11/23/2009

As the health care debate continues, we stay committed to bringing you regular communications as to issues that are being raised.  We are committed to continue this effort as long as the debate continues.  Even if you have responded to our appeal to get involved, you need to continue to stay involved by making additional contacts with your elected representatives.  The only way we can be sure that our voices are heard is to continue to provide them input.

Thank you for taking the time to get educated about the important issues at hand.  Please contact us if you have any questions as we move forward in this process.

During this health care debate, President Obama, Speaker of the House – Nancy Pelosi, and the new media have portrayed the insurance industry as the villain.  Let’s examine this in more detail.

It’s not right that insurance companies impose pre-existing conditions or decline coverage

In the group market currently, if an individual enrolls in coverage when they are initially eligible or in a timely manner when they have a HIPAA qualifying event (loss of coverage) and if they have not had a break in coverage of more than 63 days, they are able to acquire coverage without regard to their medical condition and without any pre-existing condition exclusions.  This means that this is not a problem for approximately 165,000,000 Americans.  The problem is specific to those who need to purchase their coverage through the individual market or those who have had a break of coverage. 

Does this make the insurance industry the villain?  Consider an individual who decides not to purchase coverage while he/she is healthy.  When their health changes and they need medical care, if they try to apply for coverage they will have to provide evidence of insurability and be subject to pre-existing condition exclusions.  Is this really wrong?  Let’s use this analogy; you are an underwriter for an insurance carrier that provides homeowner’s insurance coverage.  You re contacted by an individual that wants to purchase homeowner’s coverage for the first time and they have lived in their home for a period of time without insurance.  As part of the underwriting process, you find out that the individual has called to purchase coverage because they have a fire in the utility room.  Would you be willing to offer the coverage?  If so, would you cover damage caused by the current fire?  If so, what would you have to charge?  How can you offer coverage regardless of condition, cover pre-existing conditions and do so at an affordable price?
I would purpose that the insurance industry is not the villain.  We are changing the “rules” and the industry has said in order to accomplish the objective they need to have everyone in the system.

Insurance Companies cancel your coverage when you get sick and need it

Recently there was an article in the Lincoln Journal Star that stated that an insurance company had cancelled a family’s coverage because they were three days late making a premium payment and that when they found out the individual had contracted cancer they refused to reinstate the coverage.  The physician involved stated that this just wasn’t fair.

There are several things that I think are important in this case.  First of all, the insurance company they were talking about was Tricare.  This is a government run health care program for individuals in the military.  While I don’t know the specifics of this case, I do know that all insurance coverage through the private sector has a thirty day grace period during which an individual may pay premiums without a lapse of coverage or having to reinstate coverage.  Assuming Tricare has the same provision, then that would mean that the family was really thirty-three days late in paying the premiums.  Is that fair?  If not, then would sixty-three days be okay?  Ninety-three days? A year and three days? 

We are not saying that those who truly can’t afford to pay premiums for their coverage are not entitled to care.  The current system would make those individuals eligible through Medicaid.  Whether we continue to provide assistance in this manner or though tax credits to pay premiums can be debated but in the end, when an insurance carrier, whether government run or private, enforces the “rules”, they are not villains.  They are protecting the integrity of the pricing of the products.

We Need A Public Option To Keep Insurance Companies Honest

Several studies point to how concentrated the health care insurance market is. A 2008 study by the American Medical Association shows that one or two health insurance providers dominate the market in most states, implying that the providers could be exploiting a monopoly-like situation to generate "excessive" profits.

But they leave out the fact that for most people it is their employer, not the insurance company that pays for any bad health outcomes. The firm does so out of the company’s own pocket in a self-insured health program. That occurs for around 55 percent of employees according to the Agency for Healthcare Research and Quality with the Department of Health and Human Services.

We can look at the 15 "top" states, those with the very highest market share taken by the two largest insurance companies. The pattern is fairly similar. On average over 57 percent of people with insurance in those states get their insurance from companies that self-insure.

So what about President Obama’s claim that in the 34 states most concentrated states 75 percent of the insurance market is controlled by five or fewer companies? Given that self-insured firms cover 57 percent of people insured in those states, the correct total market share for the largest five firms control is 32 percent, not 75 percent.

Given all the attacks on profit-making insurance companies, what is possibly more surprising is that by far the dominant players in the "full" insurance market are non-profits. Indeed, one of the motives of the government insurance option is to take profits out of the picture. "But having a public plan out there that also shows that maybe if you take some of the profit motive out, maybe if you are reducing some of the administrative costs, that you can get an even better deal, that's going to incentivize the private sector to do even better. And that's a good thing," President Obama told the nation during his July 22nd press conference.

Yet, in 29 of the 43 states that data are available for in the American Medical Association report mentioned earlier, the dominant company in the "full" insurance market is a non-profit company. In state after state, Blue Cross and Blue Shield hold the largest market share. On average, the largest nonprofit hold over half of the “full” market share in those 29 states. Why add another non-profit operation to the mix?

Getting rid of profits wouldn’t make costs go down – they would go up, because without profits there would no longer be the same incentive to hold down costs. Profits are the reward that firms get for figuring out what customers want. Earl Grinols, Distinguished Professor of Economics at Baylor University and author of a new book from Cambridge University Press entitled “Health Care for Us All,” argues that “profit maximization combined with competition is the only reliable way that we know to keep costs low.”

Non-profits obtain the success they do largely because of tax and regulatory advantages offered to them by the government (e.g., somewhat higher federal taxes on for-profit corporations).  So much of the debate focuses on the supposed heavy concentration in the insurance industry and the supposed greed, costs, and inefficiencies of for profit companies. Private insurance medical insurance is neither very concentrated nor largely for-profit.

Based on this information, it would seem to me that a lot more could be accomplished if we didn’t try to demonize an industry and if we all tried to work toward a solution.  Health insurance is expensive because health care is expensive.  A solution that ignores the real problem is destined to fall short.  We need to get it right.

CONTACTING YOUR ELECTED REPRESENTATIVES

 Senators

Email:     Ben Nelson – (D)
Phone:     202-224-6551
Address:  720 Hart Senate Office Building, Washington, DC 20510

Email:     Mike Johanns – (R)
Phone:     202-224-4224
Address:  404 Russell Senate Office Building, Washington, DC 20510

 House of Representatives

Email:     Lee Terry – District #1 (R)
Phone:     202-225-4155
Address:  2331 Rayburn House Office Building, Washington, DC 20515

Email:     Jeff Fortenberry – District #2 (R)
Phone:     202-225-4806  
Address:  1535 Longworth House Office Building, Washington, DS 20515

Email:     Adrian Smith – District #3 (R)
Phone:     202-225-6435
Address:  503 Cannon House Office Building, Washington, DC  20515