Recent reports about how the for-profit private insurance companies really operate, even with attempts at regulation, remind me of The Parable of the Scorpion and the Frog
(follow me over...)
The Scorpion, being a very poor swimmer, asked the Frog to carry him on his back across the river.
"Well now, Mr. Scorpion! How do I know that if I try to help you, you won’t try to kill me?" asked the frog hesitantly.
"Because," the scorpion replied, "If I try to kill you, then I would die too, for you see I cannot swim!"
"Alright then...how do I know you won't just wait till we get to the other side and THEN kill me?" said the frog.
"Because you see, once you've taken me to the other side of this river, I will be so grateful for your help, that it would hardly be fair to reward you with death, now would it" said the scorpion.
So the frog agreed to take the scorpion across the river.
The scorpion crawled onto the frog's back, his sharp claws prickling into the frog's soft hide, and the frog slid into the river. The muddy water swirled around them, but the frog stayed near the surface so the scorpion would not drown. He kicked strongly through the first half of the stream, his flippers paddling wildly against the current.
Halfway across the river, the frog suddenly felt a sharp sting in his back and, out of the corner of his eye, saw the scorpion remove his stinger from the frog's back. A deadening numbness began to creep into his limbs.
"You fool!" croaked the frog, "Now we shall both die! Why on earth did you do that?"
The scorpion shrugged, "I could not help myself. It is my nature."
Then they both sank into the muddy waters of the swiftly flowing river.
Regardless of what they say, regardless of regulations and laws, this is how health insurance companies have to behave. Because this is what they are, this is what they do. What we call care, is inherently for them "medical loss ratio." At the end of the day, despite public option and exchanges, despite regulation and laws, if you keep the health insurance companies in equation, it is all about adverse selection.
- But I thought we had a deal: Mandates to assure your profits, some regulation to provide fairness.
After working for months behind the scenes to help shape health care reform, the insurance industry is now sharply attacking the emerging plan with a report that maintains Senate legislation would increase the cost of a typical policy by hundreds, or even thousands, of dollars a year.
Late Sunday, the industry trade group America's Health Insurance Plans sent its member companies a new accounting firm study that projects the legislation would add $1,700 a year to the cost of family coverage in 2013, when most of the major provisions in the bill would be in effect.
"It's a health insurance company hatchet job, plain and simple," said [Baucus] spokesman, Scott Mulhauser. White House health care spokeswoman Linda Douglass concurred. "This is an insurance industry analysis that is designed to reach a conclusion which benefits the industry, and does not represent what the bill does," she said.
The Baucus plan faces a final committee vote on Tuesday. It got a boost last week when the Congressional Budget Office estimated it would cover 94 percent of eligible Americans while reducing the federal deficit.
But the [AHIP] analysis attempted to get at a different issue — costs for privately insured individuals. It concluded that a combination of factors in the bill — and decisions by lawmakers as they amended it — would raise costs. The chief reason, said the report, is a decision by lawmakers to weaken proposed penalties for failing to get health insurance. The bill would require insurers to take all applicants, doing away with denials for pre-existing health problems. In return, all Americans would be required to carry coverage, either through an employer or a government program, or by buying it themselves.
But the CBO estimated that even with new federal subsidies, some 17 million Americans would still be unable to afford health insurance. Faced with that affordability problem, senators opted to ease the fines for going without coverage from the levels Baucus originally proposed. The industry says that will only let people postpone getting coverage until they get sick. Other factors leading to higher costs include a new tax on high-cost health insurance plans, cuts in Medicare payments to hospitals and doctors, and a series of new taxes on insurers and other health care industries, the report said. "Health reform could have a significant impact on the cost of private health insurance coverage," it concluded.
Insurers played a major role in defeating then-President Bill Clinton's health care plan in the 1990s. Sunday, the industry stopped short of signaling all-out opposition. "We will continue to work with policymakers in support of workable bipartisan reform," Ignagni said in her memo.
Actually AHIP is right about one thing. Costs will go up for sure if there is not a strong public option AND that is actually open to everybody through strong exchange AND that this goes into effect right away. And so far we are not seeing a majority of Dems supporting anything like that.
