Is there any reason (other than insurance company lobbying, of course) not to have a federal law barring insurance companies, across the board, from refusing to cover preexisting conditions? If everyone had to do it, then all insurance companies would presumably be on the same footing; they couldn’t “cherry-pick” healthy clients. Think of it as an expended anti-discrimination provision.
How are Insurance companies going to be survive if they can’t screen out guaranteed high cost clients? Not that it’s nice of them to do so, I just want to know how a for profit insurance company is going to cover expensive, high risk clients and stay in business without charging these clients essentially unaffordable fees or raising everyone’s rates to cover these costs.
**astro, ** not all people with preexisting conditions are guaranteed high-cost clients, and sometimes treating the preexisting condition can avoid much more expensive treatment for complications or exacerbation of other conditions.
Example: I am mildly asthmatic, and my asthma is sometimes triggered by allergies. Generally, I’m pretty cheap to treat: I’ve never had an attack bad enough to require an ER visit, and only a couple severe enough to require an immediate doctor visit. As long as I take my allergy meds (about $60 or so a month insurance company cost at their negotiated drug prices, plus my $25 co-pay), I rarely need more than one puff on my inhaler every few weeks. Inhalers are cheap; the generic albuterol inhaler runs less than $10 full proce, and does the job just fine.
If my allergies are not kept under control, though, I am prone to bronchitis and sinus infections, which are much more expensive to treat. The cheap antibiotics don’t help my sinus infections; I generally end up needing multiple rounds of treatment with one of the new ones, at over $100 per prescription, plus at least a couple of doctor visits, sometimes with X-rays to rule out pneumonia and a stint on a nebulizer to I can breathe well enough not to end up in the ER, plus steroids. None of that is cheap, and if my lungs were worse, could easily result in a hospital stay, which definitely ain’t cheap.
Not all preexisting conditions are as expensive to treat as full-blown AIDS or end-stage cancer. Plus what do you think happens to people with preexisting conditions that ARE that bad? Most people with full-blown AIDS can’t afford treatment out of pocket, so it ends up being paid for by Medicaid, and somes out of taxpayer funds anyway.
Suppose you went to get home insurance right after your house had been ravaged by fire. Would you expect the insurance company to foot the bill?
I think the real solution is to disconnect medical insurance from your place of employment so that it becomes portable. You don’t change car insurors when you change jobs, so why change medical insurance? Get med insurance early on and keep it throughout your life and this becomes much less of an issue.
John, I think a better analogy would be “suppose you bought a lovely Victorian frame house, and you discover you have termites. You treat the termite problem, and repair all damage found at the time. But several years down the road, you discover that the front staircase has been weakened, and the cause of the damage is undetermined.”
Damn straight I would expect my insurance company to pay! Besides, it’s sure cheaper for them to pay now than to wait until there is major structural damage to the house.
I agree with you about disconnecting medical coverage from employment, though. Reality is that some people are not employed, and that’s a fact of any economy. Reality is that many employers, even if they offer employee health care coverage, don’t offer dependent coverage, or at least not at subsidized rates. There must be a better way.
Can you think of any reason why anyone should be legally required to take on financial obligations they do not wish to?
The point you miss is that the costs to the insurance companies will go up. When the costs go up, premiums go up. Can you think of any reason why the federal government should force all of us to pay more for insurance?
You miss the point of “insurance.” Health insurance works by a large pool of persons paying into common pot for medical care, whether they actually need the care at the time or not. You pay less than the actual cost of the care that you may need, and in return you make those payments even if you didn’t need any care that year.
If you know you need the care, then you are no longer playing by the rules. You no longer have the downside risk of paying for treatment you may not need - you need the treatment. So you get discounted medical care, subsidized by your fellow insured. Why should they subsidize your treatment, when they still have to incur the downside risk?
You can think of it that way, but you would be wrong.
Actually I’ve talked to some insurance company executives about this. They really do not have a problem with it, as long as they are all on the same playing field.
Right now a huge portion of administration costs is expended on trying to out cherry-pick the other guy. A Red Queen race if there ever was one. They would likely actually save money overall if the extra expenditures were equally distributed.
