The Best Health Care System in the World!

by Eric Martin

Just think, in the rest of the industrialized world, citizens get their fully guaranteed, never rescinded health insurance from the "government" which is always the problem, never the solution.  We Americans, on the other hand, get our insurance from the private sector, which means it is, by definition, more efficient and a superior performing product.  We know this because government never outperforms the free market.  From the incomparable Murray Waas:

In May, 2002, Jerome Mitchell, a 17-year old college freshman from rural South Carolina, learned he had contracted HIV. The news, of course, was devastating, but Mitchell believed that he had one thing going for him: On his own initiative, in anticipation of his first year in college, he had purchased his own health insurance.

Shortly after his diagnosis, however, his insurance company, Fortis, revoked his policy. Mitchell was told that without further treatment his HIV would become full-blown AIDS within a year or two and he would most likely die within two years after that.

So he hired an attorney -- not because he wanted to sue anyone; on the contrary, the shy African-American teenager expected his insurance was canceled by mistake and would be reinstated once he set the company straight.

But Fortis, now known as Assurant Health, ignored his attorney's letters, as they had earlier inquiries from a case worker at a local clinic who was helping him. So Mitchell sued.

In 2004, a jury in Florence County, South Carolina, ordered Assurant Health, part of Assurant Inc, to pay Mitchell $15 million for wrongly revoking his heath insurance policy.

In September 2009, the South Carolina Supreme Court upheld the lower court's verdict, although the court reduced the amount to be paid him to $10 million.

By winning the verdict against Fortis, Mitchell not only obtained a measure of justice for himself; he also helped expose wrongdoing on the part of Fortis that could have repercussions for the entire health insurance industry.

Previously undisclosed records from Mitchell's case reveal that Fortis had a company policy of targeting policyholders with HIV. A computer program and algorithm targeted every policyholder recently diagnosed with HIV for an automatic fraud investigation, as the company searched for any pretext to revoke their policy. As was the case with Mitchell, their insurance policies often were canceled on erroneous information, the flimsiest of evidence, or for no good reason at all, according to the court documents and interviews with state and federal investigators.

The revelations come at a time when President Barack Obama, in his frantic push to rescue the administration's health care plan, has stepped up his criticism of insurers. The U.S. House of Representatives is expected to vote later this week on an overhaul of the health system, which Obama has said is essential to do away with controversial and unpopular industry practices.

Insurance companies have long engaged in the practice of "rescission," whereby they investigate policyholders shortly after they've been diagnosed with life-threatening illnesses. But government regulators and investigators who have overseen the actions of Assurant and other health insurance companies say it is unprecedented for a company to single out people with HIV.

That point should be emphasized: the current health care legislation would outlaw the practice of rescission - make it illegal for insurance companies to do this under any circumstances (even when there was a pre-existing condition).  One obvious retort is that what Fortis did in this case is already illegal, hence Mitchell won his case. 

True, but because rescission is currently allowed in a broad set of circumstnaces, insurance companies engage in overly broad sweeps of rescission knowing that either: (a) they have a valid basis for rescission due to a technicality or pre-existing condition; (b) the customer will get discouraged and drop the matter; or (c) the customer will die before there is a resolution of the matter (as with HIV sufferers, they need to locate a source of treatment while the litigation drags on or...they die).  Thus, leaving rescission as a viable option creates a nightmare of a health insurance system.

But wait, it gets worse:

"There was evidence that Fortis' general counsel insisted years ago that members of the rescission committee not record the identity of the persons present and involved in the process of making a decision to rescind a Fortis health insurance policy," Nettles wrote.

Elsewhere in his order, Nettles noted that there were no "minutes of actions, votes, or any business conducted during the rescission committee's meeting."

The South Carolina Supreme Court, in upholding the jury's verdict in the case in a unanimous 5-0 opinion, said that it agreed with the lower court's finding that Fortis destroyed records to hide the corporation's misconduct. Supreme Court Chief Justice Jean Hoefer Toal wrote: "The lack of written rescission policies, the lack of information available regarding appealing rights or procedures, the separate policies for rescission documents" as well as the "omission" of other records regarding the decision to revoke Mitchell's insurance, constituted "evidence that Fortis tried to conceal the actions it took in rescinding his policy."

In affirming the trial verdict and Nettles' order, Toal was as harsh in her criticism of the company as Judge Nettles had been. "We find ample support in the record that Fortis' conduct was reprehensible," she wrote. "Fortis demonstrated an indifference to Mitchell's life and a reckless disregard to his health and safety."

Fortis canceled Mitchell's health insurance based on a single erroneous note from a nurse in his medical records that indicated that he might have been diagnosed prior to his obtaining his insurance policy. When the company's investigators discovered the note, they ceased further review of Mitchell's records for evidence to the contrary, including the records containing the doctor's diagnosis.

Nettles also suggested that Fortis should have realized the date in the note was incorrect: "Not only did Fortis choose to rely on one false and unreliable snippet of information containing an erroneous date to the exclusion of other information which would have revealed that date to be erroneous, Fortis refused to conduct any further investigation even after it was on notice the evidence which aroused its suspicion to be false," the judge noted.

But surely this is an isolated incident, right?

But state regulators, federal and congressional investigators, and consumer advocates say that in only a tiny percentage of cases of people who have had their health insurance canceled was there a legitimate reason.

A 2007 investigation by a California state regulatory agency, the California Department of Managed Health Care, bore this out. The DMHC randomly selected 90 instances in which Anthem Blue Cross of California, one of WellPoint's largest subsidiaries, canceled the insurance of policy holders after diagnoses with costly or life-threatening illnesses to determine how many were legally justified.

The result: The agency concluded that Anthem Blue Cross lacked legal grounds for canceling policies in every single instance.

"In all 90 files, there was no evidence (that Blue Cross), before rescinding coverage, investigated or established that the applicant's omission/misrepresentation was willful," the DMHC report said.

90 out of 90, huh?  Pretty good batting average.

Despite the utterly ridiciluous GOP talking point that the current healthcare legislation represents a "government takeover of health care," in truth all it does is lightly regulate the private health insurance market, and it gives many less well-off Americans subsidies to buy-in to that newly regulated market.  Not exactly socialism, and not as good as a real public option, but even then, the GOP is in full histrionics in a desperate effort to defend the status quo.

Do read the rest. If your blood pressure can handle it.

Comments

[John Thullen]

"not record the identities of the persons present"

Did they wear hoods and speak through voice-altering filters?

This sounds suspiciously like a Death Panel. Which is O.K., mind you, because it is a private Death Panel and subject to the profit-seeking rigors of the free market, and, of course, doing so is free speech.

Who sat on this Death Panel? Sarah Death Palin? Erick Death Panel? Mitch McDeath Panel? Steve Velvetglove King of the Death Panel?

Why are they afraid to divulge their involvement in murder?

In other news, Blockbuster Entertainment, a human being by any other name, according to the Supreme Court, was slaughtered like an animal in the marketplace by Netflix.

I'm an accessory to murder.

[Bernard Yomtov]

Thanks for publicizing this.

The case illustrates some of my pet annoyances with those who complain of "frivolous" lawsuits. In their world, the frivolous litigant is always the plaintiff, never the defendant. Yet quite often, it seems to me, the only reason there is a lawsuit is "frivolous" behavior by the defendant, which is to say simple refusal to meet obvious legal obligations until actually forced to do so. One way to deter that is with geneous punitive damages, a too-often reviled aspect of the law.

Another issue, particularly graphic here but much more broadly applicable, is that corporations are immortal, human beings (as distinguished from "persons," clearly) are not. So all delay works against the plaintiff, who wants to get the whole thing over with and get on with life, while the defendant has no such imperative. Note that it was seven years from the time Mitchell took out his policy to the final decision of the State Supreme Court.

I'd guess Mitchell endured some substantial problems as a result of that delay, while for Fortis lawyers it was just part of the job.

Remember all this the next time you read about some "outrageous" verdict.

[Ugh]

is that corporations are immortal, human beings (as distinguished from "persons," clearly) are not.

What?!!? Damn, I'm going to have to change my plans.

[ChrisJ]

One of the consequences of not regarding healthcare as a public good, and therefore appropriate for regulation (like a utility company), is that this obscene behavior is actually a version of company managers carrying out their fiduciary duties -- maximizing profits for shareholders.

The healthcare reform bill on the table is weak in many, many ways. But one thing it does do is initiate the paradigm shift from heathcare being just another commodity to healthcare being a societal concern. We can then build on that in the future.