Cost will go up and we won't actually have anything close to 100% access until we shift to BOTH nationwide everybody-in nobody-out public insurance pool (aka: single payer) combined with a move to medical care being provided by a national network of community-based, private, not-for-profit, multispecialty, doctor-managed group practice model (e.g., Mayo Clinic, Cleveland Clinic, Permanente, Geisinger Health System, Marshfield Clinic, Scott and White Clinic, Billings Clinic, Denver Health, Group Health of Puget Sound, etc.).
2. But new regulation will prevent adverse selection, right?
Any health-care overhaul that Congress and President Obama enact is likely to have as its centerpiece a fundamental reform: Insurers would not be allowed to reject individuals or charge them higher premiums based on their medical history.
But simply banning medical discrimination would not necessarily remove it from the equation, economists and health-care analysts say.
If insurers are prohibited from openly rejecting people with preexisting conditions, they could try to cherry-pick through more subtle means. For example, offering free health club memberships tends to attract people who can use the equipment. Being uncooperative on insurance claims can chase away the chronically ill. And to avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions.
By itself, a ban on discrimination would not eliminate the economic pressure to discriminate.
"It would probably increase the incentive for cherry-picking," Pauly said. "I'm strongly motivated to try to avoid you if I'm not allowed to charge you extra."
Unless lawmakers tackle the problem effectively, a reformed health-care system could continue to reward insurers for avoiding rather than treating illness. It also could perpetuate existing economic penalties for health plans that do a better job of covering the sickest patients. They tend to attract costlier members, which can force them to raise premiums, fueling a cycle that can make it harder for the severely ill to get affordable coverage.
"In a competitive market, a good-guy insurer is a patsy," Pollitz said. "The race is to the bottom."
At a more nuts-and-bolts level, AHIP has been trying to shape the legislation in ways that could help insurers attract the healthy and avoid the sick, though it has given other reasons for advancing those positions. In a recent letter to Baucus, AHIP President Karen Ignagni said benefit packages "should give consumers flexible options to meet diverse needs."
There are myriad ways health plans can attract healthier members, from the messages they advertise to the overall level of coverage they provide and the smallest enticements they add to their benefits packages.
Ads for private health plans serving senior citizens on Medicare seldom feature people who are sick, said Tricia Neuman, who has studied the ads for the Kaiser Family Foundation. Many of the plans have offered benefits such as health club memberships, help buying eyeglasses, and preventive dental care, which may be more likely to sway healthy seniors than seniors who have severe and complex medical needs.
Some private Medicare plans have offered relatively inexpensive enticements while requiring members to pay more out of pocket than they would under conventional Medicare for major expenses, said the Medicare Rights Center's Precht. In 2008, a quarter of the private Medicare plans charged members more out of pocket for Part B medications, which include chemotherapy drugs for cancer patients, according to a March study for the AARP Public Policy Institute.
3. But the "exchange" will solve all problem, right?
...more important than ever to make sure that we get another part of health reform right: the exchanges, where it is envisioned that small businesses and people without employer-sponsored insurance could shop for policies of their own.
Back in the 1990s, I was the founding chairman of Texas’ state-run purchasing alliance — an exchange, essentially — which ultimately failed. There are lessons to be learned from that experience, as well as the similar failures of other states to create useful exchanges.
The Texas Insurance Purchasing Alliance, created by the Texas Legislature in 1993, was meant to help small businesses, which often cannot afford coverage for their employees.
Initially, the alliance worked exactly as planned. Sixty-three percent of the businesses that participated were able to offer their employees health coverage for the first time. The alliance offered small businesses a low-cost, nonprofit option: our administrative arrangements did away with the high marketing costs that insurers pass on to small businesses. And we didn’t charge higher rates to firms with older or less healthy workers. This in turn led other insurers, outside the alliance, to lower their prices. We did all this not by creating a government bureaucracy, but by relying on the private sector.
Nevertheless, six years after the program got off the ground, it folded. Many factors contributed to our failure. Some elements of the program, like the restriction it put on the size of eligible companies (only employers with 50 or fewer employees could join), proved unpopular.
