Don Parsons: Why insurance pools make sense
My friend Bob thinks that everyone should make an individual choice about the purchase of health insurance, and suffer the consequences of that choice. He and I are good friends, but we don’t agree on everything.
Over 50 percent of the bankruptcies in the U.S. are the result of unplanned and uninsured medical expenses. This is true even for some with insurance because it is inadequate, or the insurance company finds fine-print wiggle room to deny the claim, then to deny coverage in the future: Too bad for you, sucker.
What’s the alternative? Lack of medical care allows the natural progression of disease, often with progressive disability and early death. Darwin wins again. Or, most often, the uninsured people get expensive care they cannot afford, and the providers of that care spread the “bad debt” costs over their insured population, thus driving up the cost of insurance premiums. In the end, those who are insured subsidize care for those who choose to be uninsured.
What is it about insurance pools? We know that in any given year, the average person under 65 in this country bears a 1-2 percent chance of incurring medical bills over $30,000, but no one knows when the roulette wheel of serious injury or illness will stop on their number. We buy insurance. Then we hope with great fervor that we will never be sick enough to use it. If only the sick buy insurance, then the risk pool is saturated with high-risk participants, the utilization of expensive medical care skyrockets, and the premiums will be affordable only by the wealthy.
The health insurance companies will have to charge very high premiums to make a profit on a population, or “pool,” of those at high risk, the sick. It is much easier to make a profit on a risk pool of healthy people who have smaller-than-average risk of significant illness: Thus has evolved in our country the practice of for-profit insurance companies refusing to insure the poor risks – through a process known as “underwriting” or exclusion of pre-existing conditions – and to implement practices to select only large numbers of the healthy. This is known as “cherry picking.”
So what is the problem? Those individuals (mostly the young “invincibles”) who do their own risk assessment and refuse to buy health insurance, leave the insurance pools saturated with only the old, or frail, or inactive, or smokers, or those with bad habits or chronic illness. It is no wonder health insurance premiums are sky high. The risk pool is saturated with high-risk people. When the young go over the handlebars of their mountain bike, crash into a tree on Pali, or get meningitis, they get first-rate care – and we all pay for them.
How do we address this problem? Bob says, tough luck for those who choose to be uninsured, let ’em die! Wow. Are we ready for that?
Others say let’s all swim in the same pool together by contributing up front, lower the average risk, make health insurance affordable for everyone, even if we have to have a national or state-based policy that everyone will be insured and will pay into the system. Some countries – all other industrialized countries in the world, in fact – do this, some by mandating health insurance and most by taxing people to support a medical care system available to one and all – no paperwork, very much like our Medicare program for those over 65 and the disabled who qualify.
The ethical quandary is, should we mandate that all participate? Or should we continue to ask those who do have insurance to pay for all the others? We now have nearly 60 million Americans without health insurance, one in five people, or one in four under 65.
For those under 65, we have decided to try a different approach by passing a recent law, the Patient Protection and Affordable Care Act, which will require everyone purchase health insurance or pay a fine if they choose to “go bare.” The fines will accumulate in a fund that will be used to pay the costs for those uninsured people who get injured or sick – so, in a way, this is another insurance mechanism.
Will this approach work? It’s been tried with some promising early results in Hawaii and Massachusetts, but the experience is tiny, and similar state-based experiments have failed in the past. Though some elements of the new law will take effect this fall, most elements will not be implemented until 2014 when the insurance exchange mechanism kicks in. Thus, we will have to wait a few years to know if this will work on a large scale.
Meanwhile, the new approach will be subject to much political posturing, lawsuits and naysaying. Some people, however, will benefit immediately: children with pre-existing conditions, young adults who can stay on their parents’ insurance policies until age 26, those who need screening and preventive care and will no longer have to pay co-payments, those with very high risk and therefore deemed “uninsurable” and eligible for new state-based high-risk pools, some small business employees, the elderly, and others. They all benefit immediately.
Don Parsons lives in Dillon, is a retired general surgeon and Kaiser Permanente executive, a health policy and public health expert, serves on the Boards of Saint Anthony Summit Medical Center and the Community Care Clinic, and is executive director of the Colorado Patient Safety Coalition.
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