Healthy? Insurers don’t buy it
Minor ailments can thwart applicants for individual policies.
By Lisa Girion
Los Angeles Times
December 31, 2006
Insurers have wide latitude to choose among applicants for individual coverage and set premiums based on medical conditions. Insurers say medical underwriting, as the selection process is known, is key to keeping premiums under control.
“Our goal is to extend affordable coverage to as many people as we can,” said Cheryl Randolph, a spokeswoman for PacifiCare Health Systems Inc., a subsidiary of Minneapolis-based UnitedHealth Group Inc. “But because of the medical underwriting, we do not accept everybody.”
Consumer advocates see the practice as cherry-picking — a legal form of discrimination that is no longer tolerated in schools, public accommodations or workplaces — and a way to guarantee profits.
“The idea is to avoid all risk,” said Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego.
A consumer survey this year found that 1 in 5 people who applied for individual coverage was turned away or charged a higher premium because of preexisting conditions. Experts say it is hard to know how many of California’s more than 6 million uninsured residents are uninsurable because many people with medical problems don’t even bother applying in the belief that they would be rejected.
Insurers say they are picky because they have to be.
Kaiser Permanente’s “fairly generous” benefits require that the health maintenance organization be restrictive to remain solvent, spokesman Jim Anderson said. “We have to be very careful to not enroll a bunch of people who are going to spend all the money on their care.”
A last resort for people turned away by the private market is the state’s high-risk pool, in which the state assumes the financial risk but pays private insurers to administer coverage. Enrollees spend as much as one-third of their income on monthly premiums that cost as much as $796. Yet annual benefits are capped at $75,000.
Still, demand perennially outstrips the high-risk pool’s capacity, which has been reduced over the years as medical costs have risen and funding has remained largely limited to state tobacco tax revenue and enrollee premiums. Of 32 states with medical high-risk insurance pools, California’s is one of the largest, covering 7,800 people.
http://www.latimes.com/business/la-fi-reject31dec31,0,3951790,full.story?coll=la-home-headlines
Comment:
By Don McCanne, MD
In the debates on health care reform, those supporting private insurance solutions are frequently confronted with the problem of those denied coverage due to medical underwriting. Their glib answer usually cites the various state high-risk insurance pools that, though not perfect, take care of that problem. Most audiences accept that response and move on. But should we?
Look at California’s high-risk pool – one of the largest in the nation. For close to $800 per month, the individual’s coverage ends after $75,000 in expenses. In this day when some consumer-directed advocates are recommending deductibles of $25,000 or $50,000, you can see that $75,000 isn’t much coverage. And talk about waiting lists – only 7800 of California’s 6,000,000 plus uninsured have been able to obtain this coverage, a mere 0.0013 percent of the state’s uninsured!
Do not let anyone ever again claim that state high-risk pools are taking care of this problem.
What is the answer? Some states have required that all applicants be accepted (guaranteed issue) and that rates be established based on the risks of the population covered (community rating). But this drives up insurance premiums, causing more to drop their coverage thereby increasing the numbers of uninsured.
Another current recommendation is to establish government reinsurance. After covering (or dodging) the first $50,000 or so of medical expenses, the private insurers would be relieved of further responsibility for pooling risk. But this is where the heavy spending is. Why bother leaving the egregiously wasteful private plans in charge if we shift the insurance function over to the taxpayers?
We’re back to the fundamental problem that has created all of the turmoil. Health care has become too expensive for average income individuals to fund their proportionate share. We are already spending an average of $7100 per person – over $28,000 for a family of four (when median family income is about $44,000 per year). It is an absolutely inescapable fact that, if we expect everyone to have reasonable coverage, we will have to establish a more effective pooling mechanism that not only transfers funds from the healthy to the sick, but also transfers funds from the wealthy to those not so wealthy who need health care.
The private insurance industry will never provide the framework that will accomplish this. They have made their position clear. “We do not accept everybody,” and “We have to be very careful to not enroll a bunch of people who are going to spend all the money on their care.”
A single, publicly funded, universal risk pool is precisely the structure we need. Yet we continue to support policies that protect and enhance the private insurance industry at the cost of affordable access to health care for those with needs. Doesn’t “do not accept” and “careful not to enroll” give us the moral authority to throw these buttinskies out?
