qotd: Threat of destabilization of the private insurance market

The New York Times

August 2, 2010

Covering New Ground in Health System Shift

By Robert Pear

Administration officials are eager to demonstrate and deliver what they see as the benefits of the new law (Patient Protection and Affordable Care Act). But they face a delicate task: they do not want to destabilize or disrupt the existing market in a way that makes insurance less available or more expensive to consumers.

For the moment, President Obama has the upper hand. Congress gave him sweeping power to regulate the industry for the benefit of consumers. Administration officials said they would be tough on the industry, but, for the law to succeed, they need large numbers of insurance companies to compete in the new regulated marketplace.

Sabrina Corlette, a research professor at the Health Policy Institute of Georgetown University, said: "In 2014, we can say good riddance to bottom-feeder insurance plans, which have built a business around selling policies to healthy young people. They often provide inadequate coverage when people get sick. But if these plans pull out of the market before 2014, we want to be sure that viable alternatives are available."

http://www.nytimes.com/2010/08/03/health/policy/03insurance.html?hp

Comment:  "...bottom-feeder insurance plans, which have built a business around selling policies to healthy young people (and which) often provide inadequate coverage when people get sick..." That quotation describes the products being sold in the individual insurance market by WellPoint, the largest insurer in the nation. 

Imagine WellPoint improving those plans so that they do provide adequate benefits, with a choice of physicians and hospitals, without excessive cost sharing, and that they would include everyone regardless of preexisting conditions. Imagine the premiums that they would have to charge. Then imagine many companies developing similar quality insurance products to create a robust market of plan choices within the insurance exchanges.

Keep imagining because these products will have to exist only in our minds since the private insurance industry will never again be able to make them a reality if they are going to cover everyone with premiums we can afford.

For those who have employer-sponsored plans that seem to be working, keep in mind that these plans have cherry picked the large but highly select group of the inexpensive healthy workforce and their young healthy families. Also keep in mind that the employee cost of these plans is not only the payroll deduction, but also the forgone wage increases that pay for the employer contribution, and now to be added are the taxes that will be paid to support the subsidies for those who purchase their plans through the exchanges. Nobody is getting off cheap.

If the Obama administration is going to "regulate the industry for the benefit of consumers," then they can't help but "destabilize or disrupt the existing market in a way that makes insurance less available or more expensive to consumers."

Why should we worry about a destabilized market of private plans, when our real concern is how are we going to pay for the health care that any of us might need? The obvious solution would be to replace the private plans with a single payer national health program - an improved Medicare for all. The fate of the private insurers should be the least of our concerns.