I’ve been thinking about this for the last couple days.  First of all, health insurance companies have some work to do in the public opinion department.  So it is a bit of a mystery to my as to why the executives who met with congress were so adamant that rescission not be limited to cases of intentional fraud.

But the flip side of the issue is that it’s tough to really differentiate between intentional fraud and accidental omission.  The only person who really knows what an applicant’s intentions are is the applicant.  Do we use the “reasonable and prudent person” idea here?  Would a reasonable and prudent person forget that she had been hospitalized or taken to the ER?  Probably not.  Might she forget that she had been treated for a sinus infection six years ago?  Perhaps.

When I was new to the health insurance business, I remember hearing a story about a lady who “forgot” to mention on an application that she had emphysema.  She was later diagnosed with cancer and her policy was rescinded.  There is no part of me that believes that a person with emphysema could answer “no” to the question about lung/respiratory conditions and chalk it up to an accidental omission.  Health insurance applications are designed to eliminate accidental omission as much as possible.  There are health questions relating to pretty much every body part and organ system.  And then there’s a catch-all question at the end, asking for details about any conditions not specifically mentioned.  Any illness that required more than a passing glance from a doctor would be tough to forget when answering such specific questions.

Some people do lie intentionally when completing health insurance applications.  These people might not realize that rescission is a possibility, and might not understand what a dicey situation they’re putting themselves in.  In Colorado we have a high risk pool health insurance policy that is available for people who don’t qualify for individual health insurance.  Cover Colorado is far superior to getting an individual policy based on a fraudulent application.

Another problem is bad agents.   Over the years we’ve spoken with numerous clients who tell us that they have condition XYZ, but mention that their last agent told them that they didn’t have to list it on their application.  I have no idea what these agents are thinking.  All of us know about the possibility of rescission – it’s a basic part of health insurance license training and continuing education.  I don’t know if these agents are just trying to secure their own commissions, or if they honestly think that the condition is minor enough that it doesn’t need to be listed, or if they think that not listing it will make the process easier for their clients.  But no agent should ever tell a client to leave anything off of an application.  If a condition is minor enough to not be an issue, the underwriters will dismiss it.  But that is a decision for underwriters, not agents or applicants.  Any other course of action is way too risky.

The waters get pretty murky when it comes to looking at an application and determining what an applicant’s intentions were.  Did the person set out to deceive the insurance company?  Were they completing the application at the end of a long day, with a crying baby and a kid who needed help with homework?  Did one person complete the application for an entire family, and forget to mention a treatment that a spouse had several years ago?  Did they ask their agent for advice and get told that they could just not mention the condition on the application?

Several years ago, I spoke with a representative from Anthem Blue Cross Blue Shield about the issue of policy rescission.  She told me that – at least here in Colorado – rescission is reserved for serious cases where significant conditions are left off of applications, and that had the conditions been revealed during the application process, coverage would have been declined.  To me, this seems fair.  If a pre-existing condition is revealed after the approval process is complete, it should be underwritten just as it would have been if it had been noted on the application.  Trying to determine whether an applicant intentionally lied or genuinely forgot would just be speculation anyway.

Electronic medical records that allow underwriters to see complete medical histories at the time of application would greatly reduce the number of policy rescissions.  Then again, there’s a lot of talk on the table right now about eliminating medical underwriting all together, which would solve the problem once and for all.

The point is, there really is no one-size-fits-all when it comes to health insurance.  In terms of health care reform, unless someone just starts handing out free health care (without tax increases or premiums…), it will be tough to get people to agree on a single plan, or even a handful of coverage options.

Each state has its own regulations in terms of what all policies in that state have to cover.  The rules are different for group and individual health insurance.  In Colorado, for example, all policies have to cover well-child care, PSA testing and mammograms (based on age).  All group plans have to cover maternity, but individual plans do not.  There are a handful of individual carriers in Colorado that do offer maternity as an optional benefit (Assurant, United HealthOne, and Rocky Mountain Health Plans) but the majority of individual plans do not.  This is because the state doesn’t require it, and the market won’t support it (the premiums are expensive, and very few people choose to pay the extra premiums for maternity care on individual health insurance policies).

