Thursday, March 29, 2007

What Private Insurers in Wisconsin Want

An umbrella group for four associations that represent health insurers and underwriters in Wisconsin released a report yesterday outlining the characteristics of "sensible" health care reform in the state.

The group -- named the Coalition for Sensible Health Care Solutions -- listed these six requirements for reform:
  • It must ensure that all Wisconsinites have access to basic health care coverage.
  • It must neither bankrupt families nor the state.
  • It must provide the state’s diverse population with equally diverse health care coverage choices.
  • It must promote ongoing and long-term innovation that adapts to the evolving needs of our citizens.
  • It must address and reduce skyrocketing medical care costs.
  • It must provide consumers access to meaningful information and expert advice from licensed insurance professionals.
Let's take each point one-by-one.
It must ensure that all Wisconsinites have access to basic health care coverage.
This one is a bit of a no-brainer. But one key piece that's missing is the type of health coverage that Wisconsinites should be able to access. The word "basic" is used, but that doesn't tell a whole lot. As a number of recent studies have shown (see here and here for two examples), the under-insured are as significant of a problem as the un-insured.
It must neither bankrupt families nor the state.
This is certainly an important point to take into account. But considering our current system is bankrupting many families and the state, in many ways doing nothing -- or just tinkering around the edges -- is actually the most costly approach.
It must provide the state’s diverse population with equally diverse health care coverage choices.
This is the tricky one. As I discussed earlier in the week, risk pooling is an essential facet of any successful and affordable health coverage system. However, the preferred business model of private insurers in the current system involves targeting the least risky (and, hence, most profitable) participants, not pooling them in with those who have expensive or frequent claims.

The way I read this requirement is that insurers want the flexibility to continue the profit driven practice of adverse selection. I certainly don't have a problem with businesses seeking a profit, but the insurance industry needs to recognize that there are more significant moral implications in pricing someone out of health coverage than there are with pricing them out of other private markets.

Nevertheless, it's certainly agreed that any reform involving private insurers needs to allow some room for insurance companies to make a profit...it just shouldn't come by practices that marginalize or exclude those who need affordable health care.
It must promote ongoing and long-term innovation that adapts to the evolving needs of our citizens.
Innovation of insurance products? I can understand the need for some excess money on the provider side to spur medical care innovations and investment in better technologies, but I'm not so sure about that same need on the payer side.

However, any reform proposal that uses private insurers -- for instance, the Wisconsin Health Plan -- would encourage innovation by putting insurers into competition with each other for participants. And as long as more innovation = more efficiency = more profits, there should be innovation aplenty in the system.
It must address and reduce skyrocketing medical care costs.
Interesting how this one puts the emphasis on medical care costs, as if that's something that can be separated from skyrocketing health care costs as a whole. The difference, of course, is that the latter includes those costs associated with the payer side, too.

Other than that, this point seems pretty identical to the second point about not bankrupting families or the state.
It must provide consumers access to meaningful information and expert advice from licensed insurance professionals.
This one just screams, "No single payer -- let us keep our jobs!" Fair enough. If I worked in the private health insurance industry, I'd be screaming the same thing. While there are undoubtedly moral implications to no reform, there are also moral implications to reform that essentially wipes out an entire industry in one swoop.

But that doesn't mean things can't or shouldn't change. And, in the long run, change that brings stability to the health care system as a whole will benefit private insurers.

At the very least, they won't need to keep justifying their own existence.

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4 Comments:

Anonymous m.z. forrest said...

It must provide the state’s diverse population with equally diverse health care coverage choices.

I'm not aware of a single insurance risk where diversity of product choices produced better outcomes for the consumer. As you rightly point out, diversity of product organically produces adverse selection. Conceivably pooling of risks, like home insurance combining both property and liability risks has benefited the consumer in simplicity, but even there you will find that dwelling fire policies have increased in cost, even with a resident owner, due to adverse selection. This despite dwelling fire policies have a set of narrowly defined risks to property and HO-6's covering all risks except those specifically excluded.

March 29, 2007  
Blogger Seth Zlotocha said...

Exactly. That requirement is about better outcomes for the insurer, not the consumer.

March 29, 2007  
Anonymous Anonymous said...

The Wisconsin Health Plan is nothing more or less than the rotten Massachusetts Plan - better known as Romney Care.

March 31, 2007  
Blogger Seth Zlotocha said...

Care to be more specific, Anon?

I think if you read the WHP, you'd see that, aside from both being universal health plans, it's not at all like the Massachusetts plan.

April 01, 2007  

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