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Insurance Industry Already Finding Ways to Game New System
The insurance industry's attempt to weasel out of one of the few provisions of the new health care reform law that took effect immediately is a harbinger of what's to come.
"This is what you're going to see as each element in this plan comes up for implementation. This insurance industry is going to give up nothing." -- Dr. Marcia Angell, a senior lecturer at Harvard University and former editor of The New England Journal of Medicine. In this case, the companies that were balking at covering sick children quickly relented under media, congressional and
White House pressure.
But far from being satisfied with a windfall of new customers and massive government subsidies, the nation's insurance companies appear to already be busy devising ways to game the new system. Their goal, as ever: Maximizing profits by paying out as little on actual health care as possible.
And next time they start to weasel, Congress and the White House -- and the media -- may not be paying attention anymore.
"This is what you're going to see as each element in this plan comes up for implementation," said Marcia Angell, a former editor of The New England Journal of Medicine who now teaches at Harvard Medical School. "This insurance industry is going to give up nothing."
In the short run, companies are expected to keep doing what they've been doing, which means, among other things, jacking up their rates. "There's nothing to stop them from raising their premiums, and that's what they're going to do," said Angell, a supporter of "single-payer" health insurance.
The new law's ban on discriminating against adults with preexisting conditions doesn't kick in until 2014.
"In the meantime, they can continue to cherry pick the healthiest customers, while foisting the sick into the new high-risk pool," said Wendell Potter, a former senior health insurance executive at CIGNA who went rogue and became a consumer advocate.
That's only the beginning, though.
"They also will continue to try to shift more and more of the cost of health care from them to the people that are enrolled in their plans," Potter said. That involves moving people currently in managed care, with its relatively modest co-pays, "out of those plans and into high-deductible plans that make people pay thousands of dollars before the company will pay a dime," Potter said.
"Managed care was last decade's silver bullet," he told HuffPost. "The new silver bullet for the insurance industry is the high-deductible plan. More and more people will not get a dime from their insurance companies."
And for people who can't afford to pay the full deductible, that's a lot like not having insurance at all.
What else will the industry do? "The companies will certainly be tightening up internal practices to avoid paying claims," Potter said. "One way to do that is to make it more burdensome on providers and make it more difficult for providers to get the reimbursements that they're due. They already are difficult to work with for a lot of providers."
The more burdensome the paperwork, the more likely a provider is to make a mistake. "And if they make a mistake, the claim is kicked out," Potter said.
In the longer run, companies will still be in a race for more profits. The trick will be coming up with ingenious new ways to avoid covering the sick.
One particularly ripe area of speculation concerns how aggressively and imaginatively the insurance companies will market themselves to attract profitable healthy clients and avoid the sick and the old.
"You can do little things with marketing materials," said John Gorman, chief executive officer of Gorman Health Group, a Washington, D.C.-based managed care consulting firm. "How you set up your Web site" could make a difference, he said; so could "where you put certain drugs on your formulary" -- i.e. which drugs cost how much.
"And the plans will play those games," Gorman said. "You're going to see a lot of marketing materials with rocket bodies on the cover."
Potter agrees: "They'll certainly be offering programs that will appeal to people that are younger and more likely or able to exercise and otherwise lead healthier lifestyles."
Henry Aaron, a senior fellow at the Brookings Institution think tank, told HuffPost he recently overheard a major insurance company executive joking about the prospect of being forced to sell plans to the elderly. "We'll sponsor dances and make our pitch at 11 p.m.," Aaron recalled the executive saying. Another possibility Aaron mentioned, only half joking: putting the company's offices on the second floor -- with no elevator.
But Gorman also noted that "at the end of the day, there really isn't any place to run and hide from these patients anymore," and that companies need to start preparing for an influx of clients who were "pre-existed" or medically underwritten out of the current system: "Very sick people with health and medical needs that have been unaddressed for years."
The new law, Gorman pointed out, does include some modest efforts at "risk adjustment" to level the playing field. The government will apply some sort of formula so that "based on diagnostic codes, the government will either tack on or take away a little money" from insurers, depending on how sick or healthy their clients are.
