Matthew Holt

A little more on insurers, and reform means more of the same

Matthew HoltIn 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 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 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.

Categories: Matthew Holt

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31 replies »

  1. So Mayo is operating illegally by paying it’s docs a salary?
    Nate, I’ll refer you to this on the fraud about falling temps:
    If you go through the web site all the supporters of this hoax are answered.
    “Why we can’t “force” anybody to do anything, even when the group would benefit, that’s not the “American Way”.
    “Your so detached from personal responsibility…”
    You obviously didn’t pick up the sarcasm. We need more responsibility to the group not less, that’s a large part of this problem. But we don’t want Nazi compliancy rules.
    Deron, I’m not sure if that’s the answer, but think it may have protential, certainly healthcare motivation rather than profit motive may get this money train slowed down. Government could do it either through legislation in healthcare reform, either with incentives or the law.

  2. John to be fair Congress does oversee an agency, NASA, that did land a rocket on the moon, that is far more successful then any healthcare plan they are responsible for.
    NV and every state I have administered plans in forbid anyone without an HMO license from paying a capitated rate for care, they consider it insuring which requires a license. They also forbid providers from accepting capitated payments without an insurance license.
    From CO
    “If a health care provider enters into an arrangement with an individual, employer or other group that results in the provider assuming all or part of the risk for health care expenses or service delivery, the provider is engaged in the business of insurance. Providers wishing to engage in the business of insurance must obtain the appropriate license (e.g., sickness and accident insurance company, health maintenance organization, etc.) from the Division
    of Insurance.”
    I have never come across a state that doesn’t have something very similar to this.

  3. Nate, congratulations on identifying the association element of the California rate hike suffered by the Hollywood set. California destroyed the association market via AB 1672, which also rate-regulated the small-group market in the early 1990s. I wrote about this at (pp. 26-27). Your comments above correspond almost completely with my own. Matthew Holt cannot seem to understand that when it is illegal for an insurer to charge an actuarially appropriate premium, it will shirk from issuing the policy – no matter how “greedy” its executives are or not.
    In California, because the individual market is underwritten and the association market is modified community rated, the association market has suffered a death spiral for obvious reasons.
    The politicans listening to the ex-Cigna flack’s testimony would no more understand this than they would understand the design of a moon rocket.

  4. Again Peter, anger. I was just making an observation because you introduced your lifestyle into the conversation. Nate gets pummeled by pretty much everyone so there’s not much I can add to that. Besides, he’s farther Right than I could ever be. I’ve found that I have more common views with moderates like tcoyote and jd. I prefer the pragmatic over the ideologic any day.
    Regarding the Mayo model, you raise a good question for which my only answer is: Mayo did it long before the government ever tried so I’m thinking the private sector is ahead in that respect. My question to you: How do we get there WITH government intervention?