[Phil]

Predicted people who will be absolutely silent on this topic: Brett Bellmore, blogbudsman, bc

Predicted people who will say, "Hey, he won his lawsuit, so this is a feature, not a bug": Sebastian, Marty, GoodOleBoy

Predicted person who will simply copy and paste a lengthy cite from a right-wing source with no context or additional commentary: CharlesWT

[Slartibartfast]

Predicted people who will predict what other commenters will or won't say: Phil

[Jay C]

This very issue just showed up on TV recently - on the lawyer show The Good Wife - quite a similar story: young couple needing emergency (and expensive) prenatal surgery has their health-insurance policy cancelled for some trivial (but legally permissable) reason. Of course in TV Land, there's always a work-around: turns out the Big Insurer actually has a corporate division whose only function is to find reasons to cancel [costly]policyholder's coverage!

What really got me was the facile way in which this practice was presented, in the show, as something vaguely shady, and a pretext for subtle (and fortunately successful) blackmail on behalf of the patient. Stories like Jerome Mitchell's though, point out that, rather than being some under-the-table impropriety, this is S.O.P. in the Health-Insurance Industry.

IOW, the usual Big-Business dodge: "OUR SLOGAN: There for you when until you need us!"

[Marty]

Actually, it is abug, not a feature that could have been solved at least a year ago if we were focused on the 70% everyone agrees on.

[Eric Martin]

if we were focused on the 70% everyone agrees on.

Everyone? The GOP has voted against similar small-bore measures in the past Marty. I think you're overly optimistic about the GOP's willingness to go against the health insurance industry.

And for the record, you need to offset the repeal of rescission with other measures (mandatory buy-ins, other cost control measures). These things don't work as stand alone measures.

[Phil]

That's not a prediction. You cheated, Slarti.

[elm]

Predicted people who will predict what commenters will predict: Slartibartfast and elm.

The first rule of tautology club is the first rule of tautology club.

[Slartibartfast]

That's not a prediction. You cheated, Slarti.

I tried to cheat, but stupid Typepad wouldn't let me move my comment upthread of yours.

Stupid, stupid typepad. Ruined a perfectly good joke.

[Marty]

Its been months since snyone disagreed with this. It is not the same as preexisting conditions, which require more cost concern,

As for they don't work alone, since the current bill kicks in over at least a four year period that argument is a little weak aginst doing it in pieces.

[Jacob Davies]

Marty: the 70% everyone agrees on

There's a line in software circles: everyone agrees that 90% of the features of software products are unnecessary. The problem is, everyone has a different idea which 10% are necessary.

The problem here has been that Republicans refuse to agree among themselves which 70% they would accept. There hasn't been a counterproposal from the Republicans containing 70% of what's in the HCR bill with a promise to vote for it. Are the Democrats mind-readers? Are they just supposed to keep presenting random subsets of the bill until Republicans signal their approval? Have you ever tried feeding a kid where they keep telling you they're hungry but they won't eat anything you offer, no matter how many different things you try?

[Eric Martin]

Its been months since snyone disagreed with this.

Was it in the GOP legislation? If not, then not so much.

It is not the same as preexisting conditions, which require more cost concern

It's very much the same, unless you mean to ban rescission except in cases of preexisting conditions. Which would still allow far too much rescission.

In the current example, Mitchell was rescinded because of a pre-existing condition. That's the point.

[Sebastian]

Inappropriate recission can be really awful. Which is why it is illegal. It certainly appears that the issue hasn't been well policed in the past, and that further regulation on it may be needed.

I tend to share Bernard's concern that often corporations can try to wait it out as one of the key problems with the defendant side of our legal system. (I think that the incentives to name everyone and the kitchen sink as defendants is one of the key problems on the plaintiff side).

But cases like this are great examples of why we should police recission better--I'm not sure there is a compelling reason to try to generalize it to the entire health care debate.

[Just a reminder, before somene accuses me again of wanting to torpedo government health care or other nonsense: My desire for years (as in before Obama was even elected) has been that the uninsured be provided access to Medicare at a deficit neutral rate (ending the stupidity of being forced to rely on your job for health insurance) and as a separate matter providing subsidies to those who can't afford that rate (so that everyone has access to at least some regularized health care system).]

[Eric Martin]

But cases like this are great examples of why we should police recission better--I'm not sure there is a compelling reason to try to generalize it to the entire health care debate.

The problem is, I think, that as long as you allow rescission, it will be abused because it pays to abuse. If you read the piece, you saw that some insurance co's made hundreds of millions annually through rescission.

Further, as I said in the post, sometimes the insurance company has a valid reason to rescind (either on a technicality of improper application, or for a previous condition). Neither of those seem like particularly ethical moves to defend when it comes to health insurance IMHO.

[Rob in CT]

Just to be that guy...

There is recission and there is recission. I mean, there are reasons for which coverage should be recinded (material misrepresentation, emphasis on material). It's just that those instances are, presumably, incredibly rare. It is obvious that the practice is being abused and needs to be regulated.

I'm glad that the reform bill will deal with this. Does *anyone* disagree with that? I can't imagine that even a GOP congresscritter would publicly admit to opposing regulating recission...

[Tony P.]

... this obscene behavior is actually a version of company managers carrying out their fiduciary duties -- maximizing profits for shareholders.

Even if there were no shareholders demanding maximal profits; even if there were no C-level executives demanding fat paychecks; there would still be a "fiduciary duty" -- to the customers.

No, not the sick or petentially sick customers. The healthy customers. The ones who pay the premium every month but do NOT have medical costs. How can you keep their premiums low if you don't take care to exclude sick people from your customer pool?

A health insurance company makes money by collecting premiums from healthy people. The only way an insurance company can "compete" against other insurance companies is to seek out healthier customers than its competitors have. A truly competitive insurance company will find a way to charge the lowest premiums in the business by virtue of insuring only the healthiest customers in the country.

That's how competition in The Free Market works: if your beloved private-sector health insurer keeps collecting your premiums, that must mean you're healthy! No wonder people love their private health insurance so much that they defend it tooth and nail against Marxist Fascism. When you've got your health, you've got everything, right?

--TP

[Eric Martin]

Right Tony. Which is why for-profit health insurance creates such perverse incentives that end up leaving people in need out in the cold.

The mandates to purchase insurance mitigates the costs to insurance companies of not having recourse to rescission any more.

[Jesurgislac]

Marty: Actually, it is abug, not a feature that could have been solved at least a year ago

Why would you think this needs "solving", Marty? Aren't you an enthusiastic supporter of the free market making US health care superior?

Why, yes, you are!

Well, this is the free market in action making US healthcare what it is, Marty. This is how profit unchecked - the naked free market - works.

And yet, somehow, you don't seem to like the actual real life examples of what you were so enthusiastically defending in principle so recently. Would that be because you had never actualy thought through what your ideal "free market" is actually like?

See, this is the advantage of basing an argument on facts. You have to look the facts up. Sometimes you learn new stuff. Sometimes when you learn more about what you have been defending, you quit defending it... without making a rather public fool of yourself by defending the free market in healthcare in one thread, and next week claiming the free market in healthcare is a "bug" that should be "fixed".

Tra-la.

[Jesurgislac]

Sebastian: My desire for years (as in before Obama was even elected) has been that the uninsured be provided access to Medicare at a deficit neutral rate (ending the stupidity of being forced to rely on your job for health insurance) and as a separate matter providing subsidies to those who can't afford that rate (so that everyone has access to at least some regularized health care system).]

So what you desire is a bureaucratic, means-tested version of the NHS... while presumably, like any good conservative, rejecting the idea of the NHS itself.

Which means what you desire is bureaucracy and means-testing. Why's that? What is it about bureaucracy/means-testing that has made it desirable to you for so many years?

[ChrisJ]

"Well, this is the free market in action making US healthcare what it is, Marty. This is how profit unchecked - the naked free market - works."

Exactly. A couple of decades from now I can see what healthcare has become being taught as an instructive example of the free market doing what it is programmed to do. Free marketeers often chime in at this point that, since we don't have a truly free market (damn government) in healthcare it's never been given a chance. Such folks tend to be big fans of the Gilded Age.

[Sebastian]

"A truly competitive insurance company will find a way to charge the lowest premiums in the business by virtue of insuring only the healthiest customers in the country."

Essentially you think that adverse selection is a large problem in the US health insurance case.

But studies indicate that it is at most a very small problem. See here

In regulated states, we find that there is no effect of having higher expected expense due to chronic health conditions on neither premiums nor coverage. Overall, our results suggest that the effect of regulation is to produce a slight increase in the proportion uninsured, as increases in low risk uninsureds more than offset decreases in high risk uninsureds. Community rating and guaranteed issue regulations produce only small changes in risk pooling because the extent of pooling in the absence of regulation is substantial.

