There are no coincidences, Part II

Continued from yesterday...

Dr Greenberg does, however, make one somewhat valid point (making him 1 for 5, not exactly Hall of Fame material): if all plans were individually owned, there’d be increased competition, and more efficient benefit usage. For more on this, see the posts on “Catastrophic vs Insular.”

Of course, he then goes on to break his one-point winning streak with this gem: “Individuals might belong to a health care plan for many years or decades.” Why? Oh, because plans would have an incentive to “invest in a person’s health.”

He’s kidding, right?

Carriers are impersonal, corporate entities which are designed to generate a profit for their shareholders. They do this by offering reasonable plans, at reasonable prices, for a reasonable time. Eventually, though, rates begin to climb (regardless of whether employer-based or individually owned), and adverse selection takes over. There’s also attrition due to age, family status, heck, where one lives. I would have expected to see this silliness from Paul Krugman, maybe, but a supposedly serious economist?!

Perhaps the most egregiously stupid idea put forth by Dr Greenberg is his Earned Income Credit Model of health care: in order to levelise the playing field for those with severe or chronic conditions, or advanced age, or maybe being pregnant, Dr G proposes a “risk-adjustment payment based on age, gender, disability, or prior hospitalizations.” In other words, government subsidized health insurance. Didn’t we already reject this idea?

So, his solution is to remove one 3rd party (the employer) and replace it with…wait for it…another 3rd party (the government). But it was the government’s tax policy that created the “problem” in the first place. So we’re back to square one, right?

Not exactly; now we’re actually behind the curve. That is, we’ve substituted one somewhat-inefficient 3rd party payor with a substantially-inefficient one. By putting the government in the position of subsidizing health plans, one guarantees that the cost of those plans will increase substantially (cf: college tuition).

Thanks to Dr Ford for bringing this interesting – if flawed – article to our attention.

There are no coincidences…

So opines my better half. Her point is that everything happens for a reason, although that reason may not be immediately (or ever) apparent.

I bring this up because Bob Vineyard recently posted this comment: “My personal opinion is that employers should provide as many health benefits as possible . . . in lieu of higher wages. The tax breaks to the employer (and employee) are considerable.” The “coincidence" is that Dr Ford over at CA Medicine Man has posted his response to an article on this very subject in Internal Medicine News.

Let me take a moment to mention that Dr Ford’s blog is an extremely readable, informative, and interesting place. As a physician, he brings specific medical knowledge, but it’s never too technical, and never dry.

The article, by Dr. Warren Greenberg, posits that we should do away with the corporate tax-break for health insurance, which would lead to increased competition based on quality of care. Dr G is a Professor of Health Economics at George Washington University in Washington.

He is also ignorant of how heath insurance really works. Those who are familiar with the term may categorize the following as a fisking.

Dr Greenberg’s first premise is that health plans compete primarily on price. Actually, he gets this partially correct: price does, indeed, play a major role. But it is not the overarching criteria; if it were, then the lowest priced plan in a given market would ALWAYS dominate that market. Since that doesn’t happen, it follows that his premise is false.

He follows that up with the assertion that “there is relatively little competition among health plans based on quality of care.” For a Professor of Economics, that’s pretty sloppy. Where are the facts and figures to back that up? Where are the studies that either support or refute this claim? He continues, “if a particular health plan were known for its high-quality care, it would likely attract the sickest — and most costly — patients.” Again, this ignores the real-world fact that plans DO compete in quality: who knowingly buys the plan with the WORST care? And trust me on this: if a plan offered consistently poor quality care, the market would know this, and competitors would capitalize on it.

Since he hasn’t identified the real problem, he goes on to offer his solution: remove the tax-break for corporations. Yes, you read that correctly: the way to foster better care is to make insurance more expensive. If you agree with this conclusion, then you won’t like the rest of this post.

Dr G avers that if employer based health insurance was stripped of its tax advantages, it would become more popular. Really?! Again with the baseless assertions. On what facts is this conclusion based? Certainly not on any real world experience. The tax advantages of employer based coverage are, if anything, a minor issue. What makes group insurance attractive is the underwriting (guaranteed issue) and the benefit configuration (multiple options, maternity, etc).

The climax of the article, such as it is, is the assertion that absent employer-based coverage, plans would “be much more conducive to competition based on quality.” And why is this? Well, it’s because of “(h)igh workforce turnover.”

Hunh?!