There is one provision in the new law that could limit insurance company revenue: It concerns the "medical loss ratio". (The industry considers the amount of each premium dollar spent on actual medical care to be a "loss".)
In 1993, 95 cents of the average premium dollar went to health care, Potter said. Now the average is closer to 80 cents, and as low as 75 cents for some major companies. The rest of the money goes to overhead -- and profit.
The new law requires companies to maintain a medical loss ratio of at least 80 to 85 percent.
But there are still ways to game even that limit. One is, paradoxically, to spend more on health care, either by offering more services or driving up costs. Insurance companies typically want to spend less on this stuff, but if the 80 percent slice gets bigger, so can the 20 percent slice. Another way, of course, is to label more and more company expenses as health care.
And Angell told HuffPost that come 2014, despite no longer being allowed to raise rates or deny coverage to adults explicitly based on preexisting conditions, insurance companies will still find a way to discriminate.
One provision she expects them to exploit is the one allowing companies to charge as much as 50 percent more for people who engage in unhealthy behaviors. "With anyone who's chronically ill, you can always find an unhealthy behavior," she said.
"So that's the new preexisting condition."
Angell also pointed out that there's been very little coverage of the fact that insurance companies will still be allowed to charge older people (over age 55) much more than younger people. Three times as much, to be precise.
As a result, people between ages 55 and 65 (when Medicare kicks in) who don't have enough income to pay high premiums will be left with two options: Not buying insurance and being hit with a fine; or paying premiums they can't afford.
"These people are not going to be the annoyance they might be now, because either they're going to pay through the nose -- or they're not going to buy insurance," Angell said.
"This is a bonanza. They get captive customers. They get to charge whatever they want."
The industry is also mobilizing on other fronts.
"The insurance companies have dozens if not hundreds of lawyers and lobbyists scouring this legislation for any possible loopholes they can take advantage of," Potter said. "They absolutely will look for any way they can to circumvent any part of the legislation that they think might make them spend more for medical care than they want to spend," he said.
"One thing in particular is they'll be trying to manipulate how regulations are written." The intent of the regulations is set forth in the law, but not spelled out; that job has been left to the Health and Human Services Department (HHS) and the National Association of Insurance Commissioners (NAIC), Potter said. "The industry will spend an enormous amount of money to try to influence how those regulations are written."
Potter recently attended a NAIC conference. There are 50-plus insurance commissioners. Potter was there as one of 29 consumer representatives. "There were 1700 representatives of the health insurance industry there," Potter said. "They converge on these meetings just as lobbyists converge on Capitol Hill."
And each state legislature has to implement the regulations individually, including establishing their own regulations for the new health-insurance exchanges, where people not covered through their employers would be able to comparison shop for insurance at competitive rates.
"A key question is how the 50 states are going to handle the implementation of the health insurance exchanges, which they are tasked to do," said Henry Aaron of Brookings. "Whether they will and what happens if they don't is, I think, going to be a very interesting thing to see."
Companies won't just be selling insurance on those regulated exchanges, either. And they may try to game that distinction as well.
"I think the worst-case scenario is they keep cheap customers in plans offered outside the exchanges, and leave the exchanges with high-cost customers, making it look like the exchanges are inefficient," Aaron said.
A lot of these dynamics would have been completely different if people had a so-called public option: A government-run insurance plan without the same toxic incentive structure. Then consumers would have had an alternative when private industry rates shoot up and services decline. But there is no such option in the new law.
And without it, the law's goal of reforming the insurance market is much more of a challenge.
"It's asking this industry not to do what it's set up to do," Angell said. "What it's set up to do is to profit."
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63 Comments so far
Show AllIf I buy an insurance company stock (or stock in any other kind of company), that company is legally obligated to place my interest as a stockholder above the interests of clients or customers.
This is not my opinion, this is the law.
While my Obamabot co-workers continue to insist that Obamacare is a baby step forward toward real health care reform, Obamacare is a huge leap backwards, giving insurance companies billions in additional revenue with which they will hire more lobbyists and make more "campaign contributions" to assure that US health care continues to leap backwards.
