Healthy? Insurers don't buy it

[Khan]

http://www.latimes.com/business/la-fi-reject31dec31,0,4111486.story?page=1&coll=la-home-headlines

According to regulators' postings, rejection letters and interviews with brokers, conditions that can lead to outright rejection or a higher premium include:

AIDS, allergies, arthritis, asthma, attention deficit disorder, autism, bed-wetting, breast implants, cancer, cerebral palsy, chronic bronchitis, chronic fatigue syndrome, chronic sinusitis, cirrhosis, cystitis, diabetes, ear infections, epilepsy, gender reassignment, heart disease and hemochromatosis (a common genetic disorder that causes the body to absorb too much iron).



Other conditions are hepatitis, herpes, high blood pressure, impotence, infertility, irritable bowel syndrome, joint sprain, kidney infections, lupus, mild depression, muscular dystrophy, migraines, miscarriage, pregnancy, "expectant fatherhood," planned adoption, psoriasis, recurrent tonsillitis, renal failure, ringworm, severe mental disorders, sleep apnea, stroke, ulcers and varicose veins.

 

[Trek]

Wow, could you make a better case for universal health care? People who could even afford private health care shut out. They have to look to the government to help them via the state pool. Gee, how about making the health care of the people in your society a basic human right and giving everyone equal access. Novel idea, eh?

 

[Gone4Good]

Wow, could you make a better case for universal health care?

Yup. I'm in favor of free markets and limited government intervention on almost every topic - but I've come around on healthcare. The system we have in the US is antiquated, expensive, wasteful, and probably bad for the economy, on balance. I don't know if a federal government insurance plan is the best/only solution - but I'd give any alternative to the current mess a fair hearing. It may even be a voting issue for me come 2008, which is bad news for the crew I typically vote for.

 

[mykidslovedogs]

Current pregancy and expectant fatherhood will exclude you from coverage untill after the baby is born. This is because states may allow guaranteed issue of coverage to newborns onto the parent's policy. The risk of giving birth to an extremely unhealthy newborn is not acceptable to insurers. If you are planning to have a child, you should purchase coverage BEFORE you get pregnant or before your spouse gets pregnant....not after you are already pregnant.

The same idea holds true for the other conditions mentioned above. In order to protect yourself from the financial risks of these diseases, it is best to purchase coverage BEFORE you get sick. If you choose to wait to purchase coverage untill after you get sick or if you get stuck because you lose your job, then risk pool coverage is usually available, albeit at a higher rate.

Allergies, mild asthma, ADD, ear infections, misscarriage, mild depression, HBP (controlled with one medication), herpes, migraines, ringworm, rarely or never cause a decline in my state. A SLIGHTLY higher rating or an exclusion of coverage may apply.

Many of the other conditions listed can be very costly, and IMO, the insurance carriers are justified in declining coverage, since the cost of those diseases could hurt the low premiums that they are able to offer in the individual and family market to everyone else. Why should someone who waits to purchase coverage until after they get sick be rewarded with guaranteed issue while others who have planned ahead be "used" for having paid into the system for many many years?

IMO - Universal care could hurt the quality of care in our country. Let me give you another example...
According to some of my recent research, the USA innovates approx 45% of all the new drugs created in the world, while other countries, like Canada, reap the benefits of all of the R&D Americans pay for by importing drugs from America to Canada at low, low rates that even our stateside insurance companies cannot negotiate. Then, we further hurt the American Drug market by going outside of the USA to purchase our prescriptions, resulting in higher prices for the American insurance companies to pay, which is passed to us in the form of higher premiums.

If we have universal care, and the goverment fixes the pricing that pharmaceutical companies will be able to charge for drugs, what incentive will the pharmaceutical companies have to innovate new drugs? As some estimates state that it costs about $800,000,000 to bring a new drug to market, it's hard for me to believe that the pharmaceuticals will innovate if they can't recover the costs to create a new drug.. (This phenomenon is proven, when you look at the rates of prescription drug innovation of other countries that have universal care as compared to the USA). Granted, I realize there is a lot more to prescription drug costs than what I can cover here, but the basic economic laws of supply and demand will kick in, and IMO, universal care will have a negative impact on innovation.

