t cause a massive shift of wealth from the young to the old that I described in my previous posts. However, I fear that in the context of the current voluntary insurance market (i.e., no individual or employer mandate) that exists in virtually all states (Massachusetts will soon become an exception), two age tiers would not be sufficient because many young people would continue to find the premiums too high and would therefore not bother to purchase insurance. Keep in mind that currently in the U.S adults under age 35 are nearly twice as likely as those 45 and older to be uninsured, according to the Actuarial Research Corp.
    Response to JD and John Fembup: I might be able to accept the argument that today’s young people should be willing to subsidize older people because future generations can look forward to the same kind of subsidy if in fact the intergenerational wealth transfer was more or less constant over time. In fact, it isn’t. Thanks to ever rising health costs (in inflation adjusted dollars), relatively old folks are placing a huge financial burden on younger folks. Do I need to remind you about the unfunded post-retirement health care liabilities which have been generated by General Motors et al.? Or how about the billions of dollars in unfunded retiree health care benefits run up by the City of Detroit, San Diego County, and many other local governments? This year, the California State Government and local jurisdictions in California (e.g., cities, counties, school districts) spent $4.5 billion on retiree health care costs and they have saved “little or nothing for future years.” (S.F. Chronicle, 12/21/06). And of course, let’s not forget about the mother of all underfunded health programs, Medicare. Even Paul Krugman, who has never met a social insurance program he didn’t like, agrees that Medicare faces a major fiscal challenge over the next 20 to 30 years.
    By the way, while on average young people are less affluent than older people, I do take Mr. Fembup’s basic point that this isn’t always true. That is why I think its important to link tax subsidies to income levels—nobody (including me) wants taxpayers to subsidize the 25 year-old who struck it rich with Google stock options—that kind of young person should be subsidizing older folks.

  12. Why not use the tax laws that are currently available and take advantage of them versus crying over spilled milk. There is no health crisis people need to wake up especially the agents who sell health insurance.

  13. I think it might be easier to achieve universal coverage if the insurance package as proposed by Senator Wyden were broken into two pieces with only the first piece mandatory as follows:
    Part A (mandatory) – $5,000 per person deductible and then 100% of covered services after that.
    Part B (optional) – 20% co-pay for the first $5,000 of charges ($1,000 OOP).
    If the package as proposed by Wyden would cost $357 per month (national average) for single coverage, insurers might be able to sell the catastrophic piece with a $5K deductible for $250 per month or less. The Part B piece, which is really more like prepaid healthcare as opposed to insurance, might cost $100-$125 per month. The adverse selection problem is likely to be manageable while catastrophic coverage could be made available for a relatively affordable price.
    An unbundling approach like this would also more clearly and visibly quantify the cost of true insurance (coverage of catastrophic events) vs third party coverage of routine and more modest medical costs. Furthermore, those getting a raise equivalent to what their employer is currently spending to provide health insurance might prefer to just buy the catastrophic coverage and use the balance for other priorities including saving for retirement, education expenses, etc.
    Even if policymakers prefer to make the complete package mandatory, I think it would still be useful if insurers could separate the price into catastrophic coverage and routine cost components so people could at least better understand the cost of each.

  14. Folks, I am on the road right now with limited access to the Internet so I can’t respond right now to the latest responses to my previous posts. I will respond to you all later, thanks for the ongoing dialogue.

  15. Skeptic,
    “If (for example) a 25-year old free-lance web designer who earns $40,000 a year is heavily subsidizing the health insurance of a 60 year old self-employed attorney who makes $150,000 a year (and both of them have essentially the same health status), that doesn’t seem fair to me.”
    And if (for example) you considered the 28-year-old media technology entrepreneur who is making $300,000 per year vs a 62-year-old clerk pulling down 55,000 per year – I take it you feel the same way.
    In fact, I think about all that the “if (for example)” conversations can illustrate is that the use of examples is a bogus means for setting public policy. They are, however fortunately or unfortunately, powerful means of manipulating public opinion regarding public policy.
    “Regardless of what you or I think is fair, I wonder if such intergenerational subsidies are politically sustainable”
    Everyone ages and everyone has older family members so IMO an intergenerational subsidy is and will continue to be seen as a reasonable and desireable feature of insurance plans particularly public insurance plans such as Medicare. Of course income can also be used to determine the individual participant’s premium contribution – my company’s benefit plan does this both for active employees and retirees. One should recognize that basing contributions on income explicitly introduces charity into an insurance arrangement. That is how Medicaid works and I cannot imagine a scheme that could be successful insuring all of the presently-uninsured, unless the premiums are based on income.

