Thursday, December 29, 2011

Is this the long game on health insurance reform?

A few weeks ago Rick Unger caused quite a stir when he published an article titled The Bomb Buried in Obamacare Explodes Today - Hallelujah! The bomb he was talking about is the medical loss ratio (MLR) that requires insurance companies to spend 85% (large group insurers) or 80% (individual and small-group insurers) of their premium dollars on patient care. His point is that for-profit insurance companies will leave the market over this requirement...thus leading eventually to single payer health insurance.

So, can private health insurance companies manage to make a profit when they actually have to spend premium receipts taking care of their customers’ health needs as promised?

Not a chance-and they know it. Indeed, we are already seeing the parent companies who own these insurance operations fleeing into other types of investments. They know what we should all know – we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it...

If you thought that the Obama Administration chickened out on pushing the nation in the direction of universal health care for everyone, today is the day you begin to understand that the reality is quite the contrary.

Yesterday Unger followed up with an article titled More Proof that the American For-Profit Health Insurance Model is Doomed. In it he cites a recent study by the conservative Galen Institute which found that his prediction about for-profit insurers leaving the market is beginning to happen.

Among the many companies that are dropping out of the business —rather than comply with the MLR requirements that would force them to actually spend an appropriate share of the premium monies received from customers on real health care— are some of the nation’s largest carriers.

Principal Financial Group had already announced late last year that they were leaving the health insurance business, impacting on some 840,000 insured.

Another key player in the business, Cigna, has decided to quit the small business market in states like California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kansas, Missouri, New Hampshire, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Virginia.

In Colorado and Michigan, insurance giant Aetna is bailing on both the small business and individual markets.

But perhaps even more interesting is his acknowledgment that as this happens, we're going to hear wailings from the right about ACA destroying health care in this country. And we better be prepared to deal with those arguments. Here's what Unger says:

If an insurance company cannot make money while holding onto 15 to 20 percent of every dollar they take in, why should they continue as a business? Wouldn’t the free marketers argue that if a business model cannot profit on so wide a margin and still offer an acceptable product, the business does not deserve to survive?

The simple reality is that the health insurers can only function at a profit —and a small one at that—by denying needed care to their customers so that they can cover their own administrative costs. This is the model that Obamacare opponents, such as the Galen institute, seek to perpetuate— despite the fact that it clearly no longer works to the benefit of customers or society as a whole...

It’s easy to support the for-profit health insurer model when you have not yet found yourself in the position of needing to call upon the insurers at a time of crisis...For most people—those who have yet to have to test the system—it’s simply a matter of paying your premium, complaining about the high cost, and then sleeping soundly at night in the belief that, should someone in the family get sick, it’s all going to be okay because you have health insurance.

But it’s not okay. As many find out when the moment comes that they must call upon their insurer in a time of expensive illness, it is often anything but okay. Why? Because the insurers are struggling to provide the services for which they have contracted and manage to make a profit at the same time. And as this pressure builds, the insurers will simply leave the business—taking their billions into businesses where profits are far easier to come by.

I'd say that's a pretty compelling argument. And after having watched President Obama these last few years, it seems perfectly consistent with his style that he'd say to for-profit insurers..."Ok, give it a go folks. If you can do this business in a way that's responsible, we'll give you a chance. But if not, be prepared to step aside and we'll move on to other options." In other words, put out or get out of the way.

Yeah, that's how you play the long game of actually getting progressive policies implemented in ways that are both pragmatic and protected from eventual backlash. For those of you who say that's far-fetched (or perhaps too much 11th dimensional chess), I have two words for you - DADT repeal. Remember how most progressives said it would NEVER pass Congress? What President Obama did was take the time to get the military on board with it, making it inevitable. Same play here with getting for-profit insurers out of the way. This one will take a bit longer I suspect. But we all know that this President is very prepared to play the long game for the eventual BIG win.


  1. I been sayin'...

  2. I remember at the time reading about the 85% to care portion of the ACA and thinking it was hard to argue with. If private insurers can do that, I thought, great. I have lived if briefly in countries with real national health so I have an attachment to the idea that the gov't should administer health care. It's a silly attachment. If by regulation private insurance is as cost effective as gov't, then great. The results are what matter.

    The larger point is the one you make. This is most likely to expose for-profit health insurance for the scam it is and lead to something better.

  3. Bill - One of the things I've found fascinating about Obama's approach is that he often works to set up situations where there are 2 paths (responsible private insurance or single payer) and then is just fine with either one because both are HUGE improvements on what was status quo.

    One other thing that has struck me since I finished this is that its interesting to reflect on how progressives got so caught up in the fight over the public option. In some ways, perhaps that aided in letting the more radical changes like expansion of Medicaid to 30 million and the MLR get by without much notice.

  4. You may recall that in his speech on Healthcare before Congress he tried to say plainly to the democrats..."there are many ways to get to a public option"! They did what all PL do, did not listen because they were too busy complaining. Claire McCaskill in the Markup of the bill was brilliant in getting this one piece in the bill. I watched it all. It was amazing!

    I wish I could be happier about her now but on that day she did her job.


The root of the problem is a theology that enables sexual abuse

As someone who was raised in a white evangelical Christian family and church, it deeply saddens me every time we hear that another leader o...