Health Reform

[erosewater]

Well anything can be done, but designing an entirely new method of reimbursement for claims seems to me to be way less important than figuring out ways to reduce costs. Too many people focus on reimbursement

[FormLetter]

If you want to reduce costs you have to attack the cause(s).

Infinite demand at the point of sale
Third party payor mechanism means unit cost doesn't matter
Third party payor mechanism means utilization doesn't matter
Just about every new drug, test, or procedure seems to get covered (does every $25k/month specialty drug need to be covered? What is the benefit over the drug it replaced?)
Ability of insurers to align incentives of the insured with those of the insurer is severely hampered by regulations

I like the idea of diagnosis-made health insurance, especially since it resembles actual insurance. How do you implement it is the question. If you start a company that enters the market with it, will you survive? You're essentially selling a policy that looks like today's policies, but you continue to pay costs for new diagnoses after the term ends, while you dont' pay costs for pre-ex. Underwriting would probably need to be more rigorous than most of what is out there now, either up-front or post-diagnosis, which brings us back to those sob stories.

I'll keep thinking on this one from time to time.

[Rex Ryan]

Originally Posted by FormLetter

I like the idea of diagnosis-made health insurance, especially since it resembles actual insurance. How do you implement it is the question. If you start a company that enters the market with it, will you survive?

Bad idea, will never work.

[Not Mike]

Originally Posted by twig93

My parents had this type of insurance when my mom was pregnant with me. My dad switched jobs mid-pregnancy (mom didn't work and was covered on dad's policy) and the old company/policy paid for all the pregnancy / childbirth related stuff.

Once I was out, the new insurance company covered me.

I've advocated for exactly this type of approach in health insurance. It's exactly how every other type of insurance works. Health insurance is the lone exception. If I crash my car today, switch insurers tomorrow, and get my car fixed next weekend, it's still the first car insurance company that covers the loss.

If I die today and my employer switches life insurers tomorrow and it takes my beneficiary 3 months to file a claim, the first insurer pays.

If I become disabled today and my employer switches disability insurers tomorrow, it's the first insurance company that pays... until I reach SSNRA! (or 65 depending on the policy) And if I became disabled on the job... then there's WC insurance too. And since my employer-sponsored life insurance has waiver of premium, I've got premium-free disabled life insurance the whole time too.

Don't tell me health insurers can't do it. Life insurers, disability insurers and workers comp insurers do this - on extremely long-tailed products.

None of these are comparable.
Life insurance - there's an insurable event, and it's over.
Auto insurance - there's an insurable event, and it's over. If the car is repaired, you switch insurers and then have another insurable event related to the first event, who pays the claim? The new insurer.
Disability - there's an insurable event, and as long as that person remains disabled, there is not another event. IF that person ends their disability coverage, returns to work, switches jobs, has a new GLTD plan and has a re-currence, who pays the claim? Not the first disability carrier, the new insurer (even it's even covered).
Workers' Comp is over when you return to work.

Health care is different. TECHNICALLY, going back to your original example, if HC worked the way you wanted, the first company should have continued to cover you. Any illness or injury you had is directly related to the orginal event (the birth).

Let's say I have knee surgery, ACL reconstruction and my employer covers it, then I switch jobs. Who should pay for my physical therapy? Six months later I want a knee brace, who pays for that? Four months later, the surgery fails. Who should cover my second surgery? I need clean up on my meniscus due to complications, who covers it?

It's just not as clean as life insurance, auto insurance, or disability. Apples and oranges.

[Rex Ryan]

Originally Posted by twig93

It is a fallacy to say that this will increase premiums. People aren't going to get sick more or less often because of this insurance. They aren't more or less likely to develop cancer.

The total outlay for health care should remain fixed (assuming that no new people purchase insurance and no people currently insured drop their coverage and they make the same health care decisions as they do now. Yeah, those are imperfect assumptions, but I'm thinking at a very macro-level. In terms of every medical procedure/checkup/etc nationwide... the total costs should be about the same.).

