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 eHealthInsurance.com 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 eHealthinsurance.com 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.

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John R. GrahamJohn R. GrahamMD as HELLTom LeithPeter Recent comment authors
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Peter
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Peter

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: http://www.realclimate.org/index.php/archives/2005/01/the-global-cooling-myth/ 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… Read more »

Nate
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Nate

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. http://www.tdi.state.tx.us/rules/0822-059.html 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… Read more »

John R. Graham
Guest

Nate, you state that “Right now it is illegal for an employer to pay a hospital or other healthcare organization a capitated amount.”
To which law are you referring? (E-mail me at jgraham@pacificresearch.org if you prefer.)

John R. Graham
Guest

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 http://tinyurl.com/mp7koc (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… Read more »

Deron S.
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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.… Read more »

Nate
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Nate

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.… Read more »

Peter
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Peter

“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… Read more »

MD as HELL
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MD as HELL

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… Read more »

Deron S.
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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… Read more »

Peter
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Peter

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… Read more »

Tom Leith
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Tom Leith

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… Read more »

Nate
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Nate

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?

Peter
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Peter

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.

Nate
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Nate

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,… Read more »

Gregg Masters
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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,… Read more »