Guest Post: Large Group, Small Group, and Individual Health Insurance

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  1. Avatar Travis
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    says:

    Are you the David Lemire who spent his career working as a high-level executive in the medical insurance industry?

    http://www.google.com/profiles/106285143785379285654

    Or his son?

    http://www.nytimes.com/1994/06/19/style/weddings-elizabeth-matt-david-lemire.html

    Everyone has their biases, but it’s helpful if you disclose them up front.Report

  2. Avatar Travis
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    says:

    Are you the David Lemire who spent his career working as a high-level executive in the medical insurance industry – or perhaps his son?

    A quick Google search tells much… everyone has their biases, but it’s helpful if you disclose them up front.Report

    • Avatar Dave in reply to Travis
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      says:

      Why?

      Can’t we just debate the substantive content of the post?

      You know, I really hate this shit.Report

      • Avatar Travis in reply to Dave
        Ignored
        says:

        Why?

        Because he has a vested interest in protecting the status quo, that’s why. He’s an insurance industry insider who wants the gravy train to keep rolling on – yeah, just deregulate everything and let us executives keep raking in the giant salaries, that’s the path to solving our health care problem.

        I’m not saying it’s wrong for him to post – but it’s wrong for him to post without disclosing his conflict of interest.Report

        • Avatar David Lemire in reply to Travis
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          says:

          Nice to see my son’s wedding announcement again. Up to 3 grandchildren!
          Sorry to have seemed mysterious, but I’m relatively new at this blogging stuff. However, having worked in the industry doesn’t constitute a conflict of interest. See my former colleague, Wendall Potter’s opinions on our common employer. I’d simply like to help focus the debate where I think the greatest problem is: individual and small (2-50 employees) group. The large group market, IMO, works pretty well.Report

        • Avatar Dave in reply to Travis
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          says:

          Can you please explain to me how a former underwriter who has kind enough to submit an interesting post putting forth alternative health care reform ideas is somehow protecting the status quo?

          He focused on small groups not large groups so I have to conclude that the “deregulate” everything argument is a strawman. Furthermore, he put forth the argument that removing regulatory burdens can actually create a market-based incentive for insurers to insure those with pre-existing medical conditions. Isn’t it the Left who laments about the insurance companies always seeking profits and refusing to insure people based on a pre-existing medical condition? Does this not address one of your grievances? What’s the problem?

          As far as I see it, you read the post, disagreed strongly, found out he was a former insurance company executive and cried foul. You could have spent that time formulating responses to his ideas. Instead, you took the easy way out to point out a conflict of interest that you have established solely on the basis of his employment and nothing more. It’s a fabrication and the purpose of disclosure is not one of “fairness”. The effect of such a disclosure would be to shut him out of the debate because my experience with the Left, unfortuneately, is that they tend to be incredibly closed-minded to anyone and anything that even has the faint scent of corporate interests (reality be damned). You don’t want the marketplace ideas to reject this. You don’t want this in the marketplace at all. You’d rather he be shut out of the debate. If you don’t believe me, go to a liberal blog like Obsidian Wings and read commenter responses to anything linked to a think tank or a source that the commenters deem conservative and you’ll find more people attacking the source itself and dismissing it outright because it’s not “peer reviewed” academia than people actually addressing the points.

          To me, that’s just stupid. It has no place in political discourse. It has no place in advancing arguments, debating ideas and debating policy proposals. I am not at all surprised to see comments like yours pop up in this blog, but that doesn’t mean I have to like it.

          Following your logic, I am no longer qualified by your eyes to talk about Wall Street reforms because I worked on Wall Street for three years. If you and I disagree, it’s not going to be because we have different ideas based upon our own views and experiences, ideas developed in good faith. I will disagree because I’m a former insider and I want Lloyd Blankfein and John Mack to have huge mansions in the Hamptons.Report

  3. Avatar Sycophant of the Bourgeois
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    says:

    Has anyone studied the monetary effect of “free riders.” I tend to think this problem is minuscule compared to the total market. Especially if we start giving young people a better option with HSA’s.Report

