Aside from a few weirdos who groove on the problems of others, who wouldn’t support a change in federal law that could help millions of working Americans without health insurance find affordable coverage?
The answer, as illogical as it may seem, is a large number of this nation’s insurance companies.
One might think that people in the business of selling health insurance would support legislation that makes it easier for customers to buy it. But one might be wrong.
It turns out that the insurance industry, or at least a big part of it, would rather issue fewer, more profitable policies than more, less profitable policies. And because the insurance lobby is among the most powerful on Capitol Hill, legislation that could bring low-cost coverage within reach of many of the nation’s 43 million uninsured probably is destined for defeat.
Of course, the insurance industry isn’t about to let on why it really opposes the long-awaited set of reforms proposed last week by a Republican task force chaired by Rep. Dennis Hastert (R-Ill.) Instead it’ll rail against “heavy-handed government mandates” or some such thing.
“Everything but the kitchen sink has been thrown in here,” complained Bill Gradison, the former Ohio congressman who now presides over the powerful Health Insurance Association of America (HIAA). He and other industry pooh-bahs complained that Hastert’s proposal, by requiring managed care plans to include several pro-patient safeguards, would drive up premiums and thereby add to the ranks of the uninsured.
In most regards, however, the Hastert reforms are far kinder to the insurance industry than other alternatives before Congress.
An earlier GOP attempt, fathered by Rep. Charlie Norwood of Georgia, would have allowed patients to sue their insurance companies in state courts over coverage denials. Currently most insured workers can’t do this because their plans are regulated not by state law, but by the federal labor law called ERISA (the Employee Retirement Income Security Act of 1974.)
Managers of these federally regulated plans dread being hauled into local courtrooms, where supposed “victims” of coverage denials might win huge damage awards from sympathetic juries. (Lawsuits filed against ERISA insurance plans are tried instead in federal court, where awards generally cannot exceed the value of the denied coverage.)
The Hastert package wisely recommends no such state liability. It recognizes that an explosion of malpractice lawsuits against insurance plans–and against employers that operate so-called self-insured plans–will cause companies to stop offering insurance altogether. Instead Hastert requires that insurers, especially HMOs, refer disputed coverage denials to an independent, clinically competent review panel.
Given the huge and growing public demand for some sort of patients’ bill of rights (and the fact that this election-year Congress is itching to pass something that looks like reform) one might think the industry would glom onto Hastert’s plan like a drowning man to a life preserver.
There is, however, one piece of it that the insurance industry cannot abide. Developed by Hastert’s fellow Illinoisan, Harris Fawell, it is, for my money, the most important feature contained in any of the reforms now before Congress. To oversimplify: Companies too small under current rules to set up ERISA insurance plans (such as restaurants, body shops, hairdressers, etc.) would be allowed to do so through their industry-wide trade associations (the National Restaurant Association, for instance).
Suddenly all the fast-food joints and corner barber shops in America would have access to the same economies of scale that enable Ford and General Motors to buy the most health insurance for their premium dollar. The larger trade associations could even self-insure, (take upon themselves the financial risk of catastrophic claims) which is how the big companies save the most under ERISA.
But that’s the problem, as far as the insurance industry is concerned. When hired to administer a company’s self-insured plan, an insurer makes money by charging fees–2 or 3 percent, say, of the value of claims processed. When they’re hired to assume the full financial risk, the insurer makes more–a lot more if its actuaries make sure the plan’s income (premiums) exceeds expenses (paid claims).
The bottom line is that the insurance industry, or at least the 250-plus members of the HIAA, doesn’t want a true nationwide market in health insurance. At least not a market in which every butcher and baker has access to the benefits of ERISA self-insurance. The industry does better selling high-priced policies state by state (policies made pricier by goofy state mandates such as Illinois’ requirement for coverage of in vitro fertilization.) Small employers have no other option but to pay through the nose.
No other option, that is, except to skip insuring their workers altogether.
Five years ago the HIAA members helped kill President Clinton’s national health insurance plan with a series of TV commercials featuring “Harry and Louise.” Watch to see what gimmick they’ll use this time to convince us they care about something other than profits.
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