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Considering Your Options When The Insurance Company Stops Paying

Blue Cross just advised a twenty-six-year old woman I know that it will cut off payments for the physical therapy that was making it possible for her to sit at a keyboard for eleven hours a day.  Her thirty sessions were up.

The young woman has an overuse injury to both of her arms that causes so much pain she can’t even mix up a salad dressing.  “I am not getting any better,” she said.  “To do that I would have to stop working or scale back the number of hours required by my job.”  Those physical therapy sessions offer strengthening exercises that reduce swelling and inflammation and make it possible for her to keep working.

Shifting Medical Costs to Patients

One cannot entirely fault insurance companies for trying to clamp down on medical costs, but rather than actually lowering the underlying costs of medical services, their solution is to Read more »

*This blog post was originally published at Prepared Patient Forum: What It Takes Blog*

The Real Cost Drivers Of Health Insurance Premiums

Gary Schwitzer links to a Business Week article that says health insurance is a very uncompetitive market.  Schwitzer notes this hasn’t gotten much attention, and wonders if it is a reason why health insurance premiums keep going up.

It is – and it isn’t.  As with most things in health care, there’s more to it than it seems.

Business Week and Schwitzer are right that the market for health insurance is not especially competitive.  Most states have one or two dominant health insurers, and a number of other much smaller players.  The smaller insurers are often at a big disadvantage.  I blogged about this a couple of months ago.

But the question of the cost of health insurance is something that mostly affects small employers – the companies that employ some 55 million Americans.

As companies get bigger, they minimize their exposure to the insurance market.  Mid-sized employers (between about 500 and 2,500 employees) buy so-called “stop loss” coverage.  Under these plans, they self-insure for some of the risk, and buy coverage for unexpectedly high expenses.  It’s sort of like a high deductible plan, except it’s for the company.  That market is, in fact, highly competitive, and serves many of the 14 million Americans who work for companies of this size.

Really big companies – which employ 43 million Americans – don’t buy health insurance at all.  They hire a health plan to administer their expenses, but have completely opted out of the health insurance market.

So is the uncompetitive health insurance market driving health care premium increases?

It doesn’t help, but there here are three other things that we don’t talk enough about that are driving these increases:

1.  State coverage mandates. Each state requires that insurers who wish to sell there comply with a huge variety of coverage mandates.  In fact, there are nearly 2,000 mandates, some of which add significant costs to health insurance.  Adding new mandates is a regular activity of state governments, based on the political clout of patient groups, pharmaceutical companies and others.  State governments have had an important role to play in driving premium increases.

2.  Guarantee issue requirements. The other thing some states have done is outlaw medical underwriting.  This means that if an uninsured person gets diagnosed with an illness, he can just go out and buy an insurance policy and, for the cost of an annual premium, get all the care he needs.  He can even cancel the policy after he’s done being treated, and buy one again if he gets sick again.  There may be valid public policy reasons to make health insurance guarantee-issue.  But the reality is that insurers have to add in additional premium to account for the fact that their risk pool includes in it much more costly individuals than otherwise would.  There is no free lunch.

3.  Other cost-shifting.  Studies show that tens of billions of dollars a year of uncompensated health care to the uninsured is provided by medical providers.  They try to offset these costs by negotiating higher payment rates from private insurers.  The same is true for government-funded programs.  As these programs have attempted to control costs by simply paying less, providers have tried to recoup those reductions through higher fees to health plans.  In each case, the ultimate cost is passed on to the consumer.  Some groups think this kind of cost-shifting adds 5-10% to annual premium rates.

There are, of course, lots of other reasons for the rapidly increasing health insurance rates.  These are few of the less discussed that we ought to talk about more.

*This blog post was originally published at See First Blog*

Ezra Klein: Missing The Point

Ezra opines a bit on the role of doctors in health care with the strangely misleading headline: Listen to Atul Gawande: Insurers Aren’t the Problem in Health Care

This wasn’t Gawande’s point at all, and is something quite tangential to Klein’s point:

The reason most Americans hate insurers is because they say “no” to things. “No” to insurance coverage, “no” to a test, “no” to a treatment.   But whatever the problems with saying “no,” what makes our health-care system costly is all the times when we say “yes.” And insurers are virtually never the ones behind a “yes.” They don’t prescribe you treatments. They don’t push you towards MRIs or angioplasties. Doctors are behind those questions, and if you want a cheaper health-care system, you’re going to have to focus on their behavior.

Yes, doctors are a driver — one of many — in the exponentially increasing cost of health care.  Utilization is uneven, not linked to quality or outcomes in many cases, and may often be driven by physicians’ personal economic interests.  All of this is not news, though certainly Atul Gawande wove it together masterfully in his recent New Yorker article.  (I’m assuming you’ve all read it — If not, then stop reading this drivel and go read it immediately.) Nobody disputes that doctors’ behavior (and ideally their reimbursement formula) need to change if effective cost control will be brought to bear on the system.

But it’s completely off-base to claim that insurers aren’t one of the problems in the current system.  There are two crises unfolding in American health care — a fiscal crisis and an access crisis.  I would argue that insurers are less significant as a driver of cost than they are as a barrier to access.  Overall, insurers have, I think, only a marginal effect on cost growth, largely due to the friction they introduce to the system — paperwork, hassles & redundancy and internal costs such as executive compensation, advertising and profits.  It would be great if this could be reduced, but it wouldn’t fix the escalation in costs, only defer the crisis for a few years until cost growth caught up to today’s level.  In the wonk parlance, it wouldn’t “bend the cost curve,” just step it down a bit.

But as for access to care, insurers are the biggest problem.  It’s not their “fault” per se in that they are simply rational actors in the system as it’s currently designed.  Denying care, rescinding policies, aggressive underwriting and cost-shifting are the logical responses of profit-making organizations to the market and its regulatory structure. Fixing this broken insurance system will not contain costs, but it will begin to address the human cost of the 47 million people whose only access to health care is to come to see me in the ER.

*This blog post was originally published at Movin' Meat*

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