Now, we take the “bad guys” to task, but who really pays?


The President is on the road again to push for his version of health care reform only this time he is trying to hit a sore point with Americans, the big bad insurance companies.  Employers should listen to this message because for the seventy million workers with self-insured coverage through their employer employees will make no distinction between those plans and individual insurance.

Here are the health insurance reforms the President wants:

  1. No pre-existing conditions
  2. No excessive out of pocket expenses
  3. No out of pocket expense for preventive health care
  4. No dropping coverage for seriously ill people
  5. No gender discrimination
  6. No annual or lifetime coverage limits
  7. More coverage for uninsured or underinsured young adults (presumably via parents coverage)
  8. Guaranteed renewal

panicing manIt is hard to argue with some of these points, especially if you want to expand coverage. However, at the same time, it is clear that these changes will add cost to the coverage for everyone with health insurance.  That’s ok too if the President and the politicians will explain the impact of the changes they seek.  Here we are not talking about the federal government’s costs; we are talking about the cost of coverage for the 160 million Americans with employer-based coverage and all those with individual coverage.  Massachusetts is finding out the obvious that if you eliminate the barriers to coverage people will simply wait until they need the coverage to buy it knowing they cannot be denied and in the process have saved themselves health insurance premiums (at the expense of all of the other insured people).  Let’s hope they get the rules right the first time in Washington because Massachusetts has both an employer and individual mandate and still is suffering from adverse selection.

It is easy to point at the insurance companies and hold them accountable, but the reality is that underwriting is common and necessary in all forms of insurance to keep the cost of coverage affordable for the entire pool of insured people.  And there is the rub, we are now at a point where coverage for health care related expenses is no longer insurance in any sense of the word.  While we appear to be striving to make coverage very affordable at the point of service for the individual, we may be missing the big picture of what is affordable in premiums and direct costs to the federal government.  As we drive up the cost of the coverage, we increase the need for subsidies, and the demand for more not less employer contribution toward that cost.

Items number 2, 3, 6 and 7 have the potential for a significant impact on employer plans and on the covered employees who pay a portion of the cost of that coverage.  I would be especially concerned with number 2 “non excessive out of pocket expenses” because excessive is in the eye of the beholder and in this case, the beholder is the federal government bureaucracy.

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