A not-so-funny thing happened when our employer, Public Citizen, began to investigate whether to renew its existing health insurance policies or shift to other carriers. We asked our insurance broker to obtain bids from our current plans (an HMO and Blue Cross) and from others that might be interested in a group with about 90 employees.
What disturbed us weren't so much the prices -- we're used to annual sticker shock -- but the questionnaires that we received from several of the new bidders. They wanted to know more than how many employees we had, how many dependents, and of what ages; they required detailed personal medical histories on everyone who would be covered.
Here's the opening salvo of one questionnaire: "Please answer the following questions to the best of your knowledge. How many of your employees or dependents are pregnant? Give due dates and explain any complications." The next item asks how many covered persons are "disabled," without distinguishing which of the term's several legal and medical definitions it means. It goes on to ask whether anyone has been hospitalized within the past 12 months "or expects to be hospitalized in the next 12 months." Unsurprisingly for a group our size, the answer is yes; so we are then asked to "state reason(s) for hospitalization," with several lines left to fill in the details.
Those questions are intrusive enough, but it gets worse. Question 4 asks the employer to go back 36 months and find out whether anyone has been diagnosed with any of 14 categories of ailments. Along with such diseases as cancer and diabetes, the insurance company wants to know about highly personal matters such as alcohol/drug abuse, infertility, immune system disorders (such as AIDS), and any psychological diseases or disorders. Again, these are not just yes or no questions; employers are asked to provide information about when each diagnosis was made, what the prognosis is and what treatment the patient is receiving. And to be sure that nothing has been missed, the last question asks whether anyone has "incurred medical claims in excess of $5,000 over the last 12 months" and requires details. It apparently doesn't matter whether those claims were ever paid.
For the Public Citizen officer who would have to sign this form, answering most of the questions would be easy: "I have no idea, because only our insurance carriers have all that data, and I don't think they would give it to us even if we asked." But more important from our perspective, we don't think that any employer should have access to that kind of highly private information because it could be used, legally or not, to the disadvantage of the employee who is forced to provide it.
Therefore, we at Public Citizen decided as a matter of policy that, even if we could get the information, we would not ask for it since it is really none of our business, even though it could directly affect the cost of our health insurance program, which is our business. Indeed, as we subsequently learned, although some carriers did not insist that we fill out this kind of form before quoting us a price, almost all of them had a policy such as that reflected in the form's last line: "Rates contingent upon review and acceptance of medical information."
In the end, we kept the same carriers, albeit with a few changes and a price increase that was less than we had originally been told. In all likelihood, the small increase was because our carriers already had the answers to the questions on the form, as well as much more information about our employees and their dependents, from which they were able to decide how likely they were to make a profit at a given level of premiums. We felt good because we had not cooperated with the massive invasions of privacy that these forms demanded, but that was only because our cooperation was not needed.
The whole episode was particularly distressing because Public Citizen is a well-known consumer advocacy organization that might be expected to resist this kind of personal interrogation. Surely insurance companies are at least as invasive when dealing with other employers, who may be less concerned about protecting the medical records of their employees.
This episode clearly illustrates how the business of medical insurance in America works today. The theory behind group health insurance is that it is supposed to spread risks and costs so that the healthy subsidize the sick. That is a fair trade-off since most of us at one time or another will need some sort of expensive medical treatment. The use of these forms, however, makes clear that insurance companies are doing their best not to sell insurance, but to sell prepaid services to people who are unlikely to need much medical treatment or, at worst, who will only need fairly predictable and inexpensive services. As a result, these companies are no longer in the business of spreading risk, but of avoiding risk.
If this trend continues, it will become even more difficult for anyone to obtain reasonably priced, moderately comprehensive health coverage. Even if insurance companies were prohibited from asking for such private information before they signed up a group, there is nothing to stop them from "dumping" a group afterward if its medical costs go too high. Indeed, health insurers already are dumping patients if, after too many of them actually need medical care, they are deemed "unprofitable" as a group. That's what happened to 100,000 people in North Carolina, South Carolina and Georgia who subscribed to Mid-South Health Plan, a subsidiary of Trigon, a large managed-care company. Trigon announced in October 1999 that, because of "an unexpected increase in medical costs," it would close Mid-South. Trigon says it gave its former customers six months to find other coverage; but for any of those whose illnesses made them unprofitable in the first place, this was probably quite difficult.
As the old saying goes, "there ought to be a law," but passing one that will work is easier said than done. Congress has already tried to deal with a narrow aspect of the problem of refusing insurance to people with preexisting conditions, but the experiment has been largely unsuccessful. In 1996, in response to complaints that insurance companies were refusing to insure people who had potentially expensive conditions (such as AIDS, but also including pregnancy), Congress enacted a law that prevents outright discrimination by providers of group health insurance. The law also forbids charging higher rates for the sick than for the healthy. But the law expressly allows the insurer to raise the rates of the group as a whole. This doesn't end the discrimination; it simply shifts the cost to a somewhat larger group -- but not the entire community, let alone the entire population of a state or region. And for individuals who are not part of a group, the law assures that they can purchase medical insurance, but gives them no protection against having to pay outrageous amounts for it.
Another option for Congress would be to establish a whole regime to control health care prices -- which would include new rules and regulations for insurance companies, hospitals, doctors, companies that sell products and services to them. If it did, of course, there would have to be a significant, costly government enforcement and regulatory program to see that companies complied, not to mention the internal costs for each company to be sure that it didn't violate these inevitably complex laws. If such a system were put in place, we could pretend that the free market was still at work, but it would be unlike any free market ever seen in this country. Moreover, there is no guarantee that the new laws would do anything more than eliminate the very worst abuses, while insurance companies would still find a way to serve mainly the well and the well-off.
Of course, if we had a system under which there was no shopping around for insurance coverage, and in which the health care providers treated whoever came in the door and were paid accordingly, the problem of group dumping would disappear.
There is such a system, found in almost all developed countries in one form or another. It's called national health insurance. But the gods of conventional wisdom in this country have removed it from the list of options for discussion. However, if you believe that group dumping -- and other similar flaws in our current system -- should not be allowed to continue, don't be so quick to dismiss a single-payer system, like Medicare, unless you have something else that will do the job as well.
Alan Morrison is director of the Public Citizen Litigation Group. Sidney Wolfe is director of the Public Citizen Health Research Group.
© 2001 The Washington Post Company