American health care is an accidental system. Private coverage -- the type most Americans have -- has its origins in the wage controls of the Second World War as employers offered rich health-insurance benefits in pre-tax dollars. Public coverage like Medicaid and Medicare, on the other hand, takes its inspiration from the Beveridge report in Britain, drafted in the early 1940s; Lord William Beveridge believed in zero-dollar health care -- that people ought to pay nothing at the point of use. Today's American health care fuses these two systems, but with a common economic flaw: people are overinsured, paying pennies directly on every dollar of health service they receive.

The end result: for every dollar spent on health care in the United States, just 12 cents comes out of the individuals' pockets. Imagine what food costs might be if your employer paid 88% of your grocery bill or what a trip to Saks might be like if your company covered the vast majority of the costs of the shopping spree.

Far from addressing the 12 cent problem, Obamacare would exacerbate it. With its rich subsidies, expansion of government programs, insistence that all insurance cover specific services (and some with no copayments at all), Obamacare would pour fuel on the fire of health inflation. It's one reason that even the chief actuary of the Centers for Medicare and Medicaid Services -- a federal employee -- predicts cost rises under the President's plan.

Labels: Analysis, Insurance

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Two years ago, my wife and I had our first child. We are both self-employed and buy policies through the individual market. We specifically chose not to buy pregnancy coverage, although coverage for "complications of pregnancy" were standard with our Assurant Health policy.

The reason we didn't want to buy coverage for a normal pregnancy is the same reason everyone should have that choice -- a normal pregnancy is not an "insurable event." An insurable event is defined as something that occurs without warning, is unlikely to occur, and is unwanted.

Consumers understand this concept well in every situation except health insurance. We buy home insurance to pay for losses due to fire, hail storms, tornadoes or theft -- not to pay for repainting the family room or updating the kitchen. We buy auto insurance to pay for accidents, storm damage or vandalism -- not to pay for a new set of tires or an oil change.

Over the years, health insurance has moved away from the concept of insurance and become a complicated financing scheme for everything related to health. That's why it's so expensive.

Labels: Analysis, Insurance

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...If we lost our insurance, would this gargantuan new entitlement [of government-guaranteed health insurance] really be the only thing standing between us and an early grave?

Perhaps few people were asking, because the question sounds so stupid. Health insurance buys you health care. Health care is supposed to save your life. So if you don’t have someone buying you health care well, you can complete the syllogism.

Last year's national debate on health-care legislation tended to dwell on either heart-wrenching anecdotes about costly, unattainable medical treatments, or arcane battles over how many people in the United States lacked insurance. Republicans rarely plumbed the connection between insurance and mortality, presumably because they would look foolish and heartless if they expressed any doubt about health insurance’s benefits. It was politically safer to harp on the potential problems of government interventions -- or, in extremis, to point out that more than half the uninsured were either affluent, lacking citizenship, or already eligible for government programs in which they hadn't bothered to enroll.

Even Democratic politicians made curiously little of the plight of the uninsured. Instead, they focused on cost control, so much so that you might have thought that covering the uninsured was a happy side effect of really throttling back the rate of growth in Medicare spending. When progressive politicians or journalists did address the disadvantages of being uninsured, they often fell back on the same data Klein had used: a 2008 report from the Urban Institute that estimated that about 20,000 people were dying every year for lack of health insurance.

But when you probe that claim, its accuracy is open to question...

...Probably the best one looked at patients who had been taken to the ER, which still showed higher mortality for the uninsured. But it's not clear that this indicates that lacking insurance is dangerous; it may be telling us that people who lack insurance have a lot of factors that lead to poorer health outcomes.

To my mind probably the single most solid piece of evidence is this: turning 65 -- i.e., going on Medicare -- doesn't reduce your risk of dying. If lack of insurance leads to death, then that should show up as a discontinuity in the mortality rate around the age of 65. It doesn't. There are some caveats -- if the effects are sufficiently long term, then it's hard to measure, because of course as elderly people age, their mortality rate starts rising dramatically. But still, there should be some kink in the curve, and in the best data we have, it just isn't there.

Labels: Analysis, Insurance

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1. Can the federal government compel a person to have health insurance?
2. Why can't I buy health insurance from whatever carrier is willing to sell it to me?
3. Is tort reform constitutional?
4. Is there anything in the Constitution that empowers Congress to regulate health care or get between patients and their physicians or empower bureaucrats to tell physicians how to practice medicine?

Labels: Analysis, Insurance

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President Obama attempted to revive his faltering health care initiative by releasing a revised version of his plan on Monday. But as Grace-Marie Turner of the Galen Institute noted, the president's basic approach remains to "Tax, Spend, Regulate, Mandate" -- i.e., to impose massive new government controls over health care that Americans have already rejected in tea party protests across the country and in the polling booths of Massachusetts.

GOP leaders have been appropriately skeptical of the president's demand that his plan be the basis for their "summit" negotiations, calling it a "nonstarter." But while they've avoided that obvious trap, the Republicans are still in danger of falling for the subtler trap of agreeing to seemingly benign limited compromise "reforms" that would merely result in a slower government takeover of American health care.

One of the Democrats' favorite limited proposals has been to require insurance companies to accept all customers regardless of pre-existing medical conditions -- an idea supported by many Republicans...

