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How can insurance companies include preexisting conditions without a health care mandate?

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If there's no mandate, and insurance companies are forced to give me affordable health care regardless of preexisting conditions, that means I only have to get health insurance when I come down with cancer. How can this work without a national mandate to buy health insurance like we have with auto insurance.

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

The mandate is Constitutional. I didn't think this issue existed. But to answer your question - insurance premiums must rise for all. For auto insurance, premiums are risk based. Medical would never be risk based, as it would not work for multiple reasons. So the alternative - all premiums rise.

Eric Keller
Title: Pres
Company: H R Keller & Co.
(Pres, H R Keller & Co.) |

Suggesting medical insurance should never be risk-based is ludicrous! First about pre-existing conditions - people would never buy health insurance until they were unhealthy if pre-existing conditions were forced to be covered. People would never buy homeowners insurance until after having a fire or the having the dog bite the mailman if "pre-existing conditions" were covered.

Why should a family whose 3 members take care of themselves pay the same health insurance premium that a family of 8 fat blobs who smoke would pay? There's a reasonable argument that community-rated health insurance is priced to the advantage of people who choose to be unhealthy. No wonder employers who pay health claims out of their corporate pockets have wellness programs to encourage healthy lifestyles!

No amount of worry and hand-wringing is going to change unhealthy peoples' behavior until it hits them in the wallet. Significant deductibles or co-payments should be the rule.

This Independence Day, let's get some more people thinking about their independence from asking the government to take care of all their problems. It's time for people to start being accountable for themselves to a greater extent than in the recent past.

Dabney Wellford
Title: CFO
Company: Wellford Consulting
(CFO, Wellford Consulting) |

Carla,

What needs to be understood is that insurance companies are trying to measure risk. Sometimes (not often) their underwriting standards are too high, and they do not close enough business. When that happens, guidelines are relaxed and premiums are lowered.

Everyone needs health insurance as it is the accepted manner in which discounts are negotiated with providers. Otherwise, you are paying retail dollars to see your doctor. If you do not establish yourself with insurance, you will ultimately pay more for services, unless you are young and, by definition, superhuman.

It is still a choice that we have as Americans where we can decide to buy and manage our health risk with. As to the Mandate - Bull - Obamacare is nothing but a poorly written tax mandate which only takes the country closer to socialism. The law misses the mark in so many ways - get rid of the state boundaries that insurance companies hide behind, outlaw drug advertising and limit it to medical journals that the doctors use, do something about liability covereage that the doctors buy and limit torts.

The law does address some areas that reign in the insurance companies. The bottom line is that you have to know how to play the insurance game and manage your cost, just as you manage cost in other areas.

Alan Lester
Title: Principal
Company: R. Ellis Advisors
LinkedIn Profile
(Principal, R. Ellis Advisors) |

It is my understanding that the only people to be taxed are those who choose not to have health insurance. Now, those who have insurance are also paying for those who don't. If the tax is only for those who choose not to buy insurance, the tax should be high enough to encourage everyone to have insurance. Why should those who have insurance pay for those who don't? Isn't this a form of socialism?

Richard Goldfien
Title: Managing Partner
Company: Auxilian Insurance Services
(Managing Partner, Auxilian Insurance Services) |

Here are a few random thoughts…..

If the only tool you have is a hammer, every problem looks like a nail. What we have come to call health insurance bears only a faint resemblance to insurance.

Insurance is a pooling of risk designed to mitigate the consequences of unforeseen and serious financial loss: It is not a funding mechanism for known expenses (e.g. annual checkups, allergy medication, Band-Aids, vaccinations, etc.); It is not a subsidy to allow the insured to pay less for losses already incurred.

Just because insurance is seen as “the” way we pay for health care, does not mean it is the best way to subsidize it for people who cannot afford it – the only attractive feature of this solution is that politicians can mandate it and tell people that it will not cost anything and then blame insurance companies (or doctors or ….) when the costs actually show up. Please keep in mind that no politician ever lost an election by badmouthing insurance companies.

If society determines that people must be given health care irrespective of their ability (or willingness) to pay for it, that’s a policy decision the people of this country are free to make, but that does not necessitate that they do it by forcing private insurance to serve as the financing and funding method (see previous point regarding the primary value of this approach).