The premiums are more because you are saying you are financing them differently.

Lets say you work for a year at a company and develop diabetes. And then you go to another company and work there 30 years until you retire. You really think it is fair for the company where you worked for 1 year to pay for your medical care for the next 30 years?

And no, I really do not see your way as fixing anything.

In fact, you would create new problems with your scheme. Many employers self insure, so what happens if they go out of business? What happens to your insurance them?

As erosewater brilliantly pointed out (first time for everything), the problem is not who pays, the problem is the cost.

What does a doctor make in the US, what does a doctor make in Europe? Are people in Europe as fat and diabetic as they are in the US? Does Eurpoe have a huge class of people who don't work and sit around collecting welfare? Do 50% of people in Europe not pay income taxes?

[Chuck]

Originally Posted by Rex Ryan

The premiums are more because you are saying you are financing them differently.

Lets say you work for a year at a company and develop diabetes. And then you go to another company and work there 30 years until you retire. You really think it is fair for the company where you worked for 1 year to pay for your medical care for the next 30 years?

And no, I really do not see your way as fixing anything.

In fact, you would create new problems with your scheme. Many employers self insure, so what happens if they go out of business? What happens to your insurance them?

As erosewater brilliantly pointed out (first time for everything), the problem is not who pays, the problem is the cost.

What does a doctor make in the US, what does a doctor make in Europe? Are people in Europe as fat and diabetic as they are in the US? Does Eurpoe have a huge class of people who don't work and sit around collecting welfare? Do 50% of people in Europe not pay income taxes?

Sorry - I know you're tired of me chiming in, but it does fix a very important issue. It fixes loss spirals on individual health. Initial premiums would go up, but renewal premiums would rise more slowly. This problem is the explanation as to why rate increases are 30-40% when healthcare costs "only" rise, say, 15%, yet health companies continue to make only 2- to 5% profit margins. Health insurers have done a horrible job explaining that.

As far as employer problems, I see no logical reason for health insurance to be tied to employment. People lose their jobs when they get sick.

[FormLetter]

Originally Posted by Rex Ryan

The premiums are more because you are saying you are financing them differently.

Lets say you work for a year at a company and develop diabetes. And then you go to another company and work there 30 years until you retire. You really think it is fair for the company where you worked for 1 year to pay for your medical care for the next 30 years?

And no, I really do not see your way as fixing anything.

In fact, you would create new problems with your scheme. Many employers self insure, so what happens if they go out of business? What happens to your insurance them?

As erosewater brilliantly pointed out (first time for everything), the problem is not who pays, the problem is the cost.

What does a doctor make in the US, what does a doctor make in Europe? Are people in Europe as fat and diabetic as they are in the US? Does Eurpoe have a huge class of people who don't work and sit around collecting welfare? Do 50% of people in Europe not pay income taxes?

WRT the bolded, underlined paragraph: A diagnosis-made product would probably never be self-insured, and shouldn't be.

I know you think it is entirely a bad idea. I'd still prefer to explore the idea in more conversations on here. I don't have my heart set on it, just on one part - that fact that it actually resembles insurance. Unlike what we have now, which is 40%-70% prepaid medical.

As far as the problem of costs off in the future: yes, if hte policy says that it will pay for diagnosis XYZ from the day you get it to the day you die, then cost would be a titanic problem. Medical developments would almost all sit on the sidelines and watch for what was diagnosed a lot, then develop treatment after treatment, knowing they have cash coming their way until the insurers go bankrupt. However, the policy could be established where it will pay for all treatments for one year, and $X each year after that, or some other setup that doesn't create a perpetual gravy train for providers every time a diagnosis occurs.

[Chuck]

Originally Posted by FormLetter

WRT the bolded, underlined paragraph: A diagnosis-made product would probably never be self-insured, and shouldn't be.

I know you think it is entirely a bad idea. I'd still prefer to explore the idea in more conversations on here. I don't have my heart set on it, just on one part - that fact that it actually resembles insurance. Unlike what we have now, which is 40%-70% prepaid medical.