Labels: Insurance, OpEd

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Labels: Analysis, Insurance

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In the three years since Massachusetts enacted its individual mandate, providers successfully lobbied to require 16 specific types of coverage under the mandate: prescription drugs, preventive care, diabetes self-management, drug-abuse treatment, early intervention for autism, hospice care, hormone replacement therapy, non-in-vitro fertility services, orthotics, prosthetics, telemedicine, testicular cancer, lay midwives, nurses, nurse practitioners and pediatric specialists.

The Massachusetts Legislature is considering more than 70 additional requirements.

Labels: Analysis, Insurance, MA, States

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Labels: CO, Insurance, States

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Virginia Legislature Passes Ban on Insurance Mandate

The Virginia House of Delegates on Friday passed legislation intended to shield citizens from any federal requirement that they purchase health insurance. The bill goes to the governor for signing.

Labels: Insurance, States, VA

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* Encourage portable insurance.
* Allow special health savings accounts for the chronically ill.
* Allow special needs health insurance.
* Allow health status insurance.
* Allow self-insurance for changes in health status.
* Give people on their own the same tax break employees get.
* Allow providers to repackage and reprice their services under Medicare and Medicaid.
* Allow access to mandate-free insurance.
* Create a national market for health insurance.
* Encourage post-retirement health insurance.

Labels: Free Market, Insurance

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...[C]onservative lawmakers in about half the states are forging ahead with constitutional amendments to ban government health insurance mandates.

The proposals would assert a state-based right for people to pay medical bills from their own pocketbooks and prohibit penalties against those who refuse to carry health insurance.

In many states, the proposals began as a backlash to Democratic health care plans pending in Congress. But instead of backing away after a Massachusetts election gave Senate Republicans the filibuster power to halt the health care legislation, many state lawmakers are ramping up their efforts with new enthusiasm....

Lawmakers in 34 states have filed or proposed amendments to their state constitutions or statutes rejecting health insurance mandates, according to the American Legislative Exchange Council, a nonprofit group that promotes limited government that is helping coordinate the efforts. Many of those proposals are targeted for the November ballot, assuring that health care remains a hot topic as hundreds of federal and state lawmakers face re-election.

Labels: CO, Insurance, States

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...Along with stopping mandatory insurance purchase, the Right to Health Care Choice allows people to buy more affordable policies sold in other states. Thirty states have less expensive small-group premiums than Colorado. If governments did not shield insurers from interstate competition, “12 million previously uninsured” Americans would have coverage according to University of Minnesota economists.

You have the right to buy the best available insurance policy for you and your family. You also have the right to donate to charities of your choice. The Health Care Choice Initiative would protect you from politicians who want to deprive you of choice and increase your insurance premiums and taxes.

Labels: Free Market, Insurance, OpEd

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...Mr. Brown brazenly turned his Senate bid into a referendum on President Obama's health plan, and voters rewarded him with a job. Yet ObamaCare's model was the health reform inflicted on Massachusetts by a certain Republican governor in 2006, otherwise known as RomneyCare.

That precursor shares many elements of Washington's legislation, from an individual mandate, to employer taxes, to subsidized middle-class insurance. The program has bombed, creating giant costs while realizing minimal benefits. A big reason only 25% of Massachusetts voters strongly approve of ObamaCare is because of this experience.

The state plan has become a millstone for Mr. Romney, yet he has refused to disavow it. Had he campaigned with Mr. Brown he'd have undoubtedly been asked about it, and undoubtedly given an answer as unsatisfying as those to date.

...Mr. Romney has never backed away from his individual mandate, which requires people to buy insurance or pay a fine. Yet Republicans and independents despise the mandate, with many believing it is downright unconstitutional.

Mr. Romney's subsidized coverage is meanwhile doing what entitlements do: crowding out private insurers, compounding the cost explosion, walking the state toward rationing. So long as the former governor clings to these central points of his health plan, he's on the wrong side of free-market policy and public opinion.

That might be why in December Mr. Romney shifted again, saying his program differed significantly from ObamaCare in that it "solved" the "problem" at the state level, and featured no public option. But the public option argument has gone poof. And while GOP primary voters care about federalism, most will be hard pressed to parse the difference between a failed state program and a failed federal one.

The federal government may exercise only the powers granted to it or denied to the states. The states may do everything else. This is why, for example, states may have authority to require individuals to purchase health insurance but the federal government does not. It is also the reason states may require that individuals purchase car insurance before choosing to drive a car, but the federal government may not require all individuals to purchase health insurance.

Labels: Insurance, MA, States

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In 1993, New York adopted two of the most popular parts of the health care reform bill that recently passed the Senate: "guaranteed issue," or a rule that insurers must sell to anyone, regardless of pre-existing conditions; and "community rating," which prevents insurers from setting premiums based on characteristics like age and sex. (New York's reform is more radical than proposed federal reforms, as it allows no variance at all on age; the Senate bill would cap the amount of age-based difference).

New York did not require anybody to buy health insurance, nor did it give out subsidies to help people pay for it (though it did expand government-provided insurance at vast taxpayer expense.)

These reforms were supposed to make it possible for more people to get insurance coverage. Instead, what they did was drive premiums through the roof. Now, the cheapest insurance plan for a family in New York City costs $26,040, compared to a national average of around $13,000.

