Two days after going down in defeat, overwhelmed by the physician lobby and AARP, health plans received another shot into the bow.
Rep Henry Waxman announced his intention to schedule Congressional hearings on insurance companies practices in the individual insurance market. What may have gotten Waxman’s attention was the ongoing fiasco in California, where two major health plans joined three others settling claims that they illegally canceled members’ policies.
The Congressional inquiry comes on the heels of multiple lawsuits filed in California against multiple health plans claiming various damages due to policy cancellation. Insurers have described some as ‘political grandstanding’ and ‘totally without merit’. Nonetheless, they’ve also paid fines and agreed to corrective action.
Suits have also been filed and settlements awarded in Arizona,
Is John McCain paying attention? Remember McCain’s reform ‘plan’ relies on the individual insurance market, a ‘market’ that has once again proven it is incapable of acting within the law. McCain seeks to end employer based insurance, replacing it with individual coverage purchased on the open market. The companies who would sell that insurance are the same ones now paying fines for illegally cancelling policies and denying claims.
Let us not forget that McCain’s ‘free market’ is built on insurance companies seeking to make money – and the way they do that is by selling insurance to folks who don’t need it. Those individuals who really need coverage for their current health conditions cannot get that coverage in the vast majority of states, as the insurance company is allowed to specifically exclude certain conditions and/or to charge significantly higher premiums. In fact, there are only five states that specifically require insurance companies to sell policies to everyone regardless of medical condition. (Maine, Massachusetts, New Jersey, New York and Vermont) If you don’t live in the northeast, and if you have any pre-existing condition (and who doesn’t?), you’re out of luck.
Of course, health plans have a solution to this – they will cover a few more folks with pre-ex conditions, as long as the states agree to cover anyone with more serious problems. Now that’s free market business at its best – guaranteeing private companies will take the good risks, and dumping the rest on the taxpayer. The plan, put together after “tireless efforts of the senior leadership of our industry” and seven months of hard work by AHIP’s board would require state high-risk pools to take on anyone who may incur medical costs more than twice the state average, while requiring insurers to cover the rest.
If there’s a clearer statement of the industry’s lack of confidence in its ability to manage health care, I haven’t seen it.
AHIP’s plan crystalizes the problem – (most) health plans long ago gave up any pretense that they would or could actually manage care.
AHIP should change its name from America’s Health Insurance Plans to the ARSC – America’s Risk Selection Companies.
If McCain has a solution to this, he hasn’t published it yet.
thanks to California HealthLine for the inspiration; for an excellent review of the individual market see Julie Appleby’s piece in USAToday.
Jul
21
C’mon Joe, your political bias is influencing your otherwise reasonable arguments. “companies seeking to make money – and the way they do that is by selling insurance to folks who don’t need it.” – REALLY? Do people who have not yet had a condition that would result in a decline or are willing to accept an exclusion rider really not need insurance? The number one stated reason people don’t have insurance is that they have decided they can’t afford it. While the individual market is not a panacea (and John McCain never said it was), it does provide an alternative for individuals to purchase “insurance” and access “wholesale prices for healthcare” at affordable rates. In exchange for lower premiums, they might decide to forgo coverage for their previously diagnosed ADD/ADHD or their GERD. It is up to them. I applaud the efforts to improve consumer protections in the individual market (like Rep. Waxman’s). They will only make ings better for consumers. But until we can come up with affordable insurance for all, let’s not throw out one of the few options people have when they are choosing to be responsible and purchase health insurance.
Joe – I’m not sure I understand your criticism of insurers’ inability to manage care. Doctors’ decisions to admit patients to the hospital, order tests, refer to specialists, prescribe drugs, consult with patients and perform procedures themselves account for well over 80% of healthcare costs, and insurers’ have no control over any of this unless they are staff model HMO’s like Kaiser. Medicare and Medicaid don’t have the profit motive anywhere in their business model, and neither of them has been able to manage care (or control costs) either. If payment systems ultimately move toward some combination of bundled pricing for expensive surgical procedures and capitation for patients with chronic conditions, it might be a different story. At the end of the day, incentives matter, and the current fee for service payment system simply rewards resource utilization and not value.
