Canceled health plans bad idea from the start
By Winthrop Quigley / Journal Staff Writer | November 12, 2013
A nontrivial number of owners of individual health insurance policies will be compelled by the Affordable Care Act to purchase new policies that are more expensive and provide more benefits. The old policies don’t provide what the ACA defines as adequate coverage, and they allow insurance companies to refuse to sell insurance to people with pre-existing medical conditions, a practice Obamacare outlaws.
Some of these customers are angry they will pay more for coverage (though some will pay less), some don’t like a government that dictates to them the coverage they must buy, and some don’t like paying for coverage they don’t expect to need.
Many more are justifiably angry that they were repeatedly and inaccurately assured by the president of the United States that if they liked their insurance they could keep it.
Before we all rush to man the barricades, though, remember these are the same health plans that precipitated a different kind of outrage a few years ago when companies like Blue Cross and Blue Shield of New Mexico and Presbyterian Healthcare Services proposed completely justifiable 20-plus percent premium increases.
I should also point out that owners of these plans periodically call the Journal to complain that they just found out their pregnancies, their cancers or their bum knees are not covered, and they now face horrendous medical bills.
As near as I can tell, individual plans were first offered in New Mexico by Blue Cross and Blue Shield in 2005, to be followed by Presbyterian and Lovelace Health Plan. Together, the companies cover about 54,000 people through individual plans.
A couple of retired industry executives told me a while back that the individual plans were a big mistake. They lose money and customers go ballistic when care is denied and prices are raised.
Unfortunately, to talk about individual insurance requires a detour into some pretty deep weeds.
Insurers need large pools of customers to control risk, by more accurately anticipating the costs they will incur and, therefore, the price they must charge. That’s just basic statistics. Most of us are in such big pools, through our employers, Medicare or Medicaid, or retirement systems.
Pre-ACA individual pools aren’t big or predictable. Individuals drop in and out of the pools all the time. They join when they lose a job or start their own company, and they drop out when they go to work for someone else. They join when they worry about being sick; they drop out when they are healthy. They join when they marry; they drop when they divorce.
The companies tried to mitigate the risk through medical underwriting, which ACA has made illegal. If you had a bum knee, the individual insurance policy you could buy would most likely exclude knee treatment, assuming the company would sell you insurance at all. Nobody covered pregnancy and childbirth, to my knowledge.
Now 54,000 people are enough to create a decent-sized insurance pool, but these folks aren’t in a single pool and won’t be until they are pooled through the Affordable Care Act. They are in dozens of different pools because of what is known as the durational effect.
Over a fairly short period of time, maybe two or three years, a pool of individuals starts consuming more care, medical costs go up, premiums follow, and younger, healthier customers start to drop coverage because they don’t use it and it’s starting to cost too much. With only older and sicker customers in the pool, the costs really start to climb.
The plans then open up new medically underwritten pools to attract what they hope will be less-costly customers. These pools start demanding more care over time, costs rise, premiums rise, younger and healthy people drop coverage, and the cycle begins again.
A Journal reader who complained about losing his individual insurance to the ACA was part of that cycle. He got his first Presbyterian individual plan in 2008 and paid $172 a month for it. It cost $240 in 2010. He dropped his old policy and bought a new one as part of a different pool in 2011. That policy cost him $133. It was up to $142 last year.
As much as some of these customers like their current insurance, even if the ACA allowed them to keep it, the premium inevitably would become unbearable. That is a simple actuarial reality.
The resentment individual plan members have that they now must have coverage they won’t use is a little hard for those of us with group insurance to credit. I have been helping to pay the cost of my colleagues’ medical care for years, and they have been helping to pay for mine.
Owners of individual policies have been paying other people’s bills, too, even if they don’t know it. The pregnant woman delivers her baby, the cancer patient seeks treatment, the heart attack victim is admitted to the hospital whether they have insurance or not.
What they can’t pay out of pocket, the rest of us – even people with individual policies – pay in the form of higher insurance premiums, taxes, a less efficient and more costly health care system, unsuccessful children and a less productive workforce.
Health care always has been a common cost and will be as long as we refuse to let people die in the street.
UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to abqjournal.com/letters/new to submit a letter to the editor.
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