Fat And Fairness — And The Federal Government

What to do to deal with the obesity epidemic in America?  (And not just in America, either — recent studies also are showing increasing obesity in places like Scotland.)  Normally you might say that the eating and exercise habits of individuals are their own business.  The problem, however, is that obesity, like smoking, is statistically likely to cause significant increases in health care costs.  And when most working people participate in group health care plans, where expensive health problems inevitably produce increased premium costs, individual cases of obesity and cigarette smoking end up being everybody’s problem.

The companies that sponsor group health plans for many Americans have tried to deal with this problem by sponsoring wellness programs and offering incentives to employee participation.  But you can’t force a person to exercise or quit smoking.  Now some companies are taking a harder line, and making obese employees and smokers pay more for health coverage to reflect their increased likelihood of incurring health care costs.  Predictably, those efforts are being met by questions about the legality of distinguishing between people on the basis of weight, whether the programs have a disproportionate impact on the poor, who are said to be unable to afford health clubs and good nutrition, and the propriety of companies getting into the personal lives of  employees.  Those on the other side of the debate argue that non-smoking, non-obese employees should not pay the tab for the risky, costly lifestyles of co-workers who can’t curb their appetites for cigarettes and sugar.

It will be interesting to see how this issue plays out — and even more interesting to see what happens if President Obama’s health care statute is upheld and the federal government becomes increasingly involved in health care.  Does anyone think that federal regulators, having been given the power to require people to buy health insurance, would hesitate to mandate certain kinds of individual behavior — like eating less, quitting smoking, and exercising regularly — and punish non-compliance in an attempt to hold down costs?

Close to Home

Bob and I have probably blogged the heck out of the health insurance issue, but here’s a story that hits close to home.

The other night at dinner I sat next to my nephew who happens to run his own pizza shop here in Columbus. He doesn’t have the luxury of working for a big corporation with a group insurance plan or a mid-size business that might offer their employees health insurance. He has four employees who are young like he is and don’t want coverage cause they are all healthy, but he has to carry his own insurance, because he is not quite twenty five and has a pre-existing condition called crohn’s disease.

Currently he pays $350 per month, that’s $4,200 a year for medical coverage that is not all that great and they keep raising his premiums. So he is trying to do what any smart businessman would do, try to find better coverage at a lower cost to reduce his out of pocket expenses.

Unfortunately he is not having much luck because when he puts down crohn’s on his health questionnaire  so far each and every insurance carrier will offer him medical coverage with an attached exclusion that no claims related to his crohn’s disease will be covered even though he is taking medication to control his condition. I could tell he was visibly frustrated by this.

He asked me if I knew what the age was for dependents to be covered under their parents plan with the passage of the Health Care Reform Act and I told him it was twenty six so he has asked his mother if she would call and add him to their policy.

There will be no cost to his parents because their two daughters are currently covered and they have family coverage through his dad’s employer. By doing this he said it will give him more time to try to find better coverage as opposed to paying the high premiums for his current plan not to mention saving the premiums he would have to pay for the next year or so.

I’ve read Bob’s blog about the government statistics being unrealistic, however having been a medical underwriter for many years for a large insurance company here in Columbus I don’t agree with Bob’s conclusions. Most people are probably not aware that height and weight are a major reason why people can’t get health insurance and it has been mentioned recently that by 2015 three out of four Americans will be over weight.

Another condition which makes it hard for a very large number of individuals to get medical coverage is high blood pressure. It’s estimated that 65 million Americans have high blood pressure and from my experience most are not even aware they have this condition.

Of course being America everyone is entitled to there opinion and Bob to his, but I saw an article on the internet the other day that census bureau statistics through 2009 showed 50.7 million Americans with no health insurance coverage and in my mind there is just something terribly wrong with that.

A Primer On The Impact Of Regulations On Health Insurance Costs

Here’s a thought-provoking article from Fortune comparing health insurance costs in New York and Arizona, and analyzing how the regulatory regimes in those states have affected those costs.  The article notes that health insurance costs in New York are far higher, and the available options are far fewer, than in Arizona.  It attributes the cost difference, at least in part, to two regulatory requirements that exist in New York but not Arizona.

One of the regulatory requirements is “guaranteed issue,” which means plans operating in New York must accept all applicants regardless of their medical condition.  Health insurers therefore cannot exclude applicants because of “pre-existing conditions” — an approach which, as I have noted previously, encourages people to wait to apply for health insurance until they are immediately facing significant health care costs.  The second regulatory requirement is called “community rating,” which means that all applicants must pay the same amount regardless of their health condition.  So, young healthy people who have low health care costs pay the same amount as older people who make much greater use of health care.  As a result, the younger and healthier participants in the insurance pool are directly subsidizing the health care of older and less healthy participants.

New York imposes the “guaranteed issue” and “community rating” requirements, and as a result the health insurance costs for young healthy people are much higher than they are in Arizona, which does not impose those requirements.

What does that mean for the rest of us?  It is relevant because the “health care reform” legislation recently enacted by Congress and signed into law by President Obama imposes both the “guaranteed issue” and “community rating” concepts, although the “community rating” requirement is not as stringent as that which exists in New York.  The question is whether those two requirements will operate to push up health insurance premium costs.  The experience in New York — and common sense — suggest that that is exactly what will happen.  And the increased burden will fall most significantly on the shoulders of young, healthy individuals who use health care the least.