Unsurprisingly, few New Yorkers find these prices affordable, and the share of New Yorkers with individually-purchased coverage has fallen by 96%, to about 2 in 1000. Functionally, New York barely even has an individual insurance market anymore. As a result, New York's rate of uninsurance is in the middle of the pack nationally, even though the state ranks 4th in the share of residents on Medicaid.

New York experienced what is known as an "insurance death-spiral." Under community rating and guaranteed issue, healthy people found insurance premiums to be a bad deal and they dropped out. This increased the average risk among insureds, so premiums rose once more, again driving the healthier and poorer participants to drop. The process repeated itself until almost nobody found it worthwhile to buy their own insurance.

Labels: Insurance, NY, States

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President Obama and some other Democrats are putting out sounders about scaled-down health regulations. Striking his new populist pose, Mr. Obama told ABC News, "We know that we need insurance reform, that the health insurance companies are taking advantage of people." The problem with the president's anti-business stance is that if enacted into law, it will destroy private health insurance.

You don't have to take our word for it. Liberals like New York Times columnist Paul Krugman are warning about the president's suggestion. Regarding the regulation to forbid insurance companies from taking into account preexisting health conditions, Mr. Krugman wrote, "healthy people [will] choose to go uninsured until they get sick, leading to a poor risk pool, leading to high premiums, leading even more healthy people dropping out." In other words, proposed regulations would produce more uninsured Americans and higher insurance costs.

To illustrate how bad this idea is, imagine if motorists could buy automobile insurance right after an accident and then were allowed to drop it once the car was fixed. Without revenue from regular premiums, insurance companies couldn't cover all the claims and would go under...

Labels: Insurance

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...[F]orcing insurers to accept all comers without an individual mandate could destroy the economics of the industry. The young and healthy could simply choose not to get coverage until they get sick. States with guaranteed coverage but no mandates are among those with the highest premiums in the nation.

If there's an individual mandate, the government would likely feel compelled to provide major subsidies to help lower- and middle-class Americans afford care. And financing such a bill would require big spending and/or tax hikes. And that would bring Democrats back to where they were before Tuesday.

It would be the equivalent of not having any car insurance, hitting a tree, and then calling Geico and saying you want to sign up. It doesn't make sense.

Labels: Analysis, Insurance

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The Wall Street Journal warns us that under ObamaCare, we may see yet another "czar" -- this time, in charge of our mandatory health insurance. This would be in addition to the long list of czars President Obama has already appointed for "green jobs," executive pay, domestic violence, international climate change, and the auto industry.

Under any system of mandatory insurance, the government must necessarily determine what constitutes an "acceptable" plan. The health insurance czar would be in charge of a new bureaucracy called the "Health Choice Administration," which would regulate what prices insurance companies could charge for policies, who they must cover, and what benefits they must offer...

Labels: Insurance, OpEd

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Labels: Free Market, Insurance, Misc

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...[T]he changes proposed to all health insurance policies could have potentially adverse affects on high deductible health plans (HDHPs) that currently make people eligible to contribute to HSAs. Some of the impact may not be known until regulations implementing the final provisions are written.

...Another new requirement for all insurance policies is that they provide a minimum actuarial value for the benefits covered.

Under the House bill, the minimum actuarial value must be at least 70 percent. Under the Senate bill, the minimum actuarial value must be at least 60 percent. Given the higher deductibles that most HDHPs have (compared to traditional HMO and PPO plans), the lower minimum actuarial value requirement in the Senate bill would make it easier for more HDHPs to meet the standard.

...It is also not clear whether a plan's actuarial value would include employer or individual contributions made to the individual's HSA.

The House bill is completely silent on this matter which would leave it up to the Secretary of HHS to define in regulations. The Senate bill requires the Secretary of HHS to issue regulations on this matter.

Including the contributions in the calculation of a plans actuarial value would make it easier for more HDHPs to meet the minimum actuarial value requirement. If contributions are not included, HDHPs, many of which have actuarial values below 60 percent (or whatever the final standard becomes) based on the insurance coverage alone, could no longer be sold.

Labels: HSA, Insurance

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Are health insurance companies evil? A web search for the phrase turns up almost a million hits. The common reasons for this passionate indictment are insurance company profits, denial of claims, and rescission of policies. But these do not justify the Democrats’ goal of expanding political control of health insurance. Rather, they call attention to existing controls that unfairly advantage insurers and limit competition that would keep insurers honest. They also suggest government’s failure to enforce contracts.

Labels: Insurance

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...Now, what would have happened if the Medicaid program hadn't cut her off -- because she earns $100/month too much? In that case, she wouldn't have had to worry about the bill.

But -- the receptionist would have had to say: "You'll need to fax over a referral."

A Medicaid patient can't be billed, except for a nominal copayment. Without a referral, Medicaid can’'t be billed. So if the specialist, or in this case subspecialist, sees the patient, he cannot be paid. Moreover, he is probably violating a rule and conceivably might be prosecuted for soliciting business (that's called "fraud"). Discounts and freebies are marketing strategies, after all, and the poor and vulnerable have to be protected.

Not just any doctor can give the patient a referral. This doctor couldn't. It has to be the patient's primary care provider, who is contracted with the patient's plan. And the specialist has to be in the plan too.

Say that a seizure patient needs to see a neurologist promptly to have his medications adjusted. Sorry, the emergency room doctor can't write the referral. Neither can the hospitalist who is discharging the patient from the hospital. It has to be the "primary." If the primary happens to know the patient, he might just send the referral. But most of the time, the patient will have to come in. The primary won’t want to risk getting an unnecessary referral or an incident of "inadequate documentation" on his report card.

