Understanding Insurance: Will a Public Option or Co-op Get US Where We Want?

Today's commentary comes from an article I'd written for the Journal of the American Osteopathic Association and published today. Please click here.

HR 3962: Pre-existing condition or war injury?

Unless you have been out of the country or trapped under the cone of silence, you have no doubt heard that the House of Representatives narrowly passed HR 3962 – the Affordable Healthcare for America Act – Saturday night, 220 to 215. There are many issues in this bill that it seems both healthcare organizations and the media either haven’t read or didn’t understand. We will address them point by point over the next week or so.


Let us begin today by looking at those pesky pre-existing conditions...


SEC. 211. PROHIBITING PREEXISTING CONDITION EXCLUSIONS.

A qualified health benefits plan may not impose any preexisting condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any of the following: health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability, or source of injury (including conditions arising out of acts of domestic violence) or any similar factors.


As written, the burden of caring for our injured war veterans is lifted off the shoulders of the Veterans Administration and places it squarely on the backs of private insurers as our veterans transition back into society. Due to the rapid emergency medical response of our military, we have not had the number of deaths in Iraq & Afghanistan that we have in other wars; but we have had more injuries that previously would have killed our troops. Consequently, many have needed prosthetics and extensive rehabilitation. Good prosthetics cost tens of thousands of dollars and robotic prosthetics (hands that work like hands, such as the DEKA arm, rather than a hook) are near six figures.

This bill also provides for mental health parity. This means private insurers cannot limit mental health benefits. Given that in combination with the pre-ex elimination, the VA can also shift its mental health counseling to the private sector. With many of our troops having had multiple tours of duty, it should not be surprising that they will need some assistance readjusting back to civilian life. When vets get care at the VA, it is easier to gather data for researching what care works best and implement current standard of care treatment. In the private sector, this is much more difficult as it means educating all possible providers who may have varied or no experience treating vets.

In March, Uncle Sam floated the idea of having private insurers reimburse the Veterans Administration for care for service-related injuries. [Washington Post] After protests from veterans groups, the executive branch appeared to back off. Under this bill, House has managed to get the government off the hook again for its obligations to our wounded heroes. This is morally reprehensible.

A.M Best: BESTWIRE: Under Proposed Reforms, Little Rate Regulation, New Customers May Mean Health for Insurers

This is an article from A.M. Best's BESTWIRE. "Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. Policyholders and depositors refer to Best's ratings and analysis as a means of assessing the financial strength and creditworthiness of risk-bearing entities and investment vehicles."

Baucaus Plan's Impact on Insurance Premiums

The big controversy today is whether or not the Baucus Bill will actually be a solution to higher health insurance premiums. Politicians claim the Price Waterhouse Coopers report commissioned by America’s Health Insurance Plans (AHIP) is alarmist and self-serving in stating that insurance premiums will be higher in the proposed health insurance exchanges. However, it seems this report confirms the Congressional Budget Office’s letter to Senator Max Baucus dated September 22, 2009. It explicitly states on page 6 “…premiums in the new exchanges would tend to be higher than the average premiums in the current-law individual market – again with all other factors held equal – because the new policies would have to cover pre-existing medical conditions and could not deny coverage to people with high expected cost of healthcare. (CBO has not analyzed the magnitude of that effect.)…People with low expected costs for healthcare, however, would generally pay higher premiums.” The CBO admits it has not analyzed the effect of the no-prexisting condition policy mandate. And, it seems the CBO agrees with the PWC report.

The plan is written to fail because healthy small employer groups and individuals will go to the private sector for insurance. When they are ill, they will switch to a relatively “lower” cost co-op plan. Since pre-existing condition exclusions are outlawed, this co-op will be a magnet for the high-risk individuals or employer groups, either because of sickness or age. Since there is not a mandate for continuous coverage to be maintained, some individuals may choose to “save” money, by paying the federal fine and purchasing coverage only when they are ill. From an underwriting standpoint, there is nothing to protect the financial integrity of the Baucus plan.