Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

The House’s Benefit Advisory Committee

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Democrats like to complain about insurers denying claims to boost profits.  I debunked that linkage in my immediately prior post.  But what I have found truly amazing is that neither the House nor Senate HELP bills propose a mechanism for changing insurer claim denial practices.  What’s worse, people think that they have.  Here’s ABC News:

The House bill includes a proposal for a so-called health benefit advisory committee, which would include 25 people appointed by the president and the surgeon general to determine benefit eligibility.

“The decisions, right now, are being made by insurance companies. And I think a whole lot of people out there are having bad experiences because they know that recommendations are coming from people who have a profit motive,” the president said in an interview with ABC News’ Dr. Tim Johnson Wednesday. “If I’ve got a panel of doctors and experts whose only motivation is making sure that we get the most bang for the buck in our health care, I think that’s a situation that most Americans would feel pretty good about.”

Notice that this committee, described in Section 123 of the House draft says nothing about approval of specific claims.  Instead, what it does is work on benefit design.  For the uninitiated, what that means is that the Benefit Advisory Committee will determine whether chiropractic therapy has to be included as part of the basic benefit or whether that is an ancillary coverage insurance companies could voluntarily provide.  They will also determine maximum allowable copayments and coinsurance provisions, weighing the impact on “public health” and the ability to reduce “health disparities”, whatever the heck that that means.

What Obama’s channeling about public dissatisfaction has nothing to do with benefit design, however.  There will always be those grey areas, however, where a particular person is asking for an advanced treatment or an experimental approach, or a desperate hail-mary treatment.  The House bill is silent on those issues, yet those issues proved electric in the recently concluded campaign.

Currently, profit-driven insurers sell what people will pay money for.  If they want their lifestyle drugs covered, they will get them.  If you don’t like one insurer’s attempt to steer you to generics, you can pick a different copay structure or dump that insurer.  To date, state legislatures have borne the burden of requiring coverages when they saw the need.  The House’s Benefits Advisory Committee will be the federal voice for mandated benefits.  With very big teeth.

I think what we will find is that this committee will become politicized and will do a very poor job of mandating truly public health services, especially relative to the status quo where most of this is already covered somewhere.  Instead, I predict that this Committee will become a lobbying target of choice for various practices and require significant attention from insurance carriers, distracting them from the preferred goal of designing benefits that people will value highly as evidenced by voluntary purchase.

The bottom line: there is something called benefit design and there’s something called claims approval.  Those are two different functions and the House and Obama seem focused on the first, while the latter is what, I believe, has soured people’s perceptions of insurers.

(for this post I chose to ignore a potential alternative interpretation of Obama’s quote, which is that he believes that people are currently dissatisfied with their insurance because it covers too many things and therefore doesn’t provide sufficient bang for the buck; in this interpretation, they would trust the government to trim their benefits but not private insurers.  Possible, but I just don’t see it.)

Update:  Section 132 of HR3200 does provide for an additional layer of claim denial review.  It’s just three paragraphs long, and I’m not clear at all what it will accomplish that the current insurance department / judicial review process does not.  Therefore, I stand by my assertions above, but I thought I’d mention this section, in case people want to dig that out.

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Written by Victor

July 17, 2009 at 3:41 am

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