My own long-standing heath care proposal is indeed to[list=1]
[li]Mandate that insurance companies offer one price for the same product no matter who is buying it - pre-existing condition or not, large corporation or individual.[/li][li]Mandate health insurance coverage coupled with tax credits based on income level. Under a certain income level a bare-bones package is available totally underwritten. Employers would be required to have employees either accept their package or to nhave the employee provide evidence of private coverage or else run the risk of substantial fines. Tax returns would include a box to certify that you have insurance for yourself and your family - such would be auditable like everything else on the return. Would some cheat? I’m sure, but no more than elsewise on tax returns.[/li][li]If insurance is provided by the employer, such must be fully portable.[/li][/list=1]
Insurance companies win: they get a bigger pool of paying customers which is more likely to include the young well low risk but low income individuals who currently opt to take a job that pays a little more cash than take one with benefits. These young but fairly poor healthys current take the gamble and occasionally lose. The insurance companies save on administration costs and compete in terms of product offered, service, and price. Not who can exclude better.
Individuals win: they are all insured and at an equal playing field to buy products to the big companies. They choose based on price, product, and service.
Physicians win: they do not have to worry that a single payor will unilaterally cut their payments in an asymetric relationship that gives all the power to the payor side, and they are not stuck with as many people stiffing them.
Society wins: total health care costs drop significantly as the uninsured costs society boku bucks in many direct and indirect ways.
The whole point of insurance pooling is that no individual is supposed to know their own risk, but the entire pool has a very predicatable amount of risk that allows the insurance issuer to set premiums.
And why should the law force people to sell to anyone?
There is a long, long tradition of state regulation of insurance. Prior to 1944, insurance was held to not be “interstate commerce,” so the feds couldn’t regulate it. The South-Eastern Underwriters Assn. Supreme Court decision in 1944 held that insurance was interstate commerce and could be regulated by the federal government, but the McCarran Ferguson Act passed the following year allowed the states to continue regulating insurance.
In general, I don’t like laws barring businesses from doing reasonable things. It’s an infringement of freedom. In insurance, these kinds of restrictions are often special interest legislation for some group who has higher exposure but doesn’t want to pay higher premium rates.
One must distinguish between group health insurance and individual health insurance. A law like that would be a disaster for individual insurance. A person could wait until he became ill to buy insurance. Few healthy people would buy insurance, so there wouldn’t be enough premiums to cover the claims. This problem is called “adverse selection.”
For group health, the usual type of coverage, such a law could be coped with. Presumably every employee at a firm buys health insurance so there would be a mix premiums from the healthy and the sick.
I’m old enough to remember when “discriminating” wasn’t a pejorative. It was a compliment to be called, “a discriminating shopper.” In insurance, fairness includes fair discrimination. The typical insurance rating law prohibits *unfair *discrimination. It’s not unfair to charge old people more for life insurance. And, it’s not unfair to charge sick people more for health insurance.
Note that group plans typically don’t have a provision for varying the charge by employee. Suppose you and I join a company and my spouse has some costly illness, while your spouse is health. The insurance company can’t charge more for coverage of your spouse than mine within a group rating structure.
BTW would there be interest in a thread called, “Ask the Insurance Executive.”
Sure. If insurance is mandated, and all are forced to abide by this rule, then the insurance companies themselves won’t be hurt.
But YOU should care. Because insurance premiums will go up for YOU. Or for your employer, who will have to compensate by either lowering your salary, or firing people, or raising prices.
And if prices of coverage goes up, who is going to be hurt the most? The working poor. Their ranks will grow, because many companies that can barely afford to provide health insurance to their employees now will be forced to cancel it.
When are people going to learn that you can’t legislate wealth? SOMEONE has to pay for that extra ‘insurance’ coverage.
I put ‘insurance’ in quotes, because if you know you need treatment, it’s no longer a case of buying insurance against future risk now, is it? All that’s happening is that the insurance industry is being hijacked and forced to become an agency of social welfare. DSeid said:
Do you have any evidence for this, or is this just a wild-assed guess? Are you seriously suggesting that insurance companies would SAVE money if they just accepted everyone?
