Republicans Spurn Once-Favored Health Mandate

By Julie Rovner
NPR
February 15, 2010

For Republicans, the idea of requiring every American to have health insurance is one of the most abhorrent provisions of the Democrats’ health overhaul bills.

“Congress has never crossed the line between regulating what people choose to do and ordering them to do it,” said Sen. Orrin Hatch (R-UT). “The difference between regulating and requiring is liberty.”

But Hatch’s opposition is ironic, or some would say, politically motivated. The last time Congress debated a health overhaul, when Bill Clinton was president, Hatch and several other senators who now oppose the so-called individual mandate actually supported a bill that would have required it.

In fact, says Len Nichols of the New America Foundation, the individual mandate was originally a Republican idea. “It was invented by Mark Pauly to give to George Bush Sr. back in the day, as a competition to the employer mandate focus of the Democrats at the time.”

Pauly, a conservative health economist at the University of Pennsylvania’s Wharton School, says it wasn’t just his idea. Back in the late 1980s — when Democrats were pushing not just a requirement for employers to provide insurance, but also the possibility of a government-sponsored single-payer system — “a group of economists and health policy people, market-oriented, sat down and said, ‘Let’s see if we can come up with a health reform proposal that would preserve a role for markets but would also achieve universal coverage.’ “

The idea of the individual mandate was about the only logical way to get there, Pauly says. That’s because even with the most generous subsidies or enticements, “there would always be some Evel Knievels of health insurance, who would decline coverage even if the subsidies were very generous, and even if they could afford it, quote unquote, so if you really wanted to close the gap, that’s the step you’d have to take.”

One reason the individual mandate appealed to conservatives is because it called for individual responsibility to address what economists call the “free-rider effect.” That’s the fact that if a person is in an accident or comes down with a dread disease, that person is going to get medical care, and someone is going to pay for it.

“We called this responsible national health insurance,” says Pauly. “There was a kind of an ethical and moral support for the notion that people shouldn’t be allowed to free-ride on the charity of fellow citizens.”

So while President Clinton was pushing for employers to cover their workers in his 1993 bill, John Chafee of Rhode Island, along with 20 other GOP senators and Rep. Bill Thomas of California, introduced legislation that instead featured an individual mandate. Four of those Republican co-sponsors — Hatch, Charles Grassley of Iowa, Robert Bennett of Utah and Christopher Bond of Missouri — remain in the Senate today.

But the summary of the Republican bill from the Clinton era and the Democratic bills that passed the House and Senate over the past few months are startlingly alike.

Beyond the requirement that everyone have insurance, both call for purchasing pools and standardized insurance plans. Both call for a ban on insurers denying coverage or raising premiums because a person has been sick in the past. Both even call for increased federal research into the effectiveness of medical treatments — something else that used to have strong bipartisan support, but that Republicans have been backing away from recently.

And how does economist Pauly feel about the GOP’s retreat from the individual mandate they used to promote? “That’s not something that makes me particularly happy,” he says.

http://www.npr.org/templates/story/story.php?storyId=123670612

And…

Chafee’s political prescriptions – Republican Senator John Chaffee has his own proposals for health care reform

By Rich Lowry
National Review
January 24, 1994

Senate Minority Leader Robert Dole tapped (Sen. John) Chafee, a long-time student of health care, to craft the principles that 23 Republicans signed last fall as a buffer against the Clinton onslaught.

Chafee’s plan then looked, as critics said, like “Clinton Lite”: no price controls or employer mandates, but, universal coverage, a comprehensive benefits package, a National Health Board, and purchasing alliances. Before long Hillary Clinton, eager for Republican cooperation, was calling him her “counselor and advisor.”

In October Chafee’s bill was redrafted under pressure from conservatives and Dole. It went from having mandatory purchasing alliances–the linch-pin of the Clinton plan–to voluntary ones. “This is night and day,” says Don Devine, head of Citizens against Rationing Health, a group supported by the American Conservative Union. The plan now includes medical savings accounts–an essential feature of the conservative John Goodman plan. And Chafee puts off universal coverage to 2005, promising to extend coverage only as savings are realized.

