MrsSpringsteen

Washington Post

Like Your Health Insurance? Maybe You Shouldn't.

By Simon Johnson and James Kwak
Tuesday, August 11, 2009 12:35 AM

If we fail to reform our health care system this year, a major reason will be that a majority of Americans are satisfied with their health coverage and believe that reform could hurt them. According to a recent (unscientific) Consumer Reports survey, 64 percent of readers are satisfied with their plans -- down from 67 percent in 2007, but still a clear majority. A recent New York Times poll found that 59 percent of Americans do not think that health-care reform will benefit them personally; 69 percent are concerned that reform could harm the quality of their own care and 68 percent are concerned that it could limit their access to treatment.

This is deeply misleading, for two reasons. First, what does it mean to say that you are satisfied with your health insurance? Consider homeowner's insurance. Until you need it -- your house burns down -- you have no way of judging its quality. The same goes for health coverage; until you have a serious illness, the kind where your plan's limits and exclusions may kick in, how do you know if your health coverage is any good?

For one thing, as the House Energy and Commerce Committee uncovered, some insurers go out of their way to revoke coverage for people with serious health problems by looking for mistakes on their original applications. For another, you could be underinsured, like 29 percent of all people with health insurance, according to Consumer Reports. It is politically relevant that two-thirds of Americans seem to like their health coverage, but whether they should like it is another question.

The second problem is that the health coverage that most satisfied Americans have -- employer-based coverage -- is less secure than they think. In America today, we have three main health insurance systems. At one end we have Medicare and the Veterans Health Administration, which (although many anti-reform protesters don't realize it) are government-funded and government-run programs, and generally popular ones. At the other end we have the individual market, in which individuals buy insurance policies directly from health insurers. The individual market is completely broken; according to a recent Commonwealth Fund study, 73 percent of people who tried to buy individual coverage in the last three years did not end up buying a plan.

In the middle we have the employer-based system, which according to the U.S. Census Bureau covered 59 percent of the population in 2007. The employer-based system is good and bad. On the plus side, it solves the fundamental problem of the individual market. Again, think about homeowner's insurance. The insurance company figures out how much your house is worth, estimates the chances of it burning down, multiplies those numbers together, and charges you that much (plus a little to cover expenses and profit) in premiums. That is, the cost of a policy should be related to the expected costs of that policy to the insurer.

Now translate this to health insurance and you'll see why the individual market is broken. If you have a serious illness, like cancer, your expected annual costs could easily be $60,000. The insurer has to charge you at least $60,000 for coverage, or else it will lose money. You can't afford that, so you go without insurance. According to the Commonwealth Fund, 70 percent of people with health problems found it impossible or very difficult to find affordable coverage in the individual market. In short, a "market" for health insurance works only if you prevent insurers from doing what insurers naturally do -- discriminate among people according to how risky they are.

The employer-based system solves this problem. Employers can spread the cost of health insurance across their workforces, so that all employees are treated equally, regardless of their medical history. Furthermore, the tax rules governing employer-provided health care require that employers offer plans that treat all employees equally. The result is that if your employer provides health coverage, you can probably get it.

However, the employer-based system has two major weaknesses. First, and most obviously, it means keeping your health insurance is dependent on keeping your job. That means that your health is only insured to the extent that your job is insured -- and your job isn't insured. If you lose your job, or get a divorce from the spouse whose employer covers you, you have to find a new employer who offers a health plan, or you will be stuck in the individual market. Alternatively, if you get sick, you may be stuck in your job, no matter how much you may want or need to leave it.

Second, employers are dropping their health plans; the percentage of people covered through an employer has dropped from 64 percent in 2000 to 59 percent in 2007, and that decline is likely to accelerate. Why? Because, according to a Kaiser Family Foundation survey, the average annual premium for family coverage has already increased from $5,791 in 1999 to $12,680 in 2008 -- a 9 percent annual increase -- and a study published in Health Affairs forecasts that national health spending will grow at an average annual rate of 6.7 percent until 2017. Arithmetically, with each year that passes, it becomes harder for companies to keep their health plans without reducing benefits, reducing wages or increasing employee contributions to health plans.

The bottom line is that your current health plan may not be as good as you think it is, and there is a good chance that it will not be around when you need it.

Health-care reform comes in several different flavors these days, but the basic minimum is that it allows all people to buy health insurance regardless of medical history, and it provides subsidies to help poor and middle-income families buy health insurance. That means that if you get sick and lose your job, you w

maycocksean

What, exactly, is wrong with this idea again?

Irvine511

it will cost a trillion dollars over the next 10 years.

so it's expensive.

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maycocksean

And what's the alternative again?

UberBeaver

Don't be so poor?

maycocksean

Got it. :makes mental note to be less poor:

Irvine511

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UberBeaver

I like this attitude fellas. This is how we keep America great.

maycocksean

All kidding aside, this is what I was saying earlier. It seems to me that the underlying belief behind the conservative approach to these issues is that the poor have somehow "earned" their poverty and we are therefore absolved of responsibilibty for their plight. Their lack of health care for example is on their own heads, and I'll be damned if I'm going to have my taxes pay for someone who is in their situation because of their own laziness, etc.

Such a belief makes the argument that basic health care should be reserved for those who can pay for it a logicalone.

But again, perhaps I'm misrepresenting the conservative approach. Perhaps INDY or 2861 can clarify?

maycocksean

I mean heck, there's always Amway right? I mean ANYONE can get rich that way. There's no excuse for poverty people!

INDY500

He no doubt enjoys the benefits of a drug developed right here in Indiana. Human insulin, the world's first recombinant DNA drug. He also no doubt is appreciative of the great advancements in home glucose monitoring devices.

The United States healthcare system leads the world in new drugs, technologies and innovations. Everyone, worldwide, rich and poor, benefits from these advancements. As painful as the dollar signs can be, the cost of slowing down this river of development (feed by the streams of profit) in the name of cost containment will only be paid for in another currency, physical suffering.

maycocksean

So the way you see it, we here in the U.S. would be "taking one for the team of humanity". These European countries with their socialized medicine are providing universal health care but they're using the technology developed in U.S.--technology that wouldn't otherwise exist if not for the profits made in the healthcare industry here.

BVS

You mean the drug companies will allow physical suffering before they cut down their overbloated marketing machines? How will they survive on just one drug rep instead of four per territory, now the doctor will only be seen once a month instead of four times a month. And what about all those nifty gadgets and toys they give the nursing staff? Will they cut those out of their budgets before or after physical suffering and actual r&d? And let's not even talk about the fact that there have been one a month treatments shelved and covered up as if they were never developed because one a day is more profit. Yep, the best indeed.

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^Apparently he did.

MyBloodySleeve

MrsSpringsteen

Yes-but what exactly does that have to do with the attitude that he should have "saved up for it"? That's harsh.

INDY500

What did I miss?

Medicaid spending 2007 -- $319,676,945,585
S-Chip spending 2007 -- $15,000,000,000
All the state and local agencies to service the needs of the poor. $????

Plus the uncalculable value of all the charities, free clinics, helping-hands programs and drug vouchers, not to mention our emergency room policies.

The purpose of the Democratic Healthcare Reform Bill is not to provide more treatment for the poor, it's to make us ALL dependant on the state for our healthcare.