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More On Buying Health Insurance Across State Lines

I’ve expressed a real lack of enthusiasm for the Republican proposal that Congress should pass a law allowing groups to go jurisdiction-shopping for health insurance, especially in the absence of eliminating the prejudice against individual ownership of health insurance.

One correspondent chided me for allowing states’ “geographic monopolies” to stand in the way of competition. But isn’t that a fundamental characteristic of a state — that it has a monopoly over state laws within its own boundaries? If you don’t like it, vote in a new legislature or move to another state. I live in California, where personal income taxes are way too high and harmful to our welfare. But I’ve never heard a Republican politician propose that Congress pass a law allowing individuals to choose which state’s rate of income tax they pay, so Californians could opt to pay zero income tax by choosing Florida’s tax rates.

In any case, this is irrelevant: States can just go ahead and allow interstate purchasing of health insurance themselves. Here’s a bill in Washington State to allow just that; and here’s one in Georgia. So, just get on with it. There’s no need to wait for Congress to act.

On the “Interstate Purchase of Health Insurance”: A Dissent?

Many conservative health-policy analysts write in support of “interstate purchase of health insurance.”  What do they mean?

Or, to frame the question a little differently: Does Congressional preemption of states’ powers to regulate health insurance within their boundaries move us in the right direction? I’m afraid not, certainly not as the Republicans are proposing. Unfortunately, the GOP’s Better Solutions platform continues the policy of discriminating against people who are employed, by forcing them to get health benefits of their employers’ choice, and not letting them use their own pre-tax dollars to buy individual, portable, guaranteed renewable, health insurance.

The Republican health-reform bill (H.R. 4038 § 221) also retains this discriminatory tax-treatment, but contains 27 pages of legalese that purports to make it easier for Americans to buy health insurance across state lines. Unfortunately, it makes little sense once you get past the crowd-pleasing title. For example: “The primary State for such coverage has sole jurisdiction to enforce the primary State’s covered laws in the primary State and any secondary State.” (A “primary State” is where the issuer is licensed; and a “secondary State” is where the beneficiary resides.) So, Kentucky will enforce Kentucky’s insurance code in every other state where a business has bought Kentucky-licensed health insurance? Good luck with that.

Establishment Republicans are loathe to remove the discrimination against individual ownership of health insurance for employed people because their backers in Big Business support the status quo. The politician who advocates amending the tax code (like Senator McCain did in his presidential campaign) jumps into a buzzsaw wielded by the U.S. Chamber of Commerce, the ERISA Industry Committee, America’s Health Insurance Plans, etc.

So, the Republicans fall back to work-arounds like the interstate purchase of health insurance, and association health plans. Look, none of these things are wrong, but they are far less important than individual ownership of health insurance (through tax reform). Nor is it evident that Congressional legislation is necessary, or advisable, to achieve them.

Let’s look at another example: Suppose you travelled to a parallel USA, where the tax code was malformed such that workers’ homes were owned by their employers (using non-taxable dollars). If your employer’s HR department changed HMO (Home Maintenance Organization) annually, you’d have to move house every year. If you got a new job, even across the street from your old office, you’d have to switch homes. Obviously, housing costs would be out of control and there would be huge bureaucracy and lack of responsiveness in the “system.”

Consider three reforms:

1. Reform the tax code so that individuals can use pre-tax dollars for their own housing (through, perhaps, a mortgage-interest tax deduction);
2. Allow employers to use HMOs that were regulated in another state where the building code was not so strict; or
3. Allow small employers to band together in “association housing plans” so that they could get the same discounts on commissions, etc., as large employers.
   Surely, everyone in this America, where people choose their own homes, would immediately dismiss the latter two policy options in favor of the first (which is also imperfect).

So, when the Republican party throws up “interstate purchase” of health insurance, I believe that it actually misdirects us from the most important reform.

Even more importantly, reforming the tax code to allow employees to keep health insurance of their own choice will (almost) surely lead to effective interstate purchase of health insurance without Congressional action. There is no Congressional law mandating interstate purchase of auto insurance or life insurance, but nobody worries about what will happen to their auto or life insurance when they move between states. States figured it out through a number of mechanisms, including the Insurance Compact.

If Congress allowed individuals to use pre-tax dollars to buy health insurance of their own choice, not their employers’ choice, states which refused to collaborate with other states in making regulations that ensured a seamless portability of health insurance would see no immigrants from other states.

Ronald Reagan is reputed to have made policy choices according to a simple rule: “Does it increase liberty?” Well, which health reform increases liberty most? One which increases employers’ choices, or one which increases individuals’ choices?

Electronic Health Records Meet Government-Monopoly Health Care

A while back, I noted the Canadian province of Ontario’s negative experience setting up a province-wide Electronic Health Record (EHR) “system” for the entire province.

