A Contrasting View On Insurance

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3. A Contrasting View On Insurance
July 30, 2009
Author Wishing to Remain Anonymous
Former Executive, Major National Insurer
Roles in Underwriting, Marketing and Product Management

I have firsthand knowledge of Commercial HMO, Medicare HMO, small group (50-200 employees) and large group (200+), including multi-site national accounts.  For the record, I am a registered Libertarian with what, I think, is a pragmatic streak. Here’s what I believe is needed in any “reform” legislation.

1.      Tax health insurance premiums paid by employers as any other compensation.  The current exemption was a reaction to Federal Government wage and price controls and did not evolve in a free market. The current tax treatment masks the true cost health insurance leading to distorted behavior at the consumer level.

2.      Mandate that every resident of the US be covered by a health insurance plan whether employer provided, through a union or individually purchased. The controversies over “pre-existing conditions” and individual underwriting are resolved if everyone, from birth, has coverage. There are no “free riders.” The political process can decide at what level of poverty premiums should be subsidized by taxpayers.

3.      Establish a minimum benefits plan. The Devil will truly be in these details, but without a minimum plan the issue of the underinsured will remain. Except for the poorest among us the plan should call for cost sharing for all but preventive care and the treatment of chronic disease. The focus should be on protection against catastrophic expenses, the kind that bankrupt families, rather than day to day expenses. The degree of personal responsibility (that is, how much you must pay yourself) could be established as a function of family income much as today’s medical expense deduction is.

4.      Establish premiums using a “community rating by class” methodology (CRC). This provides for some recognition that medical expenses, in fact, vary by age, sex and geographic local. In addition, at the individual insured level, allow for “good health” discounts from the CRC premiums for those who meet certain standards shown to be consistent with lowered medical costs such as not smoking, maintaining an appropriate weight and following preventive care regimens.

5.      Provide for risk adjustment pools among participating insurers. This protects any single insurer from attracting more than the “normal” number of catastrophic cases. Participating insurance companies would pay into this “re-insurance” pool which would be required to be self supporting (no government subsidy).

6.      Abolish all State mandated benefits. There must be a single, national plan available to all. With the other provisions listed this will ensure that insurance is portable, freeing American labor to move to better opportunities without fear of losing insurance.

7.      There is no need for a “Public Option” if these rules are implemented, but if we must have one it must be self supporting (no government subsidy) and adhere to the same rules as private plans. Furthermore, any fee schedule “negotiated” by a Federal plan must be available to any participating insurance company as well.

I’m hoping this post will stimulate debate, helping me refine my positions. Let the games begin! Feel free to comment on my post in the site's blogs.

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