Phil Hauck's TEC Blog

Monday, April 12, 2010

What H/C Reform will look like in a year or two ...

On Friday, April 2, there were two articles that together tell the story of what's coming in the health insurance debacle that Congress has created:

Maine became a forerunner of our upcoming national disaster when in 1993 it declared that everyone applying for insurance must be provided it, regardless of pre-existing conditions ... with no requirement that healthy people also had to join up, nor any leverage on holding provider costs down. Today, for Anthem, 1% of its Maine insureds account for 50% of its claims. It has to raise rates greatly on the other 99% to pay for the 1%. The insurance commissioner feels Anthem's 2009 increases are too high and has nixed them, requiring a "no profit" year or two for Anthem. The premium levels, she says, are too burdensome for Maine citizens. What kind of a business model is this?
It's not insurance companies who are creating the cost problem. (They do create other problems in trying to operate a profitable business) They are trying to deal with it and provide a "broker" service between providers and citizens. The cost problem is driven by medical providers.
That same week, Massachusetts' insurance commissioner rejected 90% of the current requested increases in its state. You will see this in more and more states. Insurance companies won't be able to cope, and will withdraw.
Also that week, a New York state hospital/physician provider group said it needed a 15% price increase from a major insuror, and the insuror said it couldn't turn around and charge the resulting premiums without losing customers to competitors ... so it dropped the provider group. Now, the provider group has fewer patients and a big fixed cost problem.

Everything described above is happening just as it should from a cause/effect standpoint. High cost providers get pressure to reduce costs ... and pay the penalty of losing money and volume when they don't.
Do you see any good in the above? The health care reform package didn't solve the cost problem. It exacerbated it. What you see above is the beginning of the negative experience. The Administration says that the penalties imposed on people and businesses if they don't sign up for insurance will cover the over-spend. Yeah? The average cost per person of our health care system is $7,600 ... and the penalties are far, far less than that. It's better to pay the penalty ... another rational cause-and-effect you will see. It will be interesting to see what that drives ... people predict it is a purposeful way to get to government-provided health care.
PS: Running the system nationally (i.e., price-fixing a la Medicare) won't help ... as it hasn't in any European country. Yes, it "works," but not the way it could have if you understand what drives people to excel regardless of pay levels, and put that situation in place.

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