Newt Gingrich delivered perhaps his sharpest attack on the Clinton proposal yet in a speech to Empower America December 14. And, significantly, in a December 16 news conference Dole said, “I don’t think there’s a [health-care] crisis.” He went on to endorse incremental reforms: “When we’ve got some areas we agree on, why not just go ahead and pass those early next year?” Administrative simplification, coverage for people with pre-existing conditions, malpractice reform, insurance portability–the list goes on–would improve the system without scrapping it.

http://findarticles.com/p/articles/mi_m1282/is_n1_v46/ai_14809418/

Comment: 

By Don McCanne, MD

In perhaps the greatest irony of the reform process, President Obama has scheduled a bipartisan health care summit in which the Democrats will submit a right-wing proposal similar to that crafted by conservative economist Mark Pauly and his market-oriented colleagues. The Republicans will offer nominal proposals that would provide no significant benefit in correcting the problems that we face with our health care system.

When President and Mrs. Clinton began their reform efforts, they understood the superiority of the single payer model, but they anticipated that it would be rejected as being a left-wing government program. They decided to stake out a position that they perceived to be in the middle, when in fact it was a market-oriented proposal that would have appeal more to those on the right except for the level of regulatory oversight.

Although with the Clintons already negotiating to the right of center, the conservatives moved the fulcrum of the negotiations further to the right by offering a counter-proposal for mandatory purchasing alliances – “a health reform proposal that would preserve a role for markets but would also achieve universal coverage.” The conservatives then again pulled up stakes and moved even further to the right by making them voluntary. The process ended with Sen. Robert Dole saying that all we needed was some incremental reforms. We all know what’s happened to our health care system since then.

President Obama clearly understands the superiority of the single payer model and has stated so on several occasions, going so far as to say that we would adopt single payer if we were starting from scratch. But the position he eventually staked out was far to the right, even further to the right than the initial Republican counter-proposal offered in 1993. He campaigned against an individual mandate to purchase private plans since they were not affordable to middle-income individuals and families. Although a pseudo-mandate has been included in the Democrat’s proposal, it would still leave tens of millions without coverage, falling short of the goal that conservative economist Mark Pauly likely envisioned.

This bipartisan process began on the right. Over the past couple of decades it has been pulled further and further to the right until it has deteriorated into a process in which we are looking for those reforms, all in right-wing territory, that we can agree on. We’re only one step away from returning to Bob Dole’s incrementalism – a path that leads ever downward into despair.

It’s not too late. We can start over with single payer – an improved Medicare that covers everyone. That would end our despair.