  5. Peter, your just not smart enough to argue with. Thanks for the LONG list of things I never said. This is a common problem with the tools on the left, your knowledge is so limited you can’t grasp the consequences and effects of reality. Being the good person I am though allow me to educate you once again;
    “all you seem to want is a system where insurance companies control all aspects of healthcare.”
    I have said NUMEROUS times insurance companies should have ZERO control over any aspect of healthcare besides reimbursing people for large or unknown claims they incur. All care decisions should be between the patient and the doctor and no one else. I have frequently said our current system is a bastardization that no longer represents the concept of insurance. I want insurance companies to be insurance companies and that is all.
    “You want more denials of coverage,”
    I want clear policies where insureds know what will be covered and actuaries know what they are underwriting. Courts should not b allowed to change covered benefits after the fact.
    “you want more recissions (it’ll scare the hell out of them, hee, hee)”
    I want no recissions, simpletons click their heels and hope for a perfect world where they are not allowed and no one games the system. I’m honest and intelligent enough to know that is not reality, as long as people are allowed to buy insurance only when they need it carriers must be allowed to make sure they complete their apps honestly. If people filled out their apps with out lying there would be no recissions.
    “you want more risk assessment fine tuned by those actuary types”
    That would be terrible if insurers knew the risk they insured wouldn’t it? If you don’t want insurance then stop using insurance to finance our healthcare.
    “you want higher and higher premiums for sick people whether they were born with an affliction or developed it,”
    I want people to pay fair premiums for the risk they propose. Someone that has always had coverage should be covered by pooled risk and pay a reasonable premium based upon their health when they bought the coverage. Someone that forgoed insurance and pocketed the savings should be charged till it hurts. I only oppose people gaming the system at the expense of honest people.
    “where only insurance companies determine what health we get”
    Where has this ever been said? See above it’s the exact opposite.
    “even though if we don’t do it it’ll be hell on earth and you’ll end up paying anyway?”
    Yes these dropping average temps are going to burn us all right off the earth. Read Kyoto then open your trap, GW Legislation is about redistributing wealth not saving the earth, that is why all those advocating for it fly around int heir private jets causing so much additional damage, if it was serious Al Gore wouldn’t have such a HUGE F’n carbon footprint.
    “and to hell with future generations left to clean up the mess that, “irresponsible individualism” created.”
    By mess do you mean the 50 trillion shortfall in Medicare? The unfunded promises of Social Security? State and public retirement plans and benefit plans underfunded to the tune of hundreds of billions? Those messes?
    “Why we can’t “force” anybody to do anything, even when the group would benefit, that’s not the “American Way”.
    Your so detached from personal responsibility you can’t even see it when it hits you upside your head. How would I handle it? When someone doesn’t care enough about their own health or life that they incur avoidable medical expenses I would not pay for those medical expenses. I could care less if the person complies or not, it’s not my place to tell them how to live, it equally or more so is not their place to tell me I need to pay for their decisions. I don’t force them to get treatment or change their lifestyle and they don’t force me to pay for theirs. It is a simple concept thousands of years old, how can you not grasp it?
    Peter no one on the right post such complete garbage as you do, that is why you get such a harsh reaction. No one is going to claim I hide my opinion or its hard to figure out what I think, yet you somehow manage to misrepresent it 10 times in one comment. Your lazy and don’t bother to learn the facts before you comment, if you don’t respect your opinion before you give it why should I respect it when you throw it out there? People are allowed to have opinions, your not allowed to go around just making stuff up because you have an ideological goal. With some of the stuff you say you should be embarrassed. If someone on the right came out and made stuff up like most of the propagandist on the left do I would correct them and do. The left lied to pass Medicare, The left Lied about HMOs, the Left is lying their ass off about reform today. If your going to try to once again pass reform on a bed of lies I am going to work my ass off to expose you as the liar you are. I would love nothing more then to have an honest debate about healthcare, identify the problems, and actually solve them. But when he left starts every discussion with lies that is impossible. I.e. there is 25% overhead in private insurance that can be eliminated and pay to cover all the uninsureds.
    FYI I can’t stand Limbaugh and for the 100th time I make my living competing with insurance companies. My entire income is based on helping employers reduce the premium they pay to insurance companies and eliminating waste and excess profit from healthplans. I have told you this countless times before yet you still misrepresent what I do and generalize me. I have done more to help make insurance affordable and keep people insured then every liberal in Washington combined. Yet you still group me in with insurance companies. That is why you’re disrespected, you go out of your way to lose any someone might give you.
    “I want the Mayo model for the entire U.S. system, tell me how we’re going to get there without government?”
    By removing government impediments. Right now it is illegal for an employer to pay a hospital or other healthcare organization a capitated amount. Other places it is illegal for the providers to accept it, they get you going both ways. In rural communities single employers are larger then the market share of insurance companies. Why should an employer have to pass their capitation through an insurance company, who takes a chunk off the top, to pass it on to the hospital. In rural settings it would be a boon to the hospitals to have set budgets instead of FFS. It is illegal because the state wants their share.
    Why can’t I pay my PCP $x a year to treat me, he would have set income so he wouldn’t need to treat as many people, I might actually be able to get in when I needed to, and it is more efficient then paying the 20%, not 25% Jeff, markup insurance has. Because it is illegal.
    How about the government pay fair reimbursements for Medicare and Medicaid patients so my providers don’t need to over bill me?
    The reason we are not there is government not the other way around. All this was done in the past until government made it illegal.

  6. “Mayo and Geisinger don’t need a “government option” to deliver quality, affordable care so why is it the solution at the top of everyone’s list. Why don’t we look at what they do and build a healthcare system around that? I’m simplifying here, but I think you get the point.”
    No, I don’t get your point. The Mayo Clinic pays docs a salary so that they have no financial interest in utilization. Ok, I’ll agree with you, I want the Mayo model for the entire U.S. system, tell me how we’re going to get there without government?
    How come you never berate Nate for his “anger”, not to mention his insults or just plain stupid remarks not intended to further the conversation? Could it be because he advocates YOUR ideology? Also, don’t patronize me for my assumed “anger” and my health, you don’t have a clue what your talking about.
    MD, Cost of living in 1978:
    Average Cost of new house $54,800.00
    Average Income per year $17,000.00
    Average Monthly Rent $260.00
    Cost of a gallon of Gas 63 cents
    1LB of Bacon$1.20
    Dozen Eggs 48 Cents
    Wouldn’t it be nice to get our our time machine when we want healthcare. I suppose the government is to blame for all of the above price increase as well.
    “Get the government out of healthcare and the cost is manageable.”
    That would assume there would be someone left to “manage” it. Do you really think the government now is doing any real management?