  4. Avatar Michael Drew
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    says:

    “Remov[ing] the regulatory burden on individual insurance market” “solves preexisting conditions”? Um, so removing exactly which regulation(s) brings about the Utopia wherein insurance companies compete to insure sick people — and not just not rescind policies for sick people currently covered, but actually seek out currently uninsured sick people? ‘Cuz if you’re not doing that, you haven’t “solved” preexisting conditions.Report

    • Avatar David Lemire in reply to Michael Drew
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      says:

      To understand my point you have to have read Cochrane’s WSJ article or Cato paper. I think he is on to one way to solve the problems with pre-x and recession. there are probably others that free markets would findReport

      • Avatar Michael Drew in reply to David Lemire
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        says:

        Why do I need to read other pieces to find out what the basic regulation blocking the free markets from doing this now are? That seems to be what your post is about, after all. So what’s the answer?Report

        • Avatar Mark Thompson in reply to Michael Drew
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          says:

          Reading the Cochrane Cato paper, it seems that there are really quite a few regulations. The whole paper really does need to be read to be fully understood because the issues involved are so complicated. But the big ones are the various regulations and tax incentives that create our emphasis on employer-based health insurance. The portability problems that emphasis creates are the primary reason why pre-existing conditions are such a problem in our system and particularly in the individual market. So far as I can tell (and here, I’m less certain of my reading), the result is that a host of regulations have grown up for the individual market to alleviate some (but not all) of the perverse incentives created by our emphasis on employer-based insurance – things like restrictions on charging or adjusting premiums. These regulations in turn make innovations like long-term insurance very difficult to put in place. If you have a two-tier system of reinsurance and something akin to what we already think of as health insurance, then you could even see insurers competing for high-risk customers in the latter market, at least if I understand the argument correctly.

          This doesn’t do much to solve the problem of those who just can’t afford much of any type of health care or insurance, but it does seem to make some progress on costs and portability/pre-existing conditions.Report

          • Avatar Michael Drew in reply to Mark Thompson
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            says:

            I think that if it’s too complicated within the context of a blog post to say how a sweeping claim about a positive effect of a proposal will come about, then it is too complicated to say in and unhedged, uncaveated manner that it will come about in the context of the blog post. But I recognize that the author is not experienced in the medium.

            In terms of your reading of the limits on the claim, Mark, it seems to me you are saying this would help those currently insured but with pre-(ie currently) existing conditions keep their insurance or be able to make life changes that would normally cause them to lose their insurance without losing it. That’s a very good thing to accomplish. But it seems you acknowledge it would not help those currently without insurance because of a pre- (currently)-existing condition to get insured. Please correct me if I’m misreading you.

            To me this looks like one of those meritorious proposals that we have every reason to institute but that doesn’t accomplish everything we need in the policy area, and that doesn’t make a convincing argument that other efforts (ie regulation, subsidies, and perhaps mandates) would be either unnecessary for agreed-upon goals or would conflict with or prevent the proposal from having the desired effects. Which is to say I think we can have more extensive reform and eat this proposal too. But I’m open to reasonably concise explanations of why that is not so. However, “You have to read this Cato study to even know what I’m arguing to begin to judge whether I’m right” simply expects too much from those not previously inclined in the direction of the proposal. Perhaps if there was a link to the WSJ piece.Report

  5. Avatar M.Z.
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    says:

    Just a few notes:
    * ERISA is messy.
    * Most states already limit how much a premium can increase on renewal.
    * Innovation is starting to become the magic black box that we just have to identify. In 500 years, insurance still operates under the same basic principles. There is not magic black box.
    * In 30 years of playing with financial incentives, we haven’t been able to make a more rational consumer. In every other sane system, we give the people with 12 years of education and years of diagnostic and treatment experience the role of gatekeeper.
    * With co-insurance, the argument was that for every 5 dollars you saved the medical system, you would save a dollar. It hasn’t worked. HSAs (and the HRAs that are slowing going away, thank the lord) are bankrupting the providers with slow pays and no pays.
    * Yes recision is a problem. The big problem though is people cannot afford their health care. In auto insurance, people are taking $1500 deductibles to lower their premiums knowing full well they don’t have $1500 to cover a deer hit or whatever befalls them. This has been going on with health care for awhile and HSA plans just provide the intellectual justification for buying a product a person can’t afford. Everyone pretends they have coverage until they need real treatment and find they can’t afford it.Report