What does plan competition have to do with workplace turnover? The answer is, not much. Yes, it’s true that because the plan is sponsored by a third party (the employer), the employee has little vested interest. But this fails to take into account the myriad of financial products now bundled with the medical ones (FSA, HRA, HSA, etc), and the now ubiquitous use of deductibles, co-pays and co-insurance. Surely the employee has ownership issues now.

More tomorrow…

Forcing Employers on Medical Insurance...

Some thirty states are considering bills that would require employers to pay for at least part of the health coverage for the uninsured. There is, of course, more here than meets the eye.

First, there is a tendency in the media (and among those in the professions) to conflate “health care” and “health insurance.” This is demonstrably inaccurate: those without health insurance rarely go without health care, unless they deliberately choose to forego it.

Second, we constantly hear about “tax breaks for business,” and “employer paid health insurance.”

Neither of these things actually exist:

Businesses do not pay taxes, they collect them. And businesses do not pay for health insurance, they simply re-route dollars from employees’ wages to health insurance carriers.

The regulations under discussion here tend to fall into three broad categories:

1) Mandating employers to provide health care to workers or pay into a state fund to help the uninsured

2) Requiring that employers doing business with the state provide health insurance

3) Requiring enrollees in state public assistance programs to list their employers, thus embarrassing companies into paying better benefits.

Let’s take these one at a time: First, mandating employers to provide health care -- in essence, forcing more dollars away from employees and into insurance company coffers – is a surefire way to increase unemployment. And this does nothing to help provide health coverage to those who are self-employed, or work part-time jobs.

Second, how many companies actually do business directly with the government? A percentage, to be sure, but a minority nonetheless. How will this help to decrease the ranks of the uninsured?

The last one is just funny: how does one “embarrass” a corporate entity? Perhaps ABC Widgets can borrow Data’s “emotion chip,” and learn to blush.

But I doubt it.

The basic point here is this: companies do not pay for insurance; they redirect wages. Legislation which does not reflect this reality is doomed to failure.

Chag Sameach! (Happy Holiday!)

Tonight marks the beginning of the Jewish festival of Passover. We celebrate the time, thousands of years ago, when we were freed from slavery.

For the next 8 days, we'll eat nothing made with yeast (in fact, there's a whole raft of foods which we'll miss). Our major staple is a cracker-like product called Matzah, made simply of flour and water. There is a whole litany of terrific Passover humor, as well.

Here's one of my favorites:

A Jewish man took his Passover lunch to eat outside in the park. He sat down on a bench and began eating. A little while later a blind man came by and sat down next to him. Feeling neighborly, the Jewish man passed a sheet of matzoh to the blind man. The blind man ran his fingers over the matzoh for a few minutes, looked puzzled, and finally exclaimed, 'Who wrote this nonsense?'

Have a great Passover!

Many Happy Returns...

It’s been said that the life insurance industry moves at the speed of, well, snails. And there’s some truth to this. But every once in a while a new product, or a substantive enhancement to an existing product, comes along. Such is the case with Return of Premium term life insurance.

A relatively recent development in the life insurance universe, RoP seeks to address one of the major disadvantages of term insurance: what happens at the end of the “term?”

To understand why this is important, let’s examine what term insurance does, and what it doesn’t do. Term life insurance is “pure protection;” that is, it pays a death benefit if/when you die during a specific time frame, or “term.” It’s analogous to renting or leasing your insurance. I’m not going to get into the whole term vs permanent debate here, let’s just leave it that term insurance can provide reasonably-priced coverage for a set amount of time.

One further note: term insurance premiums are generally “locked in” for that period, usually 10, 20 or even 30 years. So the insurer can’t raise your rates if your health declines. But eventually, the end of the term comes along, and one presumably hopes to still be drawing breath. And that’s where things get dicey.

Which brings us back to the question posed above: what happens at the end of the “term?” Well, the rate is no longer guaranteed at that lower level. And many folks decide they no longer need the coverage (again, I’ll defer discussion of whether or not this is wise). And the insured has naught but a bunch of cancelled checks to show for their efforts.

But what if your insurance guaranteed to return every penny you’ve paid in if you’re “still standing” at the end of the term? No matter what your health, no matter what the economy has been doing for lo those many years, you get back everything you paid. This is the premise, and the promise, of RoP. Think of it this way: what if, when you sold your house, you got back all the homeowners insurance premiums you’d paid in? That would be a deal worth considering.

Now, this “extra” doesn’t come cheap. The rate depends, of course on the face amount, but also on the length of the term. Believe it or not, though, the longer that term (30 years vs 10), the lower the extra cost of the rider. This begins to make sense when one considers that the carrier has the use of the money for a longer period of time.