"By pursuing his own interest, [the individual] frequently promotes that of the society more effectually than when he intends to promote it."
Provide some peer-reviewed expermental or observational sociolo-economic research that supports this statement, please. Did Mr. Smith himself ever provide any substantiation for this remark beyond witty anecdotes about butchers and bakers?
I remain amazed at how the foundations of the modern "science" of free-market econmics consist of anecdotal quips that we are supposed to simply accept as axiomatic.
Marx didn't do a lot rigorous statistical research either, but at least his theories were based on observable properties of actual societies.
No surprise. It's business as usual for the corrupt corporates and all enablers of them. Did we expect them to suddenly acknowledge the need for economic and social justice?
While the IRS will fine you for not buying private insurance per the Obamacare bill, the Obamacare bill does not charge any federal agency with enforcing that the insurance companies deliver. Instead, each cash-strapped state will pony up money to hire lawyers to fight the insurance companies. The insurance companies wrote the Obamacare bill so we know who will win those fights.
How can that be a shocker when this scam already gives them 100% freedom to do as they please with no strict rules or penalties to control their misbehavior? Even the German health care system would put a strict limit on corporate misbehavior !
6:00 PM, March 30, 2010: Listening to NPR during my bus ride home from work, I hear that Obama signed what they called the last part of the Obamacare bill.
6:30 PM, March 30, 2010: I open my mail box and find a letter from Aetna officially notifying me that my primary care physician is no longer a preferred provider.
7:00 PM, March 30, 2010: I e-mail the 13 AGs who are testing the constitutionality of the Obamacare individual mandate and express my support for their efforts.
"In the longer run, companies will still be in a race for more profits. The trick will be coming up with ingenious new ways to avoid covering the sick."
We are dependant for our health care coverage on an industry whose business is to NOT provide health care coverage. Are we crazy!!!
Single-payer is the only sane choice!
I'm not usually an advocate for creative destruction, but in this case it's time to end private insurance and let them learn a new trade! Maybe something in the medical profession so they could actually HELP all those who would be able to seek medical attention under univeral health care.
It's very simple: Our entire health system is there to make maximum profits for the least expense. Health care has absolutely nothing to do with it. It's just good old Reagan bottom line economics. If that's crazy, then commit all those CEO's going to the bank. If you want something else, try a country that isn't ruled by oligarchs.
It's easy to game a system if you write the rules of the game.
exactly Buck, you beat me to it. The industry wrote much of the legislation.
And Max Baucus thanked Liz Fowler, former VP of Wellpoint, and health-insurance lobbyist extraordinare extensively for all her hard work on making this bill possible. If you haven't seen that video yet it's probably still on the front page of FDL, and it's on YouTube, also. There was no shame, only pride on a job well-done.
"There was no shame, only pride on a job well-done."
Apparently there's no shame in being a pimp for neoliberals like FDL either.
In that respect, you and Max are two peas in a pod.
Is that the same FireDogLake that ran a number of articles against this catastrophe?
"...against this catastrophe?"
Depends on what you consider "against."
DK was for the PO and "against" Obama'a plan. Right up until he voted for it.
Suffice to say, if you're sleaze enough for the PO--and many if not all at FDL are--then you're ready for Obama's plan.
Just ask DK.
I'm shocked, I tell you, SHOCKED... who, besides about half the electorate, could have guessed that a bunch of greedballs would go on acting like a bunch of greedballs, given half a chance?
When the insurance companies become so obvious in showing their true colors, so that even the teabaggers can see it, perhaps then a REAL movement will form to bring about a Single Payer system. Until then....
Finding ways to game the "new" system shouldn't be too difficult. Most of it isn't really new except that their skimming scams that divert monies from actual health care will now operate under a legislative endorsement and compulsory mandate that they wrote.
That's why the health insurance companies must be destroyed. They add nothing of value to health care. They only take money out of the system. Pure and simple.
Amen!