Republicans Spurn Once-Favored Health Mandate

By Julie Rovner
NPR
February 15, 2010
For Republicans, the idea of requiring every American to have health insurance is one of the most abhorrent provisions of the Democrats’ health overhaul bills.
“Congress has never crossed the line between regulating what people choose to do and ordering them to do it,” said Sen. Orrin Hatch (R-UT). “The difference between regulating and requiring is liberty.”
But Hatch’s opposition is ironic, or some would say, politically motivated. The last time Congress debated a health overhaul, when Bill Clinton was president, Hatch and several other senators who now oppose the so-called individual mandate actually supported a bill that would have required it.
In fact, says Len Nichols of the New America Foundation, the individual mandate was originally a Republican idea. “It was invented by Mark Pauly to give to George Bush Sr. back in the day, as a competition to the employer mandate focus of the Democrats at the time.”
Pauly, a conservative health economist at the University of Pennsylvania’s Wharton School, says it wasn’t just his idea. Back in the late 1980s — when Democrats were pushing not just a requirement for employers to provide insurance, but also the possibility of a government-sponsored single-payer system — “a group of economists and health policy people, market-oriented, sat down and said, ‘Let’s see if we can come up with a health reform proposal that would preserve a role for markets but would also achieve universal coverage.’ ”
The idea of the individual mandate was about the only logical way to get there, Pauly says. That’s because even with the most generous subsidies or enticements, “there would always be some Evel Knievels of health insurance, who would decline coverage even if the subsidies were very generous, and even if they could afford it, quote unquote, so if you really wanted to close the gap, that’s the step you’d have to take.”
One reason the individual mandate appealed to conservatives is because it called for individual responsibility to address what economists call the “free-rider effect.” That’s the fact that if a person is in an accident or comes down with a dread disease, that person is going to get medical care, and someone is going to pay for it.
“We called this responsible national health insurance,” says Pauly. “There was a kind of an ethical and moral support for the notion that people shouldn’t be allowed to free-ride on the charity of fellow citizens.”
So while President Clinton was pushing for employers to cover their workers in his 1993 bill, John Chafee of Rhode Island, along with 20 other GOP senators and Rep. Bill Thomas of California, introduced legislation that instead featured an individual mandate. Four of those Republican co-sponsors — Hatch, Charles Grassley of Iowa, Robert Bennett of Utah and Christopher Bond of Missouri — remain in the Senate today.
But the summary of the Republican bill from the Clinton era and the Democratic bills that passed the House and Senate over the past few months are startlingly alike.
Beyond the requirement that everyone have insurance, both call for purchasing pools and standardized insurance plans. Both call for a ban on insurers denying coverage or raising premiums because a person has been sick in the past. Both even call for increased federal research into the effectiveness of medical treatments — something else that used to have strong bipartisan support, but that Republicans have been backing away from recently.
And how does economist Pauly feel about the GOP’s retreat from the individual mandate they used to promote? “That’s not something that makes me particularly happy,” he says.
http://www.npr.org/templates/story/story.php?storyId=123670612

And…

Chafee’s political prescriptions – Republican Senator John Chaffee has his own proposals for health care reform

By Rich Lowry
National Review
January 24, 1994
Senate Minority Leader Robert Dole tapped (Sen. John) Chafee, a long-time student of health care, to craft the principles that 23 Republicans signed last fall as a buffer against the Clinton onslaught.
Chafee’s plan then looked, as critics said, like “Clinton Lite”: no price controls or employer mandates, but, universal coverage, a comprehensive benefits package, a National Health Board, and purchasing alliances. Before long Hillary Clinton, eager for Republican cooperation, was calling him her “counselor and advisor.”
In October Chafee’s bill was redrafted under pressure from conservatives and Dole. It went from having mandatory purchasing alliances–the linch-pin of the Clinton plan–to voluntary ones. “This is night and day,” says Don Devine, head of Citizens against Rationing Health, a group supported by the American Conservative Union. The plan now includes medical savings accounts–an essential feature of the conservative John Goodman plan. And Chafee puts off universal coverage to 2005, promising to extend coverage only as savings are realized.
Newt Gingrich delivered perhaps his sharpest attack on the Clinton proposal yet in a speech to Empower America December 14. And, significantly, in a December 16 news conference Dole said, “I don’t think there’s a [health-care] crisis.” He went on to endorse incremental reforms: “When we’ve got some areas we agree on, why not just go ahead and pass those early next year?” Administrative simplification, coverage for people with pre-existing conditions, malpractice reform, insurance portability–the list goes on–would improve the system without scrapping it.
http://findarticles.com/p/articles/mi_m1282/is_n1_v46/ai_14809418/