So you are talking about a problem which, while it exists, does not actually have a large magnitude.

[Tony P.]

Sebastian,

Would you please explain to me how exactly health insurance companies DO compete with each other in a free market?

For the sake of this particular argument, feel free to assume that private insurance companies are good-faith actors: they really are trying to provide a service to their customers.

That service has two parts: risk pooling and cost averaging. Risk pooling means that some customers pay more in premiums than they ever receive in medical reimbursements. Cost averaging means that every customer gets to pay for the "average" customer's medical costs steadily over time rather than in big lumps as needed.

These are simple financial service functions. Simple enough that we can assume all competitors will be equally efficient at fullfilling them. Whatever "creativity" gets promoted by "competition" in a free market must take some other form than simple good-faith actuarial calculation.

Okay, WHAT form?

--TP

[McKinneyTexas]

So, under the new regime, if it passes, claims won't be denied? Ever? People will get whatever they want, when they want it, no questions asked? And for less money too? Awesome. I can't wait.

Here are a couple of thoughts: first, you can't statutorily eliminate chickenshit, whether its government chickenshit (not an unknown happenstance) or private party chickenshit. It's just there. The question is: what's remedy for the consumer when told "no"?

In the private party context, the remedy is to go to court. I don't know what SC law is, but here in the People's Republic of Texas, health insurers who deny, wrongly, a claim for benefits pay an automatic 18% annual penalty plus attorney's fees and are further exposed to an additional penalty up to three times actual damages (also in addition to attorneys fees). Admittedly, the judicial remedy is a distant second to timely treatment, but my question is: what will the remedy be under HCR? Or, under a single payer system, in countries with that program?

Further to Sebastian's point, taking a hard look at limiting rescission make sense. It's finite and manageable.

[Eric Martin]

So, under the new regime, if it passes, claims won't be denied? Ever? People will get whatever they want, when they want it, no questions asked? And for less money too? Awesome. I can't wait.

Um, what? Claims will be denied if the procedure is not covered. But HIV meds? No, those won't be denied.

And for less money? Most likely, since the bill mandates that insurance co's spend 80-85 percent of dollars collected from customers on care. The current ratio is quite different.

Admittedly, the judicial remedy is a distant second to timely treatment, but my question is: what will the remedy be under HCR? Or, under a single payer system, in countries with that program?

See, the thing is, we already have government insurance programs - pretty ambitious ones in Medicare, Medicaid and SChip.

The judicial remedies are typical, but generally speaking, the litigation is less numerous. Rescission is not about insurance companies saying: "We don't cover facelifts" and then getting sued. Rescission is when someone contracts an expensive illness, and then the insurance company searches for ways to purge them from the rolls.

That doesn't happen with government insurance. So less lawsuits about getting purged from the rolls.

Chicken's defecating or not.

[McKinneyTexas]

Tony P--my sense of how private insurers compete is that they enter into provider agreements keyed off of a percentage of Medicare. The lower the provider reimbursement rate, the lower the premium (or, the higher the profit margin). Some insurers offer Provider List A (high end docs and high end hospitals) at one premium level and lesser providers at lower levels. The punch line is that you get what you pay for, subject always to the above-mentioned chickenshit factor.

[McKinneyTexas]

Um, what? Claims will be denied if the procedure is not covered. But HIV meds? No, those won't be denied.

So, does the current bill spell out what is covered and what isn't? Whether I can get treated appropriately--operative word appropriately--is a pretty big concern. I suspect it does not. I also have the feeling that 'bending the cost curve' is going to reduce what is covered to the revenue available to pay for whatever coverage is then afforded.

[Eric Martin]

So, does the current bill spell out what is covered and what isn't?

No, the insurance policies do.

Whether I can get treated appropriately--operative word appropriately--is a pretty big concern.

This is the same concern as private insurance holders have currently.

Remember, this is still private insurance.

I also have the feeling that 'bending the cost curve' is going to reduce what is covered to the revenue available to pay for whatever coverage is then afforded.

Is this feeling based on anything of substance that we can debate in an empirical way? Or should I add what my "feelings" are?

[Tony P.]

... here in the People's Republic of Texas, health insurers who deny, wrongly, a claim for benefits pay an automatic 18% annual penalty ...

Eighteen percent of what? The medical reimbursement they wrongfully denied? I'm just curious.

... but my question is: what will the remedy be under HCR? ...

What would you like it to be? No matter what entity you have a contract with, your ultimate remedy for breach of that contract is a lawsuit. Lawsuits are a pain in the ass. But I'm sure you can think of even worse ways to deal with chiselers, just like I can.

--TP

[Jesurgislac]

McKinneyTexas: So, under the new regime, if it passes, claims won't be denied? Ever? People will get whatever they want, when they want it, no questions asked? And for less money too? Awesome. I can't wait.

Well, in that case, move to the UK, and you won't HAVE to wait!

(Questions asked, of course: but only medically appropriate ones to make sure you get the health care you need.)

If you need help or advice about moving to the UK, since you "can't wait", the UK Borders Agency has a useful website here. Oops, wrong URL - it's here. Let me know when you get here and I'll buy you a drink.

[Bernard Yomtov]

McKinney,

my sense of how private insurers compete is that they enter into provider agreements keyed off of a percentage of Medicare. The lower the provider reimbursement rate, the lower the premium (or, the higher the profit margin).

I think this is an important aspect of the insurance business. But note what this means. The biggest insurers in an area are able to negotiate the lowest rates from hospitals and other providers. So it becomes difficult for smaller insurers to compete, and you end up with very few choices. (see here)

So there's not really significant competition in many areas, and you get monopoly results - higher than optimal prices, less-than optimal supply.

[Sebastian]

"Is this feeling based on anything of substance that we can debate in an empirical way? Or should I add what my "feelings" are?"

So shall we discuss the empirics of adverse selection? Or shall we continue talking about it as if it were an enormous problem in the health insurance industry despite the evidence to the contrary?

Unfair reccision isn't pretty and it isn't right, but reccission AT ALL isn't the norm. A huge majority of people with cancer or AIDS or other hard to treat illness get covered. If you want to crack down on recission cheating, I'm all for it. But that doesn't make it a good stand in for most of the problems that plauge our health systems. And it is mostly irrelevant to the question of whether or not a general overhaul (or even one particular ill) is great idea.

I don't have a problem with saying the recission is bad. I have a problem with the direction of the conversation to link it to everything else without a better examination of what links you are asserting.

If you are asserting it as an exemplar of the general precept of adverse selection as a major problem in health insurance, you're going against the evidence.

It is a great emotional appeal (Like the Walter Reed hosptial disaster area is for the anti-government health care argument). But like Walter Reed, focusing quite a bit on it doesn't actually answer useful general questions about government/private health care.

[Mike Schilling]

In the current example, Mitchell was rescinded because of a pre-existing condition.

It looks to me like Mitchell was rescinded because of a new condition. Once that happened, what made it impossible for him to get insurance anywhere else was his preexisting condition.

[Jesurgislac]

Sebastian: Or shall we continue talking about it as if it were an enormous problem in the health insurance industry despite the evidence to the contrary?

Your position, then, is that given only a small percentage of people die each year because of rescission, those deaths cannot constitute an "enormous problem" and we shouldn't talk about them? I'm fairly sure this represents a change of heart from last year...

[Sebastian]

Jesurgislac:

Nope. As is often the case you are overdrawing conclusions.

And as is also often the case you are dragging in abortion for no apparent reason.

We can talk about the problem of inappropriate recission. We can try to fix it. That doesn't mean that it automatically gives you an "I'm right on everything" card. Not even on the topic of health care.

Thanks.

[chmood]

Sebastian, your choice of Walter Reed was unfortunate for your argument, as it was intentionally left to rot by the previous administration (perhaps it was hoped that this world-renowned medical facility would be taken for exactly the government failure you claim, once it had crumbled enough).

Emotional appeal is not enough, on either side. Make your argument, if you've got one.

[Sebastian]

Chmood, you're going to have to be more specific. I'm not aware of any executive order to destroy Walter Reed. Or anything even remotely like that.

I made my argument. Inappropriate recission is bad. We should correct it. The issue of recission, at least as presented here, has very little to do with the overall health care debate. As a stand in for adverse selection in general it is a bad proxy (more anecdote than data).

[Sebastian]

The wiki article on the Walter Reed scandal (or the salon article about it) is typical. Walter Reed was largely about ridiculous and disengaged bureaucracy. One of the key problem administrators, Kussman, was a problem there as far back as the 1990s (i.e. predating Bush).

