Mandatory Health Insurance -- works like this, yes?
Today's IBD has a reference to an article that recently appeared in the WSJ reporting the actual experience of one Massachusetts health insurance company [Harvard-Pilgrim] with the "you must buy health insurance" plan of that state for their fiscal year ended 3/31/09.
According to the articles, 40% of the company's new policy holders during that year stayed with the company for less than five months. During this period, these short-term policy holders ran up average monthly costs of $2,400 -- far exceeding the premiums they paid.
***
What is happening?
The Massachusetts health insurance law is similar to ObamaCare. Insurance companies may not refuse to issue a policy to anyone. They must charge the same rates to everyone within specified classes, no matter previous health history or evidence of likely future medical costs.
And, the penalty for not having insurance is fairly low.
So, people are gaming the system.
When they think they're healthy, they refuse to buy insurance and pay the "no insurance" penalty instead.
But when they know they're going to need expensive medical care, they sign up, get the care, and then drop insurance.
My example: If you think about it, it is a lot cheaper for a pregnant young woman to sign up for even $1000 a month health care for five months and have the insurance pay for her Ob-Gyn and baby delivery costs [something like $15,000 in MA if all goes normally] and then to drop insurance [or stop paying, which amounts to the same thing].
Example number 2: Smoker who has previously been healthy and didn't carry insurance gets the sad news that he has lung cancer. The good news is that it is at an early stage and is treatable. He hustles to get coverage -- $1,000 a month for a few months is a lot cheaper than just the $12,000 radiation therapy to say nothing of the following three months of chemotherapy at $1,000 a week plus his oncologist's consultation bills of $7,000. When he's in remission, he stops paying on the insurance -- he can always sign up later with a different insurance company if he needs more of the expensive medical treatment.
Example number 3: Person who is diagnosed with an no clothes onset chronic condition -- type 2 diabetes, ALS, COPD, etc. S/he didn't previously carry insurance. Now they are facing medical bills in the $2,000 a month range. So they sign up for insurance at a cost of $1,000 a month -- thus passing half their chronic care costs to someone else (plus all their other covered medical costs of every description). [This person keeps the insurance until they're eligible for Medicare or Medicaid.]
Naturally, the insurance companies can't make money on "customers" such as this, so they must raise rates on everyone [MA law requires rates to be fairly uniform]. The companies that do the best job of making it too hard for such "customers" to sign up have the advantage -- they'll have proportionately fewer such losing accounts and thus will have the lowest rates for regular customers.
Thus, it pays for health insurance companies in MA to focus only on group insurance and to have the lowest public profile and the fewest individual accounts.
***
Somehow, I don't think this is what the voters of MA thought they were getting when their state enacted universal health insurance.
NOW for the critical question -- since gaming the system in this way is entirely predictable, why is ObamaCare designed to enable people to game the system?
What will this accomplish in the long run?
Will any insurance company participate in the "insurance exchange" at all if they know in advance that the shoppers there will include a large proportion [40% plus chronic cases in MA] of these "gaming" customers?
Wouldn't it be wiser policy for the insurance companies to refuse to participate in the insurance exchange and thus refuse these "customers" so that they can keep rates lower for their existing (honest) customers?
It seems to follow that either the co-ops or the public option "insurance" scheme will have to have astronomical rates [by comparison] or that the government subsidies will have to be gigantic.
And, of course, as people figure out how to game the system fewer and fewer will voluntarily carry health insurance except when they know they are going to need it. Thus, the proportion of the population who are "covered" declines after the initial spurt and the health insurance companies are squeezed by a falling customer base.
And as insurance companies are squeezed or suffer losses, they'll have to raise rates on group insurance -- which is already carrying about $1,000 per year per family in costs shifted by providers from the underfunded Medicare and Medicaid systems. Naturally, this makes group rates go up even faster than they were going up -- and they were already going up faster than inflation and productivity combined.
What is an employer to do then? His group rates are rising faster tha
Best Answer - Chosen by Voters
What has the government ever run that didn't fail miserably like Social security etc. They will rob this policy also and run it into bankruptcy along with the entire country.
You've hit the nail on the head and have pointed out one of several reasons the program will cost more and provide fewer services than we already have.
Add to that the government is going to introduce the public option sooner or later for the 'Competition'. What will really happen is as the insurance companies are raising rates the public option will remain cheaper due to taxation. Employers will see it as a good option for lowering business costs and will jump into it immediately. In the end, the private companies will be forced out of business because they are unable to compete. Then we will be completely at the dubious mercy of the government's health care program.
End result, higher taxes, government control, poor health care and all the rest. They keep denying it but the facts are right in front of them.