Agreed - They divert health care dollars for posh headquarters, executive salaries, paper pushers, lobbying and political contributions and all that jazz. They do not do contribute anything to the quality of medical care.
Each company has its own ever shifting sets of rules and reimbursement schemes. There is no uniformity or stability. Thus they divert money from patient care to their Byzantine, burdensome billing and pre-approval bureaucracy that requires doctors and hospitals to hire legions of billers, IT staff and insurance experts, while shrinking direct medical staff and services.
The insurance companies charge what they want, reimburse what they want, deny what they want, exclude what they want. Based on business considerations, their operatives take much initiative out of the hands of people who actually bothered to graduate from medical school.
When you think about it, the health insurance industry has become a rather bizarre looking and harmful parasitic growth. Now we have anointed this growth to be the foundation of our "health care system". We will all have to become Princess Leia and pay tribute to this voracious tribe of Jabba the Hutts, this laughable excuse for a national health system.
The Medicare-For-All route is so simple and sensible - not perfect but a huge improvement over private insurance.
Joe
One more person not buying this garbage health "care" insurance.
I'm sure that Barack will make all of this go away.
(Ha-ha, hee-hee!)
Hello Ha-ha, hee-hee!
Do you have medical insurance coverage?
Do you have up to 10% of your income to spare to buy a plan that isn't worth the paper it's written on? Got extra cash on top of that? My understanding it that these plans are estimated to cover only 70% of the costs of certain procedures.
The right and left should be giving each other a legislative "reach around" for the "historic health care insurance reform" legislation recently enacted--it is truly bi-partisan.
The neo-conservatives played their part in solidifying the reform agenda by driving through "high deductible insurance policies" under the guise of medical insurance savings accounts. The poor right-wing folks who voted for these politicians probably could not understand that if you could afford to save enough to afford one of these inane policies you would in all probably have employer health subsidized health care and not need such an account.
Now the neo-liberals have done their part in the agenda, securing compulsory insurance without meaningful benefit under the guise of breaking a hundred year battle over the right to medical care. As a result, while public costs will go down slightly or remain the same, there will be a monumental shift in costs to those most unable to afford it today. In the not too distant future, middle class and poorer Americans will be completely unable to afford any insurance with any actual benefit. Instead, they will have two dire choices: choose a high-deductible health care insurance policy that pays little if anything before the buyer is broke enough to be eligible for Medicaid; or, pay new IRS fines simply because they can't even afford the mandatory "cover-nothing" policies.
I am sure the elected representatives in the US Congress have pleased their corporate shareholders enormously, though I doubt their vote-casting constituents will feel similarly well or assured. This "historic legislation" will no doubt increase the already historically high medical-related US bankruptcy and foreclosure rates significantly. The ongoing "health insurance" exacerbated financial disaster in the US will of course serve Wall Street and the banks well, increasingly giving them the opportunity to double dip on outrageous, predatory medical financing practices and accelerated acquisition of prime housing stock at fire-sale prices.
The American Insurance Industry is the single strongest advocate for Universal Single Payer Healthcare that there is. I'll vote for the political party that brings Medicare for All to the American People.
I'm not sure what you're smoking but maybe you aught to cut back a smidge. True single payer wipes out the private medical insurance industry. The government becomes the insurer. Which would be a good thing--except not for the American insurance industry.
I think he meant because it's so awful and corrupt.
What a racket. If they could just rake in the money without ever having to pay out anything, they would certainly do it. And so they are. It's all just free money to them.
Obama has legalized stealing and isn't about to do anything about it. He's too busy working out how to give away the SS program to Wall Street. They like free money too.
How does it feel to have been sold out by BOTH political parties?
The same as it felt fifty years ago.
"I'm not usually an advocate for creative destruction, but in this case it's time to end private insurance and let them learn a new trade!"
Absolutely on the mark!
Why anybody has any sympathy for losses of jobs in a parasitic industry that does nothing but skim money away from sick and dying people is beyond reason.
