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.

Doubts About The In-And-Outers

Massachusetts has its own version of “health care reform” legislation, which is similar in some ways to the federal “health care reform” legislation.  For that reason, the current Massachusetts experience may be a precursor of what we could soon be facing on a national scale.

Yesterday that Boston Globe ran an interesting article that should cause concern among all responsible citizens.  The article addresses the phenomenon of what might be called “in-and-outers.”  “In-and-outers” are people who come in to the health “insurance” system only when they already need immediate health care, rack up health care costs that far outstrip the amounts they pay in premium, and then go out of the system when their need for health care ends.  The rest of the time, they pay a monthly penalty that is less than the monthly cost of the premium would be.  During the few months they are in the system, their average health care costs are far greater than the average health care costs of the long-term participants in the health insurance system. This phenomenon — which has created an imbalance in Massachusetts totaling in the millions of dollars — also could occur under the federal “health care reform” legislation.

Polls show that one of the most popular concepts in the federal “health care reform” legislation is the provision banning insurance companies from denying coverage to people who have pre-existing conditions.  As I’ve written before, I think this may only be because people don’t fully understand the point of exclusion of pre-existing conditions, which addresses one of the fundamental underlying concepts of insurance.  In reality, pre-existing condition exclusions hold down costs for responsible people who buy insurance to protect against future risk by preventing people from “gaming the system” by buying insurance only when, for example, they learn that they need knee surgery or have some other condition that requires expensive short-term treatment.  “In-and-outers” aren’t buying “insurance” against future risk because the risk is already realized.  Instead, they are buying a subsidy for their health care, and sticking the people who stay in the insurance pool long term with most of the tab.

This phenomenon isn’t fair, but it is predictable.  There always will be people who will try to maximize their economic benefit and take advantage of other people, without regard to fairness.  If the federal “health care reform” statutes don’t recognize and account for that reality of the human condition, it will be a significant problem for the rest of us.