For-Profit Insurance Needs a Hug

Much to the chagrin of those who have championed a single-payer system for years or even decades, the mantra of the debate in Washington is “If you like what you have, you can keep it.”  But of course opponents of reform are telling anyone who listens that you won’t be able to keep your private insurance, that Big Government is coming to beat on private insurance unfairly, and that the real solution to our health care woes is to leave what Jon Stewart of the Daily Show referred to (tongue-in-cheek) as a “benevolent free market operator” alone.  Are the forces of the status quo onto something?  Should we have more sympathy for private insurance?

Claim #1:  Private insurance is in rough enough shape in this economy – it shouldn’t be forced to compete with a public health insurance option.

Of all the sectors in the economy, health insurance seems to be doing pretty damn good.  I’m basing this on the story two days ago that UnitedHealth Group, the largest commercial insurer in the country, more that doubled its profits from Q1 to Q2 and completely beat all Wall Street expectations.  At $859 million of pure, red-blooded profit, it’s more than double the $337 million it made over the same quarter last year.  That’s right, the bellwether for for-profit insurance has made more profits since the financial crisis than it did before – a 154% increase, in fact.  Of course, some might claim this number is misleading.  After all, last year’s Q2 profit might have been even higher – if it weren’t for those pesky class action lawsuits that cost it an additional $922 million in fines.

If you’ve been reading, the obvious question is how, at a time when more and more employers are dropping health benefits and millions have lost their coverage with their jobs, how is UnitedHealth actually doing better?  Their explanation:  “’We expect this year's revenue growth in public and senior business to continue to more than offset the potential for further pressure from the employer market,’ UnitedHealth CEO Stephen J. Hemsley said in a conference call with analysts.”  Yes, that’s right.  They’re making up for a 6% dip in employer-based customers with Medicare Advantage plans – which already compete directly with standard government-run Medicare – and through administering Medicaid HMOs.

So the industry that needs to be protected from government health programs is currently leveraging government health programs to achieve record-setting profits.

Claim #2:  People love their for-profit insurance.

Yesterday’s Washington Post mentions how often Karen Ignagni of AHIP mentions that 77% of people like their insurance and presumably want to keep it.  But then it goes one step further – and actually provides the context:

But the polls are not that simple, and her assertion reveals how the industry's effort to defend its turf has led it to cherry-pick the facts.  The poll Ignagni was citing actually undercuts her position: By 72 to 20 percent, Americans favor the creation of a public plan, the June survey by the New York Times and CBS News found. People also said that they thought government would do a better job than private insurers of holding down health-care costs and providing coverage.

In addition, data from a Kaiser Family Foundation poll last year, compiled at the request of The Washington Post, suggest that the people who like their health plans the most are the people who use them the least.

Those who described their health as "excellent" -- people who presumably had relatively little experience pursuing medical care or submitting claims -- were almost twice as likely as those in good, fair or poor health to rate their private health insurance as excellent.

That, of course, is the funny thing about something like health insurance – it’s impossible to tell how good it is until you actually need it.  And then the lesson can be painful, if not deadly.

Claim #3:  People should be allowed to continue purchase individual plans outside of the Exchange.

This is what the “Page 16” brouhaha is about – the conspiracy theory that private insurance will be made illegal if the House bill passes.  Not at all.  When the Health Exchange is set up for individuals and small businesses to purchase coverage, most of the plans offered will be private insurance – they’ll just be more tightly regulated, required to provide a minimum standard of benefits and spend a fixed percentage on health care costs, and come with a subsidy from Uncle Sam if you can’t afford it.  If the individual insurance market plans have the same minimum standard of benefits, the company can keep selling those as well. Now keep in mind, the individual insurance market only has about 16 million customers right now – and almost all of the companies that offer it are likely to have an Exchange plan post-reform.  How shifting 16 million customers from one private insurance plan to another (and a subsidized one at that) will put private insurance out of business is beyond me.

People have still rushed to individual insurance market’s defense.  So let me make this clear – it doesn’t deserve it.  The L.A. Times reports on some findings from the Commonwealth Fund:

…among adults ages 19 to 64 with individual coverage or who tried to buy individual coverage in the past three years:

-- 47% found it very difficult or impossible to find coverage they needed.
-- 57% found it very difficult or impossible to find affordable coverage.
-- 36% were turned down, charged a higher price, or excluded because of a preexisting condition.

Ultimately, 73% never bought a plan.

The report also found that:

"Even people enrolled in employer-based plans are spending larger amounts of their income on health care and curtailing their use of needed services to save money."

Even if you believe that for-profit insurance as a whole gets a bad rap, there is nearly nothing defensible about this niche of the market.  If only 27% of customers who need your products can actually buy them, you’re a failure – pure and simple.

Let’s not pretend.  Private, for-profit insurance will almost certainly continue to make a profit – at worst, it won’t be able to double its profit margin each year.  It will be able to compete with a public health insurance option, particularly the somewhat hamstrung variants that have made it into the actual legislation.  The more people have to use their insurance, the less they like their insurance company.  And the individual marketplace probably ranks among the most fundamentally broken markets operating in our economy.

Save your hugs for those who are struggling with the high cost of health care in this economy, those who lost their family’s coverage because they lost their jobs, and the families of the 18,000 Americans who will lose their lives unnecessarily this year for no other reason than because they couldn’t afford health insurance.

(Photo credit:  kalandrakas on Flickr.)