For people who get their health insurance coverage from their employer, there aren’t likely to be a lot of choices in coverage, but the employer is probably subsidizing a good chunk of the premiums, which makes it easier to accept whatever is offered.  For people buying health insurance in the individual market, there are lots of options, but pricing and medical underwriting can often limit the choices.

Bill Kramer has written an article about the issues involved in designing a national benefit plan.  Overall, the process and compromises involved sound a lot like what goes into designing private health insurance policies: a delicate balance between cost and coverage, targeting the widest consumer group possible.  The major advantage that the private health insurance market has in this regard is that it can implement a wide range of options, with policies ranging from bare-bones catastrophic coverage to very comprehensive “gold-plated” coverage.

If health care reform ends up involving a public, national health insurance option, it would be wise for them to offer multiple plan designs in order to give people choices in terms of premiums and coverage.  Otherwise, it’s unlikely to appeal to a large number of people.

I found Bill’s article in the Health Wonk Review, hosted this week at Health Care Policy and Marketplace Review, written by Robert Laszewski.

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.

A friend of mine who lives in a smallish Colorado town had a c-section with her first baby after 45 hours of labor.  She wanted to try for a VBAC with baby number two, but was told that she would have to go to Denver a month before her due date and stay near one of the big metro hospitals until she gave birth.  Between her job and taking care of her toddler, that wasn’t a particularly viable option, and so she had a repeat c-section.  In fact, several of my friends had c-sections with their first babies, and all have gone on to have repeat c-sections.  They were all warned ominously that they could suffer uterine rupture if they opted for a VBAC, but none of them mentioned anything about the issues that Kathy raised in her article.

United HealthOne has changed the way they underwrite applicants in Colorado who have had a c-section.  They now charge an additional 30% on top of the standard premiums in these cases.  All health insurance carriers in Colorado cover “complications of pregnancy”, but most of them do not consider c-sections to be complications.  United does consider c-sections to be complications, but only if they are emergency c-sections (ie, not scheduled).  Since most OBs schedule repeat c-sections, it’s rare that a woman would end up with an unplanned, emergency repeat c-section.  So I was a bit perplexed by the new underwriting actions.  But after reading Kathy’s article and learning about the problems that can occur in a subsequent pregnancy following a c-section, it makes more sense.

I found Kathy’s article in the Cavalcade of Risk, hosted last week at Healthcare Manumission.

Over the last couple years, we’ve heard plenty about how the primary care system in this country is broken.  PCPs make far less money than their specialist colleagues, and very few new doctors are choosing to become PCPs.  The reimbursement system is fraught with headaches, and healthcare costs continue to soar while our outcomes don’t really improve from one year to the next.

So it’s nice to see two big companies – IBM and United – teaming up to try out a new approach.  From Seguritan’s article, it looks like the program here in Colorado isn’t the primary focus right now, but I’m glad to see that it’s underway.

In the “medical home” model, a patient works with a small group of doctors who coordinate treatment and provide holistic care.  The approach is designed to eliminate the under-treatment that sometimes occurs when doctors are just given a set fee to treat a patient, regardless of how much care is actually provided.  And it’s also set up to eliminate the over-treatment that can occur in a fee-for-service model, where doctors are reimbursed for every visit and test, regardless of how successful the treatment is.  The early indications of the medical home model indicate that it’s a win-win for everyone:  PCPs make a little more money (still far less than specialists, but any boost would probably encourage more new docs to enter the profession), fewer patients are hospitalized, overall costs go down, and patient satisfaction goes up.

I’m curious to see what the outcome is for the IBM/United medical home pilot program.  We work with United Healthcare here in Colorado, and are eager to see if United can come up with a program that would ultimately lead to lower healthcare costs (and thus lower health insurance premiums).  If the pilot is successful, I imagine we’ll see other health insurance companies implementing similar medical home programs.

