But I’m curious as to how this sort of reimbursement change might impact patient care.  The way our medical system is currently structured, most health care providers are paid per-patient and per-procedure.  If a person goes in for knee surgery and the surgeon operates on the wrong knee, this would qualify as a “never event”.  Once the problem is realized, what if other doctors become involved in fixing the situation and operating on the correct knee?  Would none of them be paid for their time?  What if the patient loses confidence in the surgeon and requests that another surgeon at the hospital perform the second surgery?  What safeguards would be in place to assure that the patient still receives top-notch care following the “never event”, given that the care would be provided for free?  I suppose that’s where malpractice insurance comes in…

Ideally, we should have enough safeguards in place that “never events” truly never happen.  But even if we eliminate the worst errors, there are still a lot of medical errors that could be prevented with extra checks and fail-safe systems in place.  As long as we have systems in place to make sure that treatment to fix mistakes – unpaid – is provided with the same diligence as treatment that is being reimbursed, I think that a trend towards not paying for mistakes could go a long way towards reducing the number of preventable medical errors in our hospitals.

I found David Williams’ article in last week’s health wonk review, hosted by The Lucidicus Project.

I’m happy to see a recent report that indicates that health insurance companies are indeed working to be better stewards for the customers they serve – insureds and providers.  In 2008, health insurance companies paid providers 5.3% faster and denied 9% fewer claims when compared with 2007.  This is what the health insurance industry is in business to do: pay claims, and pay them quickly.  Denying claims and delaying payments might save money in the short term, but it also generates ill will, which doesn’t bode well for long term success.  In order to continue to be profitable, private health insurance companies have to prove to insureds and providers that they are helpful and worthwhile.  I’m glad to see that they are making strides in this area.

The AthenaHealth report recently ranked Humana, Aetna, and Cigna at the top of a list of insurance companies, with rankings based on speed of payment, efficiency, claim denial rates, and several other factors.  We have worked with Humana since our early days in the health insurance industry, and added Aetna to our lineup when they entered the individual market in Colorado a few years ago.  Cigna – a major player in the large group market – entered the Colorado market with individual plans in January.  It’s nice to see that the top three companies in the Athena report are all available for our clients in the individual market.

Hopefully 2009 will show more improvements in terms of how efficiently health insurance companies process and pay claims.  And ultimately, we’d like to see them providing coverage for the nearly 50 millions Americans who are currently uninsured.

Jaan points out that state health insurance regulations have thus far kept health insurance carriers from getting too big; they tend to be somewhat fragmented by states or by regions, rather than being national entities.  But his concern is that if a public plan were introduced to compete with private health insurance, there would likely be a rash of mergers in the private health insurance sector, leading to bigger, national companies that might indeed become “too big to fail.”

From the perspective of working in the health insurance industry, I can say that there are already plenty of national health insurance companies.  Companies like Cigna, Aetna, United Healthcare, and Humana are all national carriers.  This doesn’t mean that they offer policies in every state, but they have policies in many states – typically all of the states with regulations that fit their business model.  The Blue Cross Blue Shield plans are often misunderstood in that people think of them as one national company when this is not the case.  The “Blue” name is licensed by health insurance carriers in different states or regions, with the carriers being entirely separate companies from one state (or region) to the next.  For example, here in Colorado, Anthem is the health insurance company that has licensed the Blue Cross Blue Shield name.  So in Colorado, Anthem is synonymous with Blue Cross Blue Shield.  There are several other states where Anthem BCBS offers health insurance, but in each state the policies are different to comply with the state’s specific regulations.

In addition to the smaller, regional health insurance companies, there are plenty of national carriers.  A HumanaOne policy in Colorado will have different underwriting guidelines, different pricing, and different coverage than HumanaOne policies in other states.  But all Humana policies are issued by the same company.  So while the Blue Cross Blue Shield name is licensed by numerous health insurance carriers across the country, and while there are plenty of small state and regional health insurance companies in operation, many of the big name health insurance carriers are already national corporations.

I think that Jaan’s prediction of mergers following the introduction of a public health insurance program is probably very accurate.  Since a public health insurance plan would have an economies of scale advantage over private carriers, it would make sense that the private carriers would want to emulate this model as much as possible.  Mergers and buyouts would be the obvious way for big private health insurance companies to rapidly increase their membership numbers.  Although such mergers would have to comply with anti-trust regulation, which might limit their scope.

I would argue that instead of being considered too big to fail, major health insurance carriers might be seen as too important to fail.  A behemoth  like AIG can be seen as too big to fail simply because of the scope of their reach – nearly all Americans would have been indirectly impacted by the failure of AIG.  But while AIG’s collapse would have been primarily indirect (ie, it would likely have delivered a devastating blow to the financial industry as a whole), health insurance companies work directly with individual Americans.  Even when a group policy is set up through a large employer with thousands of employees, the individual employees are the ones who carry the id cards with the insurance carrier’s logo on them.