It is used as a symbol of bureaucratic incompetence in government institutions. Which may or may not shed light on how government runs health care in general any more than recission does on insurance in general.

[JA Bob]

Once the court verdict was upheld, the penalty should have been siezure of all assets and instant corporate death wiping out shareholders and bond holders alike. Let them go sue the agents (corporate executives and the board members).

The funds would be put into escrow for the benefit of the policy holders.

Conservatives like to draw bright (but intellectually shallow) moral lines (crime, abortion, war, etc.). Let's see how they would deal with this one.

[KCinDC]

Some years back I got a high-deductible individual insurance policy through Fortis. I suspected at the time that it was essentially useless, because if I developed any really expensive problem they'd go through my long, long application with a fine-tooth comb and no doubt find something they could call a misrepresentation. Looks like I was right.

I have yet to see anything that would give me confidence that under our current system individual insurance is likely to be honored when it's really needed.

[Chris Schoen]

Eric,

How is the House or Senate Bill any better than the status quo in this regard?

Fortis tried to cancel Mitchel's policy on the grounds he had misrepresented his condition (which he hadn't.) They used, as pretext, a nurse's note in his medical records which suggested, erroneously, that Mitchell knew he was HIV+ before he bought the policy. In other words, they used the fraud loophole, which the HCB Bill allows to stand. Misrepresentation will still be a material breach of contract, even if insurers can't deny or terminate claims for pre-existing conditions.

Unless HHS has the authority to pre-approve insurer termination of contracts for "fraud," the only way to challenge rescission will be in the courts, just like it is now.

[Emma]

Sebastian: That doesn't mean that it automatically gives you an "I'm right on everything" card. Not even on the topic of health care.

Except that Jes *is* right on health care Sebastian, and everyone in the developed world outside the US knows it. Here in the People's Republic of Australia, you get what you need, medically, paid for by what we call Medicare, whatever age you are. It costs less money per head. We have better life expectancy and general health. You can get private health insurance if you like paying health insurance. And no conservative party here would *dare* try to repeal it.
No one can even understand why the USA is so weird in this area. It's utterly baffling.

[gwangung]

How is the House or Senate Bill any better than the status quo in this regard?

If I'm not mistaken, pre-conditions do not bar you from getting insurance (you may have to pay more, but you can get insurance). Also, since recision for non-fradulent reasons are barred, the burden of proof switches more toward the insurance company.

These two things alone make a lot of difference.

[Chris Schoen]

Gwangung,

I don't think that's what the bill says. Unless you are suggesting there is a mechanism for vetting insurer rescission, the burden remains on the insured in case of termination of policy to show that it was unwarranted.

The case Waas writes of has nothing to do with whether pre-existing conditions are covered or not. It has to do with the way the insured represented his medical condition. The insurer claimed (falsely) that Mitchell knew he was HIV+ before he bought his policy, but did not tell the insurer. If Mitchell *had* misrepresented his condition, even if Fortis was required by law to cover him, it would still have been a breach of contract. It's common practice, as Eric notes, for insurers to scour medical records looking for some un-crossed T or un-dotted I that would give them plausible denial against malice in a court case.

The question is, what does the Bill the House will vote on Sunday do to disincentivize insurers from rescinding policies on flimsy pretexts like this? If rescission is still allowed in cases of fraud, and insurers are allowed to make determinations of fraud without oversight, this kind of practice is going to continue unabated.

[Tony P.]

I asked Sebastian: Would you please explain to me how exactly health insurance companies DO compete with each other in a free market?

McKinneyTexas offered this reply: Tony P--my sense of how private insurers compete is that they enter into provider agreements keyed off of a percentage of Medicare. The lower the provider reimbursement rate, the lower the premium (or, the higher the profit margin). Some insurers offer Provider List A (high end docs and high end hospitals) at one premium level and lesser providers at lower levels. The punch line is that you get what you pay for, subject always to the above-mentioned chickenshit factor.

Bernie commented on the first piece of that: I think this is an important aspect of the insurance business. But note what this means. The biggest insurers in an area are able to negotiate the lowest rates from hospitals and other providers. So it becomes difficult for smaller insurers to compete, and you end up with very few choices.

Bernie is of course correct that McKinney's picture of competition implies a positive-feedback loop: the more market share an insurer has, the better able it is to gain more market share. "Competition" leads to monopoly.

Now, just to show how fair-and-balanced I am, let me defend McKinney against Bernie. Here's what limits the feedback loop. The potential market includes all the people in the relevant area -- from the chronically ill to the hale and hearty. To "gain market share" means to insure more people. If you have already insured most of the healthy people, gaining market share means insuring more and more sickly ones. That means you can't keep your premiums as low as they used to be. So a scrappy competitor can come along and steal some of your healthier customers.

Oh sure, your competitor (being smaller) has to offer doctors reimbursement rates that are a bit higher than yours. But he has room to do that, and not just because (being scrappy) he's willing to take a smaller profit than you are. He is going after your healthiest customers, remember? You were offering them nice low premiums when they were the only customers you were insuring -- but you had to raise their premiums once you pooled them together with sicker people in your drive for market share. Your competitor can offer them lower premiums than you're charging them now, even if those have to be slightly higher than you were offering them before.

Naturally, you (the big insurer) will counter this gambit. You will drop your premiums for your healthy customers, and raise them for your sicker ones. If you are really clever, you will fine-tune your premiums to the point where every customer is paying exactly and only his own actuarially-expected medical costs.

That seems fair, but it also seems like something less than insurance.

So I think we still need a better answer than McKinney offered. If "competition" leads to monopoly, why bother with competition? If "competition" leads to ever-finer subdivisions of the risk pool, why bother with insurance?

Incidentally, the second part of McKinney's comment reminds me of an old George Carlin joke: if there's a best doctor in the world, there has to be a worst doctor in the world -- and somebody has an appointment with him tomorrow. Somebody who got a great deal on "health insurance", no doubt.

--TP

[Sebastian]

The problem for you is, Tony, that in reality, there doesn't seem to really be much adverse selection.

So me trying to figure out a way around it isn't necessary. I'm just describing it empirically. You seem to essentially be saying that according to your theory of how it all works, there must be adverse selection. Then you insist that the burden is on me to show that you are wrong.

Empirically there doesn't seem to be much adverse selection.

I'm not sure what else I need to offer.

[Sebastian]

Emma, could you look up the thread and find what I think US health care should look like? I think you impression of what I think and what I actually think are rather different.

Hint: 2:22 P.M.

Thanks.

[Phil]

Are you ever going to actually answer Tony's question about how insurers compete, Sebastian, or simply keep telling him he's wrong about something he didn't ask about?

And as is also often the case you are dragging in abortion for no apparent reason.

Oh, that's rich.

[Hartmut]

Does Fortis accept the sentence or will it appeal to SCOTUS? I would not bet any money on SCOTUS upholding it and be not at all surprised, if there'd be another 5-4 pro-coprorate decision. I see even a remote possibility that this could be another Citizen United with the 'totally non-activist, strict constructionist' faction declaring all of HCR unconstitutional in passing. In that case I propose to rename the court SCUMTUS.

[Brett Bellmore]

"Did they wear hoods and speak through voice-altering filters?"

I vote for holographic icons around an empty table, rather like the meetings in Evangelion.

In my flavor of libertarianism, requiring companies to actually comply with their contractual commitments is a good thing. I might think we'd be better off if we could find a way to do that without involving government, but this is clearly an area where government is doing something appropriate.

Or in this case, not doing it, and you might ask how that happened, before assuming the government would be better if you cut out the private middle man.

[KCinDC]

Chris Schoen, if there is no longer an exclusion for preexisting conditions, then what sort of fraud would you be committing by omitting one from your application? I'd expect application forms to be drastically simplified, since there's no point in wasting time and paper on things that are irrelevant to coverage.

My understanding is that gwangung is wrong, and they can't even charge more for preexisting conditions. They can charge more for age and possibly for smoking, but those are different from preexisting conditions.

[Phil]

In my flavor of libertarianism, requiring companies to actually comply with their contractual commitments is a good thing. I might think we'd be better off if we could find a way to do that without involving government,

Yeah, arbitration usually works out pretty well. If you're the corporation.

[Eric Martin]

It looks to me like Mitchell was rescinded because of a new condition.

On the pretense that it was, in fact, a pre-existing condition. That was not disclosed.

The question is, what does the Bill the House will vote on Sunday do to disincentivize insurers from rescinding policies on flimsy pretexts like this? If rescission is still allowed in cases of fraud, and insurers are allowed to make determinations of fraud without oversight, this kind of practice is going to continue unabated.