Then it’s no longer insurance, is it? I can guarantee one thing - the cost to everyone will increase. Is this what you want? If you just want everyone to pay for the health coverage of poor people with serious problems, why use the insurance industry as your surrogate welfare system? Why not just increase the coverage available through medicaid?
So I’m not allowed to self-insure? I MUST buy health insurance?
Econ 101: If you force everyone to have health insurance, the demand becomes inelastic. If the demand is inelastic, there will be no downward pressure on prices. This will cause insurance companies to slowly increase their coverage prices. And since you’re now mandating coverage for people with pre-existing conditions, they’ll have to increase it even more.
Eventually, you’ll wind up with a crisis in insurance costs, and demands to regulate the pricing structure of the industry. So now you’ve got a new government bureaucracy, a highly regulated industry, and all the inefficiencies that that brings.
First off let us better characterize cherry picking by so called pre-existing conditions. Mostly it amounts to a history of a heart murmur or back pain or asthma, not real serious active disease. It is akin to an all-you-can-eat buffet not letting in people over 180 pounds because statistically they are likely to eat more than people who weigh less.
But can I document how much of the US’s astronomical administrative cost is directly attributable to chery-picking? No.
As to the rest of your post, Sam … well start with consensus and go from there.
Okay. We agree.
Here we disagree. You see the burden of the uninsured is paid for by you and me anyway. They use the ER are admitted and are charged full retail (no PPO or HMO is), which they often don’t pay, and so the cost is spread out into those who do. They stiff the docs and the cost is passed on. The huge cost to the system is paid for mostly by you and me. One way or the other. Directly and indirectly. Enron it all you like, the costs always will bounce back to you. The only way for you to really end up paying less is to make the system provide total health care to all of its population in a less idiotic manner, to decrease the total costs hile hopefully maintaining or increasing total quality of care.
I am suggesting that the total cost of health care in this country would go down, that the administrative costs would decrease, that the costs of the uninsured that we still all pay would go down, and that when coupled with mandatory insurance, the insurance companies would make more money than they do now.From http://www.fchn.org/DirigoHealth/Health_Plan_Summary.htm
Just one example of how the uninsured cost us all.
Depends on how you define “self-insure”
I took econ. Is food something we all require? Yet supply/demand still results in downward and upward pressures. Everyone is required to wear clothes and there is no elasticicity? You never saw my Uncle Julius’ pants.
We spend 13.7 % of our GDP on health care (cf to the industrialized nation average of 6 - 10 %) yet rank behind other nations in the overall quality of our care according to the WHO (they place us #37 overall)
Last of all, lest you think my ramblings are the workings of the liberal left at it again, whilst searching for administrative cherry picking cost data I found out that I have company in much of my proposals. The conservative Heritage Foundation! Here is a summary of their proposal with critiique from the Cato Institute. http://www.cato.org/pubs/pas/pa184.html
That’s an inapt analogy. The OP isn’t asking insurance companies to pay for costs incurred prior to the policy going into effect. A better anology would be your house being ravaged by fire, and the insurance company replies “it was caused by your house being surrounded by a forest prone to forest fires, a preexisting condition”. Or a car insurance company refusing to pay for an accident because it was caused by your colorblindness, a preexisting condition.
Sam Stone
Health “insurance” stopped being true insurance long, long ago. For instance, what’s the deal with asking insurance companies to pay for birth control pills? It’s not like this is an unforseen expense. Do people ask their car insurance company to buy them new tires? It sees to me that refusing to pay for a risk because there was knowledge that that risk would be more likely than normal is itself more of a perversion of the word “insurance”. It’s one thing to charge higher premiums for high risk patients, but to take their money and then refuse to treat them because “hey, you’re high risk”.
december
Are people who choose insurance really a significant portion of the pool? People who are working automatically get insurance. People who aren’t usually can’t afford it. Who actually chooses to get insurance?
Something that hasn’t been mentioned yet: “preexisting condition” really means “condition that already has been diagnosed”. These rules encourage people to not seek treatment for conditions, knowing that to do so would require them being diagnosed. Which results in higher costs for us all.