In perhaps the greatest irony of the reform process, President Obama has scheduled a bipartisan health care summit in which the Democrats will submit a right-wing proposal similar to that crafted by conservative economist Mark Pauly and his market-oriented colleagues. The Republicans will offer nominal proposals that would provide no significant benefit in correcting the problems that we face with our health care system.
When President and Mrs. Clinton began their reform efforts, they understood the superiority of the single payer model, but they anticipated that it would be rejected as being a left-wing government program. They decided to stake out a position that they perceived to be in the middle, when in fact it was a market-oriented proposal that would have appeal more to those on the right except for the level of regulatory oversight.
Although with the Clintons already negotiating to the right of center, the conservatives moved the fulcrum of the negotiations further to the right by offering a counter-proposal for mandatory purchasing alliances – “a health reform proposal that would preserve a role for markets but would also achieve universal coverage.” The conservatives then again pulled up stakes and moved even further to the right by making them voluntary. The process ended with Sen. Robert Dole saying that all we needed was some incremental reforms. We all know what’s happened to our health care system since then.
President Obama clearly understands the superiority of the single payer model and has stated so on several occasions, going so far as to say that we would adopt single payer if we were starting from scratch. But the position he eventually staked out was far to the right, even further to the right than the initial Republican counter-proposal offered in 1993. He campaigned against an individual mandate to purchase private plans since they were not affordable to middle-income individuals and families. Although a pseudo-mandate has been included in the Democrat’s proposal, it would still leave tens of millions without coverage, falling short of the goal that conservative economist Mark Pauly likely envisioned.
This bipartisan process began on the right. Over the past couple of decades it has been pulled further and further to the right until it has deteriorated into a process in which we are looking for those reforms, all in right-wing territory, that we can agree on. We’re only one step away from returning to Bob Dole’s incrementalism – a path that leads ever downward into despair.
It’s not too late. We can start over with single payer – an improved Medicare that covers everyone. That would end our despair.

Republicans Spurn Once-Favored Health Mandate

By Julie Rovner
NPR
February 15, 2010

For Republicans, the idea of requiring every American to have health insurance is one of the most abhorrent provisions of the Democrats’ health overhaul bills.

“Congress has never crossed the line between regulating what people choose to do and ordering them to do it,” said Sen. Orrin Hatch (R-UT). “The difference between regulating and requiring is liberty.”

But Hatch’s opposition is ironic, or some would say, politically motivated. The last time Congress debated a health overhaul, when Bill Clinton was president, Hatch and several other senators who now oppose the so-called individual mandate actually supported a bill that would have required it.

In fact, says Len Nichols of the New America Foundation, the individual mandate was originally a Republican idea. “It was invented by Mark Pauly to give to George Bush Sr. back in the day, as a competition to the employer mandate focus of the Democrats at the time.”

Pauly, a conservative health economist at the University of Pennsylvania’s Wharton School, says it wasn’t just his idea. Back in the late 1980s — when Democrats were pushing not just a requirement for employers to provide insurance, but also the possibility of a government-sponsored single-payer system — “a group of economists and health policy people, market-oriented, sat down and said, ‘Let’s see if we can come up with a health reform proposal that would preserve a role for markets but would also achieve universal coverage.’ ”

The idea of the individual mandate was about the only logical way to get there, Pauly says. That’s because even with the most generous subsidies or enticements, “there would always be some Evel Knievels of health insurance, who would decline coverage even if the subsidies were very generous, and even if they could afford it, quote unquote, so if you really wanted to close the gap, that’s the step you’d have to take.”

One reason the individual mandate appealed to conservatives is because it called for individual responsibility to address what economists call the “free-rider effect.” That’s the fact that if a person is in an accident or comes down with a dread disease, that person is going to get medical care, and someone is going to pay for it.

“We called this responsible national health insurance,” says Pauly. “There was a kind of an ethical and moral support for the notion that people shouldn’t be allowed to free-ride on the charity of fellow citizens.”

So while President Clinton was pushing for employers to cover their workers in his 1993 bill, John Chafee of Rhode Island, along with 20 other GOP senators and Rep. Bill Thomas of California, introduced legislation that instead featured an individual mandate. Four of those Republican co-sponsors — Hatch, Charles Grassley of Iowa, Robert Bennett of Utah and Christopher Bond of Missouri — remain in the Senate today.

But the summary of the Republican bill from the Clinton era and the Democratic bills that passed the House and Senate over the past few months are startlingly alike.