Some root problems I think we have in the U.S that negatively impact the cost of healthcare that I think we need to address before we universalize care are"

(These are all my opinions)

Root Problem #1: We need tort reform. The cost that Dr's pay for liability insurance is phenomenal and is only passed onto the private sector in the form of higher healthcare costs which ultimately impact the cost of health insurance.

Root Problem #2: Americans spend way too much money on drugs that cost a fortune to develop yet do not create a great deal of advantage over less expensive drugs that already provide the same relief (ie..celebrex, nexium) and on convenience drugs such as cialis and viagra. We also spend an absolute fortune on antidepressants, of which a new one comes out just about every year or two. We as consumers need to be more aware of the drug markets we create by demanding a new pill for every inconvenience. This is going to be a tough problem to overcome as culture and lifestyle are difficult to change. Perhaps making people more accountable for the costs of their drugs by having different copay levels for different CLASSES of drugs (such as higher copays for convenience drugs, and lower copays for lifesaving drugs), this might help change the mentality of prescription drug use in America.

Root Problem #3: Since our Medicaid system (one of the largest insurance providers in America) basically pays the pharmaceutical companies whatever they ask for instead of negotiating prices for prescriptions, the majority of costs of prescriptions are then passed on to U.S citizens in the form of taxes and higher health insurance premiums for the private sector. If Medicaid were able to negotiate pricing instead of placing all of the burden on taxpayers, the pharmaceutical companies would be forced to limit drug pricing and the innovation of unnecessary drugs

 

[Gone4Good]

IMO - Universal care could hurt the quality of care in our country. Let me give you another example...
According to some of my recent research, the USA innovates approx 45% of all the new drugs created in the world, while other countries, like Canada

I agree, to a point.

Health care quality and availability might decline for those currently getting good care. Many, however, are not currently getting care of any quality until an emergency situation develops. Their numbers are growing. Even for the insured, costs are increasingly being pushed through to consumers. While our system doesn't explicitly ration care (a primarily benefit cited when comparing it versus European style systems), rationing is happening because of unaffordability. As more and more people get priced out of our system we will eventually reach a tipping point where the rationing for those who get no or limited care overwhelms the benefits of those who can still afford care.

I struggle with your second point, but am leaning toward the conclusion that I will not miss the block-buster new drug that is never developed. I do, however, worry about the existing treatment that I can't afford. I worry about having to face the difficult situation of deciding between potential bankruptcy and medical care for a loved one.

 

[Gone4Good]

Why should someone who waits to purchase coverage until after they get sick be rewarded with guaranteed issue while others who have planned ahead be "used" for having paid into the system for many many years?

Again agree, but for the self-employed person who has paid into the system, has developed a condition, and now simply wants to move from one state to another. Too bad for you! no coverage of your "pre-existing condition".

Or the person who wants to retire while they still have some life left in them, who has had continuous coverage under his employer through good and, now unfortunately, bad. Once again, too bad for you! no coverage for your "pre-existing condition".

Or the person whose carrier drops coverage of an entire population, discontinues health-care coverage entirely, or goes out of business. Once again, too bad for you! no coverage for your "pre-existing condition".**

Or the person who . . .


** added thanks to comments made in a later post by Rich_In_Tampa

 

[mykidslovedogs]

I do, however, worry about the existing treatment that I can't afford. I worry about having to face the difficult situation of deciding between potential bankruptcy and medical care for a loved one.

I understand your concerns, but I guess my basic belief is that if we can attack some of the root problems in our country that cause healthcare to be so expensive, then you wouldn't have to face the possibility of rationing because of unaffordability, because if healthcare wasn't so expensive, then health insurance wouldn't be so unnaffordable.

Another point: (Again, IMO)

In 2002, 15 million of the uninsured were people aged 19-34 yrs. old, one of the healthiest age categories. (That's 1/3 of the uninsured population!). Why don't they buy coverage? My guess is that many of them believe they are invinceable. Also, this group is typically the least likely to be holding full-time, high paying jobs, so many of them don't qualify for employer-sponsored coverage. If we could just get these folks to buy coverage, perhaps by offering better incentives for purchasing coverage (maybe tax incentives), and stiffer penalties for not having coverage (such as bankruptcy reform), then we would increase the number of people contributing to the insurance risk pool by 15 million people! Surely, that would have some impact on premium rates.