Legally speaking, which I'm sure you know Chris, "fraud" is only "fraud" if the person lying stands to gain financially from it/or the other person being defrauded is injured. Failing to disclose a pre-existing condition would cause no harm because it wouldn't change the terms of the insurance under the new bill, hence, no fraud.

Breach of contract is not fraud. Breach of contract would be failing to dot an "i" or cross a "t" - but such reasons are no longer recognized as justifying rescission.

It is my understanding that the fraud exception has more to do with double billing and other forms of theft. After all, what sense would it make to outlaw denial for pre-existing condition, and outloaw charging more for pre-existing conditions, but allow an insurance company to rescind for failure to identify a pre-existing condition on ground that this was "fraud" even though there was no injury.

Unless you have exact text in the bill, or a link to analysis of the same. Otherwise, that is not my understanding of the changes.

[GoodOleBoy]

'In my flavor of libertarianism, requiring companies to actually comply with their contractual commitments is a good thing.'

Not much mention anywhere I can find of any presence of an insurance regulator in this South Carolina case, or any oversight of the behavior of the legal staff of the insurance company for that matter. In the case of the investigation of Anthem Blue Cross in California, statistics were cited (meriting serious punitive action) but there was no indication of such action by the insurance regulator.

The jury and the court in South Carolina seemed to have little difficulty deciding how this behavior should be treated. I don't have knowledge of the insurance regulatory environment in the state, but it seems non-existent. No mention that the plaintiff's hired legal advisors had interaction with state regulators. Same for California. Are there no insurance regulators? Maybe there should be. If there are regulators, is this the behavior we should expect from our state government employees? Do we have a reason to believe our federal employees will do better?

'Once the court verdict was upheld, the penalty should have been siezure of all assets and instant corporate death wiping out shareholders and bond holders alike.'

After proving a pattern of such behavior, I like this action. But how about some specific criminal actions against the legal advisors who were clearing the path?

[Eric Martin]

After proving a pattern of such behavior, I like this action. But how about some specific criminal actions against the legal advisors who were clearing the path?

I'm fine with all of the above.

If there are regulators, is this the behavior we should expect from our state government employees? Do we have a reason to believe our federal employees will do better?

Yes, they won't have the incentives to cheat customers. See, ie, Medicare and Medicaid.

Not much mention anywhere I can find of any presence of an insurance regulator in this South Carolina case, or any oversight of the behavior of the legal staff of the insurance company for that matter.

Well, after gutting regulation during the 80s up to the present, now conservatives want to cap lawsuit awards too.

Europre is less litigious, but it has regulations with teeth. Those are the choices: either use lawsuits to compel good behavior, or use government regulations.

Modern conservatives, of course, opt for neither. Just let the businesses regulate themselves! No conflict of interest there.

[Jesurgislac]

Sebastian: As is often the case you are overdrawing conclusions.

I live in a country where, for sixty-plus years, there has been no such thing as rescission: which delivers superior health care to the US: which costs less.

You defend the practice of withdrawing health insurance from some people because it's "appropriate" to make them go without health care and the small percentage of people who die because of inappropriate rescission is just not a big enough problem to talk about.

You have consistently and persistently argued the exact reverse with regard to late-term abortion - that it's a big enough problem no matter how small the percentage of late-term abortions.

So apparently, fetuses dying "inappropriately" is a big problem worth talking about and justifying withdrawing full health care from women.

But once a fetus has been born - baby, child, adolescent, adult - their death due to withdrawal of health insurance is not a big problem, and not worth talking about.

It would appear that the only consistency between your two positions is that it's appropriate to withdraw health care - either from women seeking abortions, or from anyone whom the insurance company can claim lied on their application form.

The problem of substandard and more-expensive health care for women (according to what I have read, women pay more for health insurance in the US than men do, even though insurance companies are entitled to refuse to cover contraception, childbirth, and abortion costs) is a big part of the problem in the US, and a big part of the reason the US has the highest infant death rate in the developed world.

Pro-lifers tend to oppose universal health care. This is surprising only to people who take seriously their claims that their support for denying women access to safe legal abortion is all about "saving babies". If those claims were true, that ought to make pro-lifers the most fervent and consistent supporters of universal healthcare in the US.

But of course - the exact reverse is generally true.

[Phil]

Wow. BB and GOB actually managed to defy my expectations, by looking for a way to blame the government, rather than the guilty party, for the situation described in Eric's post. Bravo, maestros!

[GoodOleBoy]

'Well, after gutting regulation during the 80s up to the present, now conservatives want to cap lawsuit awards too.'

Does this response mean that neither the S.C. or Ca. insurance commissioner had the necessary authority to take action against abuses?

Regarding the earlier points made about competition, the one thing I view as important is to have a choice of providers. Although government, utilities, and other monopoly providers frequently, even mostly, do a good job, whenever this is not the case, inability to go somewhere else is a great frustration. And it's a nightmare to appeal a process to the same party that is causing the issue in the first place.

'Wow. BB and GOB actually managed to defy my expectations, by looking for a way to blame the government, rather than the guilty party'

I'll accept credit for blaming the government, but not for not blaming the guilty party.

[Eric Martin]

Does this response mean that neither the S.C. or Ca. insurance commissioner had the necessary authority to take action against abuses?

It means that neither had direct oversight, and secondary regulatory powers are extremely limited. The fruit of "small government" Republicans and libertarians that view regulation as evil.

Another upside of the HCR bill is that the government can boot providers that engage in bad conduct from the pools.

[mattH]

Unfair reccision isn't pretty and it isn't right, but reccission AT ALL isn't the norm. A huge majority of people with cancer or AIDS or other hard to treat illness get covered.

Taunter had a post on the high likelihood of facing rescission if you fall in the 99th percentile of premium holders, which is where most of the money is being spent. Rescission is applied to about 0.5% of all policies a year, yet vast majority of money paid out by insurance companies (22% of costs, $35,000 or more per policy) all come at the the top 1%. Considering rescission saves hardly any money below the 99th percentile, if rescission is being applied to that 1% of policy holders, then there's a 1 in 2 chance of those individuals to have their insurance "rescinded".

In fact, Mitchell is the perfect example of a target; young, with a chronic, manageable disease that will cost the insurance company hundreds of thousands over his (extendable-with-treatment) lifetime.

[Chris Schoen]

Eric,

I just read the actual bill and answered my own question. Insurers can't rescind until there has been a "third party, independent review." That's good enough for me.

I'm curious to see if the insurers will come up with a type of material misrepresentation that isn't based on underwriting. But as long as they can't terminate the contracts unilaterally, I think the protection in the bill is a good one.

[Brett Bellmore]

"Wow. BB and GOB actually managed to defy my expectations, by looking for a way to blame the government, rather than the guilty party, for the situation described in Eric's post. Bravo, maestros!"

You actually managed to get pissy at the suggestion that regulators should force insurers to pay out benefits, because it came from the "wrong" side. Bravo, Phil!

[Rob in CT]

I'm shocked, SHOCKED, that a regulator in SC might not really stand up for the little guy. SHOCKED!

[Sebastian]

"You have consistently and persistently argued the exact reverse with regard to late-term abortion - that it's a big enough problem no matter how small the percentage of late-term abortions."

Indeed I have. But I quite specifically DO NOT argue that the problems associated with late term abortions make me automatically right about everything else, even in the abortion debate. I specifically DO NOT argue for example that the fact that women sometimes seek what is essentially infanticide in late term abortions for no health reason whatsoever (which you have for years denied, and yet you so helpfully linked a case of in Utah) logically implies that early term abortions should be banned.

[This is not an invitation to derail the thread by talking about when you think abortion is or is not appropriate]

"But once a fetus has been born - baby, child, adolescent, adult - their death due to withdrawal of health insurance is not a big problem, and not worth talking about."

Getting from my view as expressed on this thread and elsewhere to the conclusion you draw is purely emotional trolling. I have not once suggested that inappropriate revocation of policies is "not worth talking about". I have stated that it is a bad thing but that correcting it doesn't justify all the arguments being used about health care in general.

A similar argument would be saying that terrorism is a bad thing, but that 'fighting terrorism' does not justify invading Iraq or shredding civil liberties at home.

Do you truly not understand that kind of distinction?

[Phil]

Brett, are you seriously going to try that one on me after your recent jihad against the ACLU just because they don't support gun rights? Really?

[Phil]

Because I'm feeling charitable, though, I'll give you a head start towards the actual point:

The problem isn't with regulators forcing insurers to pay out benefits; the problem is with a health care system that's reliant almost entirely on insurers who have to be forced by regulators or courts to pay out benefits, rather than simply honoring their obligations.

