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Tuesday, February 3, 2009

Example of Health Care Reform from Insurance Companies

An insurance person, a union rep, and a doctor were all in a conference room together. I really wish that I actually had a punch line because it sounds like the beginning of a decent joke, especially if I had the doctor be a proctologist. However, has anyone actually met a proctologist?

Actually, the Washington State Blue Cross Insurance Company (Regence), the American Medical Association, and SEIU have united on a health care reform effort that is described in this article. Their reform effort can be summarized as following:
  1. Standardize the insurance benefit plans so they all cover similar benefits and price them according to a community rating or the average price that everyone would pay.

  2. Therefore, all employers would pay the same amount. With this plan, employers are still buying the insurance for their employees. However, under this plan, health of employees or utilization does not impact the price that an employer would pay. This is insurance in the classic definition where everyone is part of one big community pool.

  3. Provide more information about the cost and quality of health care. For example, if you want to make sure you get the best colonoscopy possible, who should you go to when money is no object?
There is no mention of changing how providers are paid other than they should be paid based on their results. I am guessing that #3 will help with that as consumers can see who the best providers are and will stop going to the guy who does 2 for 1 endoscopy and colonoscopy deals.

Here's how all the players would benefit:

Health Insurance Companies: By eliminating underwriting and offering everyone the same rate and benefit packages, this does remove a layer of administration. It should also keep the same model intact of selling insurance to employers who distribute to employees. It also ends the constant positioning for those elusive healthy groups that everyone wants to attract. On a side note, I wonder if fitness clubs are great clients for insurance companies. In theory, the staff should all be really healthy and never use any medical services.

Results: It does make administration simpler but administrative costs are only 10% of the health insurance dollar. I think that the hope is that by spreading health care costs over a community rather than one employer, prices won't increase as much and more employers will continue to offer insurance. This should work well for smaller groups who tend to have higher rate increases than larger groups. That's probably the main benefit. Otherwise, it's a small change that make administration easier for insurance companies. The health care system won't fundamentally change and costs will continue to go up for everyone.

Unions: The unions like SEIU are a wild card in health care reform. They have political clout and their main role is ensuring that unions have incredible health insurance. Often their health insurance is so good, that going to the doctor is cheaper than going to a movie and can be more entertaining than some movies like "Forgetting Sara Marshall" (It had the same cast as Superbad but how it could it have been so lame?!). In theory, you would think that unions wanted to preserve their main strength of negotiating great health care. However, ultimately they are in favor of all workers having health care and have a lot of experiencing negotiating with employers.

Results: Union support will help any reform effort and unions appear to be engaged for the right reasons of ensuring workers have good health insurance. Its members will probably not have as incredible health insurance as a result but that should be outweighed by more workers having quality health insurance.

American Medical Association (AMA): This proposal does not really change how physicians are paid or overhaul the health care delivery system. Having better cost and quality information is the one effort towards giving consumers the information to pick providers and hospitals who have better outcomes. This passes quality enforcement to consumers which is fine for restaurants, harder to do with car shopping, and no matter how good the information, will be really difficult with deciding who is going to give you a hip replacement.

In general, the AMA will have difficulty pursuing a reform agenda because of the different ends of primary care and specialists, let alone all of the subspecialists. Most reform promotes primary care and looks to cut back on specialty care because the value has been demonstrated with primary care. The inability to easily satisfy all of their membership may keep the AMA on the sidelines whose only option is to endorse someone else's plan.

Results: Physicians will benefit if more of their patients have insurance and their lives will be even simpler if everyone has a similar comprehensive design. It will make billing and their office administration easier. This also does not force any tough decisions about the delivery of care.

Overall, the health insurance plan in this example are attempting to gain control of the reform process by putting together a plan that other players can endorse by offering them some gains and no large losses. I would like to see the unions and the AMA introduce proposals also in order to get the best ideas from a diverse range of stakeholders.

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