RoP isn’t for everyone, or appropriate for every case. But if you’re looking at term coverage, and you think that you might just outlive it, take a look at RoP.

HIPAA and Maternity: A Dialectic (or a Debacle)…

My good friend, insurance guru Bob Vineyard and I have been engaged in a lengthy, interesting, and frustrating email correspondence.

It all started innocently enough: Bob wrote to tell me that he got his hand slapped (which is in itself not really all that surprising) because – apparently – HIPAA doesn’t consider pregnancy a pre-existing condition.

Usually.

And that’s where it gets interesting.

According to the DOL (Department of Labor):

“If you find a new job that offers health coverage, or if you are eligible for coverage under a family member's employment-based plan, HIPAA includes protections for coverage under group health plans that:Limit exclusions for preexisting conditionsMoreover, under HIPAA, preexisting condition exclusions cannot be applied to pregnancy, regardless of whether the woman had previous health coverage."

This seems counter-intuitive, given that other provisions in HIPAA limit coverage for pre-existing conditions. So, I identified 4 scenario’s where this might apply, to see where this new information would lead us:

1) Jane was covered under a group plan at Employer A, got a new job at Company B, and immediately enrolled in their group health plan.

In this case, there’s no problem; everyone agrees that HIPAA provides for continuity of coverage, and so Jane’s pregnancy would be covered.

Sort of: if there’s a waiting period for new hires, she’s got a problem. But that’s another post.

2) Jane was covered under an individual plan, and then went to work at XYZ Widgets.

Again, as in #1, there should be no problem, because HIPAA recognizes individual coverage as creditable toward group. In other words, the pregnancy should be covered (subject, of course, to the same waiting period proviso as in #1)

3) Jane had no insurance, and went to work at XYZ Widgets. Apparently, HIPAA says that the pregnancy must be covered.

Does it? According to an article on Parenting.com, “if (Jane) had no insurance, got pregnant, then landed a new job with insurance, (her) new health plan would not have to immediately cover (her) pregnancy.” Now, I’m not crazy about relying on the net for such critical information, but it does seem to make some sense. OTOH, I’ll keep digging, and update/correct this answer as I learn more.

4) Jane works at XYZ Widgets, but has no insurance because she waived (declined) coverage when she was originally eligible. Now, she is considered a “late enrollee,” subject to an 18 month waiting period for pre-existing conditions.

Not so fast there, pardner. According to another site, The Employers Council, “(n)o preexisting condition limitations may be imposed on pregnant women…” But, also according to that site, Jane would have had to have had [ed - that sounds clumsy] other coverage in place when she originally waived. Otherwise, she is indeed a late enrollee.

If this sounds convoluted and confusing, it is. I’m still not sure how scenarios 3 and 4 will ultimately “shake out,” so I’m going to consider this post: Under Construction.

Health Insurance: catastrophic versus insular? (Part 2)

Dr John’s conclusion is that “(t)o bring down utilization (and therefore costs) from both the patient and the doctor side, one can require more direct patient out-of-pocket contributions.”

While I don’t disagree, I think that this ignores other factors which contribute to the overall cost of coverage. For example, in any given policy (group or individual), up to 17% of the price is due to government mandated benefits. Such benefits are an integral part of the plan, and cannot be reduced or eliminated. This means that, even if you don’t want or need that benefit, you can’t request its removal in order to reduce premiums.

As to Econblog’s dismay that folks choose plans which are contrary to their best interest: folks still eat Big Macs, smoke, watch way too much TV, and don’t exercise enough, either. All of these are antithetical to one’s good health, yet many (most?) of us are guilty of at least one or two of these “sins.” So it should come as no surprise that health insurance consumers would choose a plan which ill serves them. Then, too, many agents choose the “easy route;” that is, pushing the generic plans because that’s what everyone wants (or so they believe). This is true, BTW, regardless of whether we’re talking group or individual.

By way of example: I’m currently working on a small group case which has experienced major rate increases (I know, shocking; kinda like seeing the sun rise in the east). The plan has a $250 deductible, and then pays 90%, with a maximum OOP (out-of-pocket) of $1,500 (including the deductible). Also, office visits require a measly $15 co-pay. And, of course, there’s the ubiquitous rx card.

As Dr John observes, this type of plan just begs for over-utilization.

My ideal solution would be to move them to an HSA plan with a MUCH higher deductible, and without the office visit co-pays and rx card benefit. This would save the group (and the employees) a lot of premium dollars, which could fund the savings account itself, with plenty of cash left over.

