Harold Pollack

Harold Pollack

Harold Pollack is Helen Ross Professor in the School of Social Service Administration at the University of Chicago and faculty chair of the Center for Health Administration Studies.

All together now: We need comprehensive reform

Anthem Blue Cross's proposed 39 percent premium increase highlights the stark divide between liberals and conservatives in health reform. Harry Reid, key figures in the Obama administration, and liberal commentators are harshly criticizing Anthem. Conservatives argue that such premium increases are instead the product of government red tape and regulations.

Although Anthem and its parent company WellPoint make convenient poster children for the greediness of the insurance industry, the real lesson from this episode does not concern the real or alleged perfidy of any one firm. Rather, this episode underscores the need for comprehensive reforms if we have any realistic prayer of achieving universal coverage. Anthem is not especially unethical or mean. The company is trying to survive and thrive within an insurance market that is not sustainable, and that makes it too hard to treat people with the decency everyone deserves.

To anyone who follows health policy, there is nothing especially surprising going on here. For what it says and what it does not say, an editorial in today's Wall Street Journal is especially instructive:

Wellpoint's rate hikes are the direct result of the Golden State's insurance regulations--the kind that Democrats want to impose on all 50 states. Under federal Cobra rules, the unemployed are allowed to keep their job-related health benefits for 18 to 36 months. California then goes further and bars Anthem from dropping these customers even after they have exhausted Cobra. California also caps what Anthem can charge these post-Cobra customers.

Most other states direct these customers to high-risk pools that are partly subsidized, but California requires the individual market to absorb the customers and their costs. Even as California insurers have had to keep insuring these typically older and sicker patients, the recession has driven many younger, healthier policy holders to drop their insurance--leaving fewer customers to fund a more expensive insurance pool....

This episode is a preview of the adverse selection that would happen nationwide if Obamacare passes. The Democratic bills would control what insurers could charge and force them to take all comers, regardless of health status. These burdens were supposed to be made tolerable by requiring all Americans to buy insurance or face a penalty. Yet when this "individual mandate" proved to be unpopular, Congress watered it down so that younger customers would be able to pay the penalty knowing they can wait until they're sick to pay the more expensive premiums. The only way an insurer can make up for these higher costs is to raise premiums.

This happens to be a tendentious reading of the Senate and House bills. Both bills include many measures, as well as implicit and explicit subsidies, to encourage young people to become insured. Fully implemented, "Obamacare"--for want of a better term-- will provide 11-figure annual subsidies to low-income Americans and the chronically ill to make sure that everyone has access to coverage and care. These policies, along with the regulatory structure of the insurance exchange, are specifically designed to prevent the adverse selection the Journal conjectures Obamacare will bring.

Not that the Wall Street Journal would applaud if House and Senate Democrats strengthened the individual mandate. Last January 30, here was that same editorial page describing Governor Schwartzenegger's failed health reform efforts:

What the California collapse should discredit in particular is the individual mandate as a policy tool for Republican reformers. This was Mr. Romney's enthusiasm for a time, helped along by the Heritage Foundation. But in order to be enforceable, such a mandate inevitably becomes a government mandate, and a very expensive one at that.

Voters are rightly concerned about health care, but they also don't want to pay higher taxes to finance coverage for everyone. Mr. Schwarzenegger's spectacular failure shows that there's an opening for Republicans to make the case for health-care reform based on choice and tax-equity, not mandates and tax hikes.

That last paragraph highlights what is missing in this morning's Journal editorial:
What would happen to these older and sicker consumers if Anthem were free to drop them or to charge them markedly higher rates for insurance coverage?

Today's editorial claims that premium hikes occurs because California will not allow Anthem to drop unprofitable classes of older and sicker customers, and that California imposes an accompanying cap on premiums. It goes on to claim that "most other states direct these customers to high-risk pools that are partly subsidized." Harvard researcher Katherine Swartz has carefully studied the operation of such high risk pools. The bottom line is unambiguous. These are public policy disasters.

According to the Government Accountability Office, only 200,000 Americans are now covered in such arrangements, while millions of needy people with chronic illnesses go without. Even before the current economic crisis, high-risk pools were simply overwhelmed. Participating patients who have average household incomes of only $41,000 pay higher premiums than private insurers typically charge healthy individuals. Very sick people face painful deductibles, lifetime expenditure caps, and mandatory waiting periods during which they accumulate daunting bills.

It's expensive to care for people who live with chronic illnesses or serious injuries. The Journal suggests that we can't cover our sick or injured, friends, relatives, and neighbors without a strong individual mandate. The Journal suggests that that we shouldn't do that, either. They add that voters (presumably rightly) don't want to pay higher taxes to cover everyone, either.

The logical consequence of these positions is to cast people adrift, perhaps making ourselves feel better by referring them to over-subscribed high-risk pools where they are assigned to the waiting list. Or we--taxpayers, insurers, providers, other participants in the insurance pool--can pony up to ensure that every American has access to needed care.

The longer we deny this reality, the further our market for individual and small-group health coverage will unravel, and the more needless human pain will be inflicted on people who need help.

By Harold Pollack  |  February 18, 2010; 3:59 PM ET  | Category:  Health Care Reform , Individual mandate Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Get at the root causes | Next: What WERE They Thinking??


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Attention you freakin' freeloaders who are pushing a "Public Option."

According to the Wall Street Journal, Anthem-Blue Cross LOST $58 Million in California, this past year, due to changes in COBRA regulations, by King Obummer.

Insurance companies are required to keep certain reserves on hand, pursuant to state law.

Either do your homework or move to where you can play "Freddie the Freeloader" in Canada, Britain, Cuba or Venezuela.

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | February 22, 2010 5:43 PM
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When health insurance is outlawed, only outlaws will have health insurance.

Posted by: spudpuppy2000 | February 20, 2010 12:54 PM
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