Archive for the ‘Health Insurance’ Category

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Reform Federalism?

Tuesday, September 8th, 2009
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By Evan Falchuk

In America, insurance is regulated by the states, not the federal government.

Each of the 50 states decides who can sell insurance, mandates coverages, and sometimes even premiums. For some products, like auto insurance, states have made it mandatory for everyone to buy coverage. Massachusetts has taken this a step further and applied this kind of a mandate to health insurance.

The nearly complete authority of state governments over these issues is clear.

Which makes the press release issued earlier today by Pennsylvania Insurance Commissioner Joel Ario rather curious, and revealing.

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No One Should Die or Go Broke

Friday, September 4th, 2009
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By Evan Falchuk

It’s been all over Facebook and Twitter the last couple of days. People updating their status with this message:

No one should die because they cannot afford health care, and no one should go broke because they get sick. If you agree, please post this as your status for the rest of the day.

It strikes me as odd. I mean, who can disagree with these statements? And for what policy proposal are they meant to encourage support?

How about just changing it to “no one should die, and no one should go broke”? I’d be in favor of that, too.

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How Government Insurers are a Little Different

Thursday, August 20th, 2009
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By Evan Falchuk

There has been a lot of talk about the way in which a public health insurer would compete against private ones.  As the President put it recently:

People say, well, how can a private company compete against the government?  And my answer is that if the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining — meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do — then I think private insurers should be able to compete.  They do it all the time.

He makes a good point.  But we don’t have to talk about this in theory – we can look at existing state insurance programs to see how they operate.

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Wait, Another New Sales Pitch for Reform?

Wednesday, August 19th, 2009
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By Evan Falchuk

Today’s Wall Street Journal reports that President Obama has another new sales pitch for reform, which he will roll out today in a call with religious groups.  The theme is expected to be about the “moral imperative” for reform:

“This is such a technical issue, it’s easy to get bogged down in the weeds,” said Dan Nejfelt, a spokesman for Faith in Public Life, one of the groups scheduled for the Wednesday call. “It’s important to have a voice saying, ‘This is about right and wrong. This is about honoring faith.’”

So reform is a sort of “faith-based initiative”?  Well, it’s an idea.

But could it work?

I don’t think so.  Shifting messages won’t calm the fears of those who are wondering what reform is all about.  First, it was about “the most important fiscal issue we face as a country.”  Then, it was not that big of a deal: just some simple reforms to insurance law.  Now, it seems, it is about right and wrong:

A Democratic strategist said, “If you are going to sell something as big and monumental and transformative as health care, you cannot get small with it.  You’ve got to be bigger.  You’ve got to call on the better angels out there.”

But this is a mistake.  The major trouble for reformers is the anxiety that there is something big and transformative planned, and that we’re trying to do it fast, now, right away.  Changing the sales pitch to emphasize how much the reform proposals will transform American health care may be more honest, but it will only create more of the worry it is trying to lessen.

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What is a Health Care Co-Operative?

Monday, August 17th, 2009
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By Evan Falchuk

Health care cooperatives: It’s suddenly the hot topic in reform.  But what do Congressional and Administration leaders mean when they use that word?

We don’t really know – there is no legislation describing it.   But based on news reports, it sounds like a kind of mutual insurance company.

So, what is a mutual insurance company?

In general, a mutual insurer is a non-profit company in which each insured is also a part-owner.  So you buy not just an insurance policy but also an ownership interest in the insurer.  With a co-op, you probably wouldn’t have to actually buy an ownership interest – it would just come with your policy (in a traditional mutual insurer, you would have to pay an extra fee for this). From the strands of discussion about the government providing start-up money for these co-ops, it seems like that will the the source of capital.

The policyholders have major influence on how the business is run, even though there is a professional management team.  Normally, if a mutual insurer makes a profit, all of the money is either kept as part of its reserves, or given back to the owners as a dividend.  By linking ownership with insurance, you create incentives for lower costs and lower premiums and create a mechanism for making sure that the plan provides good benefits.

It’s hardly revolutionary – this type of insurance has its origins in the ancient world.  And the rural cooperatives from which the idea of the health care cooperative springs came into being largely around the time of the New Deal.

But old ideas can be good.  There are existing health care cooperatives that are doing good and interesting things.  For example, Seattle’s Group Health Cooperative (founded in 1947) runs an entire health system around its membership, and is highly thought of for its innovative approaches to providing coordinated, high quality medical care.  Still, while I don’t doubt that Group Health’s financial structure helps it do the very good things it does, I suspect their success has as much to do with the culture of their organization as it does with the way in which care is financed.

Stepping back to the bigger picture, then, it seems like the idea is to create new mutual insurers that could compete with existing players in the market.  It might add some new competition to under-served markets for individual and small group coverage.

I’m sure we will be hearing much more on this new avenue for reform in the coming weeks.

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Why Health Insurance is So Expensive, Continued

Sunday, August 16th, 2009
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By Evan Falchuk

One of the less talked about reasons why health insurance is so expensive in America is our system of insurance regulation.  It’s a system that dates back to the 19th century, and hasn’t changed very much since.

Here’s how it works.  There are 50 insurance commissioners.  They set the rules for insurance in their states, and they have a major impact.

What it means is that if you want to sell an insurance product in the United States, you have to pick a state in which to start.  You would have to comply with that state’s rules about financial stability and management.  Then, you would have to comply with the state’s mandates as to what needs to be in the product, and, depending on the state, you may have to change your price to fit what the state says you have to charge.  Its a process that can take many months or years.