  16. Skeptic,
    I find your application of the principle “every generation should pay (most of) its own way” unconvincing. I can agree with the principle and still think it justified that the young (that is, those 18-45) subsidize the old (45+). The reason is that the generation that is now young will one day be old. At that time, they will receive the subsidies that they had earlier paid. It’s the same with Medicare, Social Security, etc.
    Why in the world should each generation have to pay its own way at every point? I see no generally accepted principle of justice or fairness that requires this. Of course, the libertarian view is that government redistributions of wealth are always wrong, so it would ban government policies that subsidized anyone at the expense of anyone else, not just those that crossed age groups.

  17. This does not preclude the healthy and affluent subsidizing the sick and impoverished within a generational cohort, which I strongly support.
    What would you think of a compromise approach of two community rating tiers – one for those less than 40 years old and one for those from 40-64 years old with Medicare kicking in at 65?
    Presumably, even the cohort of people between 40 and 64 are healthy for the most part. By age 40, careers should be well established, and people are entering their peak earnings years. Under any universal coverage approach, however, subsidies will always be required to help low income people buy insurance whether they are healthy or sick.

  18. Mr. Fembup:
    I am always pleased when policymakers are honest about their intentions and prepared to live with the consequences, but in my opinion the NY community rating system has caused an unfair redistribution of wealth. If (for example) a 25-year old free-lance web designer who earns $40,000 a year is heavily subsidizing the health insurance of a 60 year old self-employed attorney who makes $150,000 a year (and both of them have essentially the same health status), that doesn’t seem fair to me. Regardless of what you or I think is fair, I wonder if such intergenerational subsidies are politically sustainable—apparently folks in NY think so, since the system has been in effect in that state for roughly 15 years (right?), but I doubt if that kind of redistribution would be acceptable in most other parts of the country.
    Yes, I agree Medicare also redistributes wealth from the young to the old. I think that redistribution is also excessive. In my opinion, every generation should pay (most of) its own way. This does not preclude the healthy and affluent subsidizing the sick and impoverished within a generational cohort, which I strongly support.
    You ask, “Can you think of an insurance plan that does not redistribute wealth?” This is a fair question. Traditionally, employer-sponsored health plans have adjusted the employee share of premium for family size only, but not age. But even that system is gradually falling out of fashion, as more and more employers (like mine) adjust employee premiums according to the employee’s income, which makes financial burden of private health insurance more equitably distributed.

  19. “The bottom line: community rating in New York has redistributed wealth from the young to the old.”
    Thanks for the info skeptic.
    The variation was known before the regulations were written. I’d say that result is exactly what the regulators intended. As a benefits manager, I think a difference of 4X’s to 6X’s between youngest and oldest plan participants is too much. We have a differential that ranges between 2X’s and 4X’s in our plan, depending on income of the participant.
    This kind of intergenerational subsidy is exactly what happens in Medicare, BTW.
    Can you think of an insurance plan that does not “redistribute wealth”?

  20. “(1) malpractice litigation and defensive medicine, (2) prevalence of use of electronic medical records, (3) end of life care, and (4) expense and effort to save very premature babies.”
    Barry, I will not be able to give your question the depth answer deserved as I am leaving for Canada to spend xmas. We will be staying with our regional hospital CEO friend and I will attempt to discuss up-to-date issues with her. But for the short answer we have discussed malpractice here very much and if I remember Canada turned up slightly higher awards while the U.S. showed much higher frequency of suits. The Canadian tort system is different as well, as is type of evidence needed to win malprctice. Physicians in Canada are also mostly insured under the CMPA, http://www.cmpa-acpm.ca/ You can read their web site. I will also give you a couple of other sites to read:
    I hope the links come out OK.
    IT is harder for me to pin down as are the end of life amd premi issues. I will do more research and probably email you with better answers. From my personal experience on end of life, when my mother was in an old age home and I had power of attorney, I was asked every year to sign a form that showed my wishes. Several choices were from, let her die with no intervention to do what it takes. So I was in control, not some government official. I have to run now but here’s another link for you on IT.
    Happy Holidays

