It is commonly known that last July, Health Care Reform became Health Insurance Reform. This put insurance carriers directly in the crosshairs of the Obama administration. So why would Blue Cross of California and other carriers around the country risk the criticism of the public and the administration by seeking double digit rate increases. Simply – it’s because they have to.
I am not going to spend the time here to discuss how this is being played out by critics and the media. Suffice to say that there has been a great deal of sensationalism by these constituencies without having the facts. The truth is, we are talking about complex matters like rating pools, adverse selection, risk adjustments and other inter related actuarial issues that carriers can clearly defend.
So again, why would they risk the uproar that has been caused? Part of the answer lies in the auto and banking industry; examples of how the current administration’s solution to their financial losses was to take them over. So, with continued rising health care costs, what choice did these carriers have? Raise rates or risk a government takeover. So they put their customers and shareholders first. Isn’t that what they are supposed do?
One of our regular readers to this blog recently commented that blaming the insurance carriers for the cost of health care was like blaming a waiter for the price of the meal. Don’t blame the messenger. If you look at both the Senate and House bills, they are talking about limiting medical loss ratios to between 85% and 90%. If 85% of insurance premiums are tied to cost and utilization, why aren’t we reforming that piece first? On a positive note, there has been some talk in the last few days of adding some cost containment measures to any proposed legislation. In fact, media coverage on the west coast, as well as a special series on CNN has been entirely focused on the cost side of the equation. For Obama, it may be too little, too late.
Obama has called for an up or down vote to occur soon. What gives him the hope that this might work? Is it the uproar over these rate requests? This is a difficult avenue to pursue. Just as Democrats are beginning to break ranks as mid-term elections get closer, Republican resolve is becoming even stronger. CNN’s report showed that $1.2 trillion of health care spending in the US is wasted. About 50%. The Congressional Budget Office has estimated that this number is as high as 30%. So, without true cost reform, will politicians risk their careers on a “partial” or “misguided” solution?
Meanwhile, Blue Cross of California has agreed to postpone the individual rate increases by two months to allow the California Department of Insurance to review the increase, despite the fact that these rate increases are actuarially-sound and in full compliance with the law. This is a generous gesture on their part. Don’t blame the messenger!
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But health insurance, like
But health insurance, like medical services, are not sold in the competitive market.
So letting health insurance companies set rates any way they want would only work if
1. Everyone is covered
2. Insurance companies accept all comers at the same rates.
3. Everyone is able to switch carriers at any time.
None of those conditions exist.
If they did Blue Cross' rates would be much less than they are to attract more customers, and people would be able to switch on a moment's notice for better rates or service. Like you can switch supermarkets whenever you want.
But you can't switch, especially once you have a pre-existing condition. So you are stuck and they are stuck, but they can jack up the rates until you can't pay. Not really fair.
The solution of course is for health insurance to be illegal, and everyone have to pay the provider directly. There would be no more $100,000 operating room rentals (which an HMO has prenegotiated for $750), no more $900 surgical staplers (which can be bought for $45).
Costs would be controlled the way the cost of everything else is: by interested consumers. Nobody buys $99.00 tacos when perfectly adequate tacos can be had for $1 or $2.
Hardly likely.
But the Obama Administration doesn't think private health care insurers are such a great idea, and I have to say given the way things are today I can't really disagree.
The old system has run it's course and outlived it's usefulness. We need a new idea. One that won't result in people being forced out of their insurance by outlandish costs, medical services being unavailable, people dyeing trying to get care, and hospital emergency rooms closing because of unpaid bills.
The system is going to be gutted- there is no stopping that. It would be gutted even if Obama were to resign and were replaced with a Republican.
Who is left standing after that depends on many factors. Bring something to the table that is needed and you might be left standing. Bring nothing of value and end up on the floor. And good riddance.
Tough talk, huh?
Make a decent profit for your
Make a decent profit for your shareholders and be become a target by the current administraation. Or, lose billions of dollars and be owned by the Government.
Makes it all clear to me - deny rate increases so that insurers lose money - take them over and implement a single payor government owned system. Either way - we are headed down the wrong path.
Our free market system is
Our free market system is under attack! Someone needs to raise these issues. The government should not be allowed to dictate what acceptable profits are for private businesses. Let the market decide. Obviously insurance companies have to weigh many factors in determining what to insure and even whether to insure someone or something. The government cannot change all the rules and then expect the insurance companies to continue to be viable businesses. I fear that is this administration's real goal - running them all out of business and making the government the nation's health insurance company. Why doesn't anyone anywhere speak out on this? The public conversation seems very one-sided.
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