Obama Takes Pressure Off Health Insurers

The Obama administration Monday backed down from its demand that Congress enact a public option health plan and said that any approach that would increase competition among health insurers would be acceptable to the president.

Good move. If Congress takes the bait, health insurers will face uncertainty instead of extinction.

Drop the public option, or Government HMO, which would eventually lead to higher costs and less access to care. It would be hated by patients and the members of Congress they would keep on the phone all day until it was repealed.

The Senate is hot for health insurance cooperatives as an alternative to the public option health plan, or Government HMO.

Forget health insurance coops. Unlike ag coops, they don’t work because it is so easy for insurers and providers to politicize and neuter their price negotiating powers. All it takes are a few well placed campaign contributions for Pelosi and Waxman, and coops will be a mess.

Look at how a vast majority of state health insurance coops failed in the last 30 years. Coops for corn, bean and wheat farmers are relatively simple businesses and organizations. Health insurance coops require very experienced health care and health insurance administrators, which means they would be as expensive to operate as any Blues plan or private insurer. Health insurance coops are an easy answer to a tough problem and they make as much sense as ethanol as an alternative energy.

How to create more competition among insurers:

1. Require community rating by all for metro and regional markets in each state in which they operate. Each insurer would community rate its own customers and put them in large risk pools for each large market they serve. No risk pool could have fewer than, say, 300,000 to 500,000 enrollees.
2. Require each insurer offer, say, 10 health plans ranging from low deductible, high premium plans that provide every mandated benefit they can think of to high deductible, minimal preventive care and low premiums. Yes, let the rich buy Lincolns and the poor buy what they can afford. This is America.
3. Make insurers compete in terms of how successfully they lower their administrative and marketing costs and perhaps in terms of their abilities to sign up physicians. All plans should cover all hospitals in a market.
4. Require that each insurer publish on the web and update daily the full contractual details of each plan it offers and the premiums for each age group and family size.
5. Take employers and governments out of the insurance business. Let consumers do their own buying. This will force insurers to compete in terms of how well they service their agents and customers.
6. Consider using anti-trust laws to breakup the big insurers, big hospitals and health care systems and big specialty medical groups by metro and regional market.
7. Figure out a way to keep AARP from monopolizing one insurer nationally. It’s anti-competitive.
8. Require all Americans above a certain household income to buy insurance and outlaw denial of insurance because of pre-existing conditions.
9. Outlaw dropping insureds who’ve become sick and outlaw raising premiums on the critically ill. This goes back to using community rating instead of medical risk rating of individuals.
10. Minimize regulations. Keep them simple. No price controls. No wage controls.
11. Replace state health insurance regulations with federal regulations so insurers can sell nationally as well as locally. But figure out a way to use anti-trust laws to keep the market from being taken over by one or two big insurers.

This is my umpteenth rewrite of my ideas about how to reform health insurance markets. Each rewrite has been an attempt to reflect current realities. I know that this one is too radical to get any consideration in Washington, which is determined to create an even more politicized and unworkable health insurance market than we have today.

Such is health insurance politics.

White House open to deal on public health plan. Wall Street Journal.

Kennedy seeks public health care plan that finances itself. Bloomberg.

Comments

[athena:]

Excellent article, thank you!

Jul 07 09:05 AM

[Average Fool:]

I would like to nominate Donald Johnson for Heath Czar.

Jul 07 10:19 AM

[Donald Johnson:]

Health insurers and health ETFs popped this morning on the news.

Daily charts are here:

stockcharts.com/script...

Jul 07 10:43 AM

[Donald Johnson:]

Politoco.com reports Obama has rolled back his chief of staff's comments on the public option.

Do these guys talk?

Jul 07 11:52 AM

[dixie:]

The highest percentage of voters is consists of those already insured.

If the proposed change is not for the better, it will not be well received.
The mid-term election will soon be here.

Jul 07 03:13 PM

[PhillyDan:]

Great article. I agree with 10 of your 11 steps. I don't totally agree with 5. above. 1. If employers (those who currently provide employee-based healthcare benefits) were mandated to give employees raises to match the lost healthcare benefits. 2. Congress passed tax credits up to 7500 for a family of four and subsidized families below the poverty level and up to 3.5 times the poverty level to assist in paying their premiums. 3. We still need Government to be a watchdog on healthcare costs, I think unreasonable price increases should be watched and maybe moved back if the Government Watchdog decides they are too much. Tighter regulation is required here. 5. Insurance companies will need to rate the quality of their providers and also include incentives for wellness and disease prevention.

Add these elements into the mix and we are on the path to better, lower cost and more competitive healthcare reform and business.

Jul 08 03:36 AM

[Mike Martin:]

Humana in Texas has just purged many physicians from its network. This leaves many senior citizens in a lurch! Obviously, not consistent with your 3rd principle. Does this usually mean the insurer will eventually pull out of this niche market or is it having more severe financial problems?? What kind of long term "value" does this action have?
Newsrelease: www.texmed.org/Templat...

Jul 08 10:50 AM