Wednesday, March 9, 2011

California Offers Lessons on Insurance Exchanges

As Congress debates creating insurance "exchanges" as part of a health-care overhaul, the failure of a similar effort in California may offer important insights, former participants in the program say.
From 1993 to 2006, small businesses in California could buy health insurance through an exchange run initially by the government, and later by a nonprofit group.
The plan was undermined when some businesses with relatively healthy workers bought policies more cheaply directly from insurers, bypassing the exchange. That left the exchange with a shrinking pool of less-healthy workers, forcing rates higher and prompting many insurers to withdraw. Managers chose to shut the program in 2006 when one of three remaining insurers withdrew.
"There are definite lessons to be learned," said John Ramey, who as former head of the Managed Risk Medical Insurance Board helped implement California's exchange. "We learned them the hard way out here."
Among those lessons, he and others said: Employers and individuals who qualify must be required to obtain health insurance through the exchange. Failing that, John Grgurina, who ran California's exchange from 2002 until it ended, said government must impose rules governing rates and eligibility to protect the exchange from attracting a disproportionate share of high-risk people.
An exchange aims to get better prices for coverage by banding together businesses and individuals. Insurers would have an incentive to join an exchange because they would gain access to more potential customers. Individuals and employees of businesses that participate in an exchange would be able to chose from the available plans and pay the same rate.
Exchanges, either on a regional basis or a single national one, are likely to be a part of any final health-care legislation. Late Friday, the House Energy and Commerce Committee approved its health-care bill, though a full House vote won't come until the fall.
President Barack Obama on Saturday praised the House committee's action and urged lawmakers to "build upon the historic consensus."
The compromise proposal agreed to in the House Friday exempted more businesses from the mandate to provide coverage to their employees and offered subsidies to fewer individuals to buy insurance through an exchange, which would shrink the number of potential participants.
Each of the three major bills -- one in the House and two in the Senate -- would create one or more exchanges. The specifics vary, but most of the proposals would impose more regulations than the failed California program, which analysts say would help the exchanges compete.
Despite California's struggles, insurance exchanges are still the most effective way to expand coverage, said Elliot Wicks, a health-care consultant who wrote a report on the California program. The report, released last month, was commissioned by the California HealthCare Foundation, a private independent nonprofit.
Veterans of the California effort said the ultimate effectiveness of any exchange would rest on details that have yet to be worked out. They said the pool of people in an exchange should be as broad as possible, to spread both risk and administrative costs.

Coverage at the county level...

Plenty has changed since 2006, the latest year that the uninsured of California was counted by the U.S. Census. But even then, many months before the current recession hit, the percentage of people living without health insurance in our state was startling.
This week, the Sacramento Bee laid out the statistics, finding quite a disparity between those with health insurance and those without. Just in the five-county region The Bee covers, Yolo County posted an uninsured rate of 22 percent of people under 65, while the more prosperous Placer County -- with more employment-based coverage -- posted a 13.7 percent rate.
That's quite a disparity, and the article by Phillip Reese and Anna Tong is worth reading. But the Bee doesn't limit information to its circulation area, it also posts online a comprehensive rundown of each of California's 58 counties' uninsured rate, along with an interactive map of the state and rollover charts.
Here's a sampling of what the authors wrote:

"The uninsured present an immense fiscal and public health challenge: 18,000 Americans die each year because they aren't covered, according to the Institute of Medicine, a nonprofit research organization. This is because having insurance is closely tied to health outcomes: The uninsured won't see a doctor regularly, and if they seek care it is likely to be inadequate or too late.
Moreover, the uninsured are a cost for society: One economist recently estimated the tab at $56 billion per year, 75 percent of which is paid by governments. In cash-strapped California, that cost is critical: 6.6 million residents went uninsured in 2007, more than in any other state, according to the California Healthcare Foundation."
You can bet that, with massive layoffs and small businesses closing since that Census count, the number of those among us -- members of our communities -- who are going without health insurance is a great deal larger. Factor in the Governor and Legislature's cuts in health and insurance programs for lower-income Californians, their children and the elderly, and you get an unimaginable sum of fellow Californians without access to affordable, quality health care -- notably, preventative health care, with better outcomes.
This is what the conversation about health care reform boils down to, not pumped-up talking points and hyper-emotive protests based on misinformation. This is not a partisan issue. It is a people issue. And the bottom line is that the majority of Americans have already voted -- for substantive change for a better future for our country.

Insurance Companies Cancelling Health Insurance of Sick Patients

With President Obama’s speech to Congress last night outlining the details of his overhaul of healthcare in the United States, one interesting point popped up - the fact that Obama would guarantee that insurers could not reject people because of preexisting conditions. Health insurance companies are increasingly citing the failure to disclose preexisting conditions as a means to cancel policies and deny benefits to people in need of care. The term for this is "Post Claims Underwriting". What this means is that the insurance companies will not investigate someone for verification of entitlement to coverage until after they are sick and need the insurance. Of course, if they then determine the person is sick but not qualified they cancel the coverage and the sick consumer is left with no insurance.
Insurance companies are using the term "rescission" to refer to the cancellation of insurance coverage due to a company being misled. Rather than trying to mislead companies, omissions of preexisting conditions seem to be honest mistakes by people filing out increasingly complex forms. There have been countless stories about how people have signed up for health insurance, only to have their policies later cancelled when they need care. No one knows how often policies are cancelled because of a variety of different state laws and policies in place, however, the practice has become rampant enough to result in numerous lawsuits and new regulations put in by states throughout the country.
In the past year and a half, California has fined the five largest insurers in its state almost $19 million for cancelling the policies of individuals who became sick. One insurance company even admitted offering bonuses to employees who were able to find reasons to cancel policies. President Obama has been trying to gain support for his healthcare overhaul in part tapping into consumer dissatisfaction with the insurance industry, an industry that has never been popular among the American people. His plan for healthcare overhaul includes restricting insurance companies from screening for preexisting conditions, however, this still might not save people from having their policies cancelled. With new regulations, insurance companies might not necessarily cancel the policies of those individuals with undisclosed preexisting conditions, however, a company might institute further preauthorization requirements on services for certain patients, which might discourage such patients from renewing their policies. Lawsuits continue to be instituted against insurance companies who have cancelled policies. Rather than fight fraud, rescission has devolved into a backdoor route for insurance companies to stop paying the medical bills of people in their time of greatest need.