Health Care: A Requiem In Two Parts

I need to take a drug holiday from my usual concoction of Valium, Restoril, Ambien CR, and Benadryl to sleep at night. Apparently, I slept through an important change in human ethical thought. No longer does society have a moral obligation to provide health care, but rather, it's health insurance which we have the "moral imperative" to provide (1).

I find that really odd, since insurance, as I've come to know it, is defined as the "equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss" (2). Perhaps all that moral imperative stuff is found in the new revelation of Jesus Christ found in the Book of Moron Mormon. I'll have to look into that...

With health insurance, the "risk" that is being transferred is that of incurring medical expenses. As it turns out, there are a lot people in this country who do not have health insurance and therefore, are at risk for incurring medical expenses. The oft quoted (and inflated) statistic of people who do not have health insurance is 47 million (3). Even after the bill's passage, some 23 million still will not be covered.

But, who is to blame to for this high number?

"It's the insurance companies dummy!" was the implied message I got from one reader, who opined:

"I have no idea why everyone is defending the insurance companies who have been raping consumers' wallets for years and padding the pockets of politicians to keep antitrust laws from applying to them (thankfully, no more)."

Wow. Those companies sound really awful. I love my wallet. I would never let any harm come to it, sexual or otherwise. I guess a big "Thank You Mr. President Obama" is in order (and if you come into the oval office, a nice sloppy blow job too).

Obama sure screwed those wallet raping insurance companies (4): no more excluding people with pre-existing conditions, and no more setting rates based on a person's health status.

“In addition, a weak economy is causing younger, healthier individuals to drop their insurance. As healthy people forego health insurance, the rates for those Americans who need coverage increases. That is why going into 2009 we advocated for robust insurance market reforms, including guaranteed coverage with no pre-existing condition exclusions or health status rating paired with an effective personal coverage requirement to get everyone covered." (5)

The above quote is not from an Obama speech. It's from America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni (i.e., the evil insurance lobby, dun, dun, dun...).

If the insurance industry actually supports those provisions in the bill, how exactly did Obama screw them?

The real question to ask is why the insurance industry supports those provisions. The answer: national health insurance mandate (i.e., "personal coverage requirement"). The health insurance industry is happy to drop those practices as long as they have a nice pool of  "younger, healthier individuals" to be conscripted. Since unhealthy individuals can no longer be charged higher premiums, it's healthier individuals who will see their premiums go up by as little as 10-13% or as high as 27-30%, depending on varying sets of circumstances (6).

We never learn from our mistakes. Many states have experimented with banning certain insurance practices such as the exclusion practice. This essentially kills any incentive to obtain insurance until you're actually sick. This ends up costing insurance providers a lot of money. The federal government's solution? Coerce their citizens to buy insurance. That's it, problem solved right?

Not exactly. Even with the mandate, there is still no incentive for healthy people to buy insurance. The average cost for an individual policy is $5,500 (7). The fine for not purchasing insurance ranges from $95 (1% of income) the first year to $695 (or 2% of income) after that. Would you rather pay $700 or $5000? Even if you're eligible for federal subsidies, $2,300 is still more expensive than $700. It's for this reason, the health insurance industry does not support this bill. The fines are too small (and currently, not enforceable).

We can predict what will happen next. It's known as a "death spiral." When premiums rise for those healthy people who already have policies (since unhealthy people can no longer be charged higher rates), more and more healthy people will drop their insurance. This will create an insurance pool of primarily of high cost, sick people (8). Many insurance companies will not be able to stay in business under these sets of circumstances. More and more health care dollars will become the responsibility of the government, which of course, is funded by taxing it citizens.

So in this sense, Obama has screwed the insurance companies. And us along with them.

(FYI: Those pesky anti-trust laws still don't apply to the health insurance companies).

(Coming soon: Will the health care bill reduce the deficit?)