The Market Made Me Do It: Health Insurance That Disappears When You Need It

Health Net, one of California's largest health insurers, saved $35.5 million in medical expenditures for people that needed life-saving care. They did it the easy way - they just stopped paying; ejecting the sick from their health plans.

Health Net says that they are just catching fraud. The law allows insurers to deny covering people with pre-existing conditions and Health Net claims that those they cut off - in some cases cancer patients in the middle of critical treatment - are simply those that failed to disclose their conditions when enrolling in their system. It almost makes you want to give them the benefit of the doubt, since of course it's really the competitive system they have to live within. It's not their fault that the rules and laws allow discrimination and segregation of the sick. You know "the market made me do it."

Never mind that the health insurance industry has consistently fought to allow the pre-existing condition exclusion in the law. The insurers are well heeled and potent political players and have so-far succeeded. For example, California health insurers spent more than $1 million in lobbying in just the first 90 days of 2004. Health Net alone spent $2.7 million in Federal campaign contributions and Federal lobbying expenses between 1997 and 2004.

On one level, the insurers are right. The current system, regardless of their role in keeping it that way, allows for (and may even depend on) such criminal denial of care to those that need it most. It's straight-up American-style health rationing -- you don't get care if you can't afford to pay or if you're too sick and expensive to cover. It makes you wonder just how many more than the 47 million uninsured that currently have insurance are really underinsured (i.e. not covered for what they need most) or provisionally insured (i.e. insured until they need it.)

But the benefit of the doubt evaporates and becomes outraged blame with the discovery that Health Net set cancellation goals and was giving bonuses to staff based on the number of people whose policies were revoked. One Health Net analyst was given more than $20,000 in bonuses by revoking over 1600 insurance policies and saving millions for the insurer. Never mind the irony of a health care company that rewards the denial of needed medical services. That's the market working in health care -sell insurance plans and collect premiums until the policy holder gets cancer, has a heart attack, or any other expensive disease.

American economic ideology today is dominated by new kinds of religious fundamentalists. Not those that believe in a supreme being, but those that profess religious, almost fanatical, belief in the unregulated "market" as the ultimate provider of all things good. "Supply and demand" is the supreme directive. Profitability and stock prices are the alter that determines virtue or sin.

And they promote so-called "market mechanisms" as the only way to ensure high quality outcomes. "Market mechanism" is the benign-sounding term that implies that only financial gain and competition produce the outcomes we want. In this case, 'market mechanism' is just another term for the perverse financial incentives Health Net used to make sure their "cancellation department" was squeezing every unprofitable policy holder out of the system. And, in pure market terms the sick are just an unrecoverable cost for which there are only two responses - heal the patient or eject the patient. The "Market" says heal if it's cheap enough and eject if cuts into the bottom line.

This isn't an indictment of all markets - they can bring new-fangled cell phones to consumers, give people choices about what kinds of clothing to buy and helps encourage producers to innovate and continually improve service and sometimes keep prices in check.

There are simply areas in which the market stunningly fails to live up to the pronouncements of the "market fundamentalists." The unregulated market is simply unable to provide public goods that require universal, equal access.

Health care presents the classic case where the market fails and where we need other mechanisms to meet our public needs. America's market based system of health care relies on people to have enough money (individually or through their job) to pay for insurance. Only Medicare, a primarily tax-financed system takes ability to pay out of the equation and gives every American over 65 equal access to medical care. The result for those under 65 years of age: 47 million uninsured, millions more underinsured and if Health Net's revocation bonuses become the norm, then millions more with health care that disappears when you need it.

Donald Cohen is the Executive Director of the Center on Policy Initiatives (www.onlinecpi.org) a San Diego-based research and policy center. Cohen has over 25 years of experience in campaigns and organizations dedicated to economic justice, healthcare reform, education reform, environmental protection, and international human rights.