But if it makes you feel better to pat yourself on the back for recognizing that a corporation actually did something bad and that government might be able to help, well, buy yourself a box of Thin Mints and put it on my tab.

[Sebastian]

"if rescission is being applied to that 1% of policy holders, then there's a 1 in 2 chance of those individuals to have their insurance "rescinded"."

That is a mighty big 'if' and that 'if' is not shown anywhere by your quote. And while anecdote isn't usually data, when you are claiming a 50% chance, you invite the following:

I am personal friends with about 40 people who are HIV+. About half of them have private insurance. About half of them are advanced enough to require fairly expensive annual care. None of them have been rescinded.

Now all of them are super careful not to let the insurance lapse because they know that applying for new insurance will be difficult. Which is an important issue worth talking about (which I have addressed upthread as well). But none of them have been rescinded, and I think none have even been investigated for it. Additionally I have a friend who discovered she had breast cancer under a private policy--not revoked or even investigated for revokation and my sister had a serious problem which I won't reveal the nature of, but who also was not revoked or investigated.

And so out of a sample of 22 or 12, depending on how you serious you think the condition has to currently be, the posited 50% chance shows zero instances.

[Jacob Davies]

Sebastian, could you summarize what your actual point is?

I'm kind of lost here. You say rescission doesn't happen enough to matter. But it definitely happens, you don't disagree with that, the consequences are bad, you don't disagree with that, and the bill addresses it. So... what are you getting at? We shouldn't talk about iniquities of the current system that are resolved by the legislation we support unless they meet your criteria for occurrence?

Seriously, plenty of people here are clearly willing to listen to what you have to say, but speaking for myself, I have no idea what you're getting at. This is a problem, it is a small part of the motivation for the bill, it is resolved by the bill. What is it that you're trying to say about it?

[Tony P.]

Sebastian,

As Phil pointed out to you, my original question was "how DO insurers compete with each other?"

You say my "theory" implies that they do it by "adverse selection", which is not emipirically observed. Leaving aside whether "adverse selection" (sicker people choosing to buy insurance, when they can) is the same thing as "cherry-picking" (companies choosing healthier customers, when they can), we are still left with the question: how DO insurers "compete"?

When you tell us that all of your 12 or 22 friends are "are super careful not to let the insurance lapse because they know that applying for new insurance will be difficult", I cannot possibly read that as evidence that insurers are in any sense competing for their business.

My question is sincere, believe it or not. I am fully prepared to accept an answer like "okay, they DON'T compete, so quit bugging me." I am fully prepared to accept an explanation, alas not yet presented, of how they DO compete. An answer like "well they MUST be competing because 'adverse selection' is at worst a small problem" is evidence of a kind, but it's not an explanation.

--TP

[Sebastian]

It seems to me that they compete on things like co-payments, annual deductibles and doctor selection options.

[Jesurgislac]

It seems to me that they compete on things like co-payments, annual deductibles and doctor selection options.

Do they? (This is an invitation to show examples across the US, of two insurance companies operating in the same part of the US, who are competing financially by offering different systems of co-payments and annual deductibles.)

If so, the first two options are purely financial, and given that most people in the US get insurance via their employers (yes?) this would suggest this is employers picking the health insurance company that can offer them the cheapest rates for covering their employees - which will not necessarily mean the best coverage for their employees.

The third option, "doctor selection options", presumably means that some health insurance companies will be trying to offer something like the freedom of choice we have in the UK by virtue of a national insurance system? This would be actually beneficial to the patients, but as the patients will not (for the most part) get to choose their health insurer, their employer will, it's hard to see how this would help an insurance company "compete".

(If none of your disparaging comments in the thread prior to mine were intended to discourage debate on the practice of recission, that's certainly how they came across, Sebastian: but I take your word for it you had no such intention.)

[Sebastian]

Jesurgislac, your examples are Kaiser, HealthNet and BlueShield. All in California.

Which I know, because just this last month I have been shopping for an individual plan. In California.

[Brett Bellmore]

"Brett, are you seriously going to try that one on me after your recent jihad against the ACLU just because they don't support gun rights? Really?"

Yeah, Phil, I'm seriously going to point out to you that you got mad at me for agreeing that insurers shouldn't cheat their customers. And that it's OK for governments to enforce contracts.

I might wish that there were better non-governmental options for accomplishing this, but, hey, if you're going to have a government, it might as well be doing something useful, and enforcing contracts IS useful.

[Bernard Yomtov]

Sebastian,

I'm not quite sure the paper you linked to supports the "adverse selection is minor" claim so clearly. Maybe it does, but I have some doubts.

I was unable to locate a free copy, so just had to read the abstract, in itself a poor substitute in most cases.

While we find that people living in unregulated states with higher expected expense due to chronic health conditions pay modestly higher premiums and are somewhat less likely to obtain coverage, the variation between premiums and risk in unregulated individual insurance markets is far from proportional; there is considerable pooling. In regulated states, we find that there is no effect of having higher expected expense due to chronic health conditions on neither premiums nor coverage.

Lots of "modestly," and "somewhat," and "considerable," here, but no numbers. Aparently there are some effects, so there is some tendency for insurers to reject those with health problems in unregulated states. That presumnly is what is meant by "competing through adverse selection" in this discussion.

And it is sort of hard to believe that insurers ask applicants to fill out forms with medical histories and then ignore the information.

Are there other studies of which you're aware on this topic, or do you know of a free version of this paper?

[Tony P.]

Seb, we might be getting down to brass tacks here. I hardly expect you to go into specifics about your personal insurance shopping, but I would be grateful to hear in general terms how you -- a prospective customer -- get competed for.

I can imagine, for instance, that Kaiser, HealthNet, and BlueShield each offer you several different plans. Each company, I bet, has both a higher-deductible/lower-premium plan and a lower-deductible/higher-premium plan. Each of them, in other words, offers you the choice to keep more risk for yourself, or pay them to take some risk off your hands. One of them will have the plan which (along this particular dimension, anyway) you judge to be the most "competitive".

So, is that one benefit you get from competition between insurers? That one of them makes a better guess at your personal taste for risk than its competitors do?

And if so, do you think it's because its actuaries are smarter, or dumber, than the actuaries of its competitors?

--TP

[Jesurgislac]

Sebastian: Jesurgislac, your examples are Kaiser, HealthNet and BlueShield. All in California.

That's not "examples", Sebastian: that's names. You claim they offer competing versions of health insurance. What, exactly, are they competing on?

[Phil]

Brett, who besides you said I was mad at anyone? You really need to adjust your Karnakometer. It leads you in the wrong direction nearly every time.

[Sebastian]

"That's not "examples", Sebastian: that's names. You claim they offer competing versions of health insurance. What, exactly, are they competing on?"

Ummm, let's go to the film:

Sebastian: "It seems to me that they compete on things like co-payments, annual deductibles and doctor selection options."

Jesurgislac: "Do they? (This is an invitation to show examples across the US, of two insurance companies operating in the same part of the US, who are competing financially by offering different systems of co-payments and annual deductibles.)"

Sebastian: "Jesurgislac, your examples are Kaiser, HealthNet and BlueShield. All in California."

Jesurgislac: "That's not "examples", Sebastian: that's names. You claim they offer competing versions of health insurance. What, exactly, are they competing on?"

To which I will reply: "things like co-payments, annual deductibles and doctor selection options."

Apparently offering "how" and the "names" in two separate comments when one was a direct response to your question about the first was confusing to you. Now they are both in the same comment. We can only hope that will be less confusing.

Tony--they each had a high deductible and low deductible plan, but the definition of high and low was fairly different in two of the three cases (I don't remember which one was which now, but for two the high deductible was either too low to make a big enough premium difference for me, or WAY too high). All of them had very different choices about doctors and health plans that were 'in network', and that shaped my choice as well. (Though I eliminated plans that flatly didn't cover or put an enormous premium on going out of network which is one of the main reasons I didn't go with Kaiser). Most of the Blue Cross/Shield Plans high deductible plans also had high percentage co-payments. This didn't fit my needs as I'm using it as true insurance--i.e. I expect to pay nearly all regular medical needs out of pocket in any given year; i'm paying to be covered for the truly unexpected cases.

So yes, on the surface, all the companies offer high/low and low/high programs. But they aren't that similar in actual details about how high and low and what comes with it.

[Jacob Davies]

I don't know about the individual market, but the group plan market certainly has a fair amount of variety & competition here in California. My wife got her benefits at her last job through an HR outsourcing firm so there were maybe a dozen different plans with differing levels of employee contribution, co-pays, and coverage. We opted for the most expensive, quite sensibly, since the employer pays the larger share anyway and the difference in employee contribution was going to be a wash with the co-pays. Which is also a clue that the "competition" isn't very important. All the plans cover catastrophic conditions and to the extent they vary it's in minor things that roughly wash out in the difference in premiums. But yes, there is competition.