Beyond the requirement that everyone have insurance, both call for purchasing pools and standardized insurance plans. Both call for a ban on insurers denying coverage or raising premiums because a person has been sick in the past. Both even call for increased federal research into the effectiveness of medical treatments — something else that used to have strong bipartisan support, but that Republicans have been backing away from recently.

And how does economist Pauly feel about the GOP’s retreat from the individual mandate they used to promote? “That’s not something that makes me particularly happy,” he says.

http://www.npr.org/templates/story/story.php?storyId=123670612

And…

Chafee’s political prescriptions – Republican Senator John Chaffee has his own proposals for health care reform

By Rich Lowry
National Review
January 24, 1994

Senate Minority Leader Robert Dole tapped (Sen. John) Chafee, a long-time student of health care, to craft the principles that 23 Republicans signed last fall as a buffer against the Clinton onslaught.

Chafee’s plan then looked, as critics said, like “Clinton Lite”: no price controls or employer mandates, but, universal coverage, a comprehensive benefits package, a National Health Board, and purchasing alliances. Before long Hillary Clinton, eager for Republican cooperation, was calling him her “counselor and advisor.”

In October Chafee’s bill was redrafted under pressure from conservatives and Dole. It went from having mandatory purchasing alliances–the linch-pin of the Clinton plan–to voluntary ones. “This is night and day,” says Don Devine, head of Citizens against Rationing Health, a group supported by the American Conservative Union. The plan now includes medical savings accounts–an essential feature of the conservative John Goodman plan. And Chafee puts off universal coverage to 2005, promising to extend coverage only as savings are realized.

Newt Gingrich delivered perhaps his sharpest attack on the Clinton proposal yet in a speech to Empower America December 14. And, significantly, in a December 16 news conference Dole said, “I don’t think there’s a [health-care] crisis.” He went on to endorse incremental reforms: “When we’ve got some areas we agree on, why not just go ahead and pass those early next year?” Administrative simplification, coverage for people with pre-existing conditions, malpractice reform, insurance portability–the list goes on–would improve the system without scrapping it.

http://findarticles.com/p/articles/mi_m1282/is_n1_v46/ai_14809418/

In perhaps the greatest irony of the reform process, President Obama has scheduled a bipartisan health care summit in which the Democrats will submit a right-wing proposal similar to that crafted by conservative economist Mark Pauly and his market-oriented colleagues. The Republicans will offer nominal proposals that would provide no significant benefit in correcting the problems that we face with our health care system.

When President and Mrs. Clinton began their reform efforts, they understood the superiority of the single payer model, but they anticipated that it would be rejected as being a left-wing government program. They decided to stake out a position that they perceived to be in the middle, when in fact it was a market-oriented proposal that would have appeal more to those on the right except for the level of regulatory oversight.

Although with the Clintons already negotiating to the right of center, the conservatives moved the fulcrum of the negotiations further to the right by offering a counter-proposal for mandatory purchasing alliances – “a health reform proposal that would preserve a role for markets but would also achieve universal coverage.” The conservatives then again pulled up stakes and moved even further to the right by making them voluntary. The process ended with Sen. Robert Dole saying that all we needed was some incremental reforms. We all know what’s happened to our health care system since then.

President Obama clearly understands the superiority of the single payer model and has stated so on several occasions, going so far as to say that we would adopt single payer if we were starting from scratch. But the position he eventually staked out was far to the right, even further to the right than the initial Republican counter-proposal offered in 1993. He campaigned against an individual mandate to purchase private plans since they were not affordable to middle-income individuals and families. Although a pseudo-mandate has been included in the Democrat’s proposal, it would still leave tens of millions without coverage, falling short of the goal that conservative economist Mark Pauly likely envisioned.

This bipartisan process began on the right. Over the past couple of decades it has been pulled further and further to the right until it has deteriorated into a process in which we are looking for those reforms, all in right-wing territory, that we can agree on. We’re only one step away from returning to Bob Dole’s incrementalism – a path that leads ever downward into despair.