But that’s not my call, it’s the employer’s. No matter what I say, the decision ultimately comes from the man (or woman) writing the check. And if that person doesn’t perceive it in his best interest, or if he fears a negative reaction from his employees, then that plan is never going to be installed.

Remember, too, that the employees have a financial stake in this, and the cost savings would ultimately redound to their benefit. And yes, it’s my job to enlighten said employees that this is the case. But if I can’t convince the employer to make such a change -- and in this case, the employer “gets it;” he understands how HSA works – then the best to be hoped for is that we can increase the deductible a bit, and maybe the office co-pays.

Such is the real world.

Health Insurance: catastrophic versus insular? (Part 1)

Over at California Medicine Man, Dr John is hosting a debate (of sorts) regarding Consumer Driven Health Care (CDHC). His post (linked in the title above) quotes from an Econlog item written by two economists.

Confused yet?

It gets better…

Briefly, Econlog posits that “most consumers would prefer…’insular’ coverage in favor of so-called ‘catastrophic’ insurance.” “Insular coverage” being defined as what most folks own today: office visit and rx co-pays, low deductibles and some modest co-insurance. In other words, generic coverage. “Catastrophic coverage” would be some form of High Deductible Health Plan (HDHP), presumably one that would be HSA-compliant. Econlog’s puzzlement with this mimics my own take on the generic vs HDHP debate, namely: most people, in most years, spend far more in premiums than they receive in benefits, which seems bass-ackwards. As economists, Econlog expresses dismay at this seemingly irrational choice. As a physician, Dr John believes this is because the patient/insured has no ownership in the claim (after all, it’s being taken care of – for the most part – by a third party), so there is a disconnect between the fact of a given claim and the patient/insured’s responsibility for it: “The issue isn't so much ownership in their ailments, it's the perception that someone else is paying the bill (employer or government).” His conclusion is that “(t)o bring down utilization (and therefore costs) from both the patient and the doctor side, one can require more direct patient out-of-pocket contributions.”

As an agent, I think they both fall somewhat short. As I noted in Dr John’s comments section: “Assume that your employer pays for your groceries. Are you going to eat steak or chicken every night? Assume further that your employer pays for your gasoline. Are you going to fill up with premium or the cheap stuff?”

Some answers tomorrow…

When HIPAA Hurts…

Recently, I had occasion to work with a nice lady whose COBRA benefits were about to expire. Unfortunately, she has a number of health conditions that render her uninsurable in the individually-underwritten market.

What to do…

There were three choices, really: transition from COBRA to HIPAA, purchase a limited benefit but guaranteed issue plan, or go naked uninsured. She came to me with about two weeks left before COBRA ran out.

BTW, you may be thinking that a Short Term Medical plan would have bought her some time. Unfortunately, before she came to me, she had applied, and been declined, for an individual medical plan. STM plans, as a rule, are not available to those who have been declined for coverage for health reasons.

In any case, the premiums for a HIPAA plan for her run between $1,000 and $1,300 a month, depending on benefits. The guaranteed issue plan runs about $180. No brainer, right?

Not quite.

True, the guaranteed issue plan would save her $10,000 to $13,000 per year. But, the benefits are quite limited, and a major claim could easily wipe out those savings, and then some. Likewise, foregoing insurance altogether didn’t appeal, either.

This is one of those cases that, although we were able to help, still felt vaguely dissatisfying. I would have preferred to find a solution which encompassed a high deductible (to generate cost savings) PLUS a cap on out-of-pocket (to provide a safety net). Because of her health, this wasn’t an option.

Oh, almost forgot: ultimately, she chose to go with one of the HIPAA plans; in this case, the “less expensive” one. Was that the right choice?

You tell me…

He's Baaaack!

Just to let y'all know that we made it back safe and sound.

New Mexico may be the friendliest place we've ever been (outside Ohio, of course).

A special Thank You to Bob Vineyard (HealthInsurance411) for keeping the homefires burning here at InsureBlog.

TGIF...

In the old Bugs Bunny cartoons, the wascally wabbit could often be heard to exclaim:

"I knew I should have taken that left turn at Albequerque"

Well, that’s where my family’s headed next week. We’ve never been out that way before, and decided that Spring Break would be a fine time to head out west.

While I’m gone (or, as my new friend Kat would say, “on hiatus”), my good friend, health insurance guru Bob Vineyard, will be filling in. Please don’t be too hard on him.

Have a great weekend!