Again, my opinion is that health insurance isn't expensive because the insurance companies are ripping us off. I believe it is expensive, because healthcare is expensive. I just talked to a friend of mine who manages a not-for-profit hospital. He told me that at his hopital, medicaid pays 13 cents for every dollar billed. They just have to pass the additional cost to the private sector in the form of higher healthcare costs, which are then passed onto private health insurance consumers in the form of higher health insurance premiums. He also gave me the example of a woman they were working with on collections. She was quite affluent, yet she told the bill collector that she chose the non-profit hospital because she just figured they would write off the bill if she didn't pay, because they are a non-profit organization. That was her excuse for not paying her bill! That entitlement mentality is what hurts all of the rest of us who pay into the insurance system.

 

[Rich_by_the_Bay]

Trek asks rhetorically, "Could you make a better case for universal health care?"

I couldn't think of that case being much stronger that he stated, but MKLD did it for me in the opening line of her comprehensive post by stating:

"Current pregancy and expectant fatherhood will exclude you from coverage untill after the baby is born. "

So there you have it: don't reproduce or develop a health problem if you might need to acquire health insurance. As long as you are healthy and don't reproduce, no problem.

This solution has been proposed here: you could acquire health insurance when you are 18 years old (if you are lucky enough to be healthy, wealthy and wise then) and keep it forever, double paying already obscene premiums if you do work and get benefits, hoping that your carrier doesn't eliminate coverage for the population group to which you belong over the next 45 years.


I remain baffled how anyone with any real life experience can argue it as a sound and rational solution. Other than the carriers and those who benefit from the sale and management of such policies, it seems hopelessly naive to me for anyone to entertain that as a rational strategy. Like a Fellini movie.

Like others, I have serious concerns about too great a big brother government in most areas, but in this domain, basic coverage and catastrophic care need to be universal and thus government mandated, if not delivered.

For those lucky enough to not have needed substantial health care themselves here's a news flash: the system is shattered: good hardworking folks are having their lives ruined and free choice as to jobs and retirement are being curtailed, and you don't have to be alcoholic, obese, drug abusing or otherwise self-destructive to be a victim.

 

[mykidslovedogs]

Trek asks rhetorically, "Could you make a better case for universal health care?"

I couldn't think of that case being much stronger that he stated, but MKLD did it for me in the opening line of her comprehensive post by stating:

"Current pregancy and expectant fatherhood will exclude you from coverage untill after the baby is born. "

So there you have it: don't reproduce or develop a health problem if you might need to acquire health insurance. As long as you are healthy and don't reproduce, no problem.

But if you buy the coverage before you get pregnant, you will still have the coverage while you are pregnant. The insurance carrier doesn't just drop you once you get pregnant! Why not just buy before you get pregnant?

Agreed, the system is flawed and health insurance costs are phenomenal, but, and again, all my opinions, if we can just attack some of the root causes of the high costs of healthcare, then we might not be in such a bad situation with the affordability of guaranteed issue (risk pool) coverage.

 

[mykidslovedogs]

Again agree, but for the self-employed person who has paid into the system, has developed a condition, and now simply wants to move from one state to another. Too bad for you! no coverage of your "pre-existing condition".

Or the person who wants to retire while they still have some life left in them, who has had continuous coverage under his employer through good and, now unfortunately, bad. Once again, too bad for you! no coverage for your "pre-existing condition".

Or the person whose carrier drops coverage of an entire population, discontinues health-care coverage entirely, or goes out of business. Once again, too bad for you! no coverage for your "pre-existing condition".**

Or the person who . . .

These are all situations where risk pool coverage would come into play. If the root cause of the problem, the cost of healthcare itself, were to be worked on, then risk pool coverage, IMO, would not be so unaffordable.