  21. Mr. Fembup:
    Here is a quote from an early assessment of the New York community rating law:
    “Before passage of the [community rating] statute, going rates varied four- to sixfold for persons age 20 to 64. Under the statute, premium compression reduced top premiums by about 20 percent for 9 percent of the insured groups and 18 percent of the insured individuals. At the other end, 21 percent of the groups and 30 percent of the individuals received rate increases of up to 20 percent, with 5 percent over 100 percent..”
    Source: R. Epstein, “Mortal Peril: Our Inalienable Right to Health Care?” (p. 125)
    A more recent study of state “reforms” (including New York’s) for the individual health insurance market by the Commonwealth Foundation contains a similar finding: “Community rating has dramatically increased coverage costs for younger, healthier people.”
    Source: “Insuring the Healthy or Insuring the Sick? The Dilemma of Regulating the Individual Health Insurance Market,” Commonwealth Fund, February 2005. (p. 5)
    The bottom line: community rating in New York has redistributed wealth from the young to the old.

  22. I thought Martin won and Hilary Care is coming what is this other stuff? Hilary Care is the answer because insurance agents out there don’t care about the consumer just about their commissions. Look at this article.
    This might be of interest to you. Guys we have no one but our selves to blame for these problems. I try to stand up for Americans but get shit on by other brokers. Wake up or Hilary will be sleeping with you soon.
    December 19, 2006 — Chicago — Illinois Attorney General Lisa Madigan today filed a lawsuit against the fifth largest insurance brokerage company in the United States, alleging that the company authored and participated in a several business-steering schemes that raised insurance prices for Illinois consumers.
    The civil complaint, filed today in Cook County Circuit Court, alleges that Acordia, Inc., a subsidiary of Wells Fargo Bank, violated the Illinois Consumer Fraud and Deceptive Business Practices Act by demanding and receiving undisclosed contingent commissions from insurance companies to induce Acordia to steer business to those insurance companies, regardless of the price or quality of their policies. Contingent commissions are payments that insurers pay to brokers, such as Acordia, in addition to the base commissions. Contingent commission amounts generally are based on the volume and profitability of the business a broker or agent produces for an insurance company. Madigan’s investigation found that, because contingent commissions are based on volume and profitability, they encourage brokers to improperly steer their clients to particular insurers in violation of the fiduciary duty they owe their clients.
    “It is of great concern that one of the country’s largest insurance brokerage companies, which hold itself out as an unbiased customer representative, would demand payments to steer its clients to specific insurance companies in the ways we have alleged in this lawsuit,” Madigan said.
    In its lawsuit, the state seeks restitution for injured policyholders, civil penalties under the Consumer Fraud Act and an injunction that would bar Acordia, Inc. from engaging in the alleged conduct in the future.
    As an example of the conduct at issue in the lawsuit, the complaint alleges that, from 1999 through to the present, Acordia initiated its “Millennium Partnership Program,” consolidating all of its insurance business to a small number of insurance companies that paid Acordia substantial fees to place high volumes of Acordia’s clients with these “Millennium Partners.” These fees included prepayments for steering future customers to a “Millennium Partner.” So, that Acordia was obligated to place business with that Millennium Partner or pay back the advance. None of these agreements were disclosed to Acordia’s clients.
    For those insurance companies that refused to become “Millennium Partners,” Acordia is alleged to have threatened not to place any business with them or got them to enter into second tier contingent agreements for lesser payments.
    Madigan’s complaint alleges that Acordia worked to transfer large blocks of customers to the “Millennium Partners,” including enlisting its parent company Wells Fargo bank to refer its banking customers to Acordia, so that Acordia could funnel those clients to the “Millennium Partners.”
    The New York and Connecticut Attorney General’s offices also filed complaints against Acordia, Inc. today based on their investigations of customer steering. Madigan’s office has been working cooperatively with the Attorneys General of New York and Connecticut.
    The Acordia lawsuit is part of the Illinois Attorney General’s wider investigation of the insurance industry, which began in late 2004. To date, Illinois has settled with several insurers and brokers, resulting in the recovery of tens of millions of dollars in restitution and penalties.
    Public Interest Division Chief Benjamin Weinberg, Public Interest Division Deputy Chief Brent Stratton and Assistant Attorney General Mark Kaminski of the Special Litigation Bureau are handling the case for Madigan’s office.
    Source: Illinois AG’s Office

  23. “The size of this subsidy appears to be much larger than can be justified by application of any reasonable fairness principle”
    More information, please?