It’s not too late. We can start over with single payer – an improved Medicare that covers everyone. That would end our despair.

Health Care for America Now!
February 2010

The five largest U.S. health insurance companies sailed through the worst economic downturn since the Great Depression to set new industry profit records in 2009, a feat accomplished by leaving behind 2.7 million Americans who had been in private health plans. For customers who kept their benefits, the insurers raised rates and cost-sharing, and cut the share of premiums spent on medical care.

Executives and shareholders of the five biggest for-profit health insurers, UnitedHealth Group Inc., WellPoint Inc., Aetna Inc., Humana Inc., and Cigna Corp., enjoyed combined profit of $12.2 billion in 2009, up 56 percent from the previous year. It was the best year ever for Big Insurance.

Of the estimated $809 billion spent on private health insurance in 2009, the five biggest forprofit companies…  captured $232 billion.

Medical loss ratios for 2009:
WellPoint – 82.6%
UnitedHealth – 82.3%
Humana – 82.8%
Cigna – 81.2%
Aetna – 85.2%

http://hcfan.3cdn.net/a9ce29d3038ef8a1e1_dhm6b9q0l.pdf

Is health insurers’ profit 2% or 22%?
https://pnhp.org/news/2009/october/is-health-insurers-profit-2-or-22

Comment: 

By Don McCanne, MD

In a previous Quote of the Day (link above) it was pointed out that, for investor-owned private health insurers, the percentage of revenues reported as profits does not represent how lucrative the profits actually are for this industry. In light of record profits being reported, let’s look at an update of the numbers.

For purposes of these ballpark calculations, revenues are assumed to be premiums paid for purchase of the private plans (ignoring investment returns on reserves). The revenues are split into 1) a fund to be used to pay for health care benefits, and 2) funds to operate the business entity that is selling insurance services. The latter portion includes all administrative expenses and other costs of running their businesses, plus profits.

Those funds being held to pay for health care, in essence, are funds that belong to the insured and are merely being held by the insurers “in trust.” They are not part of the actual business operations of the insurers. Their exposure to risk is almost negligible since their actuaries continually adjust premiums so that they cover the potential risks.

Their actual business entity is the creation, marketing and servicing of their products that provide administrative services for health care financing. This is comparable to the service that they provide to self-funded employer health benefit programs. The actual business entity is very similar, but the employees’ health care funds are held “in trust” by the employer rather than the insurer.

Setting aside the “trust funds,” let’s look at what the actual expenses and profits are for the five biggest for-profit health insurers.

The non-weighted average of their medical loss ratios for 2009 is 82.8%. That means that 82.8% of revenues go into the “trust funds,” and 17.2% is retained for their administrative and other business expenses plus their profits.

These five companies had combined revenues of $232 billion. Of that, $192 billion went into the “trust funds,” and $40 billion went into their business operations and profits. Their combined profit was $12.2 billion. That $12.2 billion profit out of the $40 billion that they retained for their business expenses means that their actual profit averaged over 30%. Over 30%! No other industry has returns anywhere near this level.

The insurance industry often responds by saying that their profits are less than one percent of our total national health expenditures (NHE). Even if that is true, these five companies alone kept one-half of one percent of our NHE as their profits.

Some in the policy community say that eliminating profits of the private insurers won’t save enough to make a difference. But they miss the point. First, that $12.2 billion would provide for quite a bit of health care. But a far greater amount could be recovered by eliminating the administrative excesses of the insurers and the costs of the administrative burden that they place on physicians and hospitals.

But the most important reason is not even quantified. This intrusive industry has taken away our choices in health care by assessing heavy penalties for care provided outside of their restrictive networks, while putting in place numerous barriers to the health care that we need. Why do we reward these despicable people so richly for their unseemly, heinous acts?

We want a system that helps us get health care that we need, like Medicare, not one that impedes our access to care as they pick our pockets and snatch our purses.

