This is the first in a series of posts that will try to pierce the myths and reveal the facts about the reform legislation. This first post focuses on the impact that reform will have on the private insurance industry–and on the industry’s customers.
MYTH # 1: Health Care Reform represents a “boon” for private insurers.
FACT It is true that, beginning in 2014, virtually all Americans will be required to buy insurance, or pay a fine. But while insurers will pick up a boatload of new customers, many will be refugees who have been battered by a health care system that rationed care according to ability to pay. Think of the boat as a life raft. These could be very expensive customers.
Moreover, between now and 2014, insurers will face some serious financial hits. These new rules will make our health care system fairer and more affordable But the rules also suggest that for-profit health insurance may not be a viable business unless insurers learn far more about what is best for patients.Continue reading…
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” Charles Darwin
In her 1969 Book, On Death and Dying, Dr Elisabeth Kübler-Ross describes the five stages of grief. Over a 27 year career marked by mergers, acquisitions, and perpetual change, I have come to accept these five stages as necessary rites of passage that humans must endure as they navigate the inevitable shoals of change. It seems we all must endure denial, anger, bargaining and depression before we finally break through to acceptance.
While we all intellectually agree that our healthcare system is broken and is in profound need of change, most preferred that all the heavy lifting required to reduce healthcare costs as a percentage of US GDP, occurred on someone else’s watch. As Woody Allen once quipped, “ I don’t mind dying. I just don’t want to be there when it happens.”Continue reading…
I saw a patient today and looked back at a previous note, which said the following: “stressed out due to insurance.” It didn’t surprise me, and I didn’t find it funny; I see a lot of this. Too much. This kind of thing could be written on a lot of patients’ charts. I suspect the percentage of patients who are “stressed out due to insurance” is fairly high.
My very next patient started was a gentleman who has fairly good insurance who I had not seen for a long time. He was not taking his medications as directed, and when asked why he had not come in recently he replied, “I can’t afford to see you, doc. You’re expensive.”
Expensive? A $20 copay is expensive? Yes, to people who are on multiple medications, seeing multiple doctors, struggling with work, and perhaps not managing their money well, $20 can be a barrier to care. I may complain that the patients have cable TV, smoke, or eat at Taco Bell, but adding a regular $20 charge to an already large medical bill of $100, $200/month, or more is more than some people can stomach. I see a lot of this too.Continue reading…
Does it matter whether health insurance exchanges are state-level or national? I used to think that it wasn’t a major issue, but my opinion has changed.
During the health reform debate early in 2009, I thought that other exchange design issues were more important than whether they are organized at the state or national level. In my view, who is eligible to join (all small business employees or just those who receive subsidies?), whether the exchange is the exclusive market for individuals and small groups, and how the exchange will be protected from an adverse selection “death spiral” are critical design features and will determine whether the exchanges are successful.
It seemed to me that the arguments put forward by advocates of a national exchange were not compelling. The most common argument was that a national exchange was needed in order to gain sufficient size, which would supposedly give the exchange more bargaining power with health insurers. But I always thought that size was more important at the local level. Health insurers negotiate provider contracts locally, not nationally, and they gain leverage based on their size locally regardless of how big they are nationwide. In addition, the “bargaining power” argument is relevant only if the exchange is negotiating rates with insurers. In an “all comers” model, the exchange isn’t negotiating rates; it relies on healthy competition among insurers to drive down premiums.
Here are charts for AET, CI, CVH, HS, HUM, UNH and WLP. Click on a chart for more information. The stocks that are sinking serve the individual and small group markets. Those that are rising are less invested in those markets, I think.
Now, the big companies might benefit from having smaller insurers that serve individuals and small employers bankrupted. But they would be crushed by new regulations and price controls that would not allow them to make profits. Nothing in the bill says insurers should be allowed to earn market returns. That means they’re as likely to go bankrupt as the smaller insurers. Epstein’s impact graph:
The perils of the Reid bill are made evident in a recent Congressional Budget Office (CBO) report that focused on the bill’s rebate program, which holds that once an insurance company spends more than 10% of its revenues on administrative expenses, its customers are entitled to an indefinite statutory rebate determined by state regulatory authorities subject to oversight by the Secretary of Health and Human Services. Defining these administrative costs is a royal headache, but everyone agrees that they are heaviest in the small group and individual markets, where they typically range between 25% and 30%, without the new regulatory hassles.