  7. Starting to snipe at each other for relative differences in choices? This is exactly why the Pilgrims came here. Healthcare has become a secular religion. We are experiencing religious intolerance. When we pass the plate we do not command a certaain level of giving. When we pay for healthcare is should be for the care we value as individuals.
    Get the government out of healthcare and the cost is manageable. In 1978 an office visit was $12.00. A CBC was $4.00. CT scans were rare and dialysis was rationed by an ethics committee. Now we complain about poor quality care when we have MRI, MRA, stents, transplants, PEG tubes and home health. And the cost is through the roof. What is wrong with this picture? Are we really measuring quality? Are we really proposing that everyone has a right to this courtesy of Borg Obama?

  8. Peter – It sounds like you’re doing a lot to ensure that you’re leading a healthy lifestyle. Now you just need to work on that anger. That’s unhealthy too, you know.
    Nate’s just tired of the crap that the Left is dishing out, as I’m sure you’re tired of the crap that comes from the Right. The common ground is the fact that politicians are not action-oriented, pure-hearted individuals that have only the best interests of you and me at heart.
    Mayo and Geisinger don’t need a “government option” to deliver quality, affordable care so why is it the solution at the top of everyone’s list. Why don’t we look at what they do and build a healthcare system around that? I’m simplifying here, but I think you get the point.

  9. Universal budgets are not communism idiot, (your most used word), they’re there to say that healthcare is a finite resource that everyone needs access to, not just those who can afford it or those who can create more debt to get it. Healthcare is not your feeding trough to wealth through waste.
    Nate, all you seem to want is a system where insurance companies control all aspects of healthcare. You want more denials of coverage, you want more recissions (it’ll scare the hell out of them, hee, hee), you want more risk assessment fine tuned by those actuary types, you want higher and higher premiums for sick people whether they were born with an affliction or developed it, (get them the hell off our books). You want more denial of care unless it’s, “in the contract”. As long as you’re Red Baiting I think you want Corporate Communism, where only insurance companies determine what health we get, or at least only what we can afford (yes the premium without cancer is $40 cheaper) as that’s getting harder and harder because you’re so caught up in dinosauric ideology you can’t see that we’re headed for another financial meltdown, only this time it’s healthcare. Gee Nate, is enacting Global Warming legislation (MANDATED) “communism”, even though if we don’t do it it’ll be hell on earth and you’ll end up paying anyway? Maybe you’re one of those people who are only interested in getting through YOUR life as cheaply as possible and to hell with future generations left to clean up the mess that, “irresponsible individualism” created.
    “As a perfect example I am working on a group now where a non compliant diabetic cost this small employer 200K+.”
    Nate, “non compliant”? Just how would you have handled that and not fit your own description of communist. Why we can’t “force” anybody to do anything, even when the group would benefit, that’s not the “American Way”.
    Tell me Nate, what’s preventable (compliant)? What’s your lifestyle like; exercise (at least 3 times a week), eat everything organic, no sugar, vegetarion? If you do all of those things do you live where there’s no pollution, if so why don’t you move? And what about kids trapped in their parent’s life style, how do you “risk manage them” for their parents “non-compliance”? Hell, if you don’t live like me, (ALL of the above), I sure don’t want to pay for your non-compliant “lifestyle choices”.
    If you ever pay attention to my past posts, between your insults and just plain rudness (to everyone you don’t agree with), you’d see I want “compliance” too. But I’ve called for a tax on fast food or even a calorie tax so that people CAN make their own decisions but still pay society for their bad choices. I also want NO marketing of junk food to children, wait, that would be “communism’ because it would require government action. But I bet you’re against anything, short of total insurance dominance as the cure all.
    Go sit with Limbaugh, you’ll get along fine.

  10. Nate asks:
    > Any of the medical providers that read this
    > at all worried about Peter’s plan for you?
    The other half of their practices falling to Medicare rates is the only thing they’re worried about.
    To be fair to Matthew, he emphatically does not want “Medicare for All” — he does not advocate a single payor system. In a way what he really wants is a “Single Purchaser” system that negotiates price and coverage with the plans (payors) on behalf of families. The intermediaries can gather the intel and build contracts in order to pursue allocative efficiency, and the Single Purchaser deals with issues of distributive efficiency. This is what is done in most of Europe — the UK is the exception. If we must have a Single Purchaser, I’d prefer to have 50 Single Purchasers because I’m much more a Chestertonian Distributist than a Hamiltonian democrat, but that’s another whole discussion.

