Monday, February 15, 2010

Where Do They Come Up With This Stuff?

Republicans, in particular, have been pushing to allow the sale of health insurance across state lines; this is unlikely to help much with insurance rates, except possibly briefly. New York City is a good example of what forces are at work pressuring the pricing of health insurance. When I sold health insurance in the early 1990’s an extremely comprehensive and generous major medical and hospitalization policy from a major insurance company could be purchased for less than $100 a month---if you were young and healthy. When New York instituted community rating laws that stopped companies from turning you down or charging you higher premiums because of health problems---anyone could buy a policy---but the cost doubled---and has been growing ever since. In the late 1990’s a small employer group policy that offered similar benefits cost near $300. For an individual, but the same policy cost about $90 an individual for the same client---for their office staff in Utah. The reason is Utah had less restrictions on the policy standards than NY and because health care costs were significantly lower in Utah.
If the government now allows companies to sell anywhere--- their benefits and restrictions will need to conform to the most demanding and restrictive states. Eventually the costs for those policies will rise to the average cost faced by all the other insurers serving that locale. All this will accomplish is that costs, and then rates, will rise in the cheaper states, unless they continue to restrict benefits and separate costs for those states. If they do, then there will be no benefit to this, as the costs will be raised in the expensive states and remain lower in the cheaper states---just like they are now. This is what happens now as many health insurers are serving numerous states already.
The only way to control insurance costs and medical inflation is to really reform health care. Assuring coverage for every adult and child was a start that makes the system work for everyone---but does not control costs. Mandating cost controls and lower fees by limiting what insurers and Medicare pay to service providers is not an answer. That does nothing to deal with the spiraling costs the providers endure---it just allows insurance companies and the government to pay what they want---and leaves the financial pain to the systems and people that actually provide the care! Real Reform will demand new ways to look at the system and rework how it operates. It can be done and eventually, I believe, it will be done. Selling more insurance policies across state lines is not going to do it however, and it's not going to solve any of these problems.