As far as the problem of costs off in the future: yes, if hte policy says that it will pay for diagnosis XYZ from the day you get it to the day you die, then cost would be a titanic problem. Medical developments would almost all sit on the sidelines and watch for what was diagnosed a lot, then develop treatment after treatment, knowing they have cash coming their way until the insurers go bankrupt. However, the policy could be established where it will pay for all treatments for one year, and $X each year after that, or some other setup that doesn't create a perpetual gravy train for providers every time a diagnosis occurs.

How about an approach like this as possibly alleviating some of the concerns that opponents to this idea have?

I think the underlying goal should be, to the extent possible, to allow insured's to be able to switch insurance providers regardless of their health. That corrects a number of problems. The diagnosis based approach can help with this.


Instead of having this fuzzy, dangling, expensive long tail liability hanging over the previous carrier, perhaps the industry can develop a liability buy out (perhaps arbitration-based, maybe reinsurers involved, or otherwise negotiated in some way, but preferably a private solution) whereby the previous carrier pays a to be determined single premium to the new carrier and then the new carrier must take on the liability.

While certainly the single premium will be somewhat of a crap shoot, perhaps it can get to be accurate enough (on average) to keep everyone whole and not seriously disadvantage either the old or new carrier (especially since they'd most often be on both sides of these situations).

Of course there are lots of details that would need to be worked thru and all of this is unnecessary and an additional expense if you don't believe the goal, ie making health insurance actual insurance, to be worthwhile.

And admittedly, overall premiums would go up because this system would not drive those who become sick while insured, out of the system. But there are other ways to consider how to lower underlying costs of healthcare.

Chuck

[OldGuy]

While your purchase of risk idea does delete the long tail exposure, it doesn't do away with the cost to the initial insurer.

In the example the one year insurer would "sell" the risk to the 30 year insurer. The amount of risk transfer would still be proportional to the length and severity of risk.

How would the 30 year insurer know that it would have the risk for 30 years? If it did it would "buy" the risk for a very large amount of risk transfer back to the first insurer.

If it didn't it might underpay for the risk and then perhaps end up in financial trouble.

If you are going to have transfer of insurance from one carrier to the other, the risk covered has to be only for the coverage period.

[Chuck]

Originally Posted by OldGuy

While your purchase of risk idea does delete the long tail exposure, it doesn't do away with the cost to the initial insurer.

In the example the one year insurer would "sell" the risk to the 30 year insurer. The amount of risk transfer would still be proportional to the length and severity of risk.

How would the 30 year insurer know that it would have the risk for 30 years? If it did it would "buy" the risk for a very large amount of risk transfer back to the first insurer.

If it didn't it might underpay for the risk and then perhaps end up in financial trouble.

If you are going to have transfer of insurance from one carrier to the other, the risk covered has to be only for the coverage period.

Yes - it would not eliminate the cost of the first insurer. And if you buy into the concept, it should not. The first insurer should be on the hook in some (financially safe) way for the long tail liability that emerges when the insured becomes sick while insured. So the first insurer needs to price for the possibility that someone becomes sick and then transfers to another insurer with a buyout payment due.

The second "30 year" insurer must do the same. He gets the single premium, but must be priced to turn around and pay a single premium to a third insurer if the insured moves again. If he does not move, then he has the single premium (and future rate increases, if needed) to cover the future claims.

I think this dynamic would force the 1st insurer(s) to have a higher initial price for two reasons. One, it would need to be prepared to buy out if a sick insurer transfers out, and second, they also may be forced to accept sick insureds from other carriers (with a corresponding buyout). But on the positive side - Future rate increases should be dampened because you eliminate closed block loss spirals (because sick insureds can leave as easily as healthy ones), and second, this should result in less uninsureds. The only uninsureds should be those irresponsible enough to not have purchased health insurance before they got sick, which is the way insurance should work.