  11. Peter can you explain the difference between universal budget and indentured servatude to me please? To be fair it would more closely resemeble communism then slavery but when the federal government tells you how much you will make, when and how you work, and takes that much control we have pretty much said good bye to freedom.
    What I really want to know is are you OK with communism or did you just not realise what you where advocating?
    Any of the medical providers that read this at all worried about Peter’s plan for you?

  12. By Nate:
    “John, people are opposed to the public option because it will most likely set its reimbursement rates by law not negotiation”
    The only way to get control of costs, it’s called universal budgets. “Here’s what we’ll pay, live with it, deal with it, get your costs down if you don’t like the profit margin.” You’re all kidding yourselves if you think this system will cut it’s own throat by reducing costs, especially if you want to use a private for profit/for bonuses insurance system to enact public health policy.

  13. Acually Gregg BeechStreet was never a TPA. I forget who they where with, CoreSource I think, but I quoted on them a couple time, to pay the claims for their own employees. We where just down the street and used them for two decades. Beech and Multiplan don’t own 80% of anything. They don’t own 8% even. Times have changed a lot since then, PHCS who use to require 5K plus lives to even talk to you will work with just about anyone now.
    Those where great days in the 90s though, CA was a blast, that ship sailed though, good times no more.

  14. Perhaps some familiarity….from health policy beltway bandit in early 80s through present; have negotiated, and implemented global full risk PMPM contracts for major hospital systems and risk bearing physician networks; founding member of first JV PPO to reprice claims per hospital and physician contracts in 1984 at Preferred Health Network. John Hancock was our beta payor. We set the industry standard for all PPO repricing systems to follow.
    Personally worked with founders of Beech Street, and the August fund, both TPAs with provider networks. I do believe Beech Street and Multiplan own perhaps 80% of the TPA/PPO market today.
    Set-up, and managed full risk IPAs, directed employer self funded medical plan for 3rd largest US hospital management company, organized the LifeCare Network of Orange County (aka Plexus Health Alliance) via 7 hospitals including UCI Medical Center, Anaheim Memorial Hospital, and 5 proprietary hospitals including Irvine Medical Center); negotiated single largest master PPO agreement with national market leader representing a consortium of payors (Private Health Care Systems) for the largest provider sponsored health plan in the DFW metroplex.
    Your point?

  15. Deron S not sure if your aware how bad it is now. It is illegal to make a person who chooses to be unhealthy pay more. As a perfect example I am working on a group now where a non compliant diabetic cost this small employer 200K+. Lost a few toes, etc etc. All preventable. Now to pay for this person’s life choices the other 40 people in the group must all pay more, have reduced benefits, and contribute more for insurance. If I was allowed I wouldn’t cover expenses for conditions resulting from non compliance, I would be breaking the law so cut benefits and raise the price it is.
    Matt and those leaning left are you Ok with this? Personally it pisses me off that people that need legitimate care can’t get it because resources are wasted on people that don’t care enough to take care of themselves. I can’t think of anyway to make a sustainable system when you allow money to be wasted like this. How do we make that work?
    Gregg lets start with the basic facts, he doesn’t even know what loss ratio means, what is laughable about me pointing that out? As to the rest of your comments…you don’t have any clue what a TPA is do you?

