A different kind of innovation

One of the worries about the House health care bill (HR3200) and possibly about the other health care bills on the table is that by greatly enlarging the government’s role in health care and focusing on cost-cutting to the exclusion of improvement, the bill will greatly slow the pace of medical innovation coming out of the United States. And, since we are the engine that drives most medical innovation, this will mean such innovation will decline globally. I wrote about that here and others across the blogosphere have written about it as well.

There’s another kind of innovation that will almost certainly be curtailed by HR3200: innovations in insurance policies. As far as I can tell, the bill establishes four levels of polices that can be offered via “the Exchange”. Policies in each of those levels must meet certain requirements. It’s possible there will be room to innovate within those requirements but I fear there will not.

What do I mean by innovations in insurance policies? Here’s an example. I live in New Jersey. New Jersey is a very friendly State in terms of being able to obtain health insurance although not friendly at all in terms of being able to afford it. I’ve been buying my own health insurance for about 7 years and it costs me a fortune. At the beginning of this year, my insurance carrier, Blue Cross Blue Shield, started offering a new line of policies. I now have a flat copay for doctors’ visits rather than “they bill the insurance company then bill me for the residue”; my deductible is higher out of network than in; and prescriptions are paid 50-50 rather than 70-30 plus I have neither a deductible to meet first before the 50-50 kicks in nor a maximum after which the insurance company pays 100%. This policy costs me slightly less than half of what my old policy cost me.

How can they do this? I don’t know. I assume they ran the numbers and discovered they would add up. If I took a lot of prescription medications it probably wouldn’t be a good deal for me but since I don’t, it’s great. I bet it’s even great for my doctors since now I pay them up front: they never have to bill me and they never have to dun patients who don’t pay.

So one question I’d like answered is: How likely are we to get this type of policy innovation once “the Exchange” is up and running?