Sound Off

Mark Thompson in reply to Mike Schilling says:

Nope.  The awful system under which the “customer” is divorced from the “consumer.”  Health insurers don’t need to care about whether they are doing a good job providing the services they are supposed to provide at a reasonable cost; they only need to care about whether the employers of those to whom they are providing services are happy.  Employers aren’t going to care, by and large, about much more than the portion of the health insurance costs that they are paying.  I also doubt the amount of leverage that the majority of employers have to get meaningfully better rates – really it’s only the huge behemoths that are able to do this.

Besides, if we didn’t have everything tied so closely to employment, what would be out there to prevent individuals from going to a broker on their own who would then be able to use the collective weight of all his customers to get a better rate for them all.  Ultimately, tying it to employment just adds worthless layers of additional costs to the process which have nothing to do with the provision of care, all of which ultimately get paid for by the patient – the employer has its own costs to begin with, but then has to go through its own broker, who has his own costs and need to turn a profit, and then through the insurer.   And it should go without saying that the employer’s contribution to insurance costs ultimately comes out of wages, making that contribution little more than a nominal contribution.

There is also an assumption that the individual market would be equally bad if employment and insurance were divorced.  But this is a baseless assumption that ignores the question of why the individual market generally sucks by most estimations.  It would seem that the individual market sucks in no small part because:

1. With incentives as they are, it needs to offer insurance at a total rate that is cheaper than the post-employer subsidy rate paid by an employed consumer; and/or

2.  It needs to offer insurance that the unemployed can afford, since the unemployed are going to be a primary customer base; and/or

3.  Because of the employer/insurance tie (not to mention the whole no-insurance-across-state-lines issue), the individual market is artificially small and dispersed.  Combined with (1) and (2) above, this means that as it currently exists there is precious little consumer leverage to be found by consumers banding together.

And all of this says nothing about perhaps the most pernicious effect of the employer-insurance tie: the preexisting conditions problem.

A lot has been written over the years about the massive profits of health insurance companies.  I submit that the employer-insurance tie is the single biggest reason for that.  Even to the extent an employer really does want to get the best health insurance for its employees at the lowest cost to those employees (which is questionable in most instances), that loyalty is limited to the period that the employee will be working there, which will of course most likely coincide with the period when the employee is healthiest and comparatively less likely to require lots of expensive care.  The insurer gets to charge based on the assumption, more or less, that you’re going to have their insurance until you’re eligible for Medicare.  But in reality, you probably won’t, and there’s a decent chance that when you most need the insurance that you’ve paid for your whole life, you’re not going to have it anymore.

But if we got rid of that employer-insurance tie, then individuals would have the leverage to pool together on their own to negotiate the best rates (or even have a professional negotiate the best rates on their behalf!) and/or the best policies.  They’d be able to spread their insurance costs out more evenly and predictably over time.  If the insurance company turned out to give them (not their employer, them!) crappy service, they’d have the freedom and ability to switch insurers, which provides one hell of an incentive for the insurers to provide less crappy service.   And the only way the preexisting conditions problem would come up would be when someone became sufficiently dissatisfied with their insurer to switch – in effect, their problem would be that they were unable to get less crappy insurance because of their preexisting condition, which is a far sight better problem than being unable to get coverage at all.

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