There’s more news about this fiasco in a recent edition of the Ottawa Citizen.  The government has brought in a “troubleshooter” with loads of experience reining in IT projects that have run off the rails.  With a mix of public and private sector experience, Mr. Raymond Hession has a real job ahead of him.

“eHealth” was started as a result of a commitment that the provincial government made in 2000, to have all Ontarians’ health records online by 2015.  That goal is in doubt, according to the article, because of “shady procurement practices,” the “total absence of a strategic plan,” and consultants “who were running amok.”

Interestingly, the article cites successful adoption of EHR on a small scale: a family-practice group located at the Riverside Campus of The Ottawa Hospital.  This is a fundamental error with government initiatives: Observing success at a local level and believing that by investing taxpayers’ money and government control, politicians and bureaucrats can effectively scale it up to encompass an entire jurisdiction.

It’s a pipe-dream: Ontario has over 12 million residents scattered over a huge land-mass, many of whom are surely none too enthusiastic about the provincial government having control of their health records.

Maybe it’s a good thing that “eHealth” fell under the wheels of incompetence and corruption.

There’s Nothing Wrong With States Trumping Federal Antitrust Laws

One interesting contradiction about the majority faction’s position on health-insurance “reform” is that, while they don’t want a national market for health insurance (in the sense that they don’t want each American to have health insurance that is portable from job to job and state to state), they do want Congress to regulate health insurance federally.

With the “reform” in limbo, the majority has found one thing that they think will fly: Subjecting health insurers to federal antitrust laws.  This would be pointless, and likely counter-productive.

Claiming that health insurers are uniquely “exempt” from antitrust laws is misleading in more than one way.  In fact, federal law ensures that state antitrust and other consumer-protection laws dominate the field of insurance regulation.  And this goes for all lines of insurance, not just health insurance.

The law that limits the federal government from pre-empting state antitrust laws is known as the McCarran-Ferguson Act (15 U.S.C. § § 1011-1015), which Congress passed soon after a surprising decision by the U.S. Supreme Court in 1944, which overturned precedent and determined that insurance was interstate commerce.  McCarran-Ferguson immediately restored insurance to state regulation, as it had always been. 

Furthermore, market concentration in health insurance is not significantly different than it is in other lines of insurance.  Nor have states failed to regulate insurers’ solvency.  States enthusiastically regulate – even over regulate – all aspects of insurance.  A federal intrusion into insurance regulation would be redundant, adding another layer of bureaucracy to an already heavily regulated activity.

Read the full article here.

More on Anthem Blue Cross California Rate Hikes

I recently suggested that Anthem Blue Cross California’s astonishing rate hikes in the individual maket are caused by an adverse-selection spiral, and pointed my finger at recent changes in rules governing rescissions of individual policies.

An insurance agent of my acquaintance tells me that policies with maternity benefits are experiencing the biggest hikes.  Because only women get pregmant, that reminded me of a recent state law that drove up premiums for women.  In 2008, the legislature passed a bill mandating a number of benefits, of which at least one, unlimited gynecological testing beyond that which is medically indicated, was expected to be very expensive.  Since that time, the legislature has entertained more mandated benefits, which drive premiums up.

The Los Angeles Times quotes a Blue Cross spokesman who claimed that healthy people are forgoing health insurance if they lose their jobs, leaving relatively sicker people in the policies.

This may make sense for the healthy people: Federal and state law discourage continuous coverage, because an employer must offer health benefits to all its employees without discrimination.  In the small-group market, insurers must offer policies to every small group in a region at almost the same rates, no matter what their employees’ health status is. 

So, if you got laid off from your job at Cisco or Hewlett-Packard, you can go without insurance, and then form a garage-based hi-tech start-up of two or three people, and apply for group coverage whenever you decide it serves your needs.

So, there are a number of possible explanations for what’s behind this rate hike.  Anthem’s “greed” is not a plausible one.

What’s Behind Anthem’s Huge California Rate Hikes?

Californians with individually purchased health insurance were rocked last week by news that Anthem Blue Cross was planning to raise rates for some individual policies by 39 percent.  U.S. Secretary of Health & Human Services Kathleen Sebelius has got into the act, demanding an explanation (even though she has no authority over rates in California’s individual market).

Anthem Blue Cross claims that rising medical costs are the culprit, but there’s no way that underlying medical costs are going up at that rate.  California’s individual market must be suffering from adverse selection.

What’s causing it? My speculation is that California’s new regulations on rescission are one cause of the spiral.  I’ve written a long thread on the topic.  Previously, an applicant for individual coverage could lose her policy if she had not told the truth about her health status on her application.  California changed the rules to require the carrier to prove willful misrepresentation by the applicant – even with objective evidence that she had neglected to fully inform the carrier of a condition.  If an applicant “forgets” or doesn’t “understand” what her health condition is, the carrier will not be able to rescind a policy that was written with incomplete information.

I’ve heard from insurance agents that policies with maternity benefits are suffering the biggest increases.  That’s a pretty strong signal of a selection problem.  I wish Anthem Blue Cross would give us the full story.