Now, if you wanted to sell your product across the country, you have to go through this process 50 different times. It’s why when you see a brochure for an insurance product you can read on the back of the brochure all kinds of notes about how the product differs in different states.  It’s a process that adds significant administrative cost to any insurer who wants to sell a new product.  And it’s an important contributor to why the US insurance market is much less dynamic and competitive than perhaps any other market in America.

Imagine if our market for cell phones worked this way.  We’d have 50 different cell phone networks, and 50 wireless device commissioners who would decide who can sell phones, and at what price.  They would mandate what features a phone had to have and couldn’t have in their state.  Apple could design an iPhone, but why bother – they would have to make 50 different versions of it.  They could only sell it in one state at a time, and they would have to change features and price every time they went into a new market.

So when you hear people talking about health “insurance” reform, think that maybe it shouldn’t be about trying to curtail specific bad things that some insurers do.  Instead, think that maybe we should be talking about having a regulatory system that meets the needs of a modern economy.  We should be thinking of opening up our insurance markets to actual competition – not one new, giant, lumbering government insurer, but rather dozens of new, dynamic entrants into the insurance market.

old-cellphone


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Obama’s Risky Reform Gambit

Saturday, August 15th, 2009
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By Evan Falchuk

At yesterday’s town hall meeting in Montana (I live-tweeted it on my twitter feed), President Obama continued to roll out his new pitch for reform: calling it health “insurance” reform, rather than health “care” reform.

The President’s point was this:

It’s not about fundamentally changing to our health care system, or bending the cost curve, it’s really only about consumer protections in the insurance market.  It doesn’t cost $1 trillion or more, it’s really only $30 billion a year, and we can pay for that with small changes to the way wealthier people itemize their tax deductions.  It’s not really contentious, because 80% is already agreed to, and there are only a few details left to work out.

As a sales pitch, it’s appealing and soothing.  If this is all reform is about, why all the ruckus?

Well, if this was what reform was all about, there probably wouldn’t be such a ruckus. I mean, sure, federalizing vast swaths of American insurance regulation is a big deal, but it’s not the kind of thing that creates much excitement one way or the other (speaking of which, where are the state insurance commissioners on this?).

The President’s focus on these less controversial areas of reform is a clever strategy.  He is hoping that the controversial ways in which reform proposals would impact the way health care is actually delivered will get through as some kind of a no-big-deal add-on.

It’s a risky gambit.

Anxiety about reform is based on worries that the government wants to mess with people’s health care in ways that are unclear, but meant to be very important.  The anxiety is heightened by a sense that leaders aren’t leveling with us about what they plan to do.

Unless he is going to come out with his own proposal that really is just focused on insurance market reforms, the President runs the risk of falling into this trap.  Opponents will point to all the ways that proposed reforms are about much more than just changes to insurance regulation.  It will be hard to blame ordinary Americans for thinking that here is yet another politician not leveling with them on a very important issue.

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Why Reform is Going So Badly, Continued

Thursday, August 13th, 2009
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By Evan Falchuk

As I’ve blogged about before (here, here, here and here), a big reason reform is going so badly is this:  Reformers don’t understand how people react when you try to make changes to their health benefits.

Companies across America have been making changes to health benefits for years.

Reformers seem to have ignored the lessons of their experience.

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Probably Not the Best Analogy

Tuesday, August 11th, 2009
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By Evan Falchuk

President Obama held a town hall meeting today, which seems to have gone well.

Except he decided to use an analogy to dispute the idea that a government-run health insurer would drive private insurers out of business:

“As long as they have a good product and the government plan has to sustain itself through premiums and other non-tax revenue, private insurers should be able to compete with the government plan,” Obama said.  “They do it all the time,” he said.  “UPS and Fedex are doing just fine. . . . it’s the Post Office that’s always having problems.”

This is probably not the best analogy.

The US Postal Service has a monopoly on first-class mail, and is staffed pretty much completely by government workers.  As good as these workers are, the idea of the Post Office evokes images of waiting on line, and the rising cost of stamps.

And as for the villainous health insurers, are they now UPS and Fedex?

It is all very hard to follow.  It’s no wonder even people paying close attention to this issue are left wondering what these plans are all about.

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Ed Koch: Don’t Mess With My Employee Benefits

Tuesday, August 11th, 2009
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By Evan Falchuk

I’ve been making the point that health reform’s troubles are due to a fundamental failure of reformers to understand that health care is all about employee benefits.

At Real Clear Politics, former New York City Mayor Ed Koch shows you what I mean.  He recently had bypass surgery:

I speak from personal experience. I have been told that the cost of my hospital care, including the services of 20 doctors and 72 nurses and medical technicians over a six-week period may ultimately cost a million dollars. My private insurance policy is paid for by my law firm, Bryan Cave LLP, and because I still work full-time, that insurance policy is my primary one, not Medicare, even though I am 84 years old. Will that continue to be the case under any law signed by President Obama or will I be denied the right to spend my own money and my law firm’s for such unlimited coverage?

Koch says he think the answer is probably “yes,” but he’s very unsure.  In fact, he points to quotes from Administration officials along these lines that he says are “alarming.”

So, is the problem with health care reform politics?  Of course there is politics, but I don’t think Ed Koch is motivated by that.

No, Koch’s article illustrates something else.

If someone as sophisticated as Ed Koch is left wondering about the answer to fundamental questions about reform, how can you expect others, paying much less attention, to feel otherwise?

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  • "Medicine is learned by the bedside and not in the class room. Let not your conception of manifestations of disease come from work heard in the lecture room or read from the book: see and then research, compare and control. But see first."
    - Sir William Osler, MD
    The Father of Modern Medicine

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