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Wednesday, January 12, 2011

The Balance between ideal health reform solutions for the Insurance Industry and Consumers

A health reform solution that consumers and the insurance industry could agree on is as precarious and unstable as straddling 2 sides of a canyon. Everyone's groin starts to hurt after a while. Former insurance industry executive and blogging curmudgeon, Bob Laszewski, wrote a piece on what he saw as reform that could truly receive bipartisan support. What I saw is an example what best meets the needs of insurance companies and not those who purchase the plans. Here are Mr. Laszewki's arguments in contrast with my thoughts on actual consumer need. The reason that I am contrasting with consumer need is that the insurance company that figures out how to truly meet it will gain market share at the expense of others. Even the insurance industry needs to focus on its customers every once in a while.

1. Replace the individual mandate with a one-time open enrollment period: The individual mandate or requirement that individuals buy insurance is a contentious part of reform. However, if no one can be denied insurance, it's necessary to have everyone buy insurance in order to keep it affordable. Laszewski's solution is a one-time opportunity to buy insurance otherwise that individual could be denied insurance in the future. He calls it "freedom of choice and responsibility." I call it the status quo. Insurance companies love one time enrollment periods because they both bring in new customers as the same folks who always change their oil every 3 months will jump on the one time opportunity. Those folks who are too disorganized to maintain their health let alone their cars are more likely to miss the opportunity and be denied if they don't pass a health screen when they get around to applying for insurance.

The individual insurance market is very fluid. Most stay on a individual plan for a year at most before getting an opportunity for public or employer insurance. Therefore, a one-time opportunity will not be relevant to the vast majority who don't need individual insurance at that time period. For the average consumer, they want to be able to purchase health insurance when they need it not when insurance companies are willing to offer it. Health insurance has become the one industry that will refuse to sell their product to someone who has the money to buy it. That is not sustainable and needs to change or a new entrant will change it for the industry.

There is no real solution to balance affordability and access other than an individual mandate. United Healthcare developed the best alternative with an option, like a stock option, to buy insurance in the future without a health screen. While there probably isn't a true solution that consumers would embrace, Laszewski's solution mainly appeals to the insurance industry. The insurance industry's lobbying group, AHIP, has pretty effectively destroyed its reputation as a voice of reason or good ideas in health reform with ill-timed reports on cost or attacking ACO's to prevent the entrant of new competitors.

Eliminating mandated plans:
Health Reform will limit insurance carriers to only 4 plan designs that are sold in formal health care exchanges. These plan designs are cleverly named platinum, gold, silver, and bronze because calling them Tweedledee, Tweedledumb, Tweedledumber, and TweedleAngryInsuranceExecutive was probably too obvious. Laszewski wants their to be only one mandated design (the silver or Tweedledumber option) and allow insurance companies the latitude to design other plans to provide more consumer choice. Again, this is the status quo as most states already require an insurance company to offer one basic plan design.

When I talk to consumers, they do not want the current level of choice because it's overwhelming and confusing. They have to study the plans to figure out what features are included, what are not, and conduct a personal conjoint analysis to figure out what they should buy. Most just want to be able to buy one standardized health insurance and not need an owner's manual to figure out how to use it. Offering 4 designs gives this ability to buy a health insurance at 4 different prices. This "choice" that Laszewski reference is really insurance speak for benefit eliminations of services not widely used by the public (but heavily used by a few) to lower the price. However, the price can be lowered by making universal changes to all 4 plans that are clear and transparent to the consumer.

In closing: The rest of Lasewski's points were improvements in subsidies to buy insurance and change in tax policy that don't really divide insurance companies and consumers like those other 2 issues. The gap in consumer vs health insurance industry appeal of those 2 issues is why the first wave of health reform focused on the insurance industry. Subsequent waves will continue to focus on the insurance industry until we learn how to better listen to consumers. At least half of my assumptions on consumer interests are overturned when I survey them or talk with them on the phone. Talking with consumers is not nearly as painful as dealing with fall-out from getting it wrong. It's also much easier on the groin.

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