  16. Only thing more painful then reading some of these comments is seeing the US blow a 2-0 lead over brazil, just when you think we have arrived…
    “It seems clear to me that the reason the insurance people are opposed to a “public option” has nothing to do with health care and everything to do with losing a vast pool of now-uninsured and underinsured people who would jump at the chance to have better (or any) insurance.”
    John, people are opposed to the public option because it will most likely set its reimbursement rates by law not negotiation like Medicare does. When Medicare needs to save money it just cuts payments to providers, rather it is a fair reimbursement or not doesn’t matter, if providers need to compensate they have to over bill private insurance. Additionally public plans don’t have to honestly account for their expenses, a large portion of Medicare administration is paid by Congress and CMS, how do you compete with someone that doesn’t have to pay their own bills? Further still public plans don’t pay taxes or comply with regulations.
    Nothing has changed in the healthcare debate in 38 years. Kennedy’s proposal them is EXACTLY the same as what they are proposing today.
    Congress has been trying to nationalize healthcare since 1906. When Kennedy wrote and passed the HMO Act of 1973 they pre-empted state law. Congress funded their start up, was their main regulator, and controlled a large portion of their funding. To make sure HMOs won the battle for business they also made it a law that employers offer HMOs. If Congress didn’t want a handful of federally regulated carriers why do they allow them to keep merging into the mega carriers we have today? Why do they keep passing laws that make it cost prohibitive for small players? Why does it seem every law Congress passes benefits the insurance companies and Congress only?
    “if it was such a meaningless number, why did those very profitable insurers do it?”
    If you let people get away with lying on their apps more people will lie. If you bust a couple people for lying others will be scared. This is basic law enforcement and has been proven effective. Making an example of.
    After some searching I think I found the Aon comment you where referring to.
    “And you really can sit there and type that plans cant select risk? Go research AON’s activities in the municipal market where it directed healthy groups to plans who paid it bribes.”
    After rereading your comment I think I get what you meant, Aon helped plans select risk? Or Plans selected risk with the knowledge of Aon who got apiece of the action. Marsh got busted for something similar to this to. I’ll give you that one but I think you are overlooking why it happened. The placement and insuring of municipal plans is the dirtiest, most disgusting, crooked thing you have ever seen. We have been administering municipal plans in CA since the early 80s and what ever you think Aon did is not even the beginning of what goes on. For the record I was wrong and Matt does in fact know Aon, I humbly apologize for besmirching his knowledge of them. I should take more care in reading comments before I respond to make sure I am responding to what they say not what I think they are saying. Matt is still a far left whack job though!
    “I want to break down how much people pay by how much money they’ve got or make.”
    Matt I don’t really like my job, it’s long hours, to much travel, and people don’t like me. Can I come live with you? I won’t have a job and thus no income but you seem content to feed, house, and insure me. The way I see it by directly moving in with you I am doing you a favor, taking care of me in your home should be far cheaper for you then taking care of me via taxes. I take back my comment above and look forward to our new arrangement. Your are a great and compassionate person. I promise that unlike most people on food stamps and receiving free insurance I won’t eat/use/consume more then I need. I will monopolize the TV on Monday nights though, I just can’t get enough Big Bang Theory and How I Meet Your Mother.

  17. Dr. Schimpff has it right. You need to discourage unhealthy behaviors, and unfortunately, these days only money talks. Someone that feels that being obese is their right, should be allowed to stay obese if they so choose. Unfortnately, their right is costing everyone else money and they should have to pay extra to have that right. I don’t have a problem being in a pool with the rest of America, but I’m not ok with others crapping in it.
    Both social and personal responsibility need equal face time. If we focus too much on social, we will discourage personal responsibility and vice versa. The reason we haven’t reformed the system yet is because no one seems to be able to see that compromise.

  18. Settlement agreements with the Department of Managed Care, State of California:
    Anthem: $10, 000,000
    Blue Shield: $5,000,000
    Kaiser and HealthNet:
    For context and the history of regulatory actions against rescissions by major California health plans, see:
    “Department of Managed Health Continues Landmark Efforts to Extend Coverage to Consumers Stripped of Health Coverage”

  19. What the world needs now is another TPA! Got it…LOL!!
    Actually the so-called ‘paid hack’ testimony and efforts to discredit valid, and objectively verified criticisms of pervasive and shady industry practice is laughable.
    For a sampling of potential depth and range of this practice witness the following series of actions in process with the major healthplans in California:
    That a TPA is somehow ‘exempt’ from the collective failures which has priced health insurance out of the reach of both the group health (employer sponsored) and individual health markets, borders on delusional thinking; perhaps shielded by the fear based self interest of the TPA industry’s future under a heretofor undefined revised healthcare finance and delivery paradigm.
    Any insurance market or financing redesign, absent fundamental cost restructuring of the delivery system is the functional equivalent of ‘re-arranging the deck furniture on the Titanic.’