  24. Dear Mr. Fembup:
    New York’s community rating law may help individuals with pre-existing conditions get access to health insurance, but it accomplishes this goal by forcing relatively less affluent young people (e.g., 25 year olds) to heavily subsidize the premiums of older folks (e.g, 60 year-olds). The size of this subsidy appears to be much larger than can be justified by application of any reasonable fairness principle (i.e., “The healthy and wealthy should subsidize the unhealthy and poor”). I do want to help the uninsured get insurance, but I cannot support a subsidy scheme (such as New York’s community rating law) which redistributes so much wealth from the non-affluent young population to a relatively affluent older population.

  25. Skeptic said,
    “universal coverage with community rating does not eliminate insurers’ incentives to increase profits by avoiding individuals expected to generate high health care costs. Only a sophisticated mechanism for risk-adjusting of premiums can minimize risk selection problems in an insurance market with multiple carriers”
    The State of New York manages a risk-adjustment pool for its community-rated employers. It works for all practical purposes. It’s not perfect but perfection is a false standard anyway.
    Community rating in New York is required for small groups – those sponsored by employers having under 51 employees – and for HMO’s sponsored by employers of any size. Community rating does not apply for any other groups.
    New York does not require either universal coverage or universal community rating, so runs counter to Paduda’s comments.

  26. Peter – I think you misunderstand. Under the Wyden approach, the Lewin report indicates that the average premium for single coverage would be $357 per month. In a region where that was the actual rate that everyone seeking single coverage paid, the Health Help Agency (HHA) to whom the money was paid would send proportionately more than that to insurers whose pool is riskier than average and less to those with below average risk pools. The individual insured would pay the same whether healthy or sick. Nobody is penalized or disadvantaged for being sick.
    I agree with you on your consolidation point. Indeed, in the Medicare Part D and Medicare Advantage programs, the top five insurers already control the vast majority of the business. I think if we got down to between 4 and 6 national insurers (defining all of the Blues as one plan, not 38 plans) plus Medicare, Medicaid and Tricare, I think that would be optimal. Administrative costs might be a bit higher than under single payer, but the benefits of competition would increase the likelihood of innovation, spread of best practices, and the opportunity to take your business elsewhere if you are not satisfied with your current insurer. I think single payer advocates are way too focused on the administrative cost issue and not sufficiently sensitive to risks of being stuck with a plodding, unresponsive monopolist. I would be very pleased if we could eventually drive our healthcare costs down to 13%-14% of GDP (vs 16% currently and 10% in Canada). We will have somewhat higher administrative costs, our doctors will earn more money than their Canadian counterparts, and our wait times will be shorter.
    Since you know a lot about the Canadian system, perhaps you could shed some light on how much of the cost difference between our two countries is attributable to differences in each country’s approach to: (1) malpractice litigation and defensive medicine, (2) prevalence of use of electronic medical records, (3) end of life care, and (4) expense and effort to save very premature babies. The Wyden proposal claims to be able to save about $30 billion net (1.5% of current total spend) on administrative expenses which is helpful but not huge in the overall scheme of things.

  27. Barry, in NC the hurricane/flood zone is east of I95. If insurers want to do business in NC they have to insure certain % east I95. I could go on forever about my rage at government subsidized risk location. But I guess something like that with Wyden Plan is what you mean. By risk pooling you punish the sick and reward the healthy. That would have merit if people/society could/would connect healthy lifestyle to healthy. But many health problems are not a result of lifestyle or at least controllable lifestyle. Tell the 5 year old he needs to get out of the poor neighborhood to be healthier. I still don’t think the universal system will work as well as it could, or maybe even at all, as long as there are so many insurance players in the game. Consolidation, an accepted business practice to create more efficiencies of scale , is what we need to reduce the paper trail. Ask the docs if they would like one insurer to bill with one set of rules and consistant/predictable reimbursements. But again, this is still about profits not healthcare.