SuaSponte
While I don’t like the idea of the government telling private companies what to do, I think that government intrusion has become so entrenched in the insurance industry that to argue against only one part of it doesn’t make much sense. After all, the insurance companies are taking advantage of a business opportunity created in large part by government intervention (if companies weren’t required to provide insurance, there would a lot less policies). Shouldn’t a company benefitting from government intervention incur responsibilities it would not otherwise have?
I would support a position similar to the OP, but I would word it differently: insurance companies would not be allowed to force patients to disclose previous diagnoses. Now it isn’t about forcing the insurance companies to do something, it’s about not allowing them to force someone else to do something.
When a doctor applies for malpractice insurance, does the insurance company ask for transcripts of all his privilidged conversations with his lawyer?
The point of insurance pooling, is to spread out the “insurance companies risk”, not the individuals, and not to deny coverage to anyone.
Insurance is for things that will/may happen to some, and not to others. No one really knows for sure what will happen, even if you are diagnosed. People with fatally diagnosed cancer, have survived.
To deny coverage is illegal, immoral, and unethical, regardless of potential risk.
If the insurance companies had their way, they would only pay for breast cancer occuring in men, since men get breast cancer far less often than women.
Insurance companies have been able to get away with lots of illegal, illogical, and unethical practices because of their “lobbying” and how much they pay political candidates, not because what they do is right, or logical.
Furthermore, to charge more because you have weaker genes, or because you are black and suseptable to diseases that affect blacks more often, or because you are female and are suseptable to medical conditions typical that females experience, is also wrong.
Even charging more for bad drivers is wrong, if they are bad drivers, they should not be on the road. I dont care if they pay more for insurance if they are going to get into accidents. Bad drivers should not be driving.
If we allow insurance companies to get away with not covering or increasing rates for people likely to get certain medical conditions, then it is only a matter of time before the insurance companies will require a “genes” test before covering anyone.
What we allow insurance companies to get away with, is entirely up to the voters, since all states license and reguate insurance companies already.
That’s ridiculous. The class of people who have been diagnosed with cancer are going to cost the insurance company a hell of a lot more money than the class of people who have no known conditions.
Insurance pooling is fine, if the group of people covered is randomly selected. Offering group insurance for all the workers in a company, for instance. There may be some with pre-existing conditions, but the insurance company can do a statistical analysis and figure out how likely it is that there will be such people in a randomly selected group, and adjust premiums accordingly.
But premiums WILL be higher for people in good health. That’s the whole point to insurance pooling - to subsidize the less healthy by charging more to insure the healthy.
Forcing someone to pay for someone else’s health coverage at gunpoint is immoral, and unethical. Insurance companies are not charities. If someone has a condition that costs $100,000 per year, why in hell should the insurance company be forced to insure them for a lesser amount? In the real world, the insurance company might be willing to insure that person for everything other than the pre-existing condition, which is fine. But what you are suggesting is more akin to just walking into an insurance company and saying, “I need $100,000! Hand it over.”
And if car companies had their way, we’d all be driving $100,000 cars made out of Dixie Cups. Lucky for us they actually have to consider things like what we’re willing to buy. And so do insurance companies. They’re in competition to provide a service.
So isn’t the problem with the government, and not the insurance companies?
Can you point to some insurance companies that charge more to poeple with ‘weaker genes’?
And yes, sometimes females get a different fee structure. 'Round these parts, young female drivers probably pay half the rate for car insurance as do young males. That’s because, as a group young males are idiots when it comes to driving. They cost the insurance companies a hell of a lot more. Are you proposing that young women who drive carefully should have their rates raised to help subsidize the rat-racing idiots in their high school?
You must be kidding. At what point do ‘bad drivers’ lose their right to drive? After one at-fault accident? Because I guarantee the insurance companies will raise your rates dramatically if you have an at-fault accident. So you’re suggesting a new rule, “One accident, and you lose your right to drive for life”?
This is supposed to be an improvement to our quality of life?
Let me tell you what will happen if you remove the punitary effect of higher insurance rates for bad drivers - First, you’ll have to charge everyone more. The money to pay for the damage has to come from somewhere. Second, there will be less incentive to drive properly. A LOT less. Most young people are very aware of how much a speeding ticket will cost them in increased insurance. The actual $50 fine or whatever is irrelevant compared to the thousands extra they can pay for insurance. If you don’t allow insurance companies to adjust their rates based on a driver’s ongoing history, the roads will get a lot more dangerous, and rates for everyone will increase.
