In response to my previous post on healthcare reform, a reader writes in from India
…Why should an insurer agree to insure a pre-existing condition? It does not make sense to expect a business to agree to a proposition wherein it knows it will have to pay out 10x on a premium of x….
Insurance by its very definition is protection against the unknown. If the condition and its medical costs are known why take such a customer on board?
Methinks that the reason insurance premiums went up at your small business is because these guys figured out that they will now have to shell out treatment money for everyone and hence they are trying to do a CYA before overall costs go up.
For medical issues, I think either
– a public run healthcare or
– government rights to a percentage of facilities/medicines at institutions that it then distributes among the needy works best.
If there is no government healthcare in the US, it is only logical that average insurance premiums will go up for everyone if the insurance business is expected to mix humanitarian issues with cold-hearted business decisions.
The humanitarian side is actually the governments job. Making money is the private insurance business’s job. Why mix the two?
The main argument the reader makes is perfectly rational. Why should an insurer take on a pre-existing condition when they know they are going to make a loss on it?
They don’t have to today. And that is why we have over 30 million people uninsured.
Health insurance is a system. It needs to be designed to meet certain objectives. Take the internet, for instance. If it is open, egalitarian and free today, it is because it has been designed that way. If we had left it to the carriers to define the rules by which internet traffic is priced, things would have looked very different today.
The big question here is what do you want your country’s healthcare system’s objectives to be. And this is where the US departs from almost every other developed country. The US doesn’t even come close to universal healthcare. More than 10% of the country is not insured. And healthcare is 17% of the economy. Canada’s is 7% and they have a longer life expectancy.
But let’s not go into the issue of cost of healthcare, because that is an even bigger ball of wax that the current bill only begins to address. Except to note that in the US, because of the high cost of healthcare, if you are not insured, you may not be able to afford to go to a doctor. And a chronic disease will likely bankrupt you.
Many of my readers live in India. To them, this might be a storm in a teacup. India has no healthcare insurance to speak of. You get sick, you pay for your own treatment. The cost of healthcare is much, much lower, but even then many people can’t afford the cost of their treatment. But India cannot afford to provide its citizens a safety net on health. At this time, its focus, is rightly is on economic growth. There will come a time when these difficult issues will need to be addressed, but that time is not now.
The US, on the other hand, can afford such things. It provides social security which gives you a minimum living income when you are unemployed and after retirement. It provides complete healthcare coverage at the government’s expense after retirement, called Medicare. It provides free public education till high school for everyone.
But the US does not provide universal healthcare. Most other developed countries do. Some like Canada and the UK have government run healthcare. Others, like Switzerland have private healthcare but universal coverage. Their healthcare systems may differ, but the developed world does not let its citizens lose their life’s savings because they got sick. Except, that is, the United States.
Now, if universal coverage is the objective, you must either have a government run healthcare system like Canada’s or insurance companies have to accept pre-existing conditions. If insurance companies didn’t accept pre-existing conditions and the government had to pick up the tab for them, we would essentially be incentivizing the insurance companies to get rid of sick people and send them over for government aid. Eventually, this would be one huge transfer from tax payers to the insurance companies.
On the other hand if insurance companies had to accept everybody, with no other change, premiums would rise, healthy people would drop out of insurance, and premiums would rise further until the system breaks.
The only way to make this work is to force insurance companies to accept pre-existing conditions and at the same time make it unlawful for people to not have insurance which is called the individual mandate.
In my previous post, I may have bellyached about insurance companies. But really, they are products of the system we have today. They use pre-existing conditions to deny coverage because they can. They use millions of dollars to lobby lawmakers to stop healthcare reform because they can. But what Americans can do is put a stop to this. Tell your elected representatives where you stand on healthcare.
Oh, and one more thing. My company’s insurance did not go up because insurers are being forced to accept pre-existing conditions. That hasn’t begun yet, and though some people think that the huge premium increases being reported are because the insurers want to reset the baseline quickly, I don’t think that is why our premiums went up. It was probably because, on our small account, Aetna was losing money. The sum of premiums over the year was exceeded by expenses.
In the late 90s, we had a similar rate hike when I was at Infosys. We were already a sizable employer in the US and so the massive rate hike wasn’t because we were too small and they didn’t care if they lost our account. It was, and we were told as much, because our employees were having too many babies! We had a young workforce, almost entirely H1-B visa employees. There might have been some eagerness to have a baby while they were here with their spouses so that the child got a US passport. Consequently, the pregnancy rate was way over what the insurers pregnancy tables told them. And pregnancies cost a lot. So they decided that they had to lose the account. If you priced it high enough, we would leave. And we did.
That’s what healthcare insurance has become today. Sifting through the population to get to the healthy population. It’s a broken system and needs to be fixed.