Health Insurers Break Profit Records As 2.7 Million Americans Lose Coverage

Health Care for America Now!
February 2010
The five largest U.S. health insurance companies sailed through the worst economic downturn since the Great Depression to set new industry profit records in 2009, a feat accomplished by leaving behind 2.7 million Americans who had been in private health plans. For customers who kept their benefits, the insurers raised rates and cost-sharing, and cut the share of premiums spent on medical care.
Executives and shareholders of the five biggest for-profit health insurers, UnitedHealth Group Inc., WellPoint Inc., Aetna Inc., Humana Inc., and Cigna Corp., enjoyed combined profit of $12.2 billion in 2009, up 56 percent from the previous year. It was the best year ever for Big Insurance.
Of the estimated $809 billion spent on private health insurance in 2009, the five biggest forprofit companies…  captured $232 billion.
Medical loss ratios for 2009:
WellPoint – 82.6%
UnitedHealth – 82.3%
Humana – 82.8%
Cigna – 81.2%
Aetna – 85.2%
http://hcfan.3cdn.net/a9ce29d3038ef8a1e1_dhm6b9q0l.pdf
Is health insurers’ profit 2% or 22%?
https://pnhp.org/news/2009/october/is-health-insurers-profit-2-or-22

In a previous Quote of the Day (link above) it was pointed out that, for investor-owned private health insurers, the percentage of revenues reported as profits does not represent how lucrative the profits actually are for this industry. In light of record profits being reported, let’s look at an update of the numbers.
For purposes of these ballpark calculations, revenues are assumed to be premiums paid for purchase of the private plans (ignoring investment returns on reserves). The revenues are split into 1) a fund to be used to pay for health care benefits, and 2) funds to operate the business entity that is selling insurance services. The latter portion includes all administrative expenses and other costs of running their businesses, plus profits.
Those funds being held to pay for health care, in essence, are funds that belong to the insured and are merely being held by the insurers “in trust.” They are not part of the actual business operations of the insurers. Their exposure to risk is almost negligible since their actuaries continually adjust premiums so that they cover the potential risks.
Their actual business entity is the creation, marketing and servicing of their products that provide administrative services for health care financing. This is comparable to the service that they provide to self-funded employer health benefit programs. The actual business entity is very similar, but the employees’ health care funds are held “in trust” by the employer rather than the insurer.
Setting aside the “trust funds,” let’s look at what the actual expenses and profits are for the five biggest for-profit health insurers.
The non-weighted average of their medical loss ratios for 2009 is 82.8%. That means that 82.8% of revenues go into the “trust funds,” and 17.2% is retained for their administrative and other business expenses plus their profits.
These five companies had combined revenues of $232 billion. Of that, $192 billion went into the “trust funds,” and $40 billion went into their business operations and profits. Their combined profit was $12.2 billion. That $12.2 billion profit out of the $40 billion that they retained for their business expenses means that their actual profit averaged over 30%. Over 30%! No other industry has returns anywhere near this level.
The insurance industry often responds by saying that their profits are less than one percent of our total national health expenditures (NHE). Even if that is true, these five companies alone kept one-half of one percent of our NHE as their profits.
Some in the policy community say that eliminating profits of the private insurers won’t save enough to make a difference. But they miss the point. First, that $12.2 billion would provide for quite a bit of health care. But a far greater amount could be recovered by eliminating the administrative excesses of the insurers and the costs of the administrative burden that they place on physicians and hospitals.
But the most important reason is not even quantified. This intrusive industry has taken away our choices in health care by assessing heavy penalties for care provided outside of their restrictive networks, while putting in place numerous barriers to the health care that we need. Why do we reward these despicable people so richly for their unseemly, heinous acts?
We want a system that helps us get health care that we need, like Medicare, not one that impedes our access to care as they pick our pockets and snatch our purses.