 

[Martha]

We also spend an absolute fortune on antidepressants, of which a new one comes out just about every year or two. We as consumers need to be more aware of the drug markets we create by demanding a new pill for every inconvenience. This is going to be a tough problem to overcome as culture and lifestyle are difficult to change. Perhaps making people more accountable for the costs of their drugs by having different copay levels for different CLASSES of drugs (such as higher copays for convenience drugs, and lower copays for lifesaving drugs), this might help change the mentality of prescription drug use in America.

You can die from depression. Suicide is a big risk. I would hardly call depression an inconvenience.

Root Problem #3: Since our Medicaid system (one of the largest insurance providers in America) basically pays the pharmaceutical companies whatever they ask for instead of negotiating prices for prescriptions, the majority of costs of prescriptions are then passed on to U.S citizens in the form of taxes and higher health insurance premiums for the private sector. If Medicaid were able to negotiate pricing instead of placing all of the burden on taxpayers, the pharmaceutical companies would be forced to limit drug pricing and the innovation of unnecessary drugs

So you want Medicaid to be able to negotiate pricing but not have a national health care plan negotiate pricing?

I like Barney Frank's health care plan. Medicare for all, with a sliding fee for premiums/copays.

I just read a book on US healthcare. The author's conclusion is that we pay a lot for healthcare primarily because we are charged a lot. I don't know if that is correct, but my next reading is going to be on healthcare economics. Notwithstanding drug development costs, drug companies are making a LOT of money. And insurance companies are making a LOT of money.

 

[mykidslovedogs]

You can die from depression. Suicide is a big risk. I would hardly call depression an inconvenience.

I didn't say that anti-depressents were a convenience drug. I just said we spend a fortune on them. One study in 1995 showed that we used them just as often as we use anti-biotics. Why is America so depressed? Our stressful lifestyles? Because we hate our jobs? Because 65% of us are either overweight or obese? IMO, Antidepressants are way too heavily prescribed, and they can even lead to suicide in young people. You wouldn't believe how many of my female clients take anti-depressants for menopause. There are other effective forms of treating depression in lieu of or in addition to pills.

So you want Medicaid to be able to negotiate pricing but not have a national health care plan negotiate pricing?

IMO, A national healthcare program would not negotiate, it would STIPULATE OR DEFINE pricing, which, IMO, would have a negative impact on innovation and supply of care. Another Example: Let's just say we decide to allow the government to be the sole insurance provider in our country....The government decides that a good salary for a doctor is say....$90,000/yr. How many young people do you think will persue medical careers? Any doctors out there in this forum? How much would you get paid if you had to rely solely on the current Medicaid and Medicare systems to pay your salaries?

Yes, I would like Medicaid to be able to negotiate SENSIBLE pricing with pharmaceutical companies just like the insurance companies do. In a free market society, where-ever there is a market that is willing to pay higher prices with no limits on what they will pay, the creator of the product will take advantage of the profits it can make with that sector. Therefore, if Medicaid could negotiate (not stipulate, but negotiate) with the pharmaceutical companies, then the pharmaceutical companies would have to adjust pricing accordingly.


It would also be nice if the rates Medicaid paid for healthcare services were negotiated with providers, instead of stipulated at pennies on the dollar. The current system only results in providers looking to the private sector (those who have insurance) to recover lost profits.

I just read a book on US healthcare. The author's conclusion is that we pay a lot for healthcare primarily because we are charged a lot. I don't know if that is correct, but my next reading is going to be on healthcare economics. Notwithstanding drug development costs, drug companies are making a LOT of money. And insurance companies are making a LOT of money.

This statment makes the assumption that providers and insurance carriers are purposefully ripping us off, and because of inelastic demand, the providers and insurance carriers have no incentive reduce pricing. I do not believe that is true. Insurance rates and provider pricing are a function of the costs of doing business in those markets.

 

[Gone4Good]

If the root cause of the problem, the cost of healthcare itself, were to be worked on, then risk pool coverage, IMO, would not be so unaffordable.

Well I think we can all agree that if the cost of health care were much lower, we wouldn't have a problem. But I disagree with the assertion that addressing "Root Causes 1-3" will cause prices to go down. The economic structure of the current system argues otherwise.