Society also has the right to limit the amount of “free” healthcare it is willing to make available. The fact that some people may not get as much or as high-quality care as others may not seem fair, but on the other hand feeling bad about fairness does nothing to improve the quality or cost of care. Healthcare is not an infinite or free resource so it must be allocated (or to use another, more emotionally charged word, rationed). The fact that people don’t like this idea does not make it go away! We can argue about the plusses and minuses of HOW to ration (i.e., market-based, ability to pay, first-come-first served, specific limits on amount of treatment, cost/benefit - think death panel here, etc.) but it WILL be rationed until it is infinite and has no economic cost.

Healthcare is not a right. We depend on people who are willing to provide it in return for compensation, it is their right to determine what compensation is adequate for the provision of these services since it will be their obligation to provide them for such compensation.

Insurance always covers preexisting conditions. Risk underwriting is all about estimating the future costs of those conditions. For example suppose you had cancer, the cost to treat it could be very low or very high. If Insurance companies were allowed to price it correctly, they could group you with others that have a similar prognosis and charge you accordingly; this might actually still be valuable as the costs can vary dramatically. What real insurance cannot do in this instance is group people with that level of risk with others who have less known risk – that becomes a subsidy and the people with low risk leave and find another way to finance their own risk. It is only when regulators decide that this is not fair that insurance becomes unavailable; and again, their instinct is to turn it into a subsidy for some at the expense of others. It is one thing for society to generously give to those in need (and the United States has a great history and culture of doing that) but it is quite another thing for self-interested politicians to disguise or obfuscate the cost by implying it is a problem of and caused by the health insurance system – excess profits, greed, over-compensated executives, blah, blah, blah!!

Life is full of trade offs and there is no free lunch. We need to stop looking to politicians to solve this kind of problem (far more likely that they will create it) because that is not in their interest. Some politicians are wonderful and clearly well motivated but simply clueless about how well free markets can allocate resources (and improve quality, quantity and cost) without their help. Whatever their personal motivation however, their incentive system is based on them having you believe that you need them to solve such problems (i.e., they deserve your vote and are worth the price we pay to keep them working). It is not unreasonable or inappropriate to question their value proposition!

OK, I’m only scratching the surface here but I’ll stop rambling and just leave you with this: all of these issues can be addressed but I like to think that the fundamental political goal should be to implement policies (no pun intended) that encourage improvements in the value of healthcare products and services; the societal issue is how should these scarce resources be allocated. Clue: we have other tools than hammers, excuse me I mean insurance, available.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Follow-Up -People have stated, "Why should I pay for some one else that chooses not to have coverage until they need it?" Make no mistake, you pay for it now. There is a population of individuals today that use emergency rooms as their primary source of Healthcare. That is the most expensive form. In theory, with insurance these individuals will be free to make appointments with a Primary Care Physician, during office hours.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Regis -

Theory is grand, application in the real world is much more difficult (think change management or teaching an old dog new tricks).

Those who use the ER as a primary care physician will always use the ER. Those who are under the radar in our Health Care Insurance (scam) will always be under the radar (you have to file taxes to pay the penalty, if you don't file, how are they exacting that penalty?).

I wish someone would teach our federal legislators about the KISS principle.... but alas, how else can they accept PAC monies.... The following statement is not about any particular party, it is about the system which is broke and no one is interested in fixing it.

On this, the anniversary of the Declaration of Independence, I truly don't believe our founding fathers envisioned a congress so crippled by politics that it ignores the plights of our nation while they paralyze and hamper and ultimately mismanage our country.

Anonymous
(VP Finance) |

If the insurance companies were able to issue health policies based on risk, they would not insure the risky and only insure the healthy. That is why there are rules that protect us.

If health insurance was totally risk based, imagine the questions a health insurer would ask. Have you or any of your immediate family members ever have a so-and-so disease? With a yes (and we all do), that is a window for them to say no or gouge you. That is why we have group plans at work that shelter us and other rules why we can't get cut-off, cobra, etc. However not everyone does. Then imagine yourself at that time in your life with a pre-existing condition, no job, and are trying to get insurance.

So is a mandate (or even better a single payer like other countries) needed to cover people with pre-existing conditions? Yes because insurance companies would not otherwise, and >10% of the population will remain denied of coverage.

I see the country like a family, every child contributes to the household for room and board but if one child is unable to for whatever reason, you don't kick them out of the house (generally speaking with some liberties...). As such healthcare for all is a sensible thing to do, and many other countries do so. I'm happy America is beginning to do so now.

Richard Goldfien
Title: Managing Partner
Company: Auxilian Insurance Services
(Managing Partner, Auxilian Insurance Services) |

Hi Anonymous. I assume that your questions and comments are sincere so let me see if I can clarify a few things.