Most important, though, our exchange failed not because it wasn’t needed, and not because the concept wasn’t sound, but because it never attained a large enough market share to exert significant clout in the Texas insurance market. Private insurance companies, which could offer small-business policies both inside and outside the exchange, cherry-picked relentlessly, signing up all the small businesses with generally healthy employees and offloading the bad risks — companies with older or sicker employees — onto the exchange. For the insurance companies, this made business sense. But as a result, our exchange was overwhelmed with people who had high health care costs, and too few healthy people to share the risk. The premiums we offered rose significantly. Insurance on the exchange was no longer a bargain, and employers began backing away. Insurance companies, too, began leaving the alliance.
Texas wasn’t the only state to see its insurance exchange fail. Florida and North Carolina were also unsuccessful. And California, which had the first exchange (established in 1992) and the largest market, shut its doors in 2006. All these state exchanges failed for the same reason: cherry-picking by insurers outside the exchange.
If Congress now creates new exchanges, as seems increasingly likely, it must prevent this phenomenon by setting two national rules: Insurers have to accept everyone and have to charge everyone the same rates regardless of health status.
Such rules would force insurers to spread risk. But enforcement would also be difficult. Every aspect of health insurance — from the rules for underwriting and setting premiums to the marketing of policies — would need to be monitored stringently to prevent companies from steering all bad risks to the exchanges.
It is all about adverse selection. Among the stupidest comments made by the MSM/SCLM was an NPR reporter dismissing worries about adverse selection as being nonsense since of course part of the reform package was regulation that would prevent that. Back in the real world we know from "Medicare Advantage" nationally, and from attempts at state-based regulation, that this remains what insurance companies do. It is what they are.
Valerie Scaglione's story is almost comical:
Monthly premiums for Blue Cross coverage for them and their three daughters have soared over the years to almost $2,000, Scaglione says.
She estimates that in the past six years, the family has spent more than $140,000 on premiums and co-payments.
Yet when she tried to switch from the family's expensive individual insurance to a Blue Shield group plan that's more affordable, she said, she and her oldest daughter were denied coverage. She said neither of them has the medical conditions that were listed as reasons for being denied - bronchitis and a skin ailment.
Consumer advocates consider their story emblematic in many ways of complaints that plague the entire health insurance industry.
"We've seen people denied for things as minor as heartburn," said Anthony Wright, executive director of Health Access California, a statewide health advocacy coalition. "It gets to the point where living is a pre-existing condition."
Mrs. Scaglione's health insurance coverage costs three times as much as the family's MORTGAGE. And she can't get out of it and into a group plan, because Blue Shield flat-out invented reasons to deny the coverage. She has demanded to see the medical records that show her daughter having bronchitis and her having a skin condition called rosacea, but the health insurer refused the request.
As the debate continues, the Scagliones remain among California's 3 million consumers in the pricey individual insurance market.
"I wonder how many other families are like ours," Scaglione said. "What's the option, to be uninsured? This forces me to stay with our same plan. Premiums will go up and up and up. What, do we not feed the kids? It gets to the point of being absurd."
Blue Shield of California can be reached at (866) 256-7703. You might want to ask them what health care ailments they think you have of which you're unaware.
5. You baby is too fat to get insurance Sigh... just today's latest headline case of, if you might get sick or might be sick, then of course you can't get insurance coverage.
Needless to say, the health insurance companies are the scorpion.
All the rest of us -- individuals, families, small business, large business, local, state and national government, the economy, and current reform that bails-out the health insurance companies with mandates -- we are all the frog. I fear that the public option and exchange that we are going to get are not enough to avoid the fatal sting of ever rising costs and continued lack of actual coverage and access that will drown us all.
That is why, even while fighting for the strongest and most open version of public option and exchange possible in 2009, we must remember that whatever we get, this is only the first battle.
In order to achieve universal access and cost control, we need to remember that the this is a long-term fight.
Single payer national health insurance, along with other changes in the health professions training pipeline to increase primary care and limit some specialization, and the actual payment system to incentivize and preferentially promote the multispecialty integrated care model, remains not a pipe-dream but in fact the only realistic goal.