In a free market, prices rise such that supply meets demand. Higher prices ration demand. In our system, however, the end use customer is often shielded from the true cost of service he is consuming ($10 copay??). As a result, demand for health care is inelastic with respect to price, so there is no equilibrating force in the market. Someone has to bear the cost of servicing unlimited demand. So prices rise. But because resources aren't unlimited, and because the end use customer is insensitive to price increases, the system seeks to meet unlimited demand the only way it can - by rationing care.

But in our system rationing isn't done administratively, it is done haphazardly. Price increases force companies to exclude services like prescriptions, raise prices, drop health insurance entirely, anything they can to keep the wheels on. But the wheels won't stay on until supply and demand equilibrate - so the system shucks more folks out of the insurance pool, looking to reduce demand by retaining only those healthy and profitable few.

But the "solution" of dropping coverage creates its own problem. The uninsured can not be dropped from the system entirely. They return to emergency rooms in acute condition, with no ability to pay the monstrous bills that insured customers never see directly. But these costs must be met somehow. So the system raises prices, drops coverage, etc. etc.


The current system is unstable and unsustainable. Tweaking around the edges will not fix it.

 

[mykidslovedogs]

Well I think we can all agree that if the cost of health care were much lower, we wouldn't have a problem. But I disagree with the assertion that addressing "Root Causes 1-3" will cause prices to go down. The economic structure of the current system argues otherwise.

In a free market, prices rise such that supply meets demand. Higher prices ration demand. In our system, however, the end use customer is often shielded from the true cost of service he is consuming ($10 copay??). As a result, demand for health care is inelastic with respect to price, so there is no equilibrating force in the market. Someone has to bear the cost of servicing unlimited demand. So prices rise. But because resources aren't unlimited, and because the end use customer is insensitive to price increases, the system seeks to meet unlimited demand the only way it can - by rationing care.

But in our system rationing isn't done administratively, it is done haphazardly. Price increases force companies to exclude services like prescriptions, raise prices, drop health insurance entirely, anything they can to keep the wheels on. But the wheels won't stay on until supply and demand equilibrate - so the system shucks more folks out of the insurance pool, looking to reduce demand by retaining only those healthy and profitable few.

But the "solution" of dropping coverage creates its own problem. The uninsured can not be dropped from the system entirely. They return to emergency rooms in acute condition, with no ability to pay the monstrous bills that insured customers never see directly. But these costs must be met somehow. So the system raises prices, drops coverage, etc. etc.


The current system is unstable and unsustainable. Tweaking around the edges will not fix it.

3 yrs - I totally agree with just about everything you said above! (I wish I could have articulated the same points in some of my earlier posts, the way that you just did!)

In some of my earlier posts, I did talk about the self perpetuating problems related to the rising costs of care and also about rich plans with low copays and no consumer accountability attributing to overutilization and the rising cost of care. I guess I just keep adding to my earlier thoughts in new posts. Root causes one to three, I think, will help, but not by themselves....That's one of the reasons I love the HSA concept...because it puts some of the responsibility of cost of care back into the hands of the consumer as well as providing tax incentives for becoming insured. HSAs are a good start. People don't like them, because they have been so spoiled over the years by the $10.00 copay plans, but ultimately, consumer-driven health plans will be a very good solution towards slowing the rising costs of care.

Disassociating health insurance from employment would also be another good thing to start looking into.

I believe that Medicaid reform is absolutely necessary. The gov't has got to be able to negotiate on prescription drug prices, and Medicaid has also got to have better reimbursement rates to Dr's, so Dr's won't have to look to the private sector to recover the costs of doing business.

You are absolutely right about everything mentioned above. These root problems, however, need to be addressed rather than universalizing care, IMO. I think universalizing care will NOT help fix the high cost of care, but rather exacerbate it, all the while, having a negative impact on quality of care, and creating a huge tax burden to the American people.

so the system shucks more folks out of the insurance pool, looking to reduce demand by retaining only those healthy and profitable few.

