What do we need health insurers for anyway?

[pauldun170]

http://articles.latimes.com/2010/feb...ik28-2010feb28

What do we need health insurers for anyway?
MICHAEL HILTZIKFebruary 28, 2010|Michael Hiltzik
Angela Braly can't kid me.

When the chief executive of gargantuan health insurer WellPoint (parent of Blue Cross of California) went before a congressional subcommittee the other day, she displayed all the smile-through-the-tears pluck of Annie looking to a sunny tomorrow or Scarlett swearing to God she'll never be hungry again.
WellPoint didn't really want to jack up health premiums on its customers by as much as 39%, she said -- it had no choice. "We care deeply about our California customers," she said.

But what she was really telling the committee members was this: "Please put us out of our misery."

Braly explained that her company's premium increases on individual policies were based on several circumstances: One, people are getting older. Two, people are becoming unemployed, and if they're healthy they're dropping out of the insurance pool. Three, the cost of diagnostic testing is soaring.

Implicitly, she begged for the government to help -- put people back to work so they're eligible for cheaper group plans, and clamp down on costs. (Not even the government can stop people for growing older.) Without that help, she intimated, premiums are going to keep rising sharply and WellPoint's already meager profits are going to be hammered worse.

In delivering this appeal, Braly was forced to make an implicit admission that her industry almost never makes explicitly: The nation's health coverage system is so hopelessly broken that even the health insurance industry can't handle it anymore.

Her testimony, and other statements she and other WellPoint executives have made, suggests that insurers can't profitably manage through periods of high unemployment. They can't price policies in a way that keeps healthy young people in the same pool as older people, producing a mockery of the very point of indemnity insurance. Despite a decade of unobstructed consolidation, which was sold to regulators as a way to control healthcare costs by creating mega-insurers like hers, her industry can't control healthcare costs.

Braly's words are a reminder of the most important unasked question in the entire healthcare debate: What do we need insurance companies for, anyway?

The only way insurers can remain profitable at all is by selling healthy people on policies that don't offer much coverage at all, while squeezing older, less healthy people remorselessly so they either pay for most of their care out of pocket or get priced out of the insurance market completely (thus becoming a burden for taxpayers).
In short, this is an industry that acts as if it will have trouble making money unless regulators allow it to cover only injuries suffered by a young single male hit by an asteroid.

Meanwhile, however, it fritters premium income away on expenses generated largely by corporate initiatives having nothing to do with healthcare. WellPoint spent $2.6 billion repurchasing its own shares last year. This was such a good deal for shareholders that its board recently authorized spending an additional $3.5 billion for the same purpose. None of those dollars, it should go without saying, will be available for delivering healthcare to customers.
It would have been marvelous and uplifting if all the participants in Thursday’s health reform summit in Washington understood that as well as the insurers themselves.

Instead, the health reform obstructionists, who mostly belong to the Republican Party, mouthed the same tired and irrelevant bromides. They yammered about blocking malpractice lawsuits, even though the evidence shows that malpractice litigation, including the "defensive medicine" it foments, accounts for 2% to 3% of the country’s annual healthcare bill of $1.7 trillion. (Arguably a small price to pay, at that, for the value of giving patients injured by malpractice redress for their injuries.)

They returned again and again to the old chestnut about allowing insurers to sell policies across state lines. President Obama, to his credit, understood that absent minimum coverage standards this would lead insurers to race into whatever benighted states were willing to remove all coverage standards just to compete for, say, WellPoint's headquarters. No one in any state would be able to buy a policy worth a tinker's damn. The reform opponents greeted his explanation like the deaf adder in Psalm 58: They just stopped their ears.

So it's worth scrutinizing Braly's words for a reminder of what really needs to be fixed.

In that Wall Street conference call, Braly and her WellPoint management team observed that the company had lost 1.4 million subscribers, or 4%, during 2009. Much of that was because of layoffs by employers who offered WellPoint policies to their workers. That became a big problem for the insurer because of federal COBRA rules allowing laid-off workers to continue their group policies if they pay the full price themselves. Who does that? Only people with sickness in the family, which skewed WellPoint's medical spending higher.
As for the 39% California premium boost, the House subcommittee released e-mails in which WellPoint executives discussed how to moderate rate increases by creating "look-alike plans . . . with a benefit or two removed" so they would seem cheaper, like a cereal company dropping its prices by a few nickels but putting less cereal in the same size box. Is there any surprise that, in this era of intolerable premium increases, the average deductible on WellPoint's policies has risen by 20% over the last two years? (One WellPoint policy in California carries a family deductible totaling up to $40,000 -- that's not a misprint.)
Braly in her testimony assured the subcommittee that even with the latest California rate increases, "a 40-year-old woman in Los Angeles can obtain coverage with a $1,500 deductible for as low as $156 per month."

She didn't specify what kind of coverage. So let's check out what her company offers. Leaving aside whether that 40-year-old woman might have a preexisting condition that would drive up her premium or make her uninsurable -- anything from diabetes to a history of hay fever -- the insurer's California package with a $1,500 deductible requires the customer to pay up to 70% of the cost of "covered services," including routine mammograms and Pap tests, plus as much as $500 a day for hospital stays.

Maternity isn't covered at all, so our 40-year-old Angelena better have gotten her lifetime childbearing out of the way before picking up the phone to sign up.

