One of the biggest selling points for Obamacare is that it requires insurers to offer policies to people with so-called pre-existing conditions, as in known, fairly to extremely costly-to-treat ailments, like diabetes, HIV, and autoimmune diseases.
Not surprisingly, two things have started happening. One is that the early evidence suggests that people with pre-existing conditions are signing up for the new plans in disproportionate numbers. For instance, the individuals determined to be eligible to enroll in federal exchanges through the end of November had a much lower proportion of people eligible for subsidies than anticipated. Those who had health issues would naturally be highly motivated to obtain coverage. Insurers and the Administration no doubt hope this will balance out and more of the “young invincibles” will sign up as the deadline approaches.
Second is that the insurers, par for the course, are finding clever ways to make the actual coverage offered to people with pre-existing conditions so minimal as to come as close as they can to covering them, apparently with the hope that they will go elsewhere. As the Washington Post reported earlier this week:
Some plans sold on the online insurance exchanges, for instance, don’t cover key medications for HIV, or they require patients to pay as much as 50 percent of the cost per prescription in co-insurance — sometimes more than $1,000 a month….
“The easiest way [for insurers] to identify a core group of people that is going to cost you a lot of money is to look at the medicines they need and the easiest way to make your plan less appealing is to put limitations on these products,” [Marc] Boutin [executive vice president of the National Health Council] said.
The ugly reality is that, logically speaking, a known condition isn’t a matter of insurance but subsidy or socialization of costs. Readers in comments have raised this issue by saying these conditions aren’t “insurable risks”. Let’s unpack that.
In lay terms, insurance is a product that gives you a financial payment that helps offset the damage you suffer if something bad happens in the future. You might have a flood in your house. You might lose your job. You might get cancer. See these dictionary definitions:
1. a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.
2. a thing providing protection against a possible eventuality.
Now what is the uncertainty if you have, say, HIV? You have a baseline of costs that is already baked in: a certain level of payment for meds you are on that will presumably continue, and a certain number of doctor visits and tests over the course of a year. The uncertainty for you is if something bad happens on top of that, say an opportunistic infection, or a medical problem independent of your HIV, like breaking an ankle.
In other words, the cost of medical coverage for that person is the cost of baseline coverage for that condition, and the uncertainty is around adverse developments. The latter component falls properly in the insurance realm. The former component is more akin to a simple cost division: if I am pretty sure this person with HIV in Topeka will incur a baseline of costs of $4000 in a year, I’d want to make sure I am fully compensated for whatever portion of that cost I bear.
So if we as a society want to make people like this more productive, does this really fall in the insurance paradigm? This really is about socializing costs and hence the single payer model of a single risk pool is the only logical way to go (aside from the benefit that it also cuts out unnecessary layers of bureaucracy and profit margins). New York City, for instance, has programs that pay for meds for people with HIV. I know at least two people who’d be dead by now without this assistance, and both have been able to hold jobs as a result.
But within the insurance paradigm, the insurer will simply see this as a question of who eats the risk, and the policy-holder can be expected to be asked to bear a great deal of the cost of any known problem. As Don McCanne writes on the PHNP blog:
It is no surprise that private insurers would use every devious trick to try to limit their payments for expensive drugs, including requiring the patient to pay more through higher cost sharing, or by omitting expensive drugs from their formulary altogether. From the insurers’ perspective, that’s just good business….
When the insurance lobbyists are saying that they are trying to “give consumers better value for their health-care dollars,” they really mean keeping insurance premiums low enough to compete in the marketplace. They do that by paying as little as possible for health care, shifting ever more of the costs to patients. The sky is the limit on innovations when they are driven by greed.
We have the wrong people in charge – the insurers. We need our own public financing system that is designed to help patients get care by removing financial barriers. That’s what an improved Medicare that covered everyone would do for us.
Enough of this, “Boy, do we have a plan for you, and it’s cheap, but if you have anything wrong, study this plan carefully since you’ll find that it won’t cover what you need (and then go away kid, you bother me).”
Mind you, that does not mean people with existing conditions won’t benefit from getting access to Obamacare plans. They will get some subsidization from the healthier members in each pool, as well, as we discussed, underwriting of incremental risk. And when they visit hospitals in network, they’ll also gain from negotiated discounts. But this approach of using insurance in lieu of subsidies or socialization of costly conditions is just as misguided as using housing finance as a way to subsidize housing for the low income. It’s indirect, inefficient, and the complexity lends itself to fraud and abuse. But that paradigm worked well for the financiers, so it’s no surprise that the insurers are using a similar playbook.