A good analogy to preexisting conditions in healthcare might be earthquake insurance. Earthquakes can cause tremendous damage in a very concentrated area and the area of damage can usually be predicted fairly accurately since earthquake zones are fairly well known.

The result of this fact pattern is that only people who are likely to be affected by earthquakes (or preexisting health conditions), may feel the need to have insurance. However, because the damage is relatively certain and can be extensive, the expected cost (the major portion of the premium) is very large, leading many people to conclude they cannot afford insurance.

There are many approaches to this “problem”: people who cannot afford the risk may choose to live outside of the earthquake zone; they may choose to live inside the earthquake zone and assume the risk personally; they can pay the true cost of earthquake insurance; they can mitigate the risk other ways such as buying or improving their home to be earthquake resistant, etc.

Often however politicians get involved because they want to make “insurance” affordable and there are several ways they could do this: provide a disaster-recovery fund using taxpayer dollars; provide subsidies to homeowners to allow them to purchase insurance, etc.

What has often happened however, is that regulators implement requirements that insurance companies that want to offer other products (typically homeowner’s insurance) in the state must also offer earthquake coverage, AND it must be at a reasonable price. Some insurers may decide that this interferes too much with their own risk management and decide to leave the state while others decide to build an “earthquake load” or additional premium into the rates for other coverages to recapture the premium lost as a result of mandated rates (think about how hospitals charge uninsured and privately insured patients to make up for below-cost Medicaid reimbursements).

This may work (it usually won’t for many reasons) but in any case it raises the question of why insurance customers who have little or no exposure to the risk should subsidize those who do? Please understand this is NOT the same as saying they do not want to solve the problem, it is just questioning why only those who buy insurance are obligated to cover the cost as opposed to all citizens who want to solve the problem. Sorry to be cynical but the key driver here is that politicians think that they can make policy that “solves” a problem and tell people that insurance companies can absorb the cost – it won’t cost you anything! When insurance companies raise rates or leave the market as a result they are blamed for causing the problem and criticized for putting profits before people (as if they could stay in business at a loss).

All that said, if insurers are allowed to price for risk, your statement that they would not cover high risk individuals is incorrect – the problem is that by forcing them to subsidize the riskier policyholders, it drives the less risky ones out of the pool. Again let me repeat something I said before, if people want to help others who cannot afford to pay for their own costs, I am all for that, but why ruin insurance for those who can still use it cost effectively when there are more logical and honest ways to pay for it?

Finally, when I am asked by people why insurers don’t cover those with preexisting conditions (and to be clear this usually means people who are certain to need expensive care in the near future), I sometimes ask them why they don’t just start an insurance company that covers people with preexisting conditions with low prices? There is no doubt that they could sell a ton of it as they clearly would not have much competition, so I suspect that they might have a small problem trying to raise capital from investors to start the company -- if they don’t have enough money of their own to invest of course!

Look, I get that it is a complex issue, but left to run their own business, insurance companies will try cover everyone they can, because that is in their best interest too. Those who are uninsurable certainly raise difficult issues, but there are a lot of ways to address them without hijacking the insurance industry and ruining it for those whom it could potentially provide great value.

I hope this helps.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

You may find this interesting. Just released by Gallup this morning - "Fewer U.S. adults aged 26 to 64 are getting health insurance from an employer in 2012, continuing a downward trend that began in 2008. However, the decline in the percentage of 18- to 25-year-olds with insurance through an employer has now ceased."

Without the numbers, we truly don't know the impact of this legislation.

Nadia Jovianni
Title: manager
Company: Free to one
(manager, Free to one) |

What they do is limit benefits related to the existing condition for the first year of coverage.

I've never supported any action to prevent insurance companies from protecting themselves from the financial ravages of having to immediately cover pre-existing conditions in full. That would kill insurance companies, which would not be a good thing at all.

Of course, better than a mandate would be free-market solutions to the problem, so that there could be interstate competition for insurance, giving people more choice and the benefit of lower costs due to more competition between insureres. Throw in tax credits for individuals at the same level that companies get for offering health care as a benefit, and you have created a condition where people can own their own insurance policies, and which will be portable for them, so they do not keep having to worry about it when they change employment.

And, as ever, there is nothing in the Constitution that gives the federal government any authority to have any control or direct any resources to health care or health insurance. You can check this out small group health insurance colorado http://2healthinsurance.net/tag/small-group-health-insurance-colorado/
BR

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