    • Avatar David Lemire in reply to M.Z.
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      says:

      Your last point is one that could use some additional discussion. How many folks who “can’t afford” their costs of medical care have cable TV, smoke, have a cell phone etc.? We all make choices about what we want to spend our money on. At some level of “poverty” we as a people can decide to tax our selves to provide subsidies to those too poor to pay. But let’s make it conscious and visible.Report

      • Avatar M.Z. in reply to David Lemire
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        says:

        Cable TV, on the expensive side is $1200. I think the typical plan is $450/yr. I don’t have cable. Do you want to compare this to $12,000 family premium with a $3,500 deductible with $2,000 put into an HSA?

        The precentage isn’t so important, but let’s say we can agree that no more than 12% of a person’s income should be spent on medical care. For the median family at $40,000 (might be $32,000) that translates into $5000 per year between premium and copays/deductibles/coinsurance. I don’t believe we can address the median family without speaking about some sort of subsidy. Working it the other way, $12,000 premium with half the deductible regularly exercised would translate into a family income of $100,000. Given what the industry would believe to be the best practice currently (HDHPs), we have fewer than 10% of families being able to afford it out of pocket. Yeah, the numbers change a little bit as you change the percent, but, principally, health care isn’t affordable without subsidy.Report

  6. Avatar Francis
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    says:

    Once again, if the Republican party were represented by people who were sane, this piece could be a place to start. But the tax issue alone is a killer.

    Other problems:
    Race to the b0ttom — Selling across state lines is a deal-killer. The state of California has a very strong interest in having the power to regulate corporations who sell insurance in this state. They need to be able to oversee finances, so that the insurer will pay claims when owed, and to have a regulatory (as opposed to judicial) process for handling wrongful denial of claims, among other issues.

    Scope of services — I suspect that this is mostly a b.s. issue. Just how much insurance is sold covering procedures that are not medically necessary?Report

    • Avatar David Lemire in reply to Francis
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      says:

      Would you consider separating the financial regulation of insurance companies and MCO’s (CA DOI & DOC) from mandating what benefits must be included in a policy sold in the state? Selling across state lines is in an effort to do the later. The states could still collect their premium taxes to support regulation of domestic companies.Report

  7. Avatar steve
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    says:

    Good points, but some questions. In a state as large as California, bigger than many European countries, why doesnt competition bring down prices? Do you really think that once insurance companies have to staff for people in other states, they will not face the same issues and see their prices go up? If not, what does that tell us about the insurance companies already in existence in those states? Are they overcharging?

    Do you have a source you can cite, or write another post if they let you, documenting the things that are actually mandated? I have always thought most of the regs were aimed at financial issues (reserves, etc.) rather than individual coverage. Has anyone done any analysis of what these regs actually cost? Lastly, why should financial innovation for health insurance be trusted anymore than financial innovation for mortgages? How goes your track record? (I have looked at private insurance and their year over year costs.)

    IIRC, Christian Science care used to be covered in many states (old NEJM article).

    SteveReport

  8. Avatar Henry
    Ignored
    says:

    I have been an insurance broker for almost 30 years and forsee my profession disappearing within any reform decisions, but would like to make a brief comment. At first glance, health insurance is already portable with job loss and not being eligible for COBRA under the Health Insurance Portability and Accountability Act (HIPAA). It’s a guaranteed issue individual policy and can’t be rescinded. And, yes the premiums are higher, but it’s coverage. So anyone who says otherwise is clueless. Insurance companies rescind coverage for good reason. People lie and they should lose their coverage. There are not 47 million people uninsured. There are only 8-10 million people who are “medically” uninsured and these are the people we need to help. Not the 75-80% of the uninsured who can afford coverage, but wish not to. They should be forced to buy it. Some States only have one insurer of choice, which is probably due to state legislator’s getting involved in something they no nothing about, passing mandates, etc and making competition so difficult that they leave the State. I also question the comment that States regulate renewal rates. Not in AZ they don’t. Insurance statutes say the limit is 15% for renewals, but there are loop holes in the laws and I have seen increases in excess of 100%. The idea of a set price for health insurance will definitely open the door to national health care. The guy who thought this up was smoking something. Don’t get me wrong, reform is needed. If you want to see insurance rates plumet, take the insurance companies off the stock market. Mimic the rating laws of California where an insurer can only surcharge 10% over their standard rate for groups with notable health conditions. In AZ they can surcharge 400%!! I’ll stop. My blood pressure is going up and I wouldn’t trust any ideas that originate from an insurance company representative, past or present.Report

