Wednesday, February 10, 2010

Gingrich & Goodman Idea #2: "Make Health Insurance Portable"

Why is it that group health insurance plans cost less - usually far less - per enrollee than individual plans with comparable benefits? There are two obvious reasons. First, the larger the group, the more health care costs can be spread across the group, making the insurer's costs far more predictable even while insuring people with pre-existing conditions. Second, people who are healthy enough to work jobs that carry health insurance benefits are, on the whole, going to be healthier than a population of people willing to pay out-of-pocket for comparable coverage but who do not hold jobs.

Newt Gingrich is acutely aware of the fact that people who want health insurance, and perhaps particularly those who want comprehensive health insurance coverage but cannot afford it, are concerned about the cost of medical care for themselves and their families. He has thus made it a cornerstone of his own "reform" proposals to shift risk from the insurer to the individual - that is, to make the individual "responsible" for more of the cost such that the individual will "choose" to consume fewer healthcare services. I don't know how much Gingrich believes that this approach would "save" in the broader market - relatively healthy individuals who take a fevered infant to the emergency room rather than waiting to see if a high fever breaks, or who seek treatment for a lung infection before it either clears up on its own... or turns into pneumonia). But I suspect that his actual goal is to target people with chronic health conditions so that, for example, diabetics will pay more out-of-pocket for their continuing care, medicine and supplies. It would be nice if Gingrich were more specific on the subject but, if my hunch is correct, it's easy to understand why he's not.

The second idea proposed by Gingrich and Goodman as a "GOP health idea" is to "Make health insurance portable". They propose portability as a "way of solving the problems of pre-existing conditions", and advocates for employment-based insurance to "travel" with employees between jobs and "in and out of the labor market". It's really difficult for me to be charitable to Gingrich here - to find a way to interpret this proposal as consistent with his words. Because the net effect of the proposal would be to eliminate the insurer's ability to define a predictable group for its group rates. If, three years into the plan, the "group" now includes a significant number of people who have quit to take dangerous jobs, who have become too sick to work, who are self-employed doing who-knows-what, who are scattered across dozens of employers... the dynamics of the group are no longer the same. The "group" rate can be expected to skyrocket, amounting to an averaging of individual rates as opposed to the formerly discounted group rate.

Gingrich and Goodman are similarly dishonest in suggesting, "individuals should have the ability to purchase health insurance across state lines". At present, if I want to offer insurance in a state with strong consumer protection laws, I have to abide by the laws and regulations of that state. Gingrich and Goodman want me to be able to skip across state lines into whatever state offers the fewest protections and mandates the least amount of coverage, yet still be allowed to offer insurance in the more protective state without following its laws.

This proposal is unlikely to draw additional insurers into a state due to high costs of entry: there is a huge cost in developing a provider network within a state, signing up enough customers to make a plan profitable, and maintaining that level of subscribers. But you can bet your money that insurers will scramble into the state with the fewest regulations to fatten their bottom lines.

Gingrich and Goodman state, without connecting the thought to their specific proposals, that "When insurers compete for consumers, prices will fall and quality will improve." That goal can be achieved within the current system, such as when an employer offers a cafeteria plan allowing employees to choose between participating insurers and multiple insurance plans. That goal could be advanced by adding a serious national player to the scene - such as a "public option". But it's at best disingenuous to pretend that undermining group-based insurance rates or allowing insurers to regulate across state lines to avoid consumer protection laws and state regulations will increase "competition" in any way that is beneficial to consumers. On the other hand it is consistent with Gingrich's long-stated goal of weakening the scope of insurance coverage while forcing consumers to pay for more of their care out-of-pocket. What a surprise.

Finally, given that the current Senate bill includes some language allowing for the type of portability Gingrich and Goodman favor, why isn't the GOP working with the Senate over the details of that idea rather than stonewalling the Democratic bill and pretending that this is exclusively a GOP idea?

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