  20. Nate and me aren’t going to agree on much. He thinks that there’s some entty called “Congress” that is using big insurers as its puppet. I and 99% of political scientists think that it’s the other way around
    But lots of what he says rings true regarding Potter’s testimony. I think that they basically agree. Potter is saying that we have screwed up market place in which big insurers are taking advantage. I tend to agree with him. After all 20,000 recissions is still 20,000, and if it was such a meaningless number, why did those very profitable insurers do it? Obviously wasnt meaningless to them. Same with Aetna. If it went from 20m enrolees to 12m in a couple of years, it figured out some way to get rid of them, even if Nate claims that’s impossible. And Nate still hasnt explained the shenaningans that Aon and its associated and theoretically adversarial carriers carried on to rip off NY customers. (In fact Nate thought that I didnt know what Aon was, and hasnt bothered to correct himself)
    But essentially Nate is right, this is all about pooling risk. We need to collect all the money together and then pay out of that pool rationally for health care that’s appropriately delivered.
    Nate says that he’s OK with doing that in the small group market, and that he wants to break down how much people pay for health insurance by age, location, benefits & history.
    I don’t. I want to break down how much people pay by how much money they’ve got or make. I’m happy to call that a tax, but because Americans are told that taxes are bad and premiums are not taxes, lets call it a premium, or a giraffe.
    The point is, in my perfect world insurers are concerned about how to best spend the predefined aount of money coming in. I dont think that figuring out how to exclude people or charge them more based on by age, location, benefits & history adds ANY value to society.
    All the value comes from improving population health.
    I have some idea how a well structured intermediary like a Kaiser might do that in a, say, VAT funded voucher system.
    I have no idea how Nate’s TPA could do it, but I’d be willing to let him play.
    But the moment you walk down the road towards insurance voluntarily purchased in a market with insurance companies able to differentiate on any criteria, you’re moving into the world Nate & Potter describe, even if they have different views on it.
    And in that world 1) misery & financial suffering is transferred to the poor and sick and 2) there is no possibility of intermediaries focusing on improving population health.
    On another note, if I get time I’ll put up the options our broker ran for us and have Nate comment…that may be a while…

  21. You suggest that health insurance should have certain criteria for all insurers to follow such as identical deductibles, no ability to refuse insurance, and we all must opt in for insurance. There is another critical factor to include. Premium variations for adverse behaviors – more appropriately labeled incentives for healthy living. Let our insurance premiums go down if we do not smoke, do maintain an appropriate weight, do work on stress reduction, follow doctor’s suggestions for cholesterol lowering or blood pressure management. In short, we need to take some element of responsibility for our own health and our insurance premiums are a great place to create the monetary incentives to do so

  22. All that I read tells me we will eventually have universal health care via some kind of insurance. With coverage being optional, not mandatory, the cost of treating the uninsured will still be absorbed some kinda way into the system, just as it is now. But great numbers of poor and unemployed people choosing insurance will be able to do so, legally, because if their incomes falls below some (yet to be determined) multiple of the federal poverty level their premiums will be subsidized either by a tax credit or direct assistance from the general revenue.
    This has to be one big windfall for the insurance industry. Who cares where the premiums come from, even if they are provided by taxes?
    It seems clear to me that the reason the insurance people are opposed to a “public option” has nothing to do with health care and everything to do with losing a vast pool of now-uninsured and underinsured people who would jump at the chance to have better (or any) insurance.
    What am I missing?

