Wednesday, October 26, 2016

Health Insurers Have Figured Out How To Play The New System

Question: have the insurers pocketed the significant profits from the millions of low risk young people who previously were not required to have insurance?

It must have been a nice percentage of their profits. I think they have carefully segregated that large increase in low risk revenue from the higher risk people they can punish for their illnesses. Insurance is supposed to use economies of scale to spread risk, but I think insurers are instead carefully segregating risks to maximize premiums where possible.

When insurers selectively refuse to spread the risk for the benefit of their policyholders it is a fundamental violation of the whole idea of insurance.

I am in a new captive category: individuals who are no longer welcome in the insurance companies’ economies of scale for the “crime" of being an individual and not an employee of a large company. It’s the same old category from before. It appears the insurers have figured out how to sort the insured back into the ghettos which maximize their profits and minimize their expenses.

Wendell Potter, the sharpest observer we have on health insurance issues, has this to say.

Vox has published an interesting conversation about the sudden "problems" with Obamacare.

I think we’ve turned back toward the vicious cycle we saw previously, where the health insurers were motivated to exclude all the unlucky people who actually needed healthcare.

The insurance companies' new insurance pools where premiums are still affordable begin to look like exclusive clubs. The people who are welcomed in enjoy the lower premiums that they qualify for as healthy people and they are encouraged to approve the exclusion of people who are sicker than they are because they benefit from that exclusion.

This is a near perfect example of a vicious cycle, a competitive pursuit of inhumane practices. A more virtuous approach would be to put all Americans into one single risk pool: we are all human beings and all Americans.

There must have been an enormous Obamacare windfall to the insurance companies from the millions of premium-paying low risk young people who suddenly were forced to buy insurance policies. What happened to that windfall? If that revenue was consumed entirely by the increase in healthcare needed by the less healthy who were now insured, how much are the large pools of employee insurance plans being insulated from the increase? It's a perfect example of safety in numbers. Large groups protect their members, but they also select their members. What about the unfortunate people who are not invited in? Working people tend to be healthier than people who are not working, but less healthy people find it harder to stay employed, so these employee plans self segregate, insulating themselves from the ills of "other people."

How are we supposed to respond to this as human beings? If the previously uninsured were suddenly able to get needed care, why are we blaming the system which made the care possible? Obamacare's innovation was pretty simple: it accepted everybody, sick or well, employed or unemployed, as human beings. More than that: it required us to step up to some basic responsibility toward ourselves and our fellow citizens. Why do so many Americans reject this?

An analogy: a person is drowning and crying for help and we jump in to save them. Afterwards when we notice we are cold and wet are we angry about that? Do we blame the person who was drowning? Or do we simply acknowledge that this discomfort is the price we sometimes pay for being and behaving like a human being? The anger over the rise in premiums is like blaming the person who otherwise would have drowned, suggesting we would have been better off if we hadn’t heard their cries for help.

A fairer and more humane way of looking at this is to recognize we are all in the water. We are all human and mortal and prone to disease and catastrophe. Do we want to live in a society where disaster sorts us out as undesirables, leaving us alone and without help? Single payer would be a more rational solution. It would save us from that heartless and selfish part of us that would rather ignore the people in trouble, or that greedy part of us that would actually try to profit from their misery.

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