Health Insurers "Balk"

In the New York Times, June 3, 2009, Reed Abelson writes “Health insurers balk at changes for small business”, http://www.nytimes.com/2009/06/03/business/smallbusiness/03insure.html?ref=business. The gist of the article is that small businesses, unable to self-insure or to spread risk among large numbers of employees, are facing the same adverse – and expensive – market that individuals do. This is if a small business still offers health insurance to its employees: “…fewer small businesses are offering coverage, “ he writes, “especially the very smallest employers. About half of companies with 9 or fewer workers do not provide health benefits.”. Even the changes that the health insurance companies have ostensibly agreed to (if you believe them), addressed in this blog on May 16, 2009,
Health Care Industry Pledge to Cut Costs: No News at All, are not, apparently, being considered for the small businesses that employ over 40% of US workers. The insurance companies Abelson spoke to had different points of view; Aetna and Cigna “…say they would generally support similar federal rules for both the individual and small business markets…”, while WellPoint opposes the changes and United Health Group “…declined to discuss whether it would favor the changes…”, as did the Health Care Service Corporation, “…a Blue Cross operator in big states, including Texas and Illinois,” and “The national association representing Blue Cross plans also declined to comment”.

In small companies (again, the ones that actually offer health insurance) the total premiums are not only higher, but the share employees pay is more than half, while in large companies it is less than 1/3. Moreover, the article does not address at all the fact of underinsurance, that is, “what kind of coverage are employees getting?” The concept of underinsurance has been getting some traction in national discussions, but mostly it is felt by individuals. Almost all people will be underinsured if they get sick enough. This was the message of Moore’s “Sicko!” (all the featured people had had insurance), and of a variety of commentators who note that many “insurance” policies have such high deductibles and co-payments, and often maximum limits on payments, that they are worth very little. Despite high premiums. One business owner described by Abelson found his costs go from $4600 to $6000 a month to cover his 13 employees, so he had to find another carrier. What it doesn’t say was whether the health insurance coverage was comparable – or even whether the old policy was any good.

Quality of health care is a big issue. I strongly recommend the important, if upsetting, piece by Dr. Atul Gawande in the recent New Yorker, June 1, 2009, http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande. He makes many good points, which I will address in the near future, but one is that the fact of who pays does not affect the quality or cost of health care if what we pay for doesn’t change. That said, the quality of the health insurance coverage one has makes a big difference when you get sick.

The New England Journal of Medicine recently had another triumvirate of articles on health reform in its May 28, 2009 issue. Jacob Hacker, Mark V. Pauly, and Victor R. Fuchs all weigh in with their perspective on the Obama administration’s “public plan option” (http://content.nejm.org/content/vol360/issue22/index.dtl). Hacker, a political science professor at UC-Berkeley asserts that “Public health insurance emphasizes the broad sharing of risk, ensuring coverage that is affordable and of high quality for the small portion of the population that accounts for most health spending.” This sounds good, and emphasizes the point made by Bob Ferrer on this blog (May 8, 2009) that a small portion of people account for most of health spending which is why looking at a program that supplies what each person (e.g., 25 year old health aide to a congressperson) thinks they would like doesn’t do anything for costs. Hacker also says, however, that “On the other hand, private plans are generally more flexible and more capable of building integrated provider networks and they have at times moved into new areas of care management in advance of the public sector.” Boy, talk about damned with faint praise! Does this say anything really good about the private health insurance sector? Even if it were true, does it seem in any way to be comparable in importance to what he says public insurance does? I’m not sure, however, that Hacker is not entirely serious; sometimes academic experts find the oddest things to be important, stuff that would never enter into an actual regular person’s thinking.

A great example is provided to us by Dr. Pauly[1] who states, in regard to people buying insurance, that “Having insurance you prefer rather than what someone else selects for you will make you more likely to choose to be and remain insured.” Huh? When did you last hear a person for whom the choice of insurance you preferred was a big deal? People want to choose their doctor, their hospital, etc., but their insurance company? (“I’ve always been an Aetna man, myself!”) I don’t think so. Oh, he means type of insurance plan! I think I want the one that gives me the most comprehensive coverage and costs the least. Don’t you? Who doesn’t? Dr. Pauly? Some other economist? Who wants the one that has the worst coverage and pays the most? What’s that you say? He means there is a trade-off between better coverage and lower cost? Well, maybe, but actually not.

In general, the larger the organization you work for, the better and more comprehensive the coverage and the lower the cost (both to you, directly in terms of your premiums, co-payments, and deductibles, and to your employer) and the smaller the organization (hey, we got back to the original topic of this piece! Have faith!), with the smallest being the individual, the worse your coverage and the more expensive it is.

So what is the point? What is the biggest organization? Even bigger than the late General Motors with its, um, “Cadillac” insurance? Why, it’s all of us! The public! A public insurance plan (let’s say – single payer, Medicare for all) that covers all of us can get us the best deal. And you can be sure that if Dr. Pauly, and Dr. Hacker, and the president of the newly-slimmed-down GM, and your Senator all have to be in the same plan as you and your elderly ill grandmother, they will make sure it is a good plan. What an idea! All being in it together!

Of course the health insurers balk at the idea of covering small business. They balk at anything that will not cause them to have maximal profits. The question is why any of the rest of us should care, and why in heck maintaining health insurance company profits are given any consideration at all (not to mention the seat at the head of the table) in the health reform debate! We should call the balk, and if they object throw them out of the game!

You can see I’ll never be a business-school economist.

[1] Professor of health care management, business and public policy, insurance and risk management, economics, and film noir (no, not really the last; I guess I just got carried away; seems like he teaches everything else) at the Wharton School of the University of Pennsylvania).