As Jaan pointed out in his article, health insurance carrier profits aren’t as healthy as they once were.  But overall the companies are still doing all right, despite the pounding that the economy has been taking for the last year.   Now imagine for a minute that this were not the case.  If a small health insurance company were to fail (leaving its insureds high and dry), it would certainly create regional ripples, but might go largely unnoticed on the national radar.  But I honestly cannot imagine a large, national health insurance carrier going under.  If any of them seemed to be heading in that direction, I have to assume that the government would intervene, either arranging a merger with another health insurance company or providing some type of bailout.  With more than 47 million people currently uninsured, I doubt that the government would stand by and watch the number of uninsureds spike upwards because of the failure of a major health insurance carrier.

I think that at this point, the taxpayers are sick of the idea of bailouts, and corporations know that getting them in the future will be much more difficult.  There will be more concessions involved, and companies will likely see bailouts as a last resort.  I’m glad that health insurance carriers have weathered the economic storm better than some of the rest of the insurance industry, and I hope this continues to be the case.

I found Jaan’s article in the Health Wonk Review, hosted last week at Pizaaz.  Not only are there plenty of great articles, but the introduction to the HWR deserves a read as well.

But while the higher rates for younger women has been getting a lot of media attention over the last year or so, I don’t see nearly as much discussion about the fact that men typically pay higher rates than women later in life.  To illustrate the differences, I ran quotes for a few imaginary friends.  A male and a female who are 30, and another male and female who are 61.  All four are healthy non-smokers living in Colorado.  I looked at premiums for $5,000 deductible HSA qualified policies from Anthem Blue Cross Blue Shield, Aetna, Assurant, Cigna, Humana, and United HealthOne.  Here are the monthly premium price ranges for those five health insurance companies:

• 30 year old male:  $51 to $89
• 30 year old female:  $79 to $130
• 61 year old male: $231 to $461
• 61 year old female:  $258 – $359

Out of the six Colorado health insurance companies I looked at, the lowest priced one was still less expensive for the 61 year old male than for the 61 year old female.  But four of the six companies had lower prices for the female, and on the higher end of the scale the difference was dramatic ($359 for the female versus $461 for the male).  This is a reversal of the differences we see for the 30 year olds, where the high end of the scale is dramatically less for the male than for the female.  While most health insurance companies do start to charge less for females than males by about the age of 55, I rarely see this aspect of the debate in articles devoted to the topic of individual health insurance premiums and gender.

I can see where the lawmakers are coming from on HB1224.  But I’m curious as to whether those same lawmakers would advocate that auto insurance companies and life insurance companies be required to charge the same rates to males and females?  How much weight should statistical use of services be given in setting premiums for any type of insurance? It’s a valid question, and fairness doesn’t always mesh well with statistics.

My concern with HB1224 is that it doesn’t do anything to address the soaring cost of health care.  As long as health care keeps getting more expensive, so too will health insurance premiums – for both men and women.  If lawmakers decide to disallow the use of gender to determine individual health insurance premiums in Colorado, the result will be that younger women and older men will have lower premiums, while younger men and older women will have higher premiums.  There won’t be any actual benefit to the overall population – health insurance will still be the same price, but the premiums will be averaged across men and women alike.

My concern is that non-profit does not necessarily mean low cost and efficient.  Profit is what is left over after expenses are calculated, and those expenses include everything from CEO salaries to artwork in hospitals.  Another bonus for non-profit health insurance plans – as with any non-profit – is that they can apply to the IRS for income tax exempt status, and many do.  Here in Colorado, Kaiser is tax exempt, and has had to work deals with our insurance commissioner recently to determine how to best utilize the $700 million that they had in reserves.

As a test, I got quotes for myself for a $5000 deductible HSA qualified plan with 100% coinsurance from six different Colorado health insurance carriers: Aetna, Anthem Blue Cross Blue Shield, Assurant, Humana, Kaiser, and United HealthOne (Golden Rule).  The prices ranged from $78 to $130.  Kaiser was $93, higher than Assurant, Anthem Blue Cross, United, and Humana.  So although Kaiser is a non-profit health care system, in the individual market they are not providing less expensive health insurance than the for-profit health plans in Colorado.

I do agree with the rest of the comment: guaranteed issue individual health insurance will only work if everyone is required to buy into the system, and “Who pays the tab doesn’t change the underlying problem that we have runaway demand for very expensive care supplied by an inefficient system.”  One way or another, a lot of reform is needed.

I recognize that drug companies produce some vital medications.  My father’s autoimmune disease and resulting kidney failure would no doubt have killed him by now without drugs created by “big pharma.”  For that, my family is grateful.  And I know that there are lots of other families in similar situations, with a loved one still alive thanks to research and development done by pharmaceutical companies.  But there are plenty of questionable practices in the pharmaceutical industry (as there are in just about any for-profit industry).