For a retinal problem, there are probably three hurdles: the primary gatekeeper (who might not even think of the diagnosis), then the general ophthalmologist (who will make the diagnosis but can't treat it), and finally the subspecialist. All probably have waiting times for appointments, especially for Medicaid patients. Most doctors can’t afford to see very many of those.

Not just Medicaid, but all managed-care plans have a structure like that. It's part of the cost-containment strategy. I know of three insured patients who had retinal detachments. They all had premonitory symptoms, and they all -- eventually -- had elaborate and costly operations, as many as six procedures. They were "covered," and they didn't get a bill for $900, but they had a poor visual outcome that might have been prevented by prompt treatment.

Insurance is supposed to help you pay bills in the rare event of a catastrophe. If it morphs into a scheme for emptying your wallet in advance, and then prevents bills by preventing treatment, we just might be better off without it.

Labels: Analysis, Insurance, Medicaid

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Health care legislation now being debated in the Senate will do nothing to make health care more affordable but quite a lot to make it more expensive. It serves the purpose of a massive and permanent expansion of the size and power of government and the political class as an end in itself. Twelve of the many provisions that will increase the cost of care include:

The increase in government spending is largely unfunded. The ten years of increased taxes and fees to cover six years of spending conceals the true long-term cost. Taxes collected for four years before the new spending begins will of course not be set aside and hidden under a mattress by Senator Reid and Speaker Pelosi. The government will blow right through it and spend it on other things until the new spending begins. More taxes will accompany much more debt and the cost of serving the debt, which will increase the cost of health care for everyone.

The requirement that insurers take a loss and issue policies to those with pre-existing conditions will shift costs for their care to other premium payers.

The limit on co-payments will shift costs to premium payers.

The limit on deductibles will shift costs to premium payers.

New fees and taxes on medical equipment manufacturers will increase the cost of equipment and insurance.

The cost of medical liability insurance -- and the defensive medicine it forces physicians to practice in order to protect themselves -- punishes financially the states that currently limit the size of non-economic damages and the fees lawyers take from settlements. Rather than limiting such costs, it will provide strong incentives for trial lawyers to increase litigation, which will increase the cost of health care and insurance for everyone.

The tax on insurance companies for policies that provide the most benefits will increase premiums on those policies.

More health care providers will be reimbursed for less than the cost of their services, shifting those costs to other patients and premium payers.

Pre-tax contributions to flexible savings and health savings accounts will be limited and their use made more difficult, increasing the taxes and cost of care for those with such plans.

The legal requirement to buy insurance under penalty of fines and imprisonment will force the purchase of insurance with provisions specified by the government, in response to providers with the political pull to force coverage of their services. That will increase the cost of insurance.

Higher costs will not be limited to private insurance: Medicare taxes will be increased while Medicare benefits are decreased.

Medicare Advantage plans will be eliminated, reducing benefits for the ten million seniors who have them, and forcing them to pay more for "Medi-Gap" insurance -- creating a financial jackpot for the AARP in disregard for the interests of its members.

Other provisions will increase spending and debt, such as forcing states to provide Medicaid to millions of additional people without any revenue to pay for it.

Even though the Congressional Budget Office has not taken many of these costs into consideration -- especially cost shifting -- they have determined that a bill that would create more than one hundred new agencies, boards, and commissions, and that would spend trillions of dollars, would not cut the cost of health insurance.

The Senate bill is a deliberate, systematic deception for the purpose of concealing the cost of a huge expansion of government -- and the forced dependence of citizens on politicians for another crucially important aspect of their daily lives. Senators need to hear from voters now that they must not vote for legislation that increases our medical costs while eliminating our rights and personal choices.

Richard E. Ralston is Executive Director of Americans for Free Choice in Medicine.

Labels: Insurance, Medicare, OpEd

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Labels: Insurance, Media, Misc

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1. Millions of jobs lost.
4. Very high marginal tax rates.
6. Fewer insurance choices.
10. Exacerbating the problems of cost, quality and access.

Labels: Analysis, Insurance

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The U.S. Senate is making increasingly Byzantine backroom deals in an attempt to pass some form of universal health care by the end of the year. But even though the final bill isn't settled yet, one fact is becoming increasingly clear. Any plan they pass will result in the government seizing an unprecedented degree of control over previously private health spending decisions.

Two of these proposed new controls are worth highlighting, because they are not often discussed in most mainstream media reports...

Labels: Insurance, OpEd

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Why to condemn insurance companies

Is the for-profit insurance industry a "predator" that "prevent[s] us from having a decent health care system"? Letter writer Bruce Robinson says so (Daily Camera, December 1). He's partially right. The real predators are politicians who inhibit needed health policy reform. But insurers are guilty for concealing how they benefit from Congress's predatory practices, which shield them from competition and accountability to patients.

Predators gain value by using force or threats of force. Politicians prey upon patients who prefer to finance their own medical care in "politically incorrect" ways. As a result, insurers need not compete for your business. Politicians punch you with a tax penalty for buying insurance directly from an insurer instead of through your employer. They prohibit you from buying affordable policies available in other states. They tax you more for paying cash for routine medical expenses rather than buying an expensive health plan with tax-deductible premiums.