  28. Peter,
    When you have multiple insurance companies offering insurance coverage within a region, it is inevitable that some companies’ pools will be more or less risky than others. In the case of Medicare Advantage plans, for example, CMS has a methodology for calculating a risk score for each individual. A score of 1.0 is average and the range can be from below 0.5 to above 2.0 for most people and, perhaps, above 3.0 for very frail people with multiple co-morbidities. So, a company whose pool of insureds averages a risk score of 1.1 is paid 10% more than a company whose average score is 1.0. If the average score is 0.9, they are paid 10% less than the so-called benchmark rate (1.0 risk score). I am not sure how they calculate the risk score, but my understanding is that it is based, in part, on claims history and, perhaps, partially on a risk assessment completed by the beneficiary.
    Under something like the Wyden proposal, you could easily construct a system that is community rated at the individual insured level but risk adjusted at the insurance company pool level. This should mitigate the incentive to cherry pick better risks and avoid worse than average risks.

  29. I don’t quite get this community rating stuff in relation to universal coverage. In universal coverage why would you need community ratings unless you continue to support the existing 1500 insurance company system we have now? Why can’t Americans expect the same coverage rate in any state, at least in every county within a state? If you apply communtiy ratings within counties then poor counties will need higher rates as that population sees more medical needs. Poor states will be rated higher. Seems counter productive to the goal of universal coverage. Is this about profits or healthcare coverage?

  30. Martin, I know what you mean. It’s not only difficult to understand for most people, but they compound the problem be seeking answers from those that have no knowledge of how the system really works, or from those that have a stake in the game and are lobbied by the carriers to… well… lie to them. Sadly, they go forward with that bad information and make decisions based on it.

  31. Martin appears to be right. I think Hilary Care is the answer when I had my radio show I used to say I thought she was a hotty. I guess that’s why I am out of the radio business. Regardless Martin wins move on.

  32. Dear Elliott G:
    If you Google “GAO Considerations for Risk Adjustment Under Community Rating” you will get a link to a GAO study which makes it clear that universal coverage, by itself, will not do much to improve the feasibility of community rating (see p. 4). Other studies by Mark Hall (“Is Community Rating Necessary for Managed Competition?”) and Richard Epstein (“Antidiscrimination in Health Care: Community Rating Systems and Pre-Existing Conditions”) lead me to the same conclusion.
    I do agree with you that a strong dose of intelligent regulation of insurance markets can help reduce risk selection problems. However, even when guaranteed renewal and similar regulatory requirements exist, health economists who have looked for biased selection problems in private insurance markets usually find them. Hence the need for some sort of mechanism which can risk adjust premiums.
    I think what is needed to fix selection problems in insurance markets is a blend of policy tools, i.e., appropriate regulations, standardized benefit packages, useful information for consumers, and some sort of adjustment of premiums which takes into account more variables than are considered in a typical community rating scheme (e.g., age, sex, and zip code). I am all for keeping it as simple as possible, but if its too simple I fear that insurance markets will not function properly.

  33. Tim
    With all due respect, you made my point. The issues are endless, if for no other reason things are constantly changing. You also may be overestimating the abilitiy of teachers to teach this stuff, students to learn it and RETAIN IT.
    We need to shed all this massive complexity.

  34. Skeptic,
    I’d welcome some citations although I fail to see where you will find them for community rating combined with universal coverage. Your objections seem unfounded. The argument that you need some “sophisticated mechanism for risk-adjusting of premiums [that] can minimize risk selection problems in an insurance market with multiple carriers” seems like a red herring. Explain how sophisticated a must-underwrite policy need be and this argument also ignores the rather substantial insurance regulation currently in place in every state. If anything, the regulation would seem to be simpler.

