What do we need health insurers for anyway?

By Michael Hiltzik
Los Angeles Times
February 28, 2010

(Before a congressional subcommittee, WellPoint’s chief executive Angela) Braly was forced to make an implicit admission that her industry almost never makes explicitly: The nation’s health coverage system is so hopelessly broken that even the health insurance industry can’t handle it anymore.

Her testimony, and other statements she and other WellPoint executives have made, suggests that insurers can’t profitably manage through periods of high unemployment. They can’t price policies in a way that keeps healthy young people in the same pool as older people, producing a mockery of the very point of indemnity insurance. Despite a decade of unobstructed consolidation, which was sold to regulators as a way to control healthcare costs by creating mega-insurers like hers, her industry can’t control healthcare costs.

Braly’s words are a reminder of the most important unasked question in the entire healthcare debate: What do we need insurance companies for, anyway?

The only way insurers can remain profitable at all is by selling healthy people on policies that don’t offer much coverage at all, while squeezing older, less healthy people remorselessly so they either pay for most of their care out of pocket or get priced out of the insurance market completely (thus becoming a burden for taxpayers).

Braly in her testimony assured the subcommittee that even with the latest California rate increases, “a 40-year-old woman in Los Angeles can obtain coverage with a $1,500 deductible for as low as $156 per month.”

She didn’t specify what kind of coverage. So let’s check out what her company offers. Leaving aside whether that 40-year-old woman might have a preexisting condition that would drive up her premium or make her uninsurable — anything from diabetes to a history of hay fever — the insurer’s California package with a $1,500 deductible requires the customer to pay up to 70% of the cost of “covered services,” including routine mammograms and Pap tests, plus as much as $500 a day for hospital stays.

Maternity isn’t covered at all, so our 40-year-old Angelena better have gotten her lifetime childbearing out of the way before picking up the phone to sign up.

“Our plans fit the way you live,” the CoreGuard brochure says. What it really means is: You better fit the plan, or you’re out of luck.

Shouldn’t that have been on the agenda at the Washington summit?

http://www.latimes.com/business/la-fi-hiltzik28-2010feb28,0,1011707.column

And…

Our plans fit your plans

Anthem Blue Cross

Anthem Blue Cross CoreGuard Benefits for California

Deductible: choices of $750 to $20,000 (with a second deductible for Out-of-Network services)

Coinsurance (In-Network): 50%
Coinsurance (Out-of-Network): 70%

Inpatient Services (In-Network): 50% Coinsurance plus $500 Copay per day (3 days)
Inpatient Services (Out-of-Network): 70% Coinsurance plus $500 Copay per day (3 days)

http://www.ehealthinsurance.com/ehealthinsurance/benefits/ifp/CA/CAAthem_CoreGuard.pdf

When WellPoint’s CEO Angela Braly boasts that a 40 year old woman can purchase $1,500 deductible coverage from them for only $156 per month, it’s important to see how they define that coverage.

Although Angela Braly didn’t state which $1,500 deductible plan has a premium “as low as $156,” let’s look at the Anthem Blue Cross $1,500 deductible CoreGuard plan as an example. Under that coverage, a 40 year old woman would have to pay twelve monthly premiums, the first $1,500 of In-Network care, the first $1,500 of Out-of-Network care, one-half of allowed In-Network charges after the deductible (coinsurance), 70% of allowed Out-of-Network charges after the second deductible (coinsurance) (Anthem Blue Cross paying only 30% of allowed charges!), an additional $500 per day for up to three days for hospitalization (a copayment on top of the coinsurance!), all maternity care (Anthem Blue Cross paying nothing!), and… well… you get it.

When Anthem Blue Cross promotes this product as a $1,500 deductible plan, they are being so deceptive that it is dishonest. They call these “look alike plans” – it looks like a $1,500 deductible plan, but it isn’t. The patient is paying most of the health care costs while Anthem Blue Cross pretends that this is insurance.

The more sophisticated insurance purchaser might look at this plan and recognize that it is almost worthless except that it has an out-of-pocket maximum of $3,500 for the year. So maybe it is worth the premium as a catastrophic plan, limiting losses to $3,500. But look closer. The fine print excludes the deductible from counting towards the out-of-pocket costs, so it is really $5,000, but only for In-Network services. Another $9,000 ($7,500 plus $1,500 deductible) has to be paid for Out-of-Network services as well. So the exposure is the total of monthly premiums, the In-Network $5,000, the Out-of-Network $9,000, all Out-of-Network costs in excess of the allowable charges, and any services, such as maternity care, that are not a benefit of the plan. This is another one of those you’re-covered-if-you-don’t-get-sick plans.

To show how ridiculous this can be, using the same benefit guide (link above) for a family with a $10,000 deductible plan, the out-of-pocket maximum looks like it is $7,000, but it is actually $17,000 for In-Network services ($7,000 plus $10,000 deductible), plus $25,000 for Out-of-Network ($15,000 plus $10,000 deductible). In addition to this $42,000, the family must pay monthly premiums, all Out-of-Network costs in excess of the allowable charges, and any services that are not a benefit of the plan (no maternity benefits for a young family!).

Angela Braly admits that WellPoint, the largest mega-insurer in the nation in terms of enrollees, cannot control health care costs, and neither can the rest of their industry. Their solution to keeping premiums affordable is to shift more of the health care costs to the individuals and families who need care, defeating the purpose of risk pooling.

Michael Hiltzik has asked the right question: What do we need insurance companies for, anyway?