This is the one point that I think a lot of people are mistaken on. The system does shuck more and more folks out of the employer-sponsored insurance pool, but the ones that remain are not the healthy, they are the unhealthy. The healthy go off and get their own coverage at cheaper rates or drop out altogether, leaving the unhealthy in guaranteed and employer-sponsored markets, again facilitating a self-perpetuating problem of rising healthcare costs.

See, I believe that the majority of people are heathy (not the minority) and that the majority of people CAN afford coverage (not the minority). My thoughts are that if the majority of people were to purchase individual coverage, instead of depending on employers, then they would have incentive to purchase only what they need, and they would be more likely to ration their own care, because they would be more responsible for the cost of their care instead of having low copays provided for by employers. This is why I support disassociating coverage from employment. I don't know if it is possible, but I think it is a better alternative than universalizing. The ultimate result, IMHO, would be a slowing rate of inflation in the healthcare industry, and a better chance that those who need guaranteed issue would be better able to afford it.

 

[Martha]

Nice explanation of some of the economics of healthcare, 3 Yrs. Thanks.

 

[Martha]

This is the one point that I think a lot of people are mistaken on. The system does shuck more and more folks out of the employer-sponsored insurance pool, but the ones that remain are not the healthy, they are the unhealthy. The healthy go off and get their own coverage at cheaper rates or drop out altogether, leaving the unhealthy in guaranteed and employer-sponsored markets, again facilitating a self-perpetuating problem of rising healthcare costs.

You have said this before and I just don't believe it. Four percent of the insurance market is individual insurance. This does not sound like the healthy abandoning the group market.

You want to attack root causes of high cost of healthcare. But too many things are off your table. Insurance companies and their huge profits for one. Ever think that maybe part of the root cause is that insurance companies do not compete on price but instead compete for the most healthy? When I ran our business of 75 employees, we could get only one insurance company to bid on us for a number of years, only because our group tended to be a bit older. All in all we were very healthy. The more I read the more I am convinced that going to the insurance model for healthcare in the 1940s was one of the biggest mistakes our country ever made.

 

[tomz]

Root Problem #1: We need tort reform. The cost that Dr's pay for liability insurance is phenomenal and is only passed onto the private sector in the form of higher healthcare costs which ultimately impact the cost of health insurance.

I agree with you on tort reform. But according to Citizenshealthcare.gov:

Malpractice legal costs and patient payments represent less than 1/2 of 1 percent ($10 billion) of total health care expenditure. On the other hand, about one quarter of Americans account for roughly 80 percent of total spending each year. Chronic care and end-of-life spending account for the bulk of the $2 trillion we spend in this country on health care. Malpractice gets a lot of press, but is a drop in the bucket in the overall scope of things.

 

[Nords]

I just read a book on US healthcare. The author's conclusion is that we pay a lot for healthcare primarily because we are charged a lot. I don't know if that is correct, but my next reading is going to be on healthcare economics.

Look out world, here comes another smart ER with the time & energy to do something about a problem!

 

[Sheryl]

Look out world, here comes another smart ER with the time & energy to do something about a problem!

Thank goodness for Martha and Rich-in-Tampa and anyone else who is taking this on. I would if I had a clue where to start. All I can do is vote, and lobby my legislators.

The whole situation just makes me irrationally angry.

 

[Martha]

The whole situation just makes me irrationally angry.

Or rationally angry.

 

[Gone4Good]

This is the one point that I think a lot of people are mistaken on. The system does shuck more and more folks out of the employer-sponsored insurance pool, but the ones that remain are not the healthy, they are the unhealthy. The healthy go off and get their own coverage at cheaper rates or drop out altogether, leaving the unhealthy in guaranteed and employer-sponsored markets, again facilitating a self-perpetuating problem of rising healthcare costs.

See, I believe that the majority of people are heathy (not the minority) and that the majority of people CAN afford coverage (not the minority).

Really?

Here in New Jersey, where they can't turn you down, I'm told comprehensive insurance for me and my wife (ages 35 and in good health) will run around $11K. Not exactly affordable when considering the median family income is somewhere around $42K before taxes.

Elsewhere, insurance is less expensive if you're healthy, but perhaps not available to everyone.

