Insurers place first bid made in health reform game

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Taking the easier questions.

Sometimes Who shall live? and Who shall die? are policy questions subject to cost benefit analyses. You're right.

And some day those decisions may be made by the equivalent of a clemency board for death sentences. Possibly with the same reputation for mercy.

But rather than deal with insoluble questions balancing mercy toward the sick with mercy toward those dependent on government monies, let's look at business factors.

Quoting:

Health insurers want to make a deal.

They will kill their underwriting business model ? the attempt to cherry-pick risks by excluding those who are sick ? if everyone has to buy health insurance from the private market.
...
As BNET?s David Hamilton notes today, there are some conditions on this offer. No federal competition with the private market. No ?community rating? in which everyone pays the same.

[And you ask:]

1. Why not allow competition with a federal plan? Are they afraid the government would do things right?

2. Why not create larger pools of risks through community rating? Isn?t that what group insurance is about?

[End quotes]

The insurance companies are willing to make a bet. That the premiums from healthy people who would not have taken insurance without a mandate will balance claims made by those who would have been turned down because of risk.

A federal alternative has no true mandate toward a profit. It might take excessive risks by cutting rates or adding coverages which could produce crushing losses. The money to recover will come to the federal alternative, but will federal money go to the private companies?

The priorities and resources of the federal program might allow it to be profligate. And if a federal policy attraced too many healthy people, for the best of motives, the private insurers are likely to lose money as a result.



Then, the companies are looking for community eligibility, but not community rating.

What's the difference?

Communities vary. The overall rate-setting for the community should vary with the community's characteristics. As well as the cost of care in the area.

Especially important are those young, healthy people who are the main advantage of this plan. If they pay too much for insurance, they'll feel about paying the premiums in the way some older people feel about expensive school systems.

Why, they'd ask, should we pay so much for services we're unlikely to use? The answer is to provide them with sufficient price breaks.

Rates are important to perpetuating the system. Some people must pay less, others more.


As a business proposition, this is risky for the insurance companies. They might not have offered weren't (the boondoggle of) single payor being considered.

Posted by: Anton Philidor   Posted on: 11/21/08 You are currently: a Guest | Members login | Terms of Use

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