Like a true predator, politicians support legislation that backs you into a corner -- where as the patient, you are the consumer but not the customer. Hence, neither insurers nor doctors aim to please you. They cater to who pays them. Employers pay the insurers and insurers pay the doctors.

So don't condemn for-profit insurance. The profits are "anemic," reports the AP. Condemn insurers for supporting an un-free market, where profit is disconnected from pleasing consumers. Only in a free market insurers' profits would depend on satisfying you, the patient, rather than satisfying employers and politicians.

Labels: Insurance, LTE

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The section on preventive care has a hidden limitation that is likely to escape the notice of non-physician Senate reviewers. It states "A group health plan and a health insurance issuer offering group or individual health insurance coverage shall provide coverage for and shall not impose any cost sharing requirements for evidence-based items or services that have in effect a rating of 'A' or 'B' in the current recommendations of the United States Preventive Services Task Force."

That is, health insurers must pay for preventive services that the U.S. Preventive Services Task Force (USPSTF) recommends.

Regardless of whether you agree or disagree with the U.S. Preventive Services Task Force's recommended changes for mammograms, its recent proposal raises important questions for all Americans: Do you want government panels making preventive health-care decisions for you? And do you want government to outlaw private payment for preventive care? Government could end up with both powers under the health-reform bills being considered.

...[I]t appears the House version could prevent Americans from paying privately for covered preventive care. That's because H.R. 3962 states that there shall be no cost-sharing for covered preventive services. (The Senate bill includes a similar provision.) The definition of cost-sharing appears to include out-of-pocket spending. Thus without further clarification, this provision could be interpreted to prevent anyone from paying out of pocket for covered preventive care.

If this were to become law, what would happen if a physician doesn't accept insurance payments? Would he or she be legally free to bill patients directly for covered preventive services? And would patients be legally free to pay out of pocket? If the answer to both of these questions is no, then physicians who currently do not accept insurance will either have to begin doing so or stop offering preventive services.

It appears the following provisions in the House bill would infringe on both patients' and physicians' freedom to contract privately for preventive health-care services...

Labels: Analysis, Insurance

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Health care reform and the public option

Say your neighborhood deli rigged its scales so that customers who paid for a pound of meat left the store with less. Does such fraud justify a government-run "public option" for delicatessens?

Surely not, but this is how Colorado AFL-CIO Director Mike Cerbo argues for a new government-run insurance plan. Cerbo says it should "impermissible" for insurers to "drop coverage due to pre-existing medical conditions" -- presumably when patients had been honest about medical histories.

This is called "post-claim underwriting," and it violates the insurer's contract with the policy-holder. But this is no justification of a "public option." Rather, if it happens frequently and without penalty, it shows that government has been lax in one of its legitimate duties: enforcing contracts.

Brian T. Schwartz, Boulder

Labels: Insurance, LTE

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...Now comes the House-passed health-care "reform" bill that, amazingly, would extract more subsidies from the young. It mandates that health insurance premiums for older Americans be no more than twice the level of that for younger Americans. That's much less than the actual health spending gap between young and old. Spending for those age 60 to 64 is four to five times greater than those 18 to 24. So, the young would overpay for insurance that -- under the House bill -- people must buy: Twenty- and thirtysomethings would subsidize premiums for fifty-and sixtysomethings.

...Not surprisingly, the 40-million-member AARP, the major lobby for Americans over 50, was a big force behind this provision. AARP's cynicism is breathtaking. On one hand, it sponsors a high-minded campaign called "Divided We Fail" and runs sentimental TV ads featuring children pleading for a better tomorrow. "Join us in championing your future and the future of every generation," ended one ad.

...AARP justifies the cost-shifting as preventing age discrimination. Premiums based on age should be no more acceptable than premiums based on medical expenses reflecting race, gender or preexisting health conditions, it says. The House legislation bans those, so it should also ban age-based rates. AARP dislikes even the 2-to-1 limit. It thinks premiums for someone 22 and someone 62 should be identical. (In insurance jargon, that would be full "community rating.")

This is unconvincing. All insurance aims to protect against risk -- but within groups facing similar risks. Put differently, most insurance is risk-adjusted. Auto insurance premiums vary by age; younger drivers pay higher rates because they have more accidents. Homeowners' policies for similar houses cost more in high-crime areas. This is not "discrimination"; it's a reflection of risk and cost differences. Insurers that ignored these differences would soon vanish because they'd suffer heavy losses and lose customers.

Labels: Insurance

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..."The PWC report correctly notes that the Baucus bill would impose tremendous financial hardships on many middle-class Americans by forcing them to purchase expensive state-mandated insurance on terms set by the politicians," said Paul M. Hsieh, M.D., cofounder of Freedom and Individual Rights in Medicine in Denver, Colorado.

...Hsieh believes insurers ultimately will regret not fighting the reform package by arguing for market freedom.

"Earlier this spring the insurance industry could have taken a principled stand in favor of genuine free-market reforms, such as repealing laws banning sales across state lines as well as laws mandating guaranteed issue and community rating," Hsieh said.

"Such reforms could have greatly reduced insurance costs for millions of Americans currently priced out of the market," Hsieh continued. "Instead, they chose to make a deal with the devil and accept new regulations requiring them to cover everyone regardless of preexisting conditions, in exchange for a Massachusetts-like individual mandate."