    • Avatar Travis in reply to Henry
      Ignored
      says:

      “People lie and they should lose their coverage.”

      Except the only way people with pre-existing conditions can get coverage at all is to lie about their medical history because otherwise no insurer will cover them. Catch-22.Report

  9. Avatar Michael Drew
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    says:

    I never cease to be amazed at the way the representatives of this industry (including many legislators) communicate with and refer to their (perhaps soon to be legally captive) customer base with such contemptuousness, and using rapid-fire jargon, shorthand, and acronyms. It makes me perfectly happy to entertain the notion of the industry disappearing, as much a lie as it is to suggest that any of the reforms being contemplated now (including a Wyden-Bennett-like proposal or even Medicare for all) would result in that.Report

    • Avatar Henry GrosJean in reply to Michael Drew
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      says:

      Michael: I may seem a bit brief, but am in the trenches every day, talking to small employers who are dealing with the cost of health insurance that is consuming 20-25% of their payroll. And rates are allowed to increase on an annual basis that is two to three times that of inflation, I am not just an agent, but a consumer advocate who has had two insurance bills signed by the Governor and lobbied on my own time, without pay. I welcome more regulation on the insurance industry as their interests are based solely on their stock price. I have also published countless consumer-oriented articles that propose, among other things, to make the insurance industry more accountable. Just my 2 cents.Report

      • Avatar Michael Drew in reply to Henry GrosJean
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        says:

        I don’t mean to single you out since I don’t know anything about you. That’s why I didn’t direct my frustration anyone more specific than ‘the industry,’ or attach it to your comment as a response. But I think the frustration is broadly shared and deeply justified, and we should be clear who the low man on the totem pole is and aware of how that manifests in how we think and talk about the issue.Report

  10. Avatar David Lemire
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    says:

    The argument for intrastate sales is that a buyer in a state with lots of expensive mandates (hair transplants, acupuncture, etc.) could purchase a policy from a state without these mandates. In theory a buyer could search out the least expensive policy that had the benefits desired from among the 50 states. Poster Henry from AZ probably can talk about what kinds of mandates get loaded on through the lobbying process in state legislatures. Chiropractors are the most often referred to.
    Here’s a link to another Cato link re state mandates: http://www.ftc.gov/ogc/healthcarehearings/docs/030625miller.pdfReport

    • Avatar David Lemire in reply to David Lemire
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      says:

      Here’s an even more current link on state mandates:
      http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf. And I meant to type “interstate” in my previous post. Sorry.Report

    • Avatar Michael Drew in reply to David Lemire
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      says:

      Purchasing across state lines seems like a good idea in a lot of ways. My only fear is that companies could move to whatever state has the most favorable regulatory regime and take ownerhip of easily purchased state legislators in the absence of good federal regs (something David Frum clearly called for on last week’s Bill Moyer’s Journal while advocating for a ‘national market’ — ie interstate purchasing).

      Or am I mistaken in that state regs’ jurisdiction would apply to transactions based on residency of purchaser in addition to or instead of the business address of the insurer? I have been curious about that for awhile. Can you shed light?Report

  11. Avatar E.D. Kain
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    says:

    This is a very good post, with a lot of well-thought-out ideas. Much thanks to David for submitting the guest post. And I agree – the free market will do a better job at determining costs and getting everyone insured, though I do think that some basic regulations and government vouchers might be necessary for the sick and poor. The free market is a better planner than any central planner ever could be, but it nevertheless requires adjustment time and the inevitable cracks that any adjustment entails. Safety nets are still necessary.Report

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