Now We Know A Little More
Posted by Chris Martin at 12/21/2008 10:02 AM 
Categories: Health policy, Health Insurance, Creative Destruction
Categories: Health policy, Health Insurance, Creative Destruction
Last week in this blog Wonks Anonymous estimated that some 10% of people in California with employer provided health insurance had lost coverage this November. No official confirmation of this is available yet but today's SF Comical has a good piece examining the impact of job loss on health coverage.
It might seem that this would be the time for the private sector to step in with cheap, no frills, individual plans and wean us away from bloated group plans. Except that it turns out that the cheap no frills plans fit only one type of person: Someone who has absolutely no health problems.
One person who had sought treatment for allergies - allergy shots and antihistamines - was rejected. Others found that the coverage actually offered, after out of pocket was met, was negligible.
If you are not sick we will take your money. If you stay healthy you pay for it. If you get sick we will pay for it but then we will have to reject you or increase your premium because you got sick.
Now Wonks Anonymous is wondering. If our private insurance companies are getting out of the business of selling group policies to employers then what earthly good are they? It seems to this wonk that we need to keep the actual producers of health care in business and that we need to make sure that people who need health care get it. At this point keeping private insurance companies looks about as practical as buying a buggy whip for your BMW.
Maybe Schumpeter was right about creative destruction?
It might seem that this would be the time for the private sector to step in with cheap, no frills, individual plans and wean us away from bloated group plans. Except that it turns out that the cheap no frills plans fit only one type of person: Someone who has absolutely no health problems.
One person who had sought treatment for allergies - allergy shots and antihistamines - was rejected. Others found that the coverage actually offered, after out of pocket was met, was negligible.
If you are not sick we will take your money. If you stay healthy you pay for it. If you get sick we will pay for it but then we will have to reject you or increase your premium because you got sick.
Now Wonks Anonymous is wondering. If our private insurance companies are getting out of the business of selling group policies to employers then what earthly good are they? It seems to this wonk that we need to keep the actual producers of health care in business and that we need to make sure that people who need health care get it. At this point keeping private insurance companies looks about as practical as buying a buggy whip for your BMW.
Maybe Schumpeter was right about creative destruction?
«If you are not sick we will take your money. If you stay healthy you pay for it. If you get sick we will pay for it but then we will have to reject you or increase your premium because you got sick.
Now Wonks Anonymous is wondering. If our private insurance companies are getting out of the business of selling group policies to employers then what earthly good are they?»
This is based on a gross misunderstanding of the role of those companies. They are no longer insurers, because they have a business model requirement that each account be profitable.
Therefore they are no longer pooling risks, which is he definition of insurance, except within accounts. As a result "health insurance" for individuals is not insurance at all, it is just a a loan facility; the "insured" are offered a chance to be lent the money to cover their health care expenses, loan to be repaid as you say via subsequent premium increases.
"health insurance" currently is just a savings/loan scheme without risk pooling, and "health insurers" are in effect offering not policies but mortgages. The risk that the "insured" does not renew the policy and pay the higher premiums is in effect a credit, not accident, risk, like for mortgages, not for policies.
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