  35. Martin,
    What I mean by taking a class is just that… literally. You wouldn’t believe ( or maybe you would ) the amount of bad information out there given out on a daily basis by :
    1) Uneducated agents
    2) Big brokers
    3) Carriers
    4) CSR people at the carriers
    5) State Departments of Insurance
    6) Tax attorneys who think they know everything
    7) Friends/family who think they are helping
    The list goes on and on. I’m willing to wager that I could randomly poll a thousand people on the street next week, and 95% of them wouldn’t understand the basics when it comes to health insurance, let alone the strategy that I show business owners and employers.
    For example –
    1) My GA commission rep thinks COBRA is a carrier.
    2) Several people here think of HIPAA plans as what is commonly referred to as individual insurance.
    3) My parent’s CPA thinks 105 is strictly for self funding and larger employers ( say, over 100 ).
    4) One of the directors at the Indiana DOI has never heard the term “cafeteria plan” or “125 plan”.
    5) Some people here don’t think individual plans are creditable coverage.
    6) The vast majority of CPA’s I have met with ( over 100 in the last couple of years ) have never heard of Section 105.
    7) A tax attorney here in Cincinnati says you can’t pay for an individual policy for an employee because “it says so on the paperwork”.
    8) Most people have no idea what the difference between copays and coinsurance is, and how it affects them. They also don’t understand what their OP MAX is if they have coinsurance.
    9) Most people have no idea about everything covered/not covered by their plan, or what “out of network” means.
    10) Most people think that just because they called into the carrier and they were told something “was covered”, that it is of no charge to them.
    I could go on and on. People need to be educated in the basics so they aren’t getting ripped off later on and throughout life. Why do you think everyone is getting hammered? They don’t know they have any other choice or options.

  36. Well, I’m not sure if Elliot G. is attacking me or defending me. In any event, I do believe that blogs should promote civil discourse and I think I’ve lived up to that standard. If my comments about community rating seem harsh, its because my interpretation of the literature tells me that community rating is likely to produce very bad outcomes—if you’d like some citations, let me know and I will be happy to show you the evidence.

  37. Skeptic,
    There’s a difference between a skeptic (someone who views evidence critically or adopts a position of doubt) and naysayer (an agressively negative attitude). Debate with a skeptic is useful in that it refines your arguments and has the possibility of changing someone’s mind. Debate with a naysayer is a waste of time.

  38. Good article Matt and I think I agree. I have always said we are all in the same pool. By recognizing that, we can then begin to identify how and why we are getting sick people (costing us money) and what can be done with policy to prevent that. The problem seems to be that we all want this policy to work within the private, for profit, insurance industry. Why? What have they done for us lately? We cannot continue with ideas that have got us to this point now and expect any real change. Stay the course is not a solution.

  39. Gee, I guess nobody thinks taking a class on buying insurance will solve the problem. Well, let’s invite the insurance crowd to accept a new role – improving enrollee health status. As long as they can make a profit they won’t go away. Let them bid for neighborhoods/territories. We are closer to measuring small area health status. Allocate based on health status deficeincy – reward based on health status improvement. If we don’t break some old molds we will be blogging into oblivion

  40. Dear Joe:
    In fact, community rating will not work in either a voluntary insurance market or in a market with universal coverage. While a requirement that all individuals obtain health insurance could prevent healthy individuals from opting out of the insurance market, universal coverage with community rating does not eliminate insurers’ incentives to increase profits by avoiding individuals expected to generate high health care costs. Only a sophisticated mechanism for risk-adjusting of premiums can minimize risk selection problems in an insurance market with multiple carriers.

  41. Thanks Matt.
    Skeptic and Tim – I don’t understand your logic. How is community rating NOT the answer to risk selection, if the question is “how do you prevent it”?
    The other attempts to mandate community rating have failed because they did not include universal coverage. Without universal coverage, community rating does not work. Wit it, it works very well.
    Joe Paduda

  42. The only thing that needs reform is the distribution model of the product and it’s commissions.
    That, and everyone should be required to take a class in high school about health insurance, how to buy it, how to NOT buy it, and how to use HSA accounts.

  43. Sorry, but community rating is not the answer to risk-selection problems; in fact, government mandated community rating is usually a sure-fire way to exacerbate risk-selection problems, even if when applies to all insurers. Prior attempts by the states to mandate community rating (e.g., Washington state, New York) have produced bad outcomes. In other words, the Law of Unintended Consequences applies here.