Equally important, Epstein writes, the bill would turn insurers into heavily regulated utilities without giving them the right to make market rate returns on investments, which is unconstitutional.
That the bill appears unconstitutional may be good news for insurers, but think of the uncertainty that investors in insurers will face for years as the courts take their time deciding the case.
How will the Senate bill impact health insurance companies and their customers?
Even better, how will it impact a not-for-profit health plan–one with a reputation for being a “good guy” that continually wins the country’s top awards for member services and with historic profits of less than 1% of premium? And, one that is operating in Massachusetts–a market that has already been through much of this?
I will suggest that, in combination, these are three intriguing questions.
That is why I thought that the Harvard Pilgrim’s CEO’s recent post on their website was important. It is short, direct, and to the point. And, from everything I know, it is bang-on.
He has a rare talent for describing technical details of health care, insurance and finances in terms that most people can understand. His recent article in the New Yorker discussed the current health reform bills’ approach to curbing costs, using the agricultural industry as a potential model.
One of his basic points is similar to one I have made before. He describes two kinds of problems: “those which are amenable to a technical solution and those which are not. Universal health care coverage belongs to the first category . . . Problems of the second kind [referring to rising health care costs], by contrast, are never solved, exactly; they are managed.”
I would frame it somewhat differently. The two basic kinds of problems are those, which are amenable to a government solution, and those which are best addressed using decentralized market forces.
So maybe the two parties are coming together on health reform after all. Last night we learned that after days of “secret talks” among the “gang of ten” the Democrats have reached agreement to restructure their health care proposal. The changes are significant:
– ditch the already-watered-down public option plan;
– create a new insurance exchange “option” for individuals and small groups consisting of a nonprofit plan as negotiated by the Office of Personnel Management;
– expand Medicare eligibility to cover uninsured individuals aged 55-64.
What does the Democrats’ “public option ultralight” compromise have in common with Republicans’ alternative universe? Well, consider the latter’s proposal to open interstate competition for all health insurers–a move they promise will immediately lower health care costs. Besides being shameless attempts to offer simple solutions to complex problems, the two proposals are guilty of the same fundamental misunderstanding of health insurance. Simply put, they both ignore a critical economic truth of health insurance today: insurers require a provider network of hospitals and doctors or must have market leverage in order to negotiate for lower provider prices and for controls on excessive volume.
The Congressional Budget Office (CBO) issued a report today saying that if the Reid bill becomes law, the price of non group policies would be about 10 percent to 13 percent higher in 2016 than it would be under current law. The CBO projects that small group and large group premiums would be about the same in 2016 as they would have been anyway as the benefits of the bill would offset some of its new costs.
But what is likely to happen to health insurance rates in 2010, 2011, 2012, and 2013 before any of the bill’s benefits occur for both the insurance markets and consumers?
I would suggest Democrats not overlook the potential for political fallout in those years.
By delaying the start of most health insurance reform benefits—including insurance subsidies and underwriting reforms—until January 1, 2014 the Reid health care bill creates a real risk of unintended political consequences for the Democrats.
Or, maybe I should have said almost certain consequences that Reid may not have thought of.
Former Alaska Governor Sarah Palin’s widely publicized comments on death panels and rationing this August were among the opening shots of an unprecedented national fight over health care reform. At the time, few sober analysts would have predicted that Palin’s criticisms would gain traction. Yet, they found a receptive audience among conservative opponents of the Obama administration’s health care reform plans, triggering an ugly battle between supporters of reform and right wing opponents.This weekend, Gov. Palin returned to the healthcare debate with another post to her official Facebook page that touches on the talking points you’re likely to hear in the months to come from Republican critics of the Obama administration’s health care reform efforts. In the spirit of debate we are republishing the post in its entirety. — John Irvine
Now that the Senate Finance Committee has approved its health care bill, it’s a good time to step back and take a look at the long term consequences should its provisions be enacted into law.
The bill prohibits insurance companies from refusing coverage to people with pre-existing conditions and from charging sick people higher premiums.  It attempts to offset the costs this will impose on insurance companies by requiring everyone to purchase coverage, which in theory would expand the pool of paying policy holders.Continue reading…