The problem isn't competition if you don't have major healthcare needs, it's that if you really truly need healthcare to deal with a chronic health problem, you just can't get it in the individual market. Flat out, can't get it. And if you can't get a job (perhaps because of that chronic health problem...) but you're not poor enough for Medicaid, you're screwed - or more likely, you're screwed for an extended period until you become poor enough for Medicaid - which I do not think is very economically or socially efficient. This is not a hypothetical concern, it happens all the time. I agree rescission is a fairly small problem (but very serious when it occurs), but it's a symptom of an individual market for insurance that just does not work at all for cost-spreading.

[Brett Bellmore]

"The problem isn't competition if you don't have major healthcare needs, it's that if you really truly need healthcare to deal with a chronic health problem, you just can't get it in the individual market."

I think you're saying "health care" where you mean "insurance". Because you darned well can get "health care" in the individual market. You just walk in, and pay for it.

Now, you can't get insurance for a chronic condition, that's cheaper than just paying for the treatment out of pocket, that much is true. That's because the actuarial calculation, "cost of treatment" x "probability of needing it" makes insurance silly for chronic conditions.

Might as well complain that you can't get auto insurance that pays for your gasoline...

[Jesurgislac]

Sebastian: For some reason, you seemed to find it easier to give the information I'd asked for (twice) to Tony rather than to me, but whatever: he asked for it too, and you've had less arguments with him about your active support for diminished healthcare for women. So.

Most of the Blue Cross/Shield Plans high deductible plans also had high percentage co-payments. This didn't fit my needs as I'm using it as true insurance--i.e. I expect to pay nearly all regular medical needs out of pocket in any given year; i'm paying to be covered for the truly unexpected cases.

But your definition of "health insurance" brought up an interesting point: if your insurance does not cover your regular medical needs, you - a middle-class professional, reasonably well-off - seem to take for granted a far lower standard of health insurance than we have in the UK. After all, regular medical needs are normally necessary to keep a person in good health - and what is the point of a healthcare system that doesn't keep people in good health?

[Brett Bellmore]

And you, Jes, are also confusing "health care" and "insurance"; I expect Sebastian is probably getting his regular medical needs met: He's going to the doc for regular checkups, and paying for it directly, rather than through his insurance.

"Health care system" does not equal "insurance". Insurance is merely one of many ways of paying for health care, and a way which only makes sense under a certain limited set of circumstances. When the expenses are perfectly predictable is not among those circumstances.

[Larv]

Now, you can't get insurance for a chronic condition, that's cheaper than just paying for the treatment out of pocket, that much is true. That's because the actuarial calculation, "cost of treatment" x "probability of needing it" makes insurance silly for chronic conditions.

Yes. This is a very good argument for some sort of national (dare I say socialized) health insurance system. Or was that not your intent?

[Brett Bellmore]

Well, we don't respond to the fact that some people can't afford to feed themselves, by mandating that groceries sell food at a loss, do we? We have food stamps.

But why national? And why insist on calling it "insurance"?

[Brett Bellmore]

Here's what I would do:

1. Change the tax laws, so that privately purchased health insurance has the same tax status as health insurance purchased for you by your employer. This helps with the biggest problem today, the fact that, when you change employers, you have to change insurers. That's the biggest source of "preexisting conditions".

2. Change the law so that people can buy insurance across state lines, so that the market is less of an oligopoly.

3. STRINGENT regulation of insurers, aimed at making sure they actually deliver on the benefits they've contracted to deliver. With serious penalties for frivolous recision.

4. State level programs of "health insurance" and "health care" stamps, to enable the poor to afford to buy them. As I say, we don't respond to people who can't afford to feed themselves by mandating that groceries and restaurants sell them food below cost, why should we do that to insurance companies and doctors? If it's really for the general welfare, it should show up on the general budget, not be palmed off on the private sector by regulation.

I see a systematic problem with the Democratic proposals: You take a system which has perverse incentives, add some more perverse incentives, and then order people not to respond to those incentives! That doesn't really work very well, guys. People respond to incentives regardless of what the law says.

[Jesurgislac]

Well, we don't respond to the fact that some people can't afford to feed themselves, by mandating that groceries sell food at a loss, do we?

The US government does subsidise the production of some foods quite heavily, making them extremely cheap to buy.

As I say, we don't respond to people who can't afford to feed themselves by mandating that groceries and restaurants sell them food below cost

Actually, it would save the US a lot of money if, instead of subsidising corn and other grains and meat so that people on a low income can easily afford to buy cheap meat and cheap processed food full of starch and corn syrup, the US government instead subsidised the production of organic vegetables, fruit, and other wholesome, healthy food, so that people on a low income could more easily afford to eat healthily and found it more expensive to eat unhealthily.

It also saves a lot of money when, instead of having health services and health insurance required to make a profit, you have a national health insurance programme which everyone pays for and everyone benefits from, free at point of use.

But you know. It's not as if conservatives/libertarians care about saving taxpayer's money when it's being spent on corporate welfare rather than to benefit the general public...

[Jacob Davies]

People with chronic conditions still need "insurance" per se because the costs of treatment for chronic conditions can be very variable above the baseline cost of treatment. And of course because having one chronic medical condition is no guarantee against getting sick in some other way.

So yes, you still need insurance even if you have a chronic condition.

Why national? Look around you - do you see it being done at the state level? It needs to get done, I don't care who does it. Is it really that much of a problem to do it at the federal level and not the state level? If they'd included a state-by-state opt-out I wouldn't have really cared, but what's the real problem here?

I agree that the differing tax treatments and the employer-tied nature of the insurance are problems, but bear in mind, it is not only the tax advantage that makes employer-based healthcare desirable; it's also the risk pooling, which you lose when you go to individual coverage. Now this bill definitely is a push in that direction with the exchanges and so on - clearly separating health insurance from employers is part of the plan (since it's happening anyway). But then we have to get right back into community rating and must-issue regulations, which leads straight back down the rabbit hole - to prevent adverse selection death spirals, you need mandates & subsidies.

At which point you pretty much have the HCR bill on the table. Which has "health insurance stamps" - that is, subsidies to buy private health insurance.

There is no mandate in the bill on healthcare providers to provide health services below cost.

[GoodOleBoy]

Those who support the direction of the current health care reform efforts led by the progressive democrats seem not to understand or care about the concept of 'choice' and it's importance to those who value this aspect of individual liberty, guaranteed to to each American in the Constitution. Having a 'choice' means that I should be able to choose what medical care I acquire, when, where, and from whom, as well as how I will pay for it. It also means individuals may choose careers in various health care related professions without terms of earning a livelihood being dictated by bureaucrats. As many as one-third of physicians surveyed recently indicated they will consider leaving the profession if the pending legislation passes. Any legislation that reduces or eliminates the ability of individuals to exercise these choices as described is unamerican. Nothing in this comment suggests that individuals who want to join with others, cooperating voluntarily and freely, to deliver health care as a group, should be inhibited from doing so as long as there is no compulsion of others. There is also no suggestion here that those who are not able to provide for their own health care should not receive government assistance.

[Brett Bellmore]

"There is no mandate in the bill on healthcare providers to provide health services below cost."

Yeah, right. When you mandate that insurers take on people with preexisting conditions, you're not going to mind one bit somebody getting hit with a $100,000 per year premium, just because that's how much their preexisting condition costs to treat. That's just going to pass without comment.

"Why national? Look around you - do you see it being done at the state level?"

Massachusetts? Anyway, the fact that the level of government that's supposed to be doing things outside of a short list of activities, isn't doing one you want, is no reason to demand it of the level of government which is constitutionally subject to enumerated powers.

You want to do it at the federal level, because you figure that elected state governments which chose not to do it, won't have any choice in the matter. I don't think that's a legitimate reason to do something at the federal level.

[Jacob Davies]

No, I want to do it at the federal level because that's the only level it's going to get done at. MA stands alone in providing universal health insurance. That sucks.

The federal government is constitutionally subject to enumerated powers, yes, one of which is to provide for the general welfare, so that argument isn't going to get very much traction.

As for your $100,000 premium, group-pool health insurance provides for cost spreading and risk pooling. Which is why when we had our baby we didn't get a bump to $50,000 in premiums for that year, and when I was a hale 20-something I didn't get a discount for never going to the doctor. That system works extremely well for employer-provided group-pool insurance and there is no reason to think it won't work for universal insurance. And no provider nor health insurer will be required to provide services below cost. You don't like it because it smacks of socialism. Well, it is socialism. Employer-provided healthcare and government-provided healthcare is socialism on a small and restricted scale, and in that context, it works. We want to expand the context marginally to cover the 10% of the population not presently covered by said socialist healthcare systems. It's kind of a long way from here to the gulags.

