Game is up for health insurers

October 29, 2009

By John M. Berry

John M. Berry, who has covered the economy for four decades for the Washington Post and other publications, is a guest columnist.

Health insurance companies are aggressively raising premiums at the same time they are fighting to stop the creation of public non-profit funds that would give them serious competition.

This foolish effort to pad profits before any healthcare overhaul gets passed ought to backfire. The so-called public option was already gathering support despite claims by conservatives that it would lead to a government takeover of health care.

Small businesses face an average premium increase of 15 percent for 2010, according to The New York Times. Separately, the Centers for Medicare & Medicaid Services, which run Medicare, said that premiums for Medicare Advantage plans — those are private plans for people also enrolled in regular Medicare — are going up 25 percent.

With costs rising like this, it is remarkable how many supporters the insurers have in Congress. Even the best of the companies are a pain to deal with.

The for-profit insurance companies are a unique feature of the U.S. health care system. No other developed country has them, and their existence is a key reason Americans spend a much higher share of their national income on health care — while leaving many people uninsured.

T.R. Reid, a long-time Washington Post correspondent, lays out those details in a fascinating new book, “The Healing of America.” Reid worked in Post bureaus in London and Tokyo, and he and his family had received health care under the British and Japanese systems. During his research, he traveled to many other countries seeking treatment for a bum shoulder he had seriously injured years earlier while in the Navy.

The result is a tale that highlights the positive and negative aspects of other systems. By almost every measure, the healthcare outcomes are better in other developed countries than in the United States, while the costs are lower.

None is perfect. They all face the problem of rising costs. But all other developed countries essentially provide care for everyone.

“For most working people under 65, we’re Germany or France or Japan,” Reid writes. “For Native Americans, military personnel and veterans, we’re Britain, or Cuba … For those over 65, we’re Canada … For the 45 million uninsured Americans, we’re Cambodia, or Burkina Faso or rural India.”

People in the latter group get care if they can pay the bill out of pocket. The United States, however, is like no other country because it “maintains so many separate systems for separate classes of people, and because it relies so heavily on for-profit private insurance plans to pay the bills,” Reid says.

Some opponents of healthcare reform complain that the focus is on extending coverage to the uninsured, which will be expensive, rather than on ways to control costs. There’s some truth to that, but extending coverage is the far more critical step. Other changes to control costs can come in turn.

Reid notes that on average, U.S. health insurance companies pay out in claims only about 80 percent of what they collect in premiums. The rest goes for marketing, underwriting and administration, with what’s left, for profit.

In France, Reid explains, everyone has a carte vitale, a green plastic card with a small memory chip. The card carries the full health history of each person, who treated him for what and what he was charged. Every time a doctor treats someone, the details are entered on the card and the update is sent to the national non-profit insurance fund which pays the doctor’s bill, generally within a week, without any additional claim being filed.

The insurance fund’s administrative costs are about one-fourth those of U.S. insurers.

Whatever the exact dimensions of healthcare reform will turn out to be aren’t clear. But one thing seems certain: Insurance companies are going to have to cover anyone who applies. They’re not going to be able to exclude anyone because of their health history.

That likely will raise the cost of their claims. But think how much they’ll be able to save on underwriting expenses.


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