Friday, August 10, 2007

The Shark and the Shepherd on health care

There is an article in the Isthmus about a Madison woman, formerly a health insurance salesperson for Humana, who appears in Michael Moore's film Sicko. The horror she illustrates is the reluctance of insurance companies to write policies for people who are sick or likely to become sick. She expresses her shock and disgust that the company wouldn't cover pregnant women. She is outraged at the notion that it wouldn't insure people who wait until they need to make a claim to seek coverage.

My first reaction to the story is to note the willful cluelessness of it all. The woman's sly reference to the "profit end" of the insurance business reminds me of Steve Martin in The Jerk who thinks he's uncovered some dark bit of genius in the idea that you would charge more than whatever you are selling costs. ("Ah, it's a profit deal.")Why would you expect an insurance company to cover people whose claims are almost certainly going to exceed their premiums. Insurance is risk sharing. If you don't get sick, your premium dollars cover someone else's care. In order for there to be money to cover people with larger claims, there must be people who pay premiums and do not have those claims. Whether the company is "for profit" or not may change the numbers, but not the fact.

This doesn't work well when the people seeking insurance have ready-to-make claims or are very likely to have claims in excess of their premiums. In declining to insure these people, Humana is not evil or greedy. If you can't understand that, I've got a proposition. I'll pay you $100/month for the next year and you give me $ 5000 at Christmas.

My second reaction is to observe that this fact, however understandable, is a problem for a market-oriented reform of the system. While we may be willing to allow people who are accident prone to go without auto or homeowners insurance and to bear the loss of their next fire or fender bender, we are not willing to allow people to go without some type of health care.

So, I have often thought, a market solution to health care would have to impose some rules. A libertarian solution won't work. One might be to forbid individual underwriting on basic high deductible policies.

But, if you are going to do that and you don't want health insurance to be a device by which people with medical problems pool their bills, you'd have to require people to be insured - probably by imposing an "uninsured" tax on those who don't buy this basic policy. Insurer competition would be on the basis of administrative efficiency and cost controls, not on trying to pick a "healthier" book of business.


Dad29 said...

At one time, Wisconsin allowed drivers to drive without liability insurance, but the State demanded a bond in lieu of insurance.

That may still be the case.

Anonymous said...

This is some of your best commentary, Rick, and for once your writing is devoid of your typical partisan bashing.

The problem which Humana and other insurers face is that many of the uninsureds who approach seeking an individual policy have an ulterior motive for seeking coverage: they have a health issue. It's a little like the man with the burning house frantically calling every insurance agent in town.

Some of these people had jobs with health insurance but, because of health issues can no longer work. Yes, they can use COBRA to continue the coverage for a period of time, but this assumes that they can cover both halves of the premium even though they are no longer earning a living or working full time.

For these people, unless they can get another job with benefits (and access to a group plan and therefore no undividual underwriting) at some point they go uninsured -- and the spiral to bankruptcy begins.

Many of the "personal responsibility" freaks think that this is just tough luck -- these people obviously didn't plan ahead. For some folks it is true, or they engage in risky behavior (smoking or other poor habits), but for many people, there isn't anything you can do to avoid the inherited risk factors. I didn't have the luxiry of choosing my parents.

Obviously "Healthy Wisconsin" is a nonstarter this time around (even the Governor opposes it, but there is no percentage in him saying that from the rooftops any clearer than he has been). But over time, our society will have to figure out a fair solution for this part of the problem.

Bully for you for your intelligent commentary.

Anonymous said...

You're 99% right, but that $5000 Christmas present will be 20 minutes with the doc and an x-ray ...cha-ching.