This is a no brainer for single payer. I have Medicare now and in comparison to private insurance...well, there is no comparison. When I had private health insurance, my monthly premiums were $550/month and they *NEVER* paid a claim. They would send forms for additional information, claim the forms were not submitted or lost, all kinds of bullshit to deny a claim. With Medicare, my premiums are a little over $100/month and I have never had a claim rejected or questioned. The payment percentage is the same as with private insurance I pay 20% Medicare pays 80%. My routine physician visits are less than half of what they were with private insurance. The only bad part of Medicare is the part Bu$h came up with, the industry friendly part.
We need to immediately implement single payer and simply eliminate the for prpofit health skimming industry. The people who lose their jobs can get by just like those who have lost legitimate jobs...extend their unemployment benefits until they either find a wothwhile job or retrain for another line of work in a productive field that actually contributes to society rather than sucking at it's teat. As for the CEO's and upper management, they don't need to retrain to learn how to make license plates.
The insurance industries should be best thought of as the Brer Rabbits, the politicians throwing us to those corporate wolves the Brer Bears, and we the voters the laughable Brer Foxes !
True. All this talk about covering more people and eliminating pre-existing condition restrictions blah blah blah and hardly a word about the fact that the insurance companies often don't really even cover the people who are insured. I've had them deny payments for procedures they APPROVED. Nothing will significantly improve until private insurance is removed from the healthcare system.
Gee, why didn't the sick children read the 2,000+-page bill and hire lawyers so that they could defend themselves?
Corporate trial lawyers are too expensive?
No, they just don't take small cases.
Quis custodiet ipsos custodes? (Who will guard the guardians, watch the watchers, etc?)
The definition of a child is generally a small person.
Funny, i never heard of Prof. Angell (or all you whiners) when the bill was being discussed all of 14 months or more.
It's too late now.
The cows are all out of the barn.
The next thing to do is yell louder harder and with more, much more, anger and alacrity. something we should've done when Nancy Nada took universal single-payer "OFF THE TABLE"
that was their first move.
laughing up their sleeves at us is their latest.
Oh, c'mon - a lot of us whiners have been here the whole 14 months taking a shot at anything and everything! Right guys? Guys? Guuuyyys....
BTW, Doctor Angell has been out there the whole time. You just haven't been paying attention.
Back when the bill started, it may not have been as great as single payer but it had a public option and a lot of practical and yet liberal and progressive points. Once they got to work on it, they made a mess of it and expanded it for the worse. Instead of having a somewhat progressive legislation, we have no public option and but the insurance companies have everything at their disposal. I read through the archives on this site and Alternet for months and there were hundreds and thousands of complaints about members of Congress refusing to listen. I was shocked to even see all that had gone on in Washington without my being aware of it prior to being introduced here. Awareness doesn't come very easily and even the supposedly liberal or progressive sites like Huffington Post, MSNBC, Daily Kos, and other MSM type sites don't raise the kind of awareness that sites like CD and Alternet raise along with Bill Moyers.
The public option was only in there to keep liberals and progressives on board. There was never any intention of including it in the final bill. The NYT revealed two weeks ago that Obama had made that commitment to the insurance industry. He was lying every time he spoke favorably of the public option.
I would have never been able to tell that Obama was actually opposed to it until the day he conceded to letting Congress drop it. At this point, with the bill so badly modified, I wouldn't support the bill even if the public option were put back in subsequently. The way Obama folded all through the picture to the point of finally throwing us to the insurance wolves would have been like LBJ folding on civil rights fearing that he would lose the south if he were to run for reelection in 1968. Already, Obama's PR people are cooking up ways to try tell us that Obama is open to trying to give us the public option which I find laughable. If he wouldn't include where it counted the most, then what's the guarantee he'll really try in subsequent "reforms"? I would rather he just not do anymore damage at this point by doing nothing since I can't trust him to do anything progressive for change to believe in.
The last paragraph is a perfect example of how those on the fake left, like Froomkin, never learn:
"A lot of these dynamics would have been completely different if people had a so-called public option: A government-run insurance plan without the same toxic incentive structure. Then consumers would have had an alternative when private industry rates shoot up and services decline. But there is no such option in the new law."
