This Is How Screwed Up Our Concept of Health "Insurance" Has Become
Kevin Drum quotes favorably from Chad Terhune at the LA Times
Some insurers are chasing after much smaller customers with new plans designed to limit employer payouts for big claims using what's called stop-loss policies. This guarantees that businesses won't be responsible for anything over a certain amount per employee, perhaps as low as $10,000 or $20,000, with the rest paid by an insurer. Regulators and health-policy experts say this arrangement undercuts the notion of self-insurance since employers aren't bearing much of the risk, and it allows companies to circumvent some state insurance rules.
"This is not real self-insurance. This is clearly a sham," said Mark Hall, a professor of law and public health at Wake Forest University who has studied the small-business insurance market. "Regulators have good reason to be concerned about the potential harm to the market."
Self-insurance is attractive for many reasons, particularly the prospect of lower costs. It's exempt from state insurance regulations such as mandated benefits, granting employers the flexibility to design their own benefit package and the opportunity to reap some of the savings from employee wellness programs. A federal law, the Employee Retirement Income Security Act, or ERISA, governs self-funded plans. Some aspects of the Affordable Care Act do apply to self-insurance, such as the elimination of caps on lifetime benefits and some preventive care at no cost.
Yeah, it's a scam.
In a reasonably sane world, and in all other contexts outside of health care, insurance is obtained at relatively low prices to cover only catastrophic events that would be potentially bankrupting. Car insurance does not cover oil changes and home insurance does not cover oven repairs. So why is it that Drum is arguing that we should ban insurance policies that only cover catastrophic losses and not routine costs? After all, the second sentence in the first paragraph from the LA Times sure seems to define exactly what insurance should be (and is similar to my personal policy, which has a high deductible attached to a health savings account).
The problem is that when Drum and the Left use the word "health insurance" they are actually referring to a bundle of four items
- Traditional catastrophic insurance against large, unexpected, bankrupting charges
- Third party payment / capitation for entirely routine and expected health expenditures, from physicals to contraception
- Crony payoffs for favored constituencies, mainly via mandated benefits rules. This payoff may be to consumers, e.g. young women like Sandra Fluke who have the rest of us pay to maintain her sex life; or it may be to corporate cronies, who are able to get their particular device or procedure or service included in the mandated benefits, guaranteeing a large stream of customers who don't care a bit what the product or service costs because it is now paid for by a third party.
- Social engineering, in the form of embedded incentives to promote certain favored behaviors like seeking preventative care or eating better. And when the government is paying the bill, the policy becomes a Trojon horse for government micro-management of our lives in the name of health cost reduction.
The second item seems to be a paradigm embedded in the mind of everyone in the US today, that health plans somehow need to cover every imaginable health-related expense. Outside of an HMO model where these expenses are managed, this is a recipe for a cost explosion. If we all had pre-paid car policies that bought our cars for us with low deductibles, no one would be driving a seven-year-old Nova. The third and fourth items are Trojan horses for state control and cronyism that politicians are desperate to preserve. So it is not surprising that efforts to roll back insurance to just be, well, insurance is met with anger by would-be authoritarians. The question is, why do we listen to them?