  23. I think I need to take some time and do a public service. This Mr. Potter is getting way to much press and your readers deserve to know the truth. I’m sure you agree your readers should know the full story not just the progressive slant, right?
    First Mr. Potter was an executive of communications, he dealt with the media and spinning messages. This means he had no day to day involvement with the actual running of an insurance company and thus really doesn’t know how they work. The is clearly shown by butchering the meaning of loss ratio, something any first year suit and even a handful of receptionist can answer correctly. He doesn’t even come close to getting it right.
    Next lets look at the poor sob story of the Hollywood set and their insurance trust. What Mr. Potter and Matt don’t tell you is this is an association. To join the health plan you only must be a member of the association for 30 days, read their website. This Assoc is open to not only businesses but individuals. You all have on a rare occasion heard Matt refer to adverse selection, this is when sick people with large amounts of claims wait till they are sick to buy coverage. This is more common with individuals. What do you think happens with an Assoc with loss membership guidelines in CA and NJ, two of the most expensive insurance markets in the world?
    Please keep in mind CA is VERY progressive when it comes to insurance and this is what they said about it;
    “State regulators concluded that the trust members do not qualify under the state’s small-group rules, says Denise Schmidt, spokeswoman for the California Department of Managed Health Care. Nor does the increase appear aimed solely at causing members to terminate their policies, she says.
    “In looking at those rates, they don’t appear to be outside the norm, given the average age of the group, the (generous) benefit structure and the group’s claims history,” Schmidt says.”
    What Mr. Potter and Matt don’t want to seem to discuss is rates are based on;
    If based on those factors the State of CA says the rates they are asking are fair what is the problem here? A bunch of old sick people in the most expensive market want really rich benefits, it seems Matt and Potter are mad the rest of the country aren’t subsidizing them?
    Mr. Potter complains that insurance companies promised to eliminate pre-ex and didn’t. In fact pre-ex was almost eliminated with the passing of HIPAA. Again what he fails to discuss is pre-ex can not be eliminated until coverage is mandatory. You can’t allow people to wait until they are sick to buy coverage it just doesn’t work. It is up the Congress to make coverage mandatory, until they grow some balls and do what needs done the rest of the pieces can’t fall into place.
    He claims insurance is now dominated by large for profit cartels. Again this just shows he is a moron that can’t do basic research. Non Profits have around 50% of the private market and Public plans have close to half the entire market. For Profit insurers far from dominating only control about 25% of the lives.
    There have been around 20,000 individual policies rescinded in the last 5 years, that is out of 8 million plus individual policies. Total benefits saved are only 300 million out of the tens of billions paid. 300 million is rounding numbers. Over a 5 year period 300 million wouldn’t even get a foot note. To claim this effects stock price is stupidity. Further of those 20,000 a large number was from non profit insurers, the Blues, who don’t have stock prices.
    Next he wants to claim they dump small employers, again there are not many states this can even happen in. Take Matt’s CA for example, they have CalChoice Guarantee issue, rates vary from .9 to 1.1 so there is no possible way for an insurer to raise rates so high an employer is forced to drop coverage. Again to claim this has any effect on stock prices is stupidity.
    Next Mr. Potter wants to decry the act of not giving small groups their loss ratio. This is another ignorant comment that shows he never really worked in the industry. In one paragraph he complains that other companies didn’t subsidize the Entertainment Trust then takes issue with a small group getting a 22% rate increase when they had a 9% loss ratio. Small group isn’t rated by each group, it is called a pooled risk. Other groups in the pool had loss ratios of 1000%. How does this dump ass Potter expect the carrier to cover the claims of the super sick group if it doesn’t charge the healthy groups? These are the babbling of an idiot that has no idea what he is talking about. You can’t allow all your 9% loss ratio healthy groups to go buy coverage elsewhere and pay the claims for your sick groups you are required by law to keep. Mr. Potter just ignored every single rule of underwriting and law of mathematics.
    On to falling loss ratios. Again someone that worked in the business wouldn’t be saying what Mr. Potter is. What he fails to mention is loss ratios are greatly effected by the stock market. Carriers need $x to operate, a considerable portion of their operations are covered by return on investment. They invest their reserves and premium to cover IBNR, if they make a 20% return they can have higher loss rations because they make it up. If they are making poor returns in the market their loss ratio must be lower to cover expenses. Most people know the market was great 94-2000, then not so nice at all. Anyone who knows how insurance works would have told you in advance that loss ratios would go down because investment income dropped. He also leaves out Premium Taxes increasing, States have increased what they charge insurers to operate to cover shortages in Medicaid and other state programs. When the State Increases premium taxes 1% then the loss ratio must drop 1%. There was also a huge increase in regulation which cost money to comply with. Every dollar completing a new government report or mailing a new government notice is another $1.20 in premium and another drop in loss ratio.
    Mr. Potter then moves on to discussing plans. I would warn anyone who is in the communications side of the office to not attack plan designs when you are to dump to read them. He claims High Deductible Health Plans require you to pay more out of pocket. 95% of the time this is a complete lie. For the really sick HDHPs have lower maximum out of pocket then traditional plans. For the healthy, 80% of the population, the premium savings is greater then what they spend out of pocket. That leaves a very small sliver of people who have roughly $3000 to $5000 in claims per year as paying more out of pocket. Sorry HDHPs only manage to save 95% of the population money, they obviously should be done away with. Mr. Garamendi is scared to death of losing tax dollars. HDHPs deliver insurance more efficiently and reduce premium 30-50%. That means Mr. Garamendi’s budget is cut 30-50%. For the record CA is the only State where HDHPs are almost illegal. There are very few HDHPs you can sell with 105 plans and HRAs. They have saved employers in other states billions but in CA they are more concerned about protecting carrier profit and state tax revenue.
    My choice of words for Mr. Potter might be strong but I can’t express strongly enough how much of a paid partisan hack this idiot is. He works for a progressive advocacy group pushing a political agenda. He use to be a paid mouth piece for the insurance companies now anti insurance lobby is paying him. If Insurance companies offered him more tomorrow he would be back to towing their line. This individual is not an insurance insider with vast knowledge, he’s a paid dumb ass who can’t even get basic facts right after working around the business for 20 years. To quote or give value to anything this clown says does a disservice to debate and the creditability of those referencing him.