To the larger point, when companies discontinue health care coverage they discontinue it for the healthy and sick alike. The young and healthy are welcomed by the insurance industry as profitable customers. The rest, well, tough luck. Oh, and about those pre-existing conditions, tough luck. That is until we see you in the emergency room.

 

[wabmester]

Just to get a feel for the magnitude of the issue....

Google tells me that the total spending on US health care in 2005 was about $2 trillion.

Assuming 100 million families, that's an average of $20,000 per family per year (and rising).

Median household income was $46,000 in 2005 (couldn't find the mean).

 

[mykidslovedogs]

Really?

Well, I guess this is what I see a lot in my business, because my state is not a guaranteed issue state, and I deal mostly in the small group market vs. large group market where coverage is guaranteed, and insurance carriers cannot turn the small groups down regardless of health. The small group market has gotten killed, pricewise, in our state, in part due to this phenomenon of healthy individuals and/or their dependents foregoing the group plans for cheaper, individual policies.
[/quote]

Here in New Jersey, where they can't turn you down, I'm told comprehensive insurance for me and my wife (ages 35 and in good health) will run around $11K. Not exactly affordable when considering the median family income is somewhere around $42K before taxes.

This is a perfect example of why guaranteed-issue and community rating do not work. Even with a large population of people contributing to the pool, insurance carriers cannot accurately assess risk in a guaranteed market, so they just charge everyone, including the majority of people who are healthy, much higher rates, forcing even the healthy to abandon coverage and leave the risk pool.

Elsewhere, insurance is less expensive if you're healthy, but perhaps not available to everyone.

Well, this is true, but which is the worse of two evils? ... Having insurance be so expensive that almost noone can afford it, or having the ability to get insurance, albeit at different ratesfor the healthy vs. the unhealthy?

To the larger point, when companies discontinue health care coverage they discontinue it for the healthy and sick alike. The young and healthy are welcomed by the insurance industry as profitable customers. The rest, well, tough luck. Oh, and about those pre-existing conditions, tough luck. That is until we see you in the emergency room.

In a scenario like this, in the current system, many of the "uninsurables" will find other jobs to provide coverage for them (thus facilitating the self-perpetuating cycle of higher prices in the group market), some will enter high risk pools, and some will forego coverage or go into the medicare system. I don't know the best solution, but I like to theorize that consumer-driven health plans like HSAs and HRAs are a better way to reduce the inelastic demand and facilitate less inflation in the industry rather than universalizing care and making the quality of the system worse for everyone.

You want to attack root causes of high cost of healthcare. But too many things are off your table. Insurance companies and their huge profits for one. Ever think that maybe part of the root cause is that insurance companies do not compete on price but instead compete for the most healthy?

What you are saying is not logical to me. Naturally, insurance companies are competing for whatever business will bring them profits. And naturally, the competitors with the lowest premiums will win the business. If we were dealing with a situation where there were no competitors, then I could see how corporate greed could get out of hand and become a root cause of the problem, but that is not generally the case here in the U.S.A, unless you live in an area that forces competitors out of the market with guaranteed-issue and community rating.

Quite a few years ago, several insurance companies left the state of Colorado because loss ratios were 1.65 to 1. $1.65 was going out in claims for every $1.00 that came in. This happened right after Colorado decided to adopt modified community rating in the small group market and insurance carriers were required to charge flat age-banded rates, regardless of gender or health status of the group. About half of the big players left our market at that time. (Aetna and Pacificare were two of the biggest to leave). Because competition dropped so much, insurance rates went through the roof, inflating at 20-50% per year for several years. As soon as new legislation was passed, allowing carriers to rate small groups up to 25% lower for "healthier" groups and up to 10% higher for "sicker" groups, several new players came into the market, creating new competition which helped hold rates much steadier over the past few years.

I don't think corporate greed is a root cause of the healthcare problems in the U.S. I'm not saying it doesn't exist at all, but I lean more toward 3 yrs' opinions about inelastic demand and consumers having been sheltered from the cost of their care for so many years.

When I ran our business of 75 employees, we could get only one insurance company to bid on us for a number of years, only because our group tended to be a bit older. All in all we were very healthy.

