Obama Pushes Health Care Reform - Regulating Health Insurance Rates Versus Allowing Insurance Carriers To Sell Across State Lines

A report yesterday from Politicodiscussed one of the options that President Obama will put on the table when meeting with Republican lawmakers today to push his health care reform through Congress. Obama has decided that what the country needs is more oversight when it comes to rates the insurance carriers can charge to consumers. On the face of it, that might not be a bad idea, but a lot will depend which carriers are allowed in the State one lives, and how long those carriers are willing to stay, depending upon the percentage of annual increases allowed under the administration’s proposal. Rates are set based on risk, some of which is assumed. The assumptions come into play specifically in states such as the Commonwealth of Massachusetts where mandates such as fertility treatments, can push the premiums sky high. Under the Massachusetts model, mandated benefits are applied across the board to all plans, so that, in essence, everyone is paying for certain benefits that only a few will access. Generally these types of benefits, once elective, also come with steep price tags. When insurance companies set the rates for the following year, heavy claims from the previous year are factored in, and in some cases, rates for 2010 have risen upward to 14%. Blue Cross/Blue Shield of Massachusetts raised rates 11%, and by way of example, an 11% increase on a premium paid of $384, has increased $42 per month. Additionally, those that cannot afford the mandated health insurance premiums are slapped with a still fine of up to over $1,000, which if not paid, can result in garnishment of raises and a host of fines and increase by the Commonwealth’s Department of Revue – That too is in the current proposal for the nation.

Obama cited a particular instance in California where an insurance company (Blue Cross/Blue Shield), raised premiums 39 %. However, it is also not noted that California mandates benefits are increasing on average of 20 per legislative sessions. Recent additions include substance abuse treatment and acupuncture. The answer from this administration is to: regulate what the carriers can charge, include mandated benefits, most likely modeled after Massachusetts, and then sit back and watch premiums soar (for those who may not have noticed an acceptable percentage of increase was not in play, rather the president referred only to “egregious” increases. Would a 15% increase be considered “egregious”? Or perhaps even a 10% increase?

Either way the consumer suffers: Once the carriers are mandated, (whenever the word mandated is bandied about, there are forms to be completed, ad nausea, by every single health care provided associated with an insurance plan, impacting the overall cost of health care), should the corporate decision to close, due to continually running the business in the red, then the State will be given fewer choice, and those remaining health insurance carriers will continue to take full advantage of the “allowable increase”. Carriers can stay alive, by virtually downgrading plan options, raising co-pays, and deductibles each year, and finally by stalling claim payments or refusing to offer benefits, until a claim is found to be in compliance with the plan, which can take months. (Again, see Massachusetts)

Here’s the simple fact: Insurance is an industry and as such it is a business. A very simple method of addressing high premium costs, while still maintaining coverage, would be to write legislation that would allow insurance carriers to sell health care plans across state lines. This would then lend to a competitive atmosphere and that drives prices down. Massachusetts recently opened its borders to auto insurance carriers and the end result, lower premiums all the way around, savings to consumers was immediate. The premise is simple, and it works. Imagine if you would, health insurance carries allowed to compete for your business? Similar to any consumer product, once the there is competition, the rates become more favorable.

Mandated benefits, in part, should be reviewed to exclude any benefits that could possibly be considered elective. Elective as in “not medically necessary”, and allow carriers to offer tiered plans, instead of a “one size fits all”; a plan with full benefits, a plan that carriers fewer benefits to fit the needs of the individual (say a couple in the 60’s who might not be taking advantage of infertility treatments), and catastrophic coverage, a plan that would prevent someone from going into bankruptcy.

Finally, offer consumers a real stake in their coverage, by having those who have received benefits, check their statements for accuracy. (This should include Medicaid and Medicare recipients). If an error is found, the consumer should be rewarded, perhaps through a reduction in premium over the following year.).
(Also not mentioned tort reform – which would reduce the costs of hospitals, doctors and any one remotely related to the health insurance field that must carry mal-practice coverage). One can hazard to guess that this type of "watch dog" incentive might discover more fraud, than the current bureaucracy.

Common sense solutions (some of which have been offered, in a much maligned GOP proposal), would better serve the nation as a whole, by decreasing the costs, making insurance coverage more affordable, and at the same time, with tort-reform lifted, increase the numbers of physicians willing to practice in certain states.
The Toyota executives may have said it best (from a presentation to Congress over the recall of Toyota autos): (Politico):

The “Activist Administration & Congress – increasing laws & regulations” is listed as one of “Toyota Challenges,”

Toyota, as a note, produces autos in the United States.

In closing, some regulations make sense: regulating our borders by enforcing existing laws, for example. Making some preventative health screenings mandatory on plans (eliminating the need to more costly treatment down the line) and helmet laws for motorcyclists. To regulate our health care industry to the point of no return is not, in this humble opinion, wise in the least.