The Under-insured Issue

Some tout Consumer-Direct Health Plans (CDHPs) as a reasonable way to keep costs down for employers and give consumers some ‘skin-in-the-game’ in terms of how health care dollars are spent. Evidence suggests that the only portion of the population that truly benefits from these high-deductible, health savings hybrids are those professionals in the $100K and above income bracket. Those that find it hard to make ends meet in the first place have a hard time coming up with the cash to meet deductible amounts too. And when faced with a choice, healthcare is often postponed due to watching the pennies.

Now data is emerging that helps give a clue to where we are headed with all this CDHP stuff – under-insurance.  The Commonwealth Fund released a report this month that indicates the rate of underinsured in the insured population.  According to findings, in which the writers interviewed adults ages 19 and older from June through October 2007:

– Respondents were identified as underinsured if they spent 10 percent or more of their income (or 5 percent if they were low-income) on out-of-pocket medical expenses, or if they had deductibles that equaled 5 percent or more of their income.
– An estimated 14 percent of all non-elderly adults were underinsured in 2007, and more than one of four were uninsured for all or part of the year. Adding these two groups together, 75 million adults—42 percent of the under-65 population—had either no insurance or inadequate insurance in 2007, up from 35 percent in 2003.
-Those with annual incomes of $40,000 to $59,000, the underinsured percentage rate reached double digits in 2007. Barely half of those with incomes of 200 percent to 299 percent of the poverty level were insured all year with adequate coverage.

If 75 million are under-insured, and 47 million are uninsured, what does that say about insurers ability to provide access to care for all? Wasn’t that the mandate identified when for-profit health insurance was first proposed, that in going to a ‘free market’ system there could be affordable health insurance for all?

Instead, it would appear that the mandate has been largely forgotten, as evidenced by words uttered by Wellpoint’s CEO last quarter to shareholders: ‘We will not sacrifice profitability for membership’ (my all-time favorite quote these days). Is there a reason why we (society) should continue to pump billions of dollars through these organizations in order for them to make billions in profit while not providing the access to coverage that was the very basis for their existence?

It’s time we looked at what the health care ‘insurance’ companies are doing to return value to the populace at large, and to scrutinize the strategies they are employing that is leading to conditions of under-insurance. From where I sit, those strategies are designed to return maximum profit to the companies and push as much cost as possible to consumers and providers of care.

Demand for transparency and efficiency from the insurers is building. Medical cost ratios (MCRs) – which indicates the ratio of premiums brought in to health care costs paid out – are easily manipulated, and the components that make up the health benefit expense are not evident from financial filings. Is marketing included in there? How about broker incentives?  Is that where premium dollars are best spent? Spednign aside, how are these corporations run? How efficient are these operations? Do they operate as lean machines, or costly bureaucracies?  In many other industries, the more efficient you are, the more profitable you can become. Shareholders hold the boards of these companies responsible for ensuring that. Yet the same demand for insurers to do the same – operate efficiently, employ technology and processes to keep costs to a minimum, and maximize value to consumers – has not been forthcoming.

Why? Well, profits have been very lucrative so far. Insurers actually gain from being inefficient, rather than the other way ’round. The less adept you are at processing claims, the more premium dollars you hold on to. The more complex you make your product and the ability to get reimbursed for providing care to members, the easier it is for these insurers to hold on to the cash. Tie that together with pricing discipline – the refusal to reduce the price (premiums) in order to increase share (more people who could afford to purchase it) – we see profits continue to be strong.

But the end of the run is coming soon. Unsustainable cost-shifting to employers and employees and increasing numbers of uninsureds should help to force the issue. The only question left then is ‘when?’ Perhaps when preventive care has been destroyed and health epidemics such as diabetes and coronary disease climb to collosal levels, or when there are too few geriatricians and internal medicine specialists to take care of the Boomers.

An ounce of prevention is also better than a pound of cure. But then again, there is profit to be made on a pound of cure . . .


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