Saturday, February 13, 2010

What's wrong with Colorado?

Let’s consider the case of Peggy Robertson, a resident of the Great State of Colorado. Ms. Robertson had given birth by Caesarean section. Because having one child by Caesarean section means a woman is more likely to have later children by Caesarean section, many insurers consider that a pre-existing condition. This means that when a woman who has had a Caesarean section applies for an individual health insurance policy (group policies usually work differently), the insurer will either exclude coverage for a Caesarean for some number of years or cover Caesareans but charge the woman a higher premium.

In 2007 Ms Robertson had individual health insurance coverage but was shopping for a better rate. She applied to the Golden Rule insurance company and was denied coverage. She was “mystified”. She contacted the Colorado Division of Insurance which contacted Golden Rule asking for an explanation of the denial. Golden Rule then wrote Ms. Robertson to explain their decision:

The plan you applied for is an association group plan and is medically underwritten. As a general rule, our underwriting guidelines require that we issue coverage with a rider excluding benefits for caesarean section delivery for three years. However, the Colorado Division of Insurance no longer allows us to place that rider. Without the rider, we have decided that we cannot provide any coverage for the individual. Unfortunately, we cannot collect sufficient premium to offset the risk of paying for a repeat C-section delivery during the first three years of coverage.

In order to consider coverage without a rider, we require that certain requirements be met. One requirement is that some form of sterilization has occurred since the caesarean section delivery. Also, women age 40 and over, who had their last child two or more years prior to applying for coverage, will not require a rider. Unfortunately, since you had not met either of these requirements, it would have been necessary to place the C-section rider.

Some people on the Left reported this as “woman was told to ‘get sterilized’ if she wants insurance.” This is, of course, not at all what the letter said but it made a handy stick with which to beat insurance companies. (I’m pretty sure that if Golden Rule had sent Ms. Robertson a letter without that second paragraph about sterilization and Ms. Robertson had had her tubes tied after her Caesarean section, those same people on the Left would have reported this as “sterilized women denied insurance because of previous Caesarean.”) In fact, the letter was a straightforward, professional response to a request for information.

Golden Rule was asked by its regulating agency to respond to Ms. Robertson’s complaint about being denied coverage. It did so and it explained the circumstances under which Ms. Robertson’s Caesarean section would not have caused her to be denied. It’s no different from an insurer turning down someone who was injured working at a high-risk job; explaining that they had to do so because they aren’t allowed to exclude coverage for injuries from the high-risk job or charge a higher rate for coverage because of the high-risk job; and stating that they would not have denied coverage if the applicant had taken safer employment since the accident. I don’t understand why, more than forty years after the founding of NOW, we’re arguing that women deserve special treatment and apparently accepting the idea that merely mentioning the world “sterilization” to a woman of child-bearing years causes her unbearable mental anguish.

But why, you’re wondering patiently, did I call this post, “What’s wrong with Colorado”? Because the real source of Ms. Robertson’s denial is not Golden Rule; Golden Rule would have been happy to write her an individual health insurance policy. The real source is the Colorado Division of Insurance which has got to be in the running for stupidest insurance regulator in the country. The CDI forbad Colorado insurance companies to exclude Caesarean sections from coverage: if an insurance company takes on a new customer, the insurance company must cover Caesarean sections beginning immediately. However, it obviously never even occurred to the CDI that this would mean insurance companies would simply start refusing to take on women who had had Caesarean sections. Not only did such an outcome never even cross the minds of the rule-makers at the CDI, it apparently also never occurred to them to actually ask insurance companies, “What would happen if we forbad you to exclude Caesarean sections from coverage for new policyholders?” I’m pretty sure that anyone who worked for an insurance company would have foreseen quite clearly that their company would simply stop writing policies for such women.

But perhaps it’s perfectly understandable that the CDI would never have asked an insurance company what the outcome of their new policy would be. After all, insurance companies are all the spawn of Satan whose only goal is to be mean to people who need insurance. None of their decisions have any rational basis, they just randomly do whatever is the most hurtful thing they can think of. The guys in government are smart enough to see through their dastardly plans and thwart them without having to pay any attention to what those monsters at insurance companies say about anything.

