Chronic Care in Healthcare Reform Insurance
Frank Pasquale at Concurring Opinions argues in favor of the so-called Public Option partly because he believes it is needed to provide care for the chronically sick but insureds. This may be true, but it is only true because the Exchange, by commoditizing insurance and encouraging annual elections, will weaken the effectiveness and incentives currently in the marketplace.
Currently, almost all, if not all, individual insurance is “guaranteed renewable”. That means that as long as the customer continues to pay premiums, the insurance company is on the hook for medical expenditures, regardless of changes in the insured’s health status. Insurers also do not rate for any single person’s condition; rather, they pool risk in various methods as required by the various states.
In practice what this means is that the chronically ill, once they obtain insurance, can stay on the particular health plan for the remainder of their lives. This stability is ironically reinforced by the fact that switching to another carrier would require that they go through underwriting.
The net impact of these restrictions is a many-year or possibly lifetime commitment from the insurance company to the insureds who purchase individual insurance from them. The observed explosion in large case management, utilization and case review, disease management, health education and other programs is the logical result of this multiyear commitment. Group insurance also has seen this explosion caused because of a similar multi-year commitment on the part of employers to the health of their workers.
Almost all healthcare reforms proposed today are designed to weaken multi-year insurance, along with the value of these programs to the insurance companies. Specifically, the nature of the “Exchange” coupled with guaranteed issue restrictions means that sick individuals will be much more likely to shop. In fact, most financial advisors will likely recommend a “stair-step” approach to Exchange insurance: buy the slimmest available plan as long as you are healthy and save the difference; this includes possibly avoiding the Exchange altogether (either via a grandfathered plan or an employer plan). Once you get sick, switch to a rich Exchange plan.
Increased “benefit ratio” regulation will further decrease the incentives to private payers to continue to pay for costly management of chronic conditions, except to meet whatever narrow “quality” benchmarks are required. The “quality” benchmarks will also likely only target prevalent conditions, meaning those will become the focus of management in contrast to overall cost efficiency which is incented today (for carriers who are selling new issues or renewals and therefore want to keep premiums low).
My ideal healthcare reform approach would value and encourage multiyear commitments from healthcare financing companies to their members. I see the Exchange as weakening that objective. I find it especially odd to argue that a Public plan is necessary to accomplish that which is being discouraged elsewhere in the reform proposals.
Frank’s also concerned about plans being opaque. I am not; at least I wouldn’t rate it as one of the top two or three issues for a public plan or healthcare reform to address. Doctors voluntarily contract with insurers. If an insurer becomes too cumbersome, they should refuse patients from that financing organization, or seek employment in an integrated delivery system where they don’t have to worry about that at all. I’ll also note the irony in this criticism, since the main reason why payments are so “opaque” today is the absolute mish-mash that our beloved government has made of healthcare coding. But that’s a post for another day.