Barry – I agree with your comments re what docs do and what they control, right up to the statement that ‘insurers have no control over any of this unless they are staff model HMOs.’
Yes, they do – if they want to. Health plans don’t manage care, they negotiate reimbursement. By conceding control over all health care to any doc, health plans have become nothing but transaction processors. Health plans could do much more – identify and select high-performing physicians and ancillary providers, design benefit plans that force members to use those physicians, aggressively manage chronic conditions, identify and force members to use specific hospitals, and any number of other initiatives. I fully understand that health plans merely respond to the market’s demands, and that’s why they are dead wrong.
Healthplans should be leading the market in design and innovation, and instead they are getting better and better at risk selection. There is a very large market out there that would buy insurance if it was affordable – it isn’t, because insurers haven’t done what is necessary to make it affordable.
The current fee for service system is certainly a big part of the problem. But the inability of health plans to truly innovate is much more significant.
Health plans are staffed (with some notable exceptions) by people who get ahead by saying ‘no’.
Re Medicare/medicaid, those are cost plus contracts, and it is no surprise that processors have zero incentive to reduce long term costs. What’s in it for them if they do a good job and reduce costs? Nothing.
I do agree – incentives matter. And that’s precisely why health plans are failing as an industry.
Joe – Thanks for the clarification about the kinds of things insurers can do to manage care. I think Aetna, United and, perhaps, some others are starting to offer products that give patients lower co-pays for using doctors and hospitals that rank in the preferred (highest quality) tier.
At the same time, an executive from United recently told me that every time they try to be “entrepreneurial” or innovative, they create so much friction among providers and get so much pushback that the effort is more trouble than its worth. For a concept like bundled or episode pricing for expensive surgical procedures, Charlie Baker, CEO of Harvard Pilgrim Healthcare, wrote on his blog that CMS drives payment policy in the U.S. and it is very hard for insurers to try to do something like this unless and until CMS does it first. Yet, CMS’ pilot project on bundled pricing, which just started on July 1 of this year, will go on for three years and probably take another year after that to evaluate.
Finally, the concepts of both doctor and hospital ranking and P4P are fiercely resisted by providers because they claim it’s impossible to do it fairly or to reflect the individual circumstances of their particular practice or hospital. Personally, I think they resent anyone trying to measure them because they don’t want to be held accountable. They just want to practice medicine the way they want to or think is best and expect insurers to pay their bills promptly and without question. I hope insurers, hopefully with the encouragement of large employers, keep pushing these concepts, but it’s an uphill battle to put it mildly.
Barry – thanks for the note. I must say health plan execs do seem to talk a lot about how hard their industry is, and how tough their jobs are. I don’t want to be unkind, but things could be worse, they could be bankers…
The strategies you mention are incremental, and necessary, and likely too little and perhaps too late.
Health plans are stuck in Clayton Christensen’s innovator’s dilemma – trying to incrementally improve their base business model (which I would argue is risk selection coupled with passive/aggressive provider reimbursement management). What they should be doing is rethinking their entire model – their reason for existence is to deliver the right health care at a reasonable price, with the plan best able to do that winning in the market. One version would be a very small provider network, with a few PCPs and specialists, one or two hospitals that agree to contract all hospitalists into the ‘network’ and sufficient ancillary providers to deliver mental health etc. But this would be a very small, highly select network with providers paid under a generous FFS arrangement for all but chronic care management, which would be paid based on a fee higher than FFS for routine care but much lower than would be paid if chronic conditions resulted in acute care.
Would all employers but this product? Would all members sign up? Would there be provider resistance? No No and Yes. But most innovations are at the fringes of the markets that they eventually replace.
The health plans of today look a lot like the indemnity carriers of my youth. And we know what happened to them.
FYI, risk pools are funded in large part by assessments on insurers. High risk pools make sense in a voluntary system.
Plans could do more, but not without getting sued or into political battles with providers. Last time costs were under control was the heyday of HMOs. Politicians, employers, and patients couldn’t fade the heat from the providers.
But, that kind of raises the question “then what the hell am I paying you for”?