[Eric Martin]

As many as one-third of physicians surveyed recently indicated they will consider leaving the profession if the pending legislation passes.

This is actually not true:

http://mediamatters.org/blog/201003170036

More conservative misinformation to fool a suspecting public.

Having a 'choice' means that I should be able to choose what medical care I acquire, when, where, and from whom, as well as how I will pay for it.

Which is good that the current health care legislation doesn't change that at all. It doesn't tell you what medical care you acquire, when, where or from whom you can get it. You can also pay in any number of ways.

There is also no suggestion here that those who are not able to provide for their own health care should not receive government assistance.

Which is what this bill does!

Any legislation that reduces or eliminates the ability of individuals to exercise these choices as described is unamerican.

Um, OK. But the bill doesn't do that.

[GoodOleBoy]

Eric, I know the bill does not do those things you pointed out. But I view this bill as the first step on the road to serfdom,the first step in an effort to have the government take over one-sixth of our economic activity. I see a recent step in the education finance area is already in the works. And immigration waiting in the wings. Freedom depends on this being stopped here and now.

Brett has described a pretty fair formula for dealing with some of the major issues in health care. But I realize that progressives really want to have welfare without the government payments looking like welfare and the way to do that is to reduce everyone to the same low level but equal service and pretend this is some sort of democracy since it yields equality of outcome, in theory at least. This is basic to communism. What comes after health care? Education? Energy?

We likely will know after tomorrow what the next steps will be. If the bill is not stopped, there will be challenges under constitutionally required congressional procedures to make law or under the tenth amendment . That should be fun. Then, of course, all House members must face voters in November.

[Marty]

"Which is what this bill does!"

Which is one of the multitude of things this bill "does". and it is not even clear it does this by definition since there are still many people not covered.

At the end of the day, hours before the final vote, I find the evolution of the discussion remarkably depressing.

The clear focus of this legislation for liberals and progressives, notably one of the easiest things for me to agree with them on, was to provide at least baseline coverage for everyone.

Fail.

The second was to focus on lowering costs of health care delivery.

Fail.

Now this is a bill to expand coverage to some(not all) and regulate insurance companies. For a trillion dollars plus it seems like a pretty big fail.

[Eric Martin]

Which is one of the multitude of things this bill "does". and it is not even clear it does this by definition since there are still many people not covered.

Right. But the critics of the bill from the right want to cover even less! The Dems were pushing for universal coverage, and they pared it back because of GOP resistance/centrist Dem resistance.

The clear focus of this legislation for liberals and progressives, notably one of the easiest things for me to agree with them on, was to provide at least baseline coverage for everyone.

Tell me about it. But to get that, we need more and better Democrats. We need to get more Russ Feingolds and less Republicans and Liebermans and Nelsons.

I mean, the GOP plan cost more, covered fewer people and didn't cut delivery costs one iota.

The second was to focus on lowering costs of health care delivery.

But it does lower costs. This just isn't true. And, again, it could have further lowered costs if the public option or single payer were adopted. But the right opposed.

For a trillion dollars plus it seems like a pretty big fail.

First of all, it's less than a trillion. Second, it reduces the deficit due to cost cutting, taxes and spending cuts. And it could have been even cheaper if a public option or single payer were adopted.

[Eric Martin]

Eric, I know the bill does not do those things you pointed out. But I view this bill as the first step on the road to serfdom,the first step in an effort to have the government take over one-sixth of our economic activity.

Couple of thoughts: other than the UK, few Western nations have actually pursued taking over health care. On the contrary, most preserve private health care systems with a guaranteed public insurance, with private insurance supplementals.

Not a bad deal really.

As for serfdom, this was the warning for Western Europe issued so many years ago. And yet...quality of life is in many ways better than it is in America. And either way, NOT remotely close to serfdom.

But I realize that progressives really want to have welfare without the government payments looking like welfare and the way to do that is to reduce everyone to the same low level but equal service and pretend this is some sort of democracy since it yields equality of outcome, in theory at least. This is basic to communism.

No, that is basic BS. This is nowhere to be found on the American political landscape. It's fantasy borne out of paranoia.

[Marty]

But it does lower costs. This just isn't true. And, again, it could have further lowered costs if the public option or single payer were adopted. But the right opposed.

No it doesn't lower the cost of delivery, and neither would the puyblic option. This is still talking about paymet, not delivery.

First of all, it's less than a trillion. Second, it reduces the deficit due to cost cutting, taxes and spending cuts. And it could have been even cheaper if a public option or single payer were adopted.

It costs more than a trillion dollars and it isn't even deficit neutral (refer to Seb's nice explanations of gaming the system). And they don't even have a CBO report yet to prove the games worked, they keep touting an unreleased preliminary CBO estimate, which is really weak.

Most of all, the steady decline of expectations keeps getting blamed on Republicans, when every change in the bill for the worse was driven by Democrats.

Oh I like the way the current talking point is Reps/centrist Dems because it is just too hard to admit that the bill isn't good by any standard but we have to pass it for purely political reasons.

Or we can admit the process failed to craete anything that was good and continue to work on it, with a more measured approach. Get the recission/preexisting conditions fixed, cover the uninsured with Medicare baseline expansion and then focus on cost of delivery.

But no, we have to do it all now (whatever all turns out to be) or "it will be decades before anything is done". This defines the lack of will to do something good or right.

[Tony P.]

Seb,

Thanks for the rundown. It does seem like the three insurance companies are offering you different tranches of the same risk, namely your "unexpected" medical costs in a given year, at different prices. I have no doubt that you can price your own risk better than their actuaries can. You probably do save a few bucks (actuarially speaking) by having the choice.

Now put yourself in the shoes of those 12 to 22 friends you talked about before. You didn't say they all live in California, but let's pretend they do. The same "system" that saves you a few bucks through "competition" between insurers requires them to be "super careful not to let the insurance lapse because they know that applying for new insurance will be difficult". Do you see any connection at all between their "difficulty" and your "choice"? Does "competition" between insurance companies have anything to do with it?

Jes,

Rest assured that if I have given Seb less grief over abortion than you have it's only because I don't trust myself to do so as temperately as you do.

Jacob,

The only thing I quibble with in your 10:18 comment is the proposition that "it's also the risk pooling, which you lose when you go to individual coverage". From an insurer's point of view, its individual customers are by definition a "pool". Competition is what makes the insurer try to keep sick people out of its pool. Competition is what makes the insurer try to subdivide its pool down to individual-sized puddles so that Seb doesn't have to share his particular puddle with his 12 to 22 friends.

Brett,

You are correct that health insurance is merely one way to pay for health care. Insurance is a financial service, not a medical one.

And I'm with you on the proposition that it's idiotic to tie health insurance to employment. Thankfully, us libruls did manage to loosen that tie a bit in 1965 -- over the vociforous opposition of consrvatives, mind you. Retired people are not "employed". But they do have health insurance.

You say that insurance is a fine way to pay for health care in some circumstances but "when the expenses are perfectly predictable is not among those circumstances." This begs several questions. Let me start with this one: when do expenses become "predictable"?

GOB,

When you write "Having a 'choice' means that I should be able to choose what medical care I acquire", I assume first that you mean "require" and second that you mean "I" very literally. If I'm not mistaken, you're not too hot on letting other people (e.g. pregnant women) have a 'choice'. It's nice that you love your own freedom, but it's not particularly praiseworthy. Saddam Hussein loved his own freedom, too. The measure of your love of freedom is how much you value your neighbor's freedom. You can accuse a commie pinko librul like me of falling short in that regard, but I don't pretend to be quite the freedom-lover you profess to be.

--TP

[Marty]

I have one more idea that doesn't ever seem to get talked about, it is my primary criticism of insurance companies. The whole pool concept is absurd. The pool should consist of everyone that an insurance company insures. Then insurance companies would truly compete on price and availability of providers to attract the lowest risk people to offset the higher risk policies.

And, just to add one more important way that insurance companies compete, it is important to evaluate the breadth of provider acceptance. When we purchase insurance for the company the key measures are cost of a baseline, cost and coverage of a more expensive buy up option (including total potential out of pocket expenses, and provider breadth. Then we look at customer satisfaction for our current and competitive plans to see if the price difference supports the hassle factor.

Most important though is we could save a lot of money if the stupid pool concept was expanded to just include everyone they cover.