Md. health care receives good marks

By Shantee Woodards
Maryland Gazette
February 10, 2010
Health care reforms in Maryland need only minor adjustments to be as effective as an insurance “exchange” established in Massachusetts, according to a new report that compared both states.
The report, released Wednesday in Annapolis by two insurance trade associations, found that Maryland’s current system of distributing insurance to small employers and individuals is adequate and takes the place of the so-called health insurance exchange offered in Massachusetts.
In Maryland, there’s an environment “where brokers can buy health insurance and it’s sold to individuals and it looks like our ‘Connector,’ ” said Jonathan Gruber, an author of the report and professor of economics at the Massachusetts Institute of Technology.
http://www.hometownglenburnie.com/news/Health/2010/02/10-21/Md.+health+care+receives+good+marks%0A.html

And…

A Health Insurance Exchange for Maryland?

Comparing Massachusetts and Maryland

By Robert L. Carey and Jonathan M. Gruber, PhD.
Maryland Association of Health Underwriters
National Association of Insurance and Financial Advisors of Maryland
The success of the reform generally, and the Connector specifically, in Massachusetts has motivated similar approaches both at the Federal level and in other states. Virtually every current proposal for reform at the state and Federal level includes some form of “exchange” that would organize and sell health insurance in the non-group and small group markets. The popularity of this approach raises the important question of whether the Massachusetts model can be replicated – and how much government involvement is required to make that a reality. The answer will clearly vary from place to place, and with the details of the proposed exchange.
In this report, we evaluate the possibility of setting up an exchange in Maryland. We begin with a detailed description of the non-group and small group markets in Massachusetts before health reform. We then discuss health reform in that state, discussing both the establishment of the Connector and its early role in health reform. We next turn to an evaluation of the non-group and small group markets in Maryland, and in particular the much more significant role played by intermediaries in that state. In many senses, intermediaries in Maryland play a role much like the Connector plays in Massachusetts. This makes the transition to an exchange much less onerous in Maryland.
http://www.marylandahu.com/broker_images/marylandahuorg/documents//mahu_exchange_study.pdf

Many experts touting the Congressional reform proposals have singled out the insurance exchange concept as being one of the most important avenues of reforming the private health insurance market. MIT Professor Jonathan Gruber was involved in designing the Massachusetts exchange and has been an independent-expert-on-the-dole for the administration and Congress as they move forward with the concept of private insurance exchanges.
In this report, commissioned by the insurance intermediaries that would be threatened by an insurance exchange, Robert Carey and Jonathan Gruber conveniently show that Maryland’s brokers are already providing the function of an exchange, so the transition to an exchange would be “much less onerous.” They seem to suggest that we could retain this middleman industry to fulfill the function of the exchange.
They are careful to say that they addressed this one issue only, and did not address the many other issues involved in reform. That’s important since Maryland’s private quasi-exchange has left 800,000 uninsured – over 14 percent of their population. Also Maryland citizens are facing the same outrageous increases in insurance premiums that citizens of other states face. Exchanges alone will not solve these problems.
The Gruber/Obama/Baucus approach to reform has been to take a group of individual policy proposals, such as the exchange, and patch them together in a comprehensive reform package. Each policy concept used has significant deficiencies. When you patch them all together, you still end up with a system that will leave tens of millions without insurance, with inadequate measures to stem health care inflation, with an expansion of underinsurance products, and with increasing financial hardship for America’s workforce and their families.
Private insurers are providing us with expensive, intrusive, and largely worthless services that take away our choices in health care. What good will it do to line them up in a private insurance exchange that adds only the imprimatur of the federal or state governments?
Using the most expensive and dysfunctional model of reform to build on the most expensive and dysfunctional health care system of all industrialized nations makes no sense whatsoever, especially when the goals of universality, comprehensiveness and affordability have been so mercilessly compromised.
The least expensive and most effective model would be to improve Medicare and include everyone. But Gruber’s microsimulation model is designed to assess private insurance solutions. It does not work for a single payer Medicare model.
Isn’t it time that we told Gruber to pick up his model and take a hike? Let’s bring in Steffie Woolhandler and David Himmelstein and take a closer look at their model. Of course the sponsors of this new report by Gruber and Carey would cringe at that prospect.