It's been the corrupting influence of ideas like the market easy fix manifested in Clinton's plan 16 years ago and the PO today that has lead to where we are now.
Fuck the fake left. Fight for singlepayer.
We might not get singlepayer either--but at least we'll be headed in the right direction instead of pretending.
Professor Angell and all us whiners have been speaking loudly and clearly since the beginning. We did object with all our might when single payer was declared off the table, some spending time in jail for doing so. You didn't hear us only because groups like MoveOn helped the White House et al turn off our microphones. We must continue to state the truth about what just happened, what the bill has done, and what real reform looks like. We must hold groups like MoveOn accountable, and form truly progressive alternatives. Turning on the microphones, and not being silent about silencing is the central issue of our day.
Call it socialism if you so choose, but the only thing that will bring true health care reform is a sinle Payer System.n fact, if Congress wants to make a real contribution of a decent health care system they should give every citizen a health care system exactly like the one they have for which we are paying. Just think, for just a little bit more, we not only would be insured for life, but the "pool" would be expanded to such a degree that the premiums would DECREASE quite a bit!
The way the Health Insurance industry is raising the rates this year tells me that the only thing for which they use the actuarial tables is tolearn how far to raise the rates so that they are guaranteed profits of 50% plus.
One question I've never heard asked: who gets to keep the $$$'s generated by the fine, the guvmint or the insurance leeches, or is it split even-steven between them?
Independently, Dr. Marcia Angell and Mr. Wendell Potter have gotten so angry and frustrated that they decide to MOVE TO CANADA. Picking a province out of a hat, they both chance to select the province of Manitoba. And so in the fullness of time, two large moving vans cross the border and proceed to the city of Winnipeg. Are you following this? The vans unload their cargo at two lovely homes, and these semi-ex-patriots discover they are new neighbors. Neat. Whooda thunk?
Within days, Wendell and Marcia proceed to the government offices which can register them for the province's universal health care system - which is not a single payer system. And due to their medical and insurance backgrounds, neither one is seriously surprised by the coverage rules et cetera. They each go back home, shaking their heads that Americans are too foolish to establish a comparable Health Care system.
But - - Wendell and Marcia are actually in for an INCREDIBLE SURPRISE. Each of them owns two cars. Obviously, these cars need to be registered with the province, WRT titles and the ordinary matter of license plates. This procedure is familiar to them. One of their neighbors comes out of his house, so they ask him to recommend an automobile insurance company. The neighbor laughs, and Marcia and Wendell do not know why this is funny. The neighbor explains that NO AUTO INSURANCE COMPANIES OPERATE IN MANITOBA. The only purveyor of auto insurance is the Province of Manitoba. It is a SINGLE PAYER SYSTEM. Premiums are handled efficiently, and so are all damage claims. Collision dealers know better than to pad expenses - because they would not be milking an insurance company, they would be cheating the government which has the authority and power to throw them in jail.
THIS is an incredible surprise to Marcia and Wendell, who chanced to pick the only Canadian province with the sense to operate their own auto insurance system.
Trylon
What sort of universal health care system does Manitoba have?
Once again, what is the point of one more article, and the endless comments about how bad this bill is, how bad insurance companies are, and how good USP would be? Is anyone learning anything new? It is all as useless as Hollywood gossip.
The discussion needs to be about organizing and acting. This means physically getting up from your comfortable computer chair and attending meetings, working on comittees, taking buses to rallys at your state capitol, and visiting your your state representatives.
If you are in eastern PA contact Health Care for All Pennsylvania
www.healthcare4allpa.org
If you are in western PA contact the Western Pennsylvania Coaliton for Single Payer Healthcare
www.wpasinglepayer.org
I'm sure lots of other states have similar organizations.
Nationally, the PDA (Progressive Democrats of America - yes, I know) continues to fight for single payer.
what the RELATIVELY Conservative French President Nicolas Sarkozy told the American Audience in a speech in Columbia University yesterday:
"TO EUROPEANS - when we watch the health-care debate in america -- we are simply in DISBELIEF....these are things we already decided on and solved half a century ago".