Guest post: Interstate Health Insurance Sales
Guest post by Michael Halasy Practicing Emergency Medicine PA, Health Policy Analyst, and Health Services Researcher
Interstate Health Insurance Sales
One of the more common ideas often thrown around in health policy is the idea of allowing patients to purchase health insurance across state lines. The idea of course, is to allow patients access to potentially cheaper policies, and that by increasing competition, lower rates will ensue.
While this does not sound like the worst idea, there are several problems with this concept, the first, and most obvious, being regulatory. Insurance plans are regulated by each state, and each state has a mandatory minimum coverage. State regulators have legal authority to oversee all insurance matters within their state boundaries, but do not have the authority to oversee out of state plans. If a patient were to purchase insurance in a neighboring state, and then have a grievance or complaint against that company, the patients legal recourse might be very limited. Additionally, if they buy plans that do not meet the minimum coverage requirements of their own state, are there potential legal problems?
The second issue with this, is that it will create an adverse risk pooling. Out of state insurers will almost certainly offer plans to healthy, young individuals. This will leave in state insurers with a potentially sicker risk pool. What this will do is lower premiums potentially for one group of patients, but concurrently raise rates for a sicker group. Risk pooling, and spreading the risk through a group of patients is the backbone of health insurance, this could possibly interfere with this.
The final issue is fragmentation. In a system that is already badly fragmented, increased fragmentation reduces the leverage of insurers. In a BNET article in 2009, it was noted that the city of Milwaukee, with multiple insurers, and no dominant health insurer on the landscape, demonstrated that on average, providers would not accept less than 200% of Medicare as their reimbursement. Nearby Chicago however, with a dominant BC/BS insurance market demonstrates that on average, providers accepted 112% of Medicare as their reimbursement. The reason is simple. Leverage. Who has it? The insurers? Or, the providers?
Finally, perhaps the biggest issue with Interstate Health Insurance sales is that it fails to address rising costs. It will create a cost shifting onto sicker patients, and lower premiums for younger, healthier patients….but only temporarily. It will not address the continued, unsustainable rise in healthcare costs, and could create a regulatory nightmare.
Of course if we did not have the noble small business person in health care as a model we could adopt the Japanese system. Rates are set for all proceedures on a nationwide basis with adjustment factors for localities. It would be interesting to see what hospitals would do if they were told they would only get medicare rates for all patients. I have never heard an answer beyond we could not survive from the medical types. Assume its the given rates or leave the country for professionals what happens?
Lyle I’d bet many investors in the health care field would strongly oppose the notion but there is an organization of doctors who believe Medicare for all would be a good idea. They say that insurance-related administrative costs are killing them and would plummet. Vermont is considering a single-payer, too, and here’s a story about how doctors may move there to practice medicine more and push paper less: http://www.commondreams.org/newswire/2011/03/22-21
Surveys show doctors are rather split on the idea, for example here: http://www.reuters.com/article/2008/03/31/idUSN31432035
Medicare for all would be difficult for some and good for others. There are some fundamental flaws within the Medicare reimbursement system (thanks to specialty lobbies) and there is a paradigm of reimbursing much higher for specialty care and procedures, rather than for good, strong, primary care.
This would need to change. Good luck with that politically though.
Up to 45 million Americans did not have health insurance last year, according to the National Association of Health Underwriters. The health care legislation that passed in 2010 will eventually require coverage for everyone, but it does not go into effect until 2014. Buying individual insurance coverage will provide for your health care needs in the meantime.
Marks, regarding your comment about 45 million Americans w/o insurance, I wanted to share further statistics I found on http://www.healthinsuranceguardian.org:
* In 2001, the U.S. Census Bureau reported that 41.2 million citizens, 14.6% of the population, lacked health insurance.In 2002, this number rose to 15.2% – 43.6 million individuals.2
* In 2002, 20% of families with children include at least one family member who is uninsured.3 Americans often have gaps in their insurance coverage.
* In 2002-2003, 82 million Americans under age 65 – 33% of the under-65 population – did not have health insurance coverage for at least one month.4
* By 2006, 46.6 million Americans lacked health insurance.5
* In 2010, 50 million Americans were uninsured. Among those under age 65, 20% of the population had no medical insurance – 33% of 19 to 29 year olds.6
* How much does all of this cost? According to a study by Families USA and reported on FOXNews.com, the typical American family’s health insurance premium, and other costs, are increased by $1,000 every year in “hidden expenses” directly tied to medical expenses for the uninsured. The typical person with an individual health insurance plan pays an additional $370 annually.7
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