Hmmm...it's hard for me to believe that the insurance carriers were declining to quote because of the overall age of the group, because I'm fairly certain it is against the law for insurance companies to decline to quote based on the age of the group. I have, however, seen large groups be declined due to being in a high-risk industry (such as nursing home care - yes, people who work in the nursing home business tend to be heavy utilizers of healthcare), and I've also seen large groups be declined because of the overall disclosed health status of the group.

It always kills me when people say, "I really am healthy...the insurance company just doesn't want my business because...." It's simply not true. Whether or not a group or individual is accepted for coverage depends purely on a logical, statistical analysis of the risk of taking them on as customers.

 

[mykidslovedogs]

Just to get a feel for the magnitude of the issue....

Google tells me that the total spending on US health care in 2005 was about $2 trillion.

Assuming 100 million families, that's an average of $20,000 per family per year (and rising).

Median household income was $46,000 in 2005 (couldn't find the mean).

But I think that about half of that spending is in the Medicare and Medicaid sectors (public sector), so you can't include that into the pricing for the private sector. Good thought to check into that, though...It's still too high no matter how you look at it!

 

[Martha]

Well, I guess this is what I see a lot in my business, because my state is not a guaranteed issue state, and I deal mostly in the small group market vs. large group market where coverage is guaranteed, and insurance carriers cannot turn the small groups down regardless of health. The small group market has gotten killed, pricewise, in our state, in part due to this phenomenon of healthy individuals and/or their dependents foregoing the group plans for cheaper, individual policies.

Cherry picking.

This is a perfect example of why guaranteed-issue and community rating do not work. Even with a large population of people contributing to the pool, insurance carriers cannot accurately assess risk in a guaranteed market, so they just charge everyone, including the majority of people who are healthy, much higher rates, forcing even the healthy to abandon coverage and leave the risk pool.

Many insurance companies abandoned the guaranteed issue/community rating market of NJ and some other eastern states, for better waters elswhere. If the whole US was guaranteed issue and community rated, the insurance companies would have to compete on price.

I don't know the best solution, but I like to theorize that consumer-driven health plans like HSAs and HRAs are a better way to reduce the inelastic demand and facilitate less inflation in the industry rather than universalizing care and making the quality of the system worse for everyone.

You assume reduced quality without facts. You assume that HSAs will effect inflation in the industry with no facts. An HSA would do nothing for me. I still need to take certain drugs for asthma. If I was low income and only could buy an HSA plan, I may forgo getting necessary drugs. End result I would end up in the hospital. If I found a lump in my breast, I am not going to call around and find out who does the cheapest biopsy. I am going to my primary care doc and asking for referal to the best. If the lump is cancer, I am not going to shop around for the cheapest chemo provider. I want the one who gives the best result. Not Budget Chemo at the mall. According to the Kaiser foundation, half of HSAs are not even funded and the average funding is only $500.

What you are saying is not logical to me. Naturally, insurance companies are competing for whatever business will bring them profits. And naturally, the competitors with the lowest premiums will win the business.

Lowest price for the healthy, no coverage or outrageous price for the unhealthy. They are cherry picking, not competing.

I don't think corporate greed is a root cause of the healthcare problems in the U.S. I'm not saying it doesn't exist at all, but I lean more toward 3 yrs' opinions about inelastic demand and consumers having been sheltered from the cost of their care for so many years.

I think you are reading more into what 3 Yrs said that what he really said. I think insurance companies are a big reason why are costs are so high in the US, along with a number of other reasons.

Hmmm...it's hard for me to believe that the insurance carriers were declining to quote because of the overall age of the group, because I'm fairly certain it is against the law for insurance companies to decline to quote based on the age of the group. I have, however, seen large groups be declined due to being in a high-risk industry (such as nursing home care - yes, people who work in the nursing home business tend to be heavy utilizers of healthcare), and I've also seen large groups be declined because of the overall disclosed health status of the group.

This is a state law issue. Actually, we did get one company say it would quote but the quote would be so much higher than our current provider that we probably would not want to bother. This was before they obtained any health info from our group and only had age info.