"Our plans fit the way you live," the CoreGuard brochure says. What it really means is: You better fit the plan, or you're out of luck.

Shouldn't that have been on the agenda at the Washington summit?

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at michael.hiltzik@latimes.com, read previous columns at www.latimes.com/hiltzik, and follow @latimeshiltzik on Twitter.

[Avatard]

Paul, it doesn't matter how many people from both sides of the table on this matter testify that the system's broken, the Republican obstructionists have determined that because Health Reform was put forth by Obama, who is both Black, and Democrat, that it must be defeated at all costs - even if it's tantamount to biting one's nose to spite one's face.

That's how we crackers roll here in the US of A.

[Particle Man]

and why does it cost so much for diagnostic testing?

that seems to be a question that nobody wants to ask.

early detection in a lot of cases is almost as good as prevention.

[goof2]

Originally Posted by Avatard

Paul, it doesn't matter how many people from both sides of the table on this matter testify that the system's broken, the Republican obstructionists have determined that because Health Reform was put forth by Obama, who is both Black, and Democrat, that it must be defeated at all costs - even if it's tantamount to biting one's nose to spite one's face.

That's how we crackers roll here in the US of A.

Obviously, because if a person doesn't want President Obama's health care "reform" it means they don't want anything at all and it has to be because Obama is a Democrat and black. It couldn't possibly have anything to do with the fact that the President's proposal does absolutely nothing to lower the actual costs of health care (not health insurance), anyone who opposes this proposal (75% of Americans) are doing so for racial and partisan reasons.

[smileyman]

Anything that goes on the government's or private insurance bill has huge overruns, military, medical, or not. They find a crease in the system, any system and abuse it while the tax payer or premium payer picks up the slack. Rather than bluster about finding ways for everyone to afford it, lets fix the problem and get some cost accountability in it. Isnt there some way for government to examine what a procedure costs and keep costs low so insurance will be low?

[derf]

Originally Posted by goof2

Obviously, because if a person doesn't want President Obama's health care "reform" it means they don't want anything at all and it has to be because Obama is a Democrat and black. It couldn't possibly have anything to do with the fact that the President's proposal does absolutely nothing to lower the actual costs of health care (not health insurance), anyone who opposes this proposal (75% of Americans) are doing so for racial and partisan reasons.

People oppose the plan set forth because it is a crappy one. If it could limit malpractice suits to reasonable levels, and place limits on pharmicudical companies. Medical malpractice insurance and drug cost are the 2 things that have driven costs up way past the point of being reasonable over the last 3 decades.

[Avatard]

Maybe you missed the part about malpractice only accounting for about 2%.

[goof2]

Originally Posted by smileyman

Anything that goes on the government's or private insurance bill has huge overruns, military, medical, or not. They find a crease in the system, any system and abuse it while the tax payer or premium payer picks up the slack. Rather than bluster about finding ways for everyone to afford it, lets fix the problem and get some cost accountability in it. Isnt there some way for government to examine what a procedure costs and keep costs low so insurance will be low?

Exactly, this is what I have been saying from the beginning. The overriding statement that has been beaten in to the ground is "Health care costs too much!". Fine. Tell me where and why it costs too much and lets fix it. Health care costs are rising (depending on who you believe) by anywhere from 6% to over 10% per year. Insurance companies profit margins are not rising at a comparable rate. That is a pretty good indication that the root of the problem lies somewhere down the line.

CNN is running a story today about bills from hospitals with ridiculous charges. One patient was billed $1,000 for a toothbrush, another was charged $140 for a single Tylenol, and another was charged $24 for each alcohol swab during a surgery where almost 50 of them were used. Screwing around trying to regulate the health insurance industry isn't going to fix any of that. Tell me why that happens and correct the problem.

This wouldn't be especially difficult to do, but it is much easier to make a scapegoat out of someone (they tried with doctors, hospitals, and lawyers before settling on the insurance industry) and call it job done. They have chosen the latter. Unfortunately it isn't going to fix anything and the taxpayers are going to be the ones left holding the bill when it comes due.

[smileyman]

My Latest surgery bill had an additional 830 dollars added in on a line item I did not receive in order for the clinic to net what they wanted to bill after the insurance wrote their bill down for allowed amount. So who is screwing whom? Insurance wouldnt cover but 1144 allowable, my Dr claim was 2205, in the end blue cross Blue shield had me pay my 1000 deductible and disallowed 200 worth saying it was 'comfort and convenience'. So I end up outta pocket my premiums of 3036 per year plus my fees of 1164 whil BC/BS pick up 179.00
!!??

[Amber Lamps]

Personally, I think that it's the medical industry that is at fault. The costs are outrageous! When I had the initial throat surgery done, I got bills from three separate "specialists" that looked at my x-rays. I didn't authorize any of this, I never met any of these people nor was it ever explained why this was necessary... When I was in the hospital, I just about received a bill for every service as a line item. I was surprised that I didn't get a bill from the old black guy that swept the floor! What exactly is covered in the $500+/day room rate? Is that the money they use to pay all of the staff that always seems to be hanging around chit chatting? Perhaps it's to cover the millions of dollars spent advertising the only hospital for 50 miles... Don't get me started on the number of people involved to prescribe motrin because you have an owie. From the moment you step into the office, you probably have to go through 5 people to see a Doctor for 5 minutes. Not to mention the people whose only job is to handle the billing after you've gone.