CMA Health Policy Blog

Can We Afford a Private Health Plan Option?

August 24, 2009 at 6:42 pm meshepard Leave a comment

Last week, Congressman Anthony Weiner (D. NY) asked TV commentator (and former Congressman) Joe Scarborough a series of questions about private insurance companies that form the lynchpin of our current health care system and around which health care reform may be based. Congressman Weiner asked:  “Why are we paying profits for insurance companies? Why are we paying overhead for insurance companies? Why are we paying for their TV commercials? What is their value? What are they bringing to the deal?”

Here’s what we know about the role private health insurance companies play in our health care system – and might well play in healthcare “reform”:

1.  Private insurance companies decide which doctors we see.  Most Americans are in network plans that require them to use the doctors who allowed into their network.  Some plans allow members to go to non-network providers, but only if the individual pays more out-of-pocket.  Private insurance supporters argue that people are always free to go to a doctor who isn’t in their insurance plan’s network, but if they do so they have to pay the full cost themselves, something most Americans cannot afford.

2.  Private insurance plans decide who gets insurance.  They reject people who use too much health care, rescind contracts from high health-care users, and deny health insurance and/or coverage to people with pre-existing conditions.  Plans also charge higher premiums for people based on what they determine to be a pre-existing condition or based on the individual’s gender, making health insurance unaffordable for many people.

3.  Private insurance companies decide what health care will be provided and paid for.  They decide what services will be covered in the insurance package they offer.  They establish drug formularies and prior approval requirements for drugs and procedures.  They set the standards for the documentation and proof they require to determine whether a prescribed treatment is medically necessary, and each plan has its own requirements.  Private insurance plans are not bound by what your doctor thinks is best for you, and they may override your doctor’s recommendation, and refuse coverage.

4.  Private insurance companies increase the administrative work load for doctors’ offices.  Staff must submit different health claim forms for different insurance companies and comply with each plan’s own formularies and requirements for submitting medical records to justify claims.  They must spend hours on the phone with insurance companies to verify coverage, cost sharing, and formulary rules.

5.  Private insurance companies encourage people to ration health care.  By developing products with high deductibles and cost-sharing, private health insurance companies encourage enrollees to think twice about getting the care their doctors prescribe.  Unfortunately, such decisions are often based on cost rather than on medical necessity and/or quality of care.  Someone who delays needed care because of a high deductible or high cost-sharing amount may leave a condition untreated, and may end up requiring more costly health care in the future.

6.  Private insurance companies are highly profitable industries, for their investors.  According to insurance industry filings with the federal Securities and Exchange Commission, profits for the 10 largest publically traded health insurance companies rose 428% from 2000 to 2007, from $2.4 billion to $12.9 billion.   During the same time period, the number of uninsured continued to rise, although the economic downturn enabled some individuals to get insurance through state Medicaid programs, many lost their health insurance due to lay-offs.

What do we get from private insurance companies?  A system that decides who gets insurance and who does not; that comes between patients and their doctors – and that makes profits for investors.  Is this the right direction for our country to take in “reforming” the health care system?  Can we afford this?  And who stands to gain?

Entry filed under: Health Care Reform, Public vs. Private Health Coverage, Single Payer, Uncategorized.