What it really boils down to is that it doesn’t matter how great the drugs are if people can’t afford them.  When seniors with confusing Medicare D plans are struggling to pay for their out of pocket expenses for their drugs, something is broken.  And allowing Medicare to negotiate prices is a plausible way of curtailing the upward spiral in drug pricing.  Here in Colorado we’ve seen more and more health insurance carriers increase copays for drugs, add prescription deductibles, or cover only generic drugs in an effort to keep prescription costs under control.  And unless something changes in the way drugs are priced, I doubt that health insurance carriers will be likely to start increasing coverage anytime soon.

People (probably in the pharmaceutical industry) will no doubt be crying foul, and claiming that with an estimated $10 – $30 billion cut in revenue if Medicare gets to negotiate lower prices, pharmaceutical research and development will suffer.  But let’s look at the numbers.  Health insurance carriers are often criticized for the profits they earn.  But when we look at the five Fortune 500 health insurance companies (Wellpoint, United, Aetna, Humana, and Cigna) the profits as a percentage of revenue are between 2.3% and 7%.  They’re not losing money, but they’re not bringing down the house either.  Now let’s consider the pharmaceutical industry.  There are 12 companies in the Fortune 500 list, and only two (Abbott and Bristol-Myers Squibb) have profits below 10% of their revenue.  Phizer’s 2007 profit was nearly 37% of their revenues.  Those are some pretty big numbers.  They even make the oil and gas industry profit margins seem small.  So let’s not feel too sorry for big pharma.  I think they’ll be ok, even if Medicare gets to negotiate drug prices.

That’s about to change. Aetna will join the other health insurance carriers in Colorado when they start offering policies for tobacco users with a rate increase as of September 1, 2008. Nobody likes to see higher health insurance rates for any group, but it’s logically difficult to justify giving the same premium to smokers and non-smokers alike. Tobacco use damages health. There’s the obvious long-term effects – cancer, heart disease, strokes… but there are also lots of smaller, day to day effects, things like asthma, bronchitis, allergies, more frequent colds, etc. These little things all add up, especially if the insured seeks medical treatment for them. And since the decision to smoke is a personal one – and one that can be changed – it really only makes sense to charge a higher premium to smokers. On the plus side, I’ve never met a smoker over the age of 18 who hasn’t tried at least once to quit. So one more incentive to do so – namely higher health insurance premiums – can actually be a benefit to smokers looking for a reason to give quitting another shot.

When I saw the report card, the first thing that stood out for me was how well Medicare did. I know that their reimbursement rates are much lower than private health insurance companies, but at least they do what they say they will. 98% of their claims were paid at the contracted rate – the next closest was Coventry with 87%, and United Healthcare only paid according to the contracted rate schedule 62% of the time. So at least with Medicare, doctors know what they’re going to get. In the transparency and accuracy categories, Medicare was by far the best insurer. To me, these are the categories that matter most. Denials might not be the fault of the insurer – perhaps the patient went in for a service that’s not covered by their policy (as is the case for nearly 60% of United Healthcare’s denials), or maybe the physician made a billing error. These are things that are out of the insurer’s control to a large extent. But every health insurance company should be making allowable amounts readily available to physicians, and should be honoring the contracted amounts when claims are being paid. Otherwise, what’s the point of having a contracted amount in the first place? We’re big fans of transparency in health care, and we know what a drag it is to be thwarted in your efforts to obtain accurate billing information. So while the opponents of a universal health care system love to bash Medicare, it looks like a national system for all Americans based on the Medicare model would at least be a lot more transparent than the system we currently have. Doctors might get paid less overall, but they wouldn’t have to spend so much time dealing with several different insurance billing systems, or wonder how much they are going to get paid for a particular service.

Another thing that caught my attention was the number of denial codes that simply had to do with incomplete claim forms. Things like missing or incomplete patient, treatment, or provider information. How is this happening in the age of electronic medical records and Web 2.0? I remember when we used to use paper applications with our clients. We would have to proofread the apps before we submitted them to the health insurance companies, but every once in a while something would get through with missing information. In general it was a slow and error-prone process. But several years ago insurance carriers started making applications available online, and removed nearly all of the human error issues. The online applications don’t allow you to move forward if information is missing, and since everything is typed, nobody has to decipher someone else’s handwriting.

If health insurance billing could be set up with a universal computer-run system, used by all physicians and all health insurance carriers, the denials because of errors would surely decline. As it is now, every company has their own billing system (and based on the report card it looks like some of them even have proprietary codes) and doctors have to submit claims in a different way for each insurance company. Think how easy, transparent, and time-saving it would be if they were all on the same, simple system. But with our profit-driven, private health insurance system, a change like this would have to be pushed through from the doctor’s side, because it’s unlikely that the health insurance carriers are going to want to work together to develop a universal billing system. But it sure does make a good case for a government-run universal health care system.