California’s New HMO Regulations

Perhaps the greatest absurdity of California state senator Mark Leno getting his single-payer bill passed in the state senate is that it happened the same month the Department of Managed Health Care announced its new regulations limiting waiting times for HMOs. 

The new regulations will require that telephone calls be returned within 30 minutes; that health professionals be available 24/7; that appointments with general practitioners take place within ten days, or 15 days for specialists.  

There are standards that a single-payer plan could not hope to achieve.  Indeed, California’s current government-run health plans can’t achieve them.

The new regulations are a result of years of negotiations between HMOs, the government, and self-styled “consumer advocates”, who lobby for laws and regulation friendly to trial lawyers.  Indeed, Anthony Wright, ED of Health Access California, the “statewide health care consumer advocacy coalition” is actually listed on the DMHC’s press release as “sponsor of the original 2002 law.”  (Can you imagine the outrage if Pfizer or Eli Lilly were listed on a government press release as “sponsor” of a law concerning prescription drugs?)  According to Cindy Ehnes, Director of the DMHC, “Californians are literally sick of having to wait weeks to see a doctor.”

Well, I’m sure they are.  But what of the poor Califorians enrolled in Medi-Cal, our Medicaid program? Only 11 percent of cardiologists in Los Angeles accepted Medicaid patients, and the highest accepting specialty was dermatologists: 58 percent.

Lengthy waits for medical services, as doled out by government bureaucrats, are characteristic of so-called “universal” health care.  In my home country of Canada, we don’t measure waiting times in days, but in months – over four months, to be precise, according to The Fraser Institute’s 2009 annual survey of waiting lists for twelve specialties in each of Canada’s ten provinces.

Read more here.

More On The Premier of Newfoundland’s Heart Surgery

I think this story will have a long life.  One major question, yet unanswered, is: “Who is paying for this surgery?,”  although the fact that his doctors at home referred him suggests that the provincial health plan will pay.

If Mr. Williams is paying himself, he has a real political problem, because he’s violated the so-called “social solidarity” of government monopoly over people’s access to medical services.

If the Newfoundland health plan is paying for it, it’s even worse.  People will want to know if every Newfoundlander has the same claim to go the U.S. on the taxpayers’ tab.  Periodically, provincial health plans have to contract with U.S. providers because waiting lists just get too long at home.   Also, when Canadians go to the U.S. and pay out-of-pocket for specialized care, there have been cases where they made claims, and even lawsuits, against their provincial health plans to reimburse them.

I hope that the Canadian media will keep kicking at this issue.

Medicare & Medicaid Melt Down in Michigan

Another day, another report in the local newspaper about the shortage of doctors, driven by the policies and pay under which government programs expect physicians to labor.

The latest is from the South Bend Tribune, which reports that several thousand physicians have stopped practicing in the Michigan. The Michigan State Medical Society assigns primary blame to a recent 8 percent cut in Medicare and Medicaid fees.

These government programs are nothing short of miraculous: Per capita spending on both Medicare and Medicaid have increased one third more than private health spending, from 1970 through 2008. Nevertheless, their dependents are rapidly losing access to medical services, because reimbursements are too low. Only government could have a track record like that, and keep proposing their expansion.

Instead of fixing these broken programs, the health “reform” proposes to decimate Medicare Advantage, a program which reduces Medicare’s hidden tax on private plans, and provides better care to beneficiaries than the traditional Medicare monopoly.

If the government succeeds, the flow of patients escaping government-rationed care across the Ambassador Bridge between Windsor (Ontario) and Detroit might well reverse itself.

“A Showdown Between Corporate Oligopolies”

Congratulations to New York Times reporter Anemona Hartocollis for a very informative article on a contract dispute between UnitedHealth Group and a consortium of New York hospitals.

The health plan wants to insert a clause in its contract with the hospitals that will reduce fees by 50 percent if a hospital does not inform the plan within 24 hours of one of its enrollees being admitted.  The incentives are obvious: The health plan wants to know ASAP before the hospital staff start running up the bills.

In this case, my sympathies lie (ever so slightly) in favor of UnitedHealth Group, if only because UHG is attempting to insert the condition in a privately negotiated contract, whereas the hospital consortium is running to the state government to stop it (as other hospitals in Tennessee have done, according to the article).

However, one expert quoted in the article described this as a “showdown between corporate oligopolies”.   That may be a little extreme, but it brings us to the gist of the issue.  As long as we rely on a third party to pay for our medical services, piece by piece, it will be subject to micro-management.

I expect that if every American were free to buy a health-insurance policy of his or her own choice, a catastrophic illness or accident that required hospitalization would result in a cash pay-out by the insurer, and the patient would go to whichever hospital he preferred.  There would be little or no need for wasting time and effort negotiating “networks.”

But that’s just one man’s opinion: Government needs to give that money and power to patients, and then we’ll find out.