Tuesday, March 02, 2010

What do we need health insurers for anyway?

Los Angeles Times
February 28, 2010
What do we need health insurers for anyway?
By Michael Hiltzik

(Before a congressional subcommittee, WellPoint's chief executive Angela)
Braly was forced to make an implicit admission that her industry almost
never makes explicitly: The nation's health coverage system is so hopelessly
broken that even the health insurance industry can't handle it anymore.

Her testimony, and other statements she and other WellPoint executives have
made, suggests that insurers can't profitably manage through periods of high
unemployment. They can't price policies in a way that keeps healthy young
people in the same pool as older people, producing a mockery of the very
point of indemnity insurance. Despite a decade of unobstructed
consolidation, which was sold to regulators as a way to control healthcare
costs by creating mega-insurers like hers, her industry can't control
healthcare costs.

Braly's words are a reminder of the most important unasked question in the
entire healthcare debate: What do we need insurance companies for, anyway?

The only way insurers can remain profitable at all is by selling healthy
people on policies that don't offer much coverage at all, while squeezing
older, less healthy people remorselessly so they either pay for most of
their care out of pocket or get priced out of the insurance market
completely (thus becoming a burden for taxpayers).

Braly in her testimony assured the subcommittee that even with the latest
California rate increases, "a 40-year-old woman in Los Angeles can obtain
coverage with a $1,500 deductible for as low as $156 per month."

She didn't specify what kind of coverage. So let's check out what her
company offers. Leaving aside whether that 40-year-old woman might have a
preexisting condition that would drive up her premium or make her
uninsurable -- anything from diabetes to a history of hay fever -- the
insurer's California package with a $1,500 deductible requires the customer
to pay up to 70% of the cost of "covered services," including routine
mammograms and Pap tests, plus as much as $500 a day for hospital stays.

Maternity isn't covered at all, so our 40-year-old Angelena better have
gotten her lifetime childbearing out of the way before picking up the phone
to sign up.

"Our plans fit the way you live," the CoreGuard brochure says. What it
really means is: You better fit the plan, or you're out of luck.

Shouldn't that have been on the agenda at the Washington summit?



Anthem Blue Cross
Our plans fit your plans

Anthem Blue Cross CoreGuard Benefits for California

Deductible: choices of $750 to $20,000 (with a second deductible for
Out-of-Network services)

Coinsurance (In-Network): 50%
Coinsurance (Out-of-Network): 70%

Inpatient Services (In-Network): 50% Coinsurance plus $500 Copay per day (3
Inpatient Services (Out-of-Network): 70% Coinsurance plus $500 Copay per day
(3 days)


Comment:  When WellPoint's CEO Angela Braly boasts that a 40 year old woman
can purchase $1,500 deductible coverage from them for only $156 per month,
it's important to see how they define that coverage.

Although Angela Braly didn't state which $1,500 deductible plan has a
premium "as low as $156," let's look at the Anthem Blue Cross $1,500
deductible CoreGuard plan as an example. Under that coverage, a 40 year old
woman would have to pay twelve monthly premiums, the first $1,500 of
In-Network care, the first $1,500 of Out-of-Network care, one-half of
allowed In-Network charges after the deductible (coinsurance), 70% of
allowed Out-of-Network charges after the second
deductible (coinsurance) (Anthem Blue Cross paying only 30% of allowed
charges!), an additional $500 per day for up to three days for
hospitalization (a copayment on top of the coinsurance!), all maternity care
(Anthem Blue Cross paying nothing!), and... well... you get it.

When Anthem Blue Cross promotes this product as a $1,500 deductible plan,
they are being so deceptive that it is dishonest. They call these "look
alike plans" - it looks like a $1,500 deductible plan, but it isn't. The
patient is paying most of the health care costs while Anthem Blue Cross
pretends that this is insurance.

The more sophisticated insurance purchaser might look at this plan and
recognize that it is almost worthless except that it has an out-of-pocket
maximum of $3,500 for the year. So maybe it is worth the premium as a
catastrophic plan, limiting losses to $3,500. But look closer. The fine
print excludes the deductible from counting towards the out-of-pocket costs,
so it is really $5,000, but only for In-Network services. Another $9,000
($7,500 plus $1,500 deductible) has to be paid for Out-of-Network services
as well. So the exposure is the total of monthly premiums, the In-Network
$5,000, the Out-of-Network $9,000, all Out-of-Network costs in excess of the
allowable charges, and any services, such as maternity care, that are not a
benefit of the plan. This is another one of those
you're-covered-if-you-don't-get-sick plans.

To show how ridiculous this can be, using the same benefit guide (link
above) for a family with a $10,000 deductible plan, the out-of-pocket
maximum looks like it is $7,000, but it is actually $17,000 for In-Network
services ($7,000 plus $10,000 deductible), plus $25,000 for Out-of-Network
($15,000 plus $10,000 deductible). In addition to this $42,000, the family
must pay monthly premiums, all Out-of-Network costs in excess of the
allowable charges, and any services that are not a benefit of the plan (no
maternity benefits for a young family!).

Angela Braly admits that WellPoint, the largest mega-insurer in the nation
in terms of enrollees, cannot control health care costs, and neither can the
rest of their industry. Their solution to keeping premiums affordable is to
shift more of the health care costs to the individuals and families who need
care, defeating the purpose of risk pooling.

Michael Hiltzik has asked the right question: What do we need insurance
companies for, anyway?

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