Nice solution.
Uh, we do have the ability to pass laws. Just because we’re not willing to pass the crazy suggestions above does not mean that we’ll refrain from passing laws against more marginal cases. This is a straw man.
This is true. And whether you have a healthy insurance industry at all is also up to the voters. Once again, I have to point out that you cannot legislate wealth. Mucking about with the insurance industry through regulatory fiat can certainly be done. But you won’t make it cheaper. The fact is, 100,000 people as a group will cost $XXXX in medical care. The insurance companies will sell you a service to reduce your risk to the average risk for evreyone by selling you insurance for $YYYY/100,000, plus their profit.
If you try to remove their profit, there will be no more insurance companies left. If you try to reduce some people’s rates, it will HAVE to be paid for by raising the rates on others. This will have many side-effects, cause changes in behaviour, require regulatory oversight, etc.
There are no free lunches.
And let me point out something that you don’t apparently understand - the discriminatory power of insurance companies is a GOOD thing. Insurance companies are a powerful social force that lead us to better behaviour. Do you know what Underwriter’s Labs are? An arm of the insurance companies. Auto crash tests are often done by insurance companies. Insurance companies help us move away from the most risky things, and help make our lives safer. The mechanism by which they do this is their rate structure, which is based on risk. Take that away, and you’re doing harm to society.
I opened this thread expecting it to be stupid, but it’s not. But let’s get the question clear: the question is NOT “why would insurance companies fail to cover pre-existing conditions?” nor “is it a good idea that they don’t?” - it is “why can’t they if they want to?”
I don’t think anyone has addressed this question directly.*
There are clear reasons for insurance contracts excluding existing conditions. Insurance is about pooling risk, and if the risk is already 100% you’ve nothing to insure against.
But equally clearly an insurance company may want to write a contract for an asthmatic which covers her asthma drugs if it reduces likely costs for diseases whose risk factors depend on general health. As a crude example, suppose Eva Luna is insured against falling over and going into an expensive coma - the insurance company may prefer to cover the cost of her asthma medication if it it lessens her chance of falling over sufficiently and they can’t effectively charge her the difference in premiums or insist I take her medication as a contractual condition.
So why are insurance companies banned from so doing?
I don’t think it can be because it’s always a dumb idea to offer such coverage - because then existing insurance companies would just be happy not to offer such policies and watch any new entrants who didn’t know this go broke.**
For the same reason, it makes little sense as a restriction on competition within the industry of existing players - why would you conspire to ban a thing if it’s dumb for any company?
For the same reason, it can’t be to drive people to government programmes or to self-insurance.
As an economist, my default position is to assume that regulation of competition benefits producers and producers can only agree upon conspiracies against consumers (and/or taxpayers). But I can’t see how that works here (although I’ll be easily persuaded).
The answer must lie in adverse selection. The costs of administering an insurance pool are high - IIRC something in the neighbourhood of half the typical premium. Defining what is covered and what is not covered is an expensive business - not just in writing the contract but in enforcing it when it comes to sorting out which claim you should pay and which you should refuse/litigate. My SWAG is that whilst it would be profitable for individual companies to offer complex policies which cover existing conditions, it would raise industry compliance and adminstration costs too much. The difference between the actuarily fair premium and market premiums is already huge, and this factor is damaging to both insurance companies and potential customers (as a group).
So my guess is that this is an agreement between providers that prevents them from doing informationally complicated things that would make both themselves and their customers worse off due to increased information and compliance costs.
*[sub]although december and The Ryan got close and I suspect Apos was hinting at it. Sam Stone reveals he should fail eco 101.[/sub]
**[sub]Small weasle here: insurance is a long period business - a dumb company that offers foolish policies could be disruptive. We had a case here involving a foolish company called HIH that has played havoc with sensible premiums, which has/will queer the pitch for a decade. I’m assuming your market is bigger and has more players.[/sub]
High blood pressure is a very good example. High blood pressure can lead to other very expensive medical complications(which would be covered), including stroke, if not treated properly.
was required. Oops.