Saturday, November 23, 2013

Access denied

Robert Laszewski’s newest post is, like all that have come before, worth reading in its entirety. Entitled “If You Like Your Doctor You Will Be Able to Keep Your Doctor, Period”, this piece explains why ObamaCare makes narrow networks an increasingly important way for insurers to control their premium pricing; hypothesizes that those low-cost, narrow network plans will strongly influence the subsidy amount; and points out that attempts to use legislation to force insurers to widen their networks will result in another round of rate shock.

One point Laszewski does not make clearly enough is that not only do the new insurance plans have restricted networks; many (my limited research indicates most) of them also do not have any out-of-network coverage other than emergency care. None. Zip, zilch, nada. Niente. So when Laszewski says (emphasis mine):

... some health plans are only offering narrow networks on the new health insurance exchanges. Health plans, figuring that a great many of the new exchange customers will be coming from the ranks of the uninsured have decided to craft plans that largely include providers located where many of these uninsured people live and where they are most likely to get their health care anyway––perhaps not as big a deal for these folks who, because they are uninsured, don't have a regular provider relationship. But it also means these people will not have access to some of the most respected centers of excellence if they have a serous illness. [snip]

People who might be accustomed to broader networks found in employer health plans will have to either buy-up to better plans or may find their choices limited on the exchange.

it isn’t just that people will have to buy a more expensive plan to get a broader network; it’s also that people will have to buy a more expensive plan to get any coverage for out-of-network treatment at major cancer centers, well-regarded children’s hospitals, specialty diagnostic facilities - all kinds of “respected centers of excellence”.

Do people without out-of-network coverage still have “access” to these facilities? Of course, if by access one means they can show up and ask to be treated. But if by “access” one means actually receiving treatment at these facilities without insurance coverage - well, if people could get expensive medical treatment without being able to pay for it, no one would need health insurance in the first place.


E Hines said...

From Laszewski’s article: Under Obamacare, insurers can no longer underwrite, or exclude people, to keep the cost of their individual market health insurance plans down––a good thing.

Aside from the distortion present in his statement, Laszewski also chooses, mendaciously in my view, not to explain why not allowing health insurers consider health histories and health factors in assessing the risks they're taking on and the fees they'll charge for that taking is so wonderful. He simply presents this as a bald, unsubstantiated "Of course." Yet by eliminating the connection between risk and fee which Obamacare achieves, the insurance aspect of the industry also is eliminated.

Yet that simple move drives, in no small way, the premiums health insurers must charge in order to break even, much less to earn a small profit. This price control/distortion also forces the insurers to limit the breadth of health care providers they're willing to reimburse for those services, as Laszewski correctly notices. Since they can't charge for the risk, they're forced to charge for the welfare, and their only way to control costs is to control their own labor supply--those providers.

Further, since the availability of health providers is so severely circumscribed by these outcomes--not only by the shrunken networks, but also by the unwillingness of qualified doctors, hospitals, and I suspect clinics to participate in such stuff--so is the "benefit" of the health welfare payments circumscribed.

And everyone loses.

Eric Hines

Elise said...

That statement struck me, also, and I considered writing a separate post on it, but it simply wasn't my focus in this post.

I'm not sure what distortion you see in this. And I don't think it's mendacious of Laszewski to not explain why he thinks this is a good thing. My own experience has been that a post can only contain so much, go on for so long - and that I have only so much time and energy to expend on each one.

I don't know why Laszewski thinks this is good; perhaps one of his other posts explains that. I can see aspects of it that are good. For example, if I've paid premiums to YourHealth Insurance Company for 30 years and been reimbursed for nothing more than a broken arm and an appendectomy, it doesn't seem quite right that if I'm diagnosed with a serious or chronic illness, YH Insurance could suddenly refuse to renew my contract or start charging me ten times what they charged me last year.

I understand that we don't need laws to handle this. For example, insurance companies could tack on a fee to premiums to make a policy guaranteed renewal and/or to guarantee some ceiling on premium hikes. Of course, I haven't noticed insurance companies clamoring to offer anything like this but perhaps in a truly free market, they would.

I wonder if some of problem is that health insurance policies are one-year contracts. This may have made sense when (a) there wasn't much medical to be done for serious illnesses or (b) serious illnesses killed us pretty quickly or (c) both. Now, of course, there are lots of very expensive things to be done for serious illnesses and people with such illnesses can live for a long, long time, far outliving a one-year health insurance contract.

E Hines said...

insurers can no longer underwrite, or exclude people is the distortion. He lays this off on the insurance companies as if that's what they do of their own accord. Of course, that's not true. It's government distortions of the market that force this. Insurance companies would sell policies to anyone were there a free market in which to do so. They'd even sell policies to precondition persons, since there still is a risk to be transferred. But that requires risk-based premiums, and that requires both free markets and an ability--canceled under Obamacare--to consider health factors and health histories in assessing health risks for transfer.

The mendacity is in the bald claim that not being able to do these things--that masquerading health welfare as health insurance--is a good thing. He knows better. He's too intelligent not to know better. doesn't seem quite right that if I'm diagnosed with a serious or chronic illness, YH Insurance could suddenly refuse to renew my contract or start charging me ten times....

Without knowing the details of your hypothetical policy, I fail to see why this isn't quite right. You're no longer in the risk population, now that you have a chronic illness, that you were in when all you had was the bone break or the appendectomy. Of course the premiums should change: a different risk is being transferred or declined to be accepted. Neither party to a contract is a slave to the other party; each is a free agent.

You're likely right about the one-year contracts--but that, too, takes a free market to permit. Competition is as powerful an antiseptic as sunlight.

Eric Hines

Elise said...

I'm not convinced insurance companies would sell policies to people with serious pre-existing conditions, regardless of price.

And the question of whether it's right for YH to drop me or ramp up my premium is all about what you think health insurance is for. I think it's for - or should be for - I pay faithfully when I'm well and if I get sick the insurance steps up for me. That's why I think the one-year model is flawed; that model says I pay faithfully and if anyone gets sick the insurance steps up for them.

I don't think there's a right and wrong way to look at what insurance should be for but if an insurance company if going to drop me or raise my premiums beyond my reach if I get seriously ill then there's no reason for me to buy health insurance. Accident insurance, yes; health insurance, no.

E Hines said...

But what is it that you're insured for in your policy? Pre-Obamacare, that was specified in your policy, with a measure of negotiation (albeit not enough--just negotiation in the form of selecting from a range of bundled coverages) between you and the insurer concerning what would be covered. None of those policies (or very few of them) covered everything. Thus, if you get an illness (or something) that's not covered, the insurer has no obligation to pay, and if you want coverage for that, you (generic "you," not you personally) need to understand that that new condition puts you into a different risk pool, with necessarily different premium structures.

The right way to look at what insurance should be for IMNSHO is whatever the players in a free market want.

As to the availability of policies for preexisting conditions in a free market, the arithmetic underlying risk assessment is pretty straightforward. Research identifying the size of the population having a particular preexisting condition is pretty straightforward. Determining the premium needed to cover the expected payout in any time frame is 3rd grade arithmetic. Such policies will exist, albeit perhaps not a premium reachable by many. But free markets have solutions for that, too: bundling, for instance.

Eric Hines