Labels: Insurance, Media

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Why is private health insurance so expensive? Blame Albany. First, state lawmakers have mandated that all health plans cover a host of procedures and "alternative-medicine" services, far more than companies in most states offer. Even the most stripped-down plan must include coverage of off-label drugs, surgical second opinions, and midwife and podiatrist services. Each mandated benefit makes the policy more expensive. Two state insurance regulations -- "guaranteed issue," which forces insurers to sell to any applicant, and "community rating," which requires them to offer the same price to everyone, regardless of age and health -- inflate prices further. Finally, the state has added billions of dollars in taxes and fees to private insurance policies, making them even pricier.

The perverse result: the young, healthy, and self-employed -- facing higher premiums for insurance that they seldom use, and realizing that they can always wait until they become ill to buy insurance -- tend to drop their coverage. (If New York regulated home insurance like this, you could buy a policy after your house had caught fire.) What's left is an insurance pool of older, sicker people, which drives private premiums higher still. Worse, the large number of uninsured people -- a consequence of Albany's bad policies—then becomes a justification for expanding the Medicaid rolls.

Labels: Insurance, Medicaid, NY, States

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HB3962, Insurance, and Preexisting Conditions

Should government force you to pay more for medical insurance so others can pay less? Dr. Laura Rosenthal thinks so, calling it "compassion and kindness." It's more like charity at gunpoint.

In a recent Camera article, Rosenthal advocated making it "illegal for health insurance companies to discriminate on the basis of pre-existing conditions." That is, insurers must sell policies to everyone at the same price.

These mandates have dire consequences, including more people without insurance. "Individual insurance markets deteriorated," concludes a Milliman actuarial study. "Insurance companies chose to stop selling individual insurance," "premium rates tended to increase, sometimes dramatically."

This legislation encourages insurers to design products that sick people don't want, as insurers lose money by insuring the sick because it's illegal to charge higher premiums. Such policies lack features higher-risk customers want, like comprehensive coverage and minimal bureaucratic obstacles to doctor-recommended treatments.

These political controls cause a "death spiral:" premiums increase, so the healthiest stop buying insurance, the remaining risk pool is less healthy, and premiums rise again. Repeat. To prevent this, politicians want mandatory insurance, which Massachusetts imposed in 2006. Since then Massachusetts insurance premium costs have skyrocketed, affordable policies become illegal, and patients have poor access to care.

Preexisting conditions are a problem because the tax code favors non-portable employer-based insurance. This prevents people from buying guaranteed renewable policies before contracting a chronic condition. A free-market in insurance would also offer innovative products such as health status insurance, which would pay for premium increases should you get sick.

Labels: Insurance, LTE

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Expect less, pay more. It's not the slogan for some "Bizarro World" Target store in a comic book; it's an accurate slogan for congressional Democrats' health care "reform" proposals. They include a new government-run insurance plan, mandatory insurance, new political controls on insurance, and new taxes.

Labels: Free Market, Insurance, OpEd

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1. Millions of jobs lost
2. A shift to independent contracting
3. Major industrial restructuring
4. Emergence of niche markets
5. Growth of the underground economy
6. Higher insurance premiums
7. Fewer insurance choices
8. Higher than anticipated taxpayer costs
9. New unfunded liabilities
10. Exacerbating the problems of cost, quality and access

Not only will "reform" not solve any of the problems it is supposed to solve, it will almost certainly undermine the ability of entrepreneurs in the private sector to solve them.

Labels: Analysis, Insurance

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Forcing insurance companies to take all comers, and to charge all customers similar fees can accomplish only one thing: to force some health insurance customers (primarily the young and healthy) to subsidize other health insurance customers (the elderly and the sick). That's not insurance -- that’s welfare.

The overall effect of eliminating health insurance discrimination is to drive up the costs of health insurance. As the Wall Street Journal points out, states that currently prevent insurance discrimination through community rating and guaranteed issue rules have the most expensive individual insurance markets in the country. "In 2007, the average annual premium in New Jersey was $5,326 for singles and in New York $12,254 for a family, versus the national average of $2,613 and $5,799, respectively."

...If we can painlessly ban health insurance discrimination, then why don't we end all discrimination for all forms of insurance? Why should we have to buy car insurance before we get in an accident? Why should Geico be able to drop Robert Downey, Jr. after his fifteenth DUI? Why should a three-pack-a-day smoker have to pay more for life insurance than Michael Phelps?

Insurance is inherently discriminatory. An insurance company cannot function without assessing risk, charging greater fees for greater risks, and refusing to provide "insurance" to those for whom the outcome in question is certain. It is by carefully assessing risk and discriminating accordingly that insurance companies enable us to protect ourselves against some of life's unknowns. That is a crucial benefit, and those who provide it should not be smeared, but thanked.

Labels: Analysis, Insurance

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...[T]he trade group for the nation's insurers, America's Health Insurance Plans, estimated that the average premium for family coverage in the individual market nationally was $5,800. But the study found wide disparities in costs, ranging from average premiums north of $12,000 in New York and Massachusetts to premiums costing on average only $3,000 to $5,000 in more than a dozen states. Some states have even allowed insurers to introduce low-cost, high-deductible policies that can cost under $1,000 a year.

It's fair to say that the costs imposed by some states based on how they regulate health insurance are now a bigger burden on individuals and small and mid-sized firms than state and local taxes.