  24. The basics Matt the Basics. I own TPAs and happen to be licensed to sell insurance. Calling me a broker ignores 99% of what I do, and ignores the most important part of what I do, helping employers drastically reduce the premium they pay carriers.
    Do you not like human interaction? Why didn’t you sit down with a broker for 20 minutes and have them explain the options to you? It would have saved you one hour forty minutes, tought you a hundred things you missed, and most likely end with better results? Do you fix your car with self help books and diagnosis yourself off the internet? A broker has 20 years of comparing these plans and could tell you off the top of his head what the differences where and which would be best for you, in most cases it wouldn’t even cost you a penny more then you pay now.
    If we are going to have a functioning insurance market we need more then 2-3 insurance companies in each market and we need Congress to stop driving all the small players out of business. Congress has made it almost impossible for companies like mine to exist let alone compete against the mega carriers they love. It’s clear they want me out of the way but it’s annoying when they claim they care about cost and quality at the same time they are stabbing me in the back.
    You should be careful quoting Mr. Potter, his testomony was so error riddled I doubt he has any real experience in the industry. He reminds me of the fake soliders the left trauts out every couple months to toe the progressive line. As soon as they open their mouth you can tell they are lieing.
    It might be worse for the insurers but far better for the public. Reform on the table now will just enslave this country to another 30 years of overpriced and sometimes poor quality healthcare. We need to break the relationship between Congress and Insurers not strengthen it. You forget Mega Insurers are the vessles of Congress’s goverance. Congress and States always have and want to further pull the strings of their puppets. The reason you see mega insurers instead of public plans is Congress doesn’t want to be the target of the complaints that insurers take.

  25. Margalit, I for one am not talking about a system I would design if I could start from scratch.

  26. It seems that you all agree on three levels of plans, basic, intermediate and comprehensive and I assume they will be priced accordingly.
    I don’t understand that at all.
    Who is the basic plan for? Healthy people? Most everybody starts out healthy. What if someone on a basic plan develops a condition that requires lots of care? Are they just out of luck?
    Or maybe basic plans are for poor people?
    Shouldn’t universal care, by definition, be the same across the entire “universe”?

  27. Indeed, Wendell Potter steps up in exquisite ‘Markopolos-esque’ fashion to expose the under-belly of this ‘you rape em, we scrape em’ assault on the public health’s interest.
    I believe the California Department of Managed Care has also settled a number of egregious cases of unethical and illegal rescissions to the tune of a fair amount of money.
    Yet, the practice continues; and the cartel is well funded to execute both ground and air assaults designed to confuse and engender fear of the specter of a public option being a prelude to ‘government run’ health care.
    This is a classic Edward Bernays style strategic merger of ‘swiftboating’ and ‘harry and louise’ sound bytes into a tactful diversion to obfuscate the health reform issues on the table.
    Nice piece Matt.
    Absent a public option that ‘levels the playing field (government’s true role here) i.e., stipulating defined basic, intermediate and comprehensive benefits plans, eliminating cherry picking, and mandating community rating for premium calculations, we stay in the same ‘cost shifting charade’ that began some 30 years ago with selective contracting for hospital and physician services.

  28. I agree with almost everything you say this time. Nice effort to put it together.
    When Aetna discarded unprofitable business, how could it selectively throw off small groups in community rated markets? Did it just raise rates on everyone, in which case those firms that were economically weaker dropped, not those with worse risk.
    I’m not sure how much standardization you are proposing. This is not a simple topic, nor one that can be answered without doing a lot of market and consumer research on the sweet spot between customizability and unmanageable complexity. A good job for consultants. I assume there would be a small number of types of plan (the minimum permitted benefit plan, the middle plan and the cover-everything plan). Within each type of plan, there would be a defined range in which some things can vary. Presenting that information about differences in a standard, uniform way will be essential.
    Last point: there is a reason that the mid-level folks tend to agree with you and the C-suite does not. Two, actually: the C-suite has to answer to the board, which at a publicly-traded company is all about the bottom line. Second, and perhaps more important, is that the C-suite is looking only a couple years ahead. CEOs don’t tend to last that long at companies anymore, and most CEOs want to be able to continue to do things they way have learned to and have proven successful at. Their thinking is: “Not on my watch. Do your reform after I retire. I don’t want to deal with the huge headache and change assumptions I’ve worked under my whole career.” Of course, people tend to rationalize and find reasons not to change that aren’t just selfish. Don’t forget that many of those executives wouldn’t see the company through to the other side of reform.
    I, on the other hand, have 20-30 years more work ahead of me. I would love to spend the majority of it in a sensible system and feel like what I do is valued.