Way to go, stalwart members of the CDI. I’m sure Peggy Robertson appreciates your efforts on her behalf.

Look, I’m not sure insurance companies have a role in health care/insurance going forward. Their business model does not seem workable to me in an era when we can help sick people a lot more than we once could by spending a lot, lot more money than we once did; when people increasingly think health care is a God-given right; and when any hint of profit is considered the mark of the devil. This country spends about $8,000 per year on health care. If we accounted for our spending honestly, that would mean an insurance premium of $32,000 per year for a family of four. Darn few families could afford that. So the only route for insurance companies is to either raise premiums so high no one can afford them or do their best to weed out people who are actually sick. Neither one is sustainable in the long run. None of that means insurance companies are evil. It just means they are reality-based. It’s easy to rail about what insurance companies should be doing when you don’t have to meet an insurance company payroll or have enough in the bank to pay an insurance company’s claims. Dollars and cents, however, are not amenable to uninformed rhetoric.

We can try to regulate away the practices we don’t like but as Ms. Robertson can testify, reality cannot be regulated away. Of course Colorado can now turn around and require insurance companies to write individual policies with no exclusion of coverage and no higher premiums for women who have had Caesareans. The result would be that premiums for everyone with health insurance would go up. That’s a nice outcome for Ms. Robertson - everyone else is subsidizing her chance of having another Caesarean - but it’s not so nice for the other policy holders.

And, of course, States can require insurers to write standard individual polices not just for women who have had Caesareans but for people with diabetes and heart trouble, with cancer and multiple sclerosis, with any and all diseases and conditions you can think of. My State of New Jersey has basically done that. Our health insurance is very expensive and we may well be in that downward death spiral where regulators force insurers to cover everyone no matter how sick; insurers have to raise rates; fewer people can readily afford the rates so healthy people drop their health insurance; the people left in the health insurance pool are sicker on average; rates go up again; and the whole thing repeats until the only people with health insurance are those who are unlucky enough to be really sick but lucky enough to be pretty rich.

On the other hand, we can go down the path of the health bills passed by the House and Senate which somehow let us convince ourselves that we can cover 10 or 20 or 30 million more people without spending one more cent. Or down the path of single-payer where we can convince ourselves that health care is free because it will be paid for by taxes - and 95% of us will assume that the taxes will be assessed only on the other 5%.

Or we can finally admit that we can’t have everything for nothing and decide what we’re willing to pay for and what we’re willing to give up. Perhaps David Brooks is right and President Obama can become the leader who forces us to face up to those choices - or at least to realize the choices actually exist and can’t be wished away by everyone’s perfectly understandable desire to get what they want and leave someone else with the bill. It would be a great service to the nation and require an unflinching look at the reality of health care costs.

And that’s the reason I object so strongly to demonizing insurance companies: it’s just a way of pretending there are no choices to be made when it comes to health care. As long as we tell ourselves that all our health care woes are the result of rapacious insurance companies, we allow ourselves to refuse to look full on at why insurance companies really do what they do. That means we allow ourselves to refuse to acknowledge that money only goes so far, everything we want has to be paid for by someone, and the more we want the more it’s going to cost.



I was going to write about Peggy Robertson when I first read about it last October but never got around to it. I decided to revisit it after Movin’ Meat put up a post about another example of how stupidly Colorado is regulating its insurance companies. I’m really sorry the Colorado Division of Insurance is incapable of doing a competent job but I don’t think that’s a very good argument for passing a massive overhaul of the entire nation’s health care/insurance.


Mark Sorrentino said...

Thanks so much for your thoughts on this. As an independent insurance agent (Life and Health) in Colorado I appreciate your stance on the subject of medical insurance and insurance companies.

If more people would back away from the emotional and see the cogs that spin the wheel, it would be easier to reform health care.

I am for reform, and I am for helping folks who can't afford or get coverage under the existing system. However, there needs to be a sober discussion of what "can't afford" and "can't get" really is.

If we all thought as logically and dispassionately about the subject as you we might be better off.


Caesarean section said...

More and more women today are asking for C-sections as an elective form of childbirth to eliminate pain and take control of the deliver so there is no waiting game, which spurred a movement to do Caesarean deliveries on maternal request. However, little research has been done to support or dispute the safety of elective C-sections.