...There's no evidence that states garner any benefit from such regulation and mandates. States with numerous mandates don't have healthier populations, for instance. Indeed, many state mandates are enacted for political reasons that have little to do with health care outcomes. Several years ago New York's then-Governor Pataki signed into law the state's hefty in vitro fertilization mandate as a payoff to conservative religious groups whose members favor big families and lobbied heavily for the law. It's a rather classic example of how, when you vest such power in lawmakers, some will eventually abuse it.

Labels: Insurance, MA, NJ, NY, States

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From a practical standpoint, the requirement to purchase health insurance will start badly and grow even worse. That's because the choice of what kind of insurance to purchase will no longer belong to consumers but to politicians and bureaucrats, relentlessly pressured by lobbyists to add to every conceivable screening or procedure in the nanny-state's wish list to your mandatory policy.

Politicians who resist that pressure and defend your right to choose your own level of coverage will be smeared at election time by dishonest advertisements accusing them of opposing mammograms and maternity care.

Requiring health insurance to pay for preventive screenings is like mandating that auto insurance must pay for oil changes and new tires. Only in health care do we forget that insurance was designed to pay for unforeseen catastrophes, not for predictable events for which we should plan and budget.

...If Congress can order us to use our own money to buy goods or services that we might not otherwise purchase, what's to stop it from ordering us to drive hybrid vehicles, install solar panels on our homes, or eat our vegetables?

Labels: Analysis, Insurance

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Labels: Insurance, Medicare

E-mail Paul Hsieh, MD / PermaLink / Comments / Trackbacks / BlogThis

...In a free market, insurers and consumers voluntarily make an agreement to mutual benefit. When politicians dictate what policies and services will be sold and to whom, those politicians undercut people's ability to reach insurance agreements that work best for them.

In a free market, companies that don't take care of their customers risk losing them to a competitor, creating an incentive to provide the best service at the best price. When there is no free market for health insurance, there is less competition, resulting in less need to out-bid competitors for our business.

A free market also depends on the reliability of contracts. Once a contract between an insurance company and an individual is made, breaking that contract should be punishable by law. This means that if an insured individual's coverage is dropped when they find a medical problem that was covered, they should be able to sue the company for breach of contract.

It is true that many people today with pre-existing conditions have trouble finding affordable coverage. But politicians, not a free market, created the problem.

Currently, employer-based insurance makes it difficult for those with pre-existing conditions to stay on the same insurance because it is not portable. Current tax law that favors employer-sponsored insurance over directly purchased plans makes it more likely individuals will be tied to their employer for insurance.

Insurance is meant to hedge against unforeseen, catastrophic events or illnesses, as opposed to covering every doctor visit. If it were, protection against major health problems or accidents would be possible for a majority of individuals and pre-existing conditions would be much less of a worry for those who need coverage...

Labels: Free Market, Insurance, OpEd

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...According to proponents, this "individual mandate" will increase the size of insurance risk pools and bring down premiums. Young and healthy people who might normally go without insurance will be forced to buy into the system and, in effect, subsidize the old and sick.

Of course, this line of reasoning ignores the fact that many Americans are uninsured not because they want to be but because they can't afford insurance. Nationwide, the average annual premium for family health coverage is $12,300. That figure is expected to double over the next decade.

Forcing millions to purchase budget-busting insurance policies or face hefty fines will push family bank accounts to the brink and make economic recovery even harder.

The Baucus plan attempts to address these affordability concerns by allocating billions in subsidies to people with incomes up to four times the poverty level, or $88,000 for a family of four. But with health insurance costs rising at astronomical rates, taxpayers will no doubt have to shell out ever-increasing amounts each year so that the subsidies can keep pace.

Labels: Insurance, OpEd

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In more than a dozen statehouses across the country, a small but growing group of lawmakers is pressing for state constitutional amendments that would outlaw a crucial element of the health care plans under discussion in Washington: the requirement that nearly everyone buy insurance or pay a penalty.

...[T]the measures could create legal collisions that would be both expensive and cause delays to health care changes, and could be a rallying point for opponents in the increasingly tense debate.

Labels: Insurance

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If past cycles are any indicator, we are about due for another round of studies showing that being uninsured kills. Headlines will abound, commentators will wring their hands, and anyone who opposes ObamaCare will be portrayed as an insensitive killer.

The good news is that the majority of the supposed deaths due to a lack of health insurance are statistical artifacts. Unlike deaths from government health care, which has been extensively documented to cause harm to the seriously ill, the elderly, and the newborn, the deaths due to a lack of health insurance are usually conjured out of data sets using a variety of statistical tricks...

Labels: Analysis, Insurance

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...President Obama proposes to require insurers to sell policies to everyone no matter what their health status. By itself this requirement, called "guaranteed issue," would just mean that insurers would charge predictably sick people the extremely high insurance premiums that reflect their future expected costs. But if Congress adds another requirement, called "community rating," insurers' ability to charge higher premiums for higher risks will be sharply limited.

Thus a healthy 25-year-old and a 55-year-old with cancer would pay nearly the same premium for a health policy. Mr. Obama and his allies emphasize the benefits for the 55-year old. But the 25-year-old, who may also have a lower income, would pay significantly more than needed to cover his expected costs.