I found Seguritan’s article in the Health Wonk Review, published this week at Medicaid Front Page by Brady Augustine.

Ritter and Colorado lawmakers have been working on HB 1293 (the Colorado Healthcare Affordability Act) since mid 2008.  Although it’s rarely possible to please everyone with any new legislation, it does appear that HB 1293 has at least a measure of support from many sides, including most hospitals, the Colorado Association of Health Plans, and health insurers Anthem Blue Cross Blue Shield, Cigna, and United Healthcare.

The plan would involve charging a fee to Colorado hospitals which would generate about $600 million in revenue for the program.  That would then be matched by $600 million in federal funds.  The $1.2 billion generated will be used to expand Medicaid, the Colorado Indigent Care Program, and Children’s Health Plan Plus (CHP+), allowing more people to qualify for and enroll in the programs.

I like the approach of expanding current programs, rather than trying to re-invent the wheel.  All of the administrative systems are already in place for programs like Medicaid and CHP+.  Increasing the income limits and enrolling more people doesn’t require additional infrastructure or administrative changes.  Working within our current framework, but with expanded enrollment, seems to be an efficient way of going about this process.  It’s also probably the quickest way to actually get health insurance coverage to Colorado residents who need it.

There are currently 800,000 uninsured people in Colorado, so obviously this bill won’t solve all of our problems.  But it will be a start.  And hospitals like Denver Health, where a huge number of uninsured patients are treated, should find it a bit easier to stay afloat.

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.

United Healthcare has introduced an option called United Health Continuity through Golden Rule, the individual coverage arm of UHC.  Here’s the gist of it: people who currently have health insurance and can qualify through the medical underwriting process can buy the option to enroll in an individual Golden Rule policy at a later date – with no additional underwriting – for 20% of the regular premium on the policy.  People who are currently sick wouldn’t qualify, but the idea here is to allow people who are healthy now to take advantage of their healthy status and guarantee future insurability.  If you already have individual health insurance through a stable, reputable carrier, you don’t have to worry about future underwriting, a job loss, or an employer getting rid of health insurance benefits to cut costs.  But for people who rely on an employer to provide health insurance, there’s a degree of uncertainty that Continuity aims to address.

Golden Rule has launched Continuity in 25 states, and is working to roll out the program in the other states where they market policies.  Colorado isn’t one of the first 25 states, although Golden Rule is a big part of the individual health insurance market here, so I expect that we’ll see the Continuity option here before long.

I like the outside of the box thinking here, and I can see how an option like this could be beneficial to a select group of people.  If you work for a company that provides group health insurance at no cost to you, maybe you don’t mind paying $50 or so every month in out of pocket costs to secure future insurability, especially if you have specific plans to quit your job before you turn 65.

But many people already pay a good chunk of money every month for their health insurance, and the idea of tacking on even more premiums – for whatever reason – isn’t likely to be a very popular option.  Also, a lot of people aren’t aware that medical underwriting is used in the individual health insurance market.  I think this misconception isn’t as widespread as it used to be, thanks in part to the presidential campaign this year where health insurance was a much-discussed issue.  But we still talk to people on a regular basis who question the legality of underwriting, and say “I didn’t think they could do that!?”  People without a good understanding of how individual health insurance works probably wouldn’t see any value at all in the Continuity product.  Unfortunately, people often find out about the ramifications of underwriting after they need health insurance and have a medical condition.  Continuity wouldn’t be any help to them, since they wouldn’t be able to qualify once they’re already ill.

The other issue here is that health care reform of some sort is just around the corner.  What form it will take remains to be seen, but some major health insurance carriers are backing a plan to make individual health insurance guaranteed issue as long as there’s a mandate requiring everyone to obtain coverage.  Reform of that nature would make a product like Continuity unnecessary.