A lot of progressives are really pissed off at the crappy compromises that went into the healthcare bill. So am I. But after having a little time to let go of the fury I felt at just how much we’d lost, and after learning more about the details, I now think some of our friends are misreading this as a full-blown corporate win. In doing so they aren’t taking seriously some of the long-term strategic advantages provided by the bill. James Surowiecki explains a crucial one:
Politicians on both sides of the aisle overwhelmingly believe [...] that insurance companies should be prohibited from taking preëxisting conditions into account when setting prices or extending coverage. Both the House and the Senate reform bills include language banning this. Even Republicans have been vehement on the subject: Senator Tom Coburn, of Oklahoma, has said that “everyone agrees” that we need to eliminate the use of preëxisting conditions, while Senator Chuck Grassley, of Iowa, declared that insurers have to be barred from “charging higher premiums to people who are sick.” The insurance companies themselves have accepted that the only factors they’ll be allowed to take into account in setting prices will be age, region, and whether or not someone smokes….So where’s the contradiction? Well, Congress’s support for community rating [i.e., no exclusions based on pre-existing conditions] and universal access doesn’t fit well with its insistence that health-care reform must rely on private insurance companies. After all, measuring risk, and setting prices accordingly, is the raison d’être of a health-insurance company. The way individual insurance works now, risk and price are linked. If you’re a triathlete with no history of cancer in your family, you’re a reasonably good risk, and so you can get an affordable policy that will protect you against unforeseen disaster; if you’re overweight with high blood pressure and a history of heart problems, your risk of becoming seriously ill is substantial, and therefore private insurers will either charge you high premiums or not offer you coverage at all. This kind of risk evaluation—what’s called “medical underwriting”—is fundamental to the insurance business. But it is precisely what all the new reform plans will ban. Congress is effectively making private insurers unnecessary, yet continuing to insist that we can’t do without them.
The truth is that we could do just fine without them: an insurance system with community rating and universal access has no need of private insurers….
So if you want to make health insurance available to everyone, regardless of risk, the most sensible solution would be to expand Medicare to everyone. That’s not going to happen…. Instead of replacing private insurance companies, the proposed reforms would, in theory, turn them into something like public utilities. That’s how it works in the Netherlands and Switzerland, with reasonably good results.
Yes, this puts a lot of money in insurance company pockets. And yes, insurance company stock went up after the bill broke the deadlock — it was much better than the position many had expected they’d end up in. But eliminating real risk management is in no way what insurance companies wanted.
Insurance companies will try to find ways to get around the new rules, but it’s a dangerous game. Every time they find and exploit loopholes, more regulations will get passed to close them. And with each round of evade and crackdown, Surowiecki’s question — do we really need health insurance companies anymore? – will gain traction.