...But the combination of a guaranteed issue, community rating and an individual mandate means that younger, healthier, lower-income earners would be forced to subsidize older, sicker, higher-income earners. And because these subsidies are buried within health-insurance premiums, the massive income redistribution is hidden from public view and not debated.

Labels: Insurance, OpEd

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Labels: Analysis, Insurance, OpEd

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1. Individual Choice and Free Market Competition
2. Tax and Geographic Equity
3. Personal Responsibility
4. Tort Reform

Labels: Insurance, OpEd

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1) "Bring down skyrocketing costs"
2) "Cover all Americans"
3) "Modernize our system"
4) "Ensure that people aren't overcharged for prescription drugs"
5) "Ensure that people aren't discriminated against for pre-existing conditions"
6) "Eliminate fraud, waste, and abuse in government programs"

Labels: Analysis, Insurance

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Democrats pretend that Republicans are just a bunch of obstructionists when it comes to health proposals. Meanwhile, Republicans debate minor aspects of Barack Obama's plan such as whether it subsidizes illegal immigrants and abortions.

The reality is that every key element of Obama's plan either came from Republicans or arose with Republican support...

Labels: Insurance, MA, OpEd, States

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1. If we know we can buy health insurance after we get sick with no increase in premiums, none of us will want to pay premiums for insurance while we are healthy. Yet, if only the sick are paying premiums, the entire insurance system will collapse.

2. So to prevent collapse, there must be a requirement that people buy in when they are healthy.

3. Now if the requirement is a general mandate -- with lots of coverage options -- we are back to a variation of the problem in 1. People will choose scaled down, inexpensive insurance when they are healthy and then switch to comprehensive, expensive insurance after they get sick.

4. So to prevent a meltdown similar to the one described in 1, choices must be eliminated and there must be a standard (government-defined) benefit package which all individuals are required to buy and all insurers are required to sell. People won’t be allowed to buy anything less generous and no insurer would be foolish enough to offer anything more generous.

5. Now suppose there is a health insurance Exchange where people get their insurance, but insurance can also be sold outside the Exchange. In particular, imagine a special deal offered to the Iron Man's Club (requirement: swim a mile, run 10 miles and bicycle 20 miles). Soon, word would get out that anyone who can qualify for Iron Man membership can get the standard benefit package for a really cheap price. In this, and in other ways, insurers outside the Exchange would siphon away the healthiest people leaving the Exchange with the sickest, most costly enrollees.

6. So to prevent the death spiral the conditions in 5 would lead to, insurance outside the Exchange would have to be outlawed and insurance within the Exchange highly regulated. (See below.)

7. How can you force people to buy insurance? Since cattle prods are too impractical and prison cells are too expensive, about the only practical tool is a fine. And if you want it to work, the fine needs to be near (and maybe even above) the premium people have to pay.

8. Of course, there is this problem: How can we know whether anyone has insurance? The easiest way -- without a new bureaucracy -- is to rely on the income tax system. Make people show proof of insurance at the time they file their income taxes.

9. Trouble is: People file tax returns once a year and most people who are currently uninsured are uninsured for less than a year. So a logical way to get to people with greater regularity is to use the employers as an enforcement mechanism.

10. Once employers are involved, however, we run into the unfortunate fact that most people believe that premium payments are an addition to wages, not a substitute for them. So to the question, "should we mandate that you buy insurance or that your employer buy it for you," the employer tends to win hands down. Result: both an individual mandate and an employer mandate seem inevitable.

Notice the cyclical pattern in all of this. You distort incentives in a complex system and you get perverse behavior. To prevent that, you distort incentives some more and you get other kinds of perverse behavior. The more you intervene, the greater the need for even more intervention.

One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.

Labels: Analysis, Insurance

E-mail Paul Hsieh, MD / PermaLink / Comments / Trackbacks / BlogThis

The fundamental issue is not profit versus nonprofit, but freedom versus force. The problem with insurance companies is not that they seek to make a profit, but that they must operate as de facto agents of political overseers who call the shots.

On a truly free market, in which insurers and their customers were free from today's political controls, people would tend to buy insurance directly, rather than get stuck with the few non-portable plans their employer chooses for them.

In a free market, insurers would be free to offer more plans to more people, and consumers would be free to shop around, regardless of state boundaries. Politicians would no longer coddle insurers with protectionist controls and tax favoritism.

In a free market, insurers would compete on the basis of quality, security, and transparency of contract. Today, because of political controls, insurance companies face little real competition, and they would face even less under Obama's policies.

In a free market, insurance companies would be able to offer long-term policies that today are politically impossible.

Labels: Insurance, OpEd

E-mail Paul Hsieh, MD / PermaLink / Comments / Trackbacks / BlogThis

...Obama's plan to force insurance companies to cover people with preexisting conditions combined with his plan to force everyone to buy health insurance whether he or she wants it or not would impose an implicit tax on all policyholders in the form of insurance premiums that are higher than they would have been without the program. (Some would have opted out of insurance and paid nothing.) The rich would not be the only ones taxed, no matter what Obama says.

Implicit taxes are worse than open ones because people are unaware they are paying them. Therefore they would not know how much Obama's scheme truly costs. In a supposedly free and democratic society, that is just wrong. We should at least know how much government costs.

By relabeling welfare "insurance" and claiming that only the rich will pay for his plan, Obama misleads the American people when he talks about healthcare. This is strange coming from someone who insists on honesty from his opponents.

Labels: Insurance, OpEd

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