As I posted earlier today, I believe the feds did the right thing in making sure AIG did not fall.
But as the dust settles, that takes us to another big question--the question of more or less regulation generally and, more specifically for readers here, more or less regulation for the health insurance industry.
The first thing to note is that the existing state regulation of the insurance industry generally worked well in AIG's case. AIG's mainstream insurance business is in great shape.
AIG's problems were in its bond wrap business--the financial side. That said, those were financial products offered by a sub of an insurance giant and the regulators blew it in letting them so leverage the company where they essentially guaranteed the housing bubble. My 20-something son passed on buying his first house in 2004 and 2005 because he was smart enough to smell a bubble--but the AIG guys weren't and that is unforgivable.
The nation's perspective on the regulation of business will now very correctly focus on getting our financial regulatory systems back to what they should have been. Even Palin and McCain are calling for the regulators to do their jobs!
This is also a reminder that there needs to be a very even balance between government regulation and private enterprise. A balance that has clearly gone too far in favor of greed.
John McCain has called for a more vibrant and more unregulated health insurance market as a core solution to our health care problems. Whether or not he is elected, I expect those ideas are now incredibly out of step with voters more than wounded in recent days by the unfettered market.
I also call your attention to Joe Paduda's post today, "Implications of the AIG bailout"
Showing posts with label State-Based Risk Pools. Show all posts
Showing posts with label State-Based Risk Pools. Show all posts
Wednesday, September 17, 2008
Monday, July 28, 2008
State High Risk Pools For the Uninsured--Who Would Want To Be In Them?
What do we do with people who are uninsurable because they have a pre-existing medical condition?
That is a particularly important question as both McCain and Obama propose reforming American health care by building on the private health insurance system.
One of the solutions being discussed--by McCain among others--is to use state-based risk pools. Under McCain's plan heavily dependent on an individual platform, people who don't have employer-based coverage and healthy enough to qualify for individual health insurance could get a private mainstream plan and people who do not qualify for a standard individual plan could buy into a state-run high risk pool for the uninsurable.
In today's market, these state-run pools can be lifesavers for those who can't otherwise get coverage. But of 47 million uninsured, only about 200,000 people are in these pools nationwide. Sometimes the pools are prohibitively expensive, sometimes they are full and taking no new members, sometimes their coverage is hardly worth it.
One of the states that proponents point to as doing a good job with their risk pool is Minnesota.
Minnesota does have one of the better pools for those who are uninsurable. It offers a wide range of plans with a maximum cost of 125% of comparable market plans that medically underwrite. A family of four can get an HSA-style plan for about $9,000 a year (parents age 35-39). A couple age-60 can get a $2,000 deductible, 80/20 plan for about $12,500 a year. Pre-existing conditions are excluded for six months if you do not have prior creditable coverage.
If you are uninsurable in Minnesota--and can afford those premiums--you are likely facing some pretty high medical costs to make it worth your while. These plans tend to be anti-selection magnets in our voluntary system.
In 2006, there were about 30,000 enrollees in the Minnesota high risk pool (out of 465,000 uninsured in the state). Minnesota had a total program cost of $236 million that year. Of that, $124 million--more than half the funding--came from state subsidies collected by an assessment on insurer premiums. The per enrollee subsidy coming from state government was $4,265. That family of four had a state subsidy of over $16,000 that was added to the $9,000 premium they paid.
So, how does a state-based risk pool work?
In Minnesota, if you are uninsurable you qualify only for the limited state plans, at a cost that is up to 25% more than in the mainstream market, and the state government has to come up with a subsidy of more than $4,000 per participant to make it work--and it still costs you a lot.
If the federal government were to pass a health care reform bill that required the states to set these pools up, as McCain proposes, wouldn't that just be another unfunded state mandate?
I can't figure out why John McCain wants to go to voters with the unappealing notion that those with pre-existing conditions are going to be shipped off to a risk pool like Minnesota's when we could accomplish something better by putting them in mainstream health plans using proven market-based reinsurance principles and underwriting rules.
If assessing insurers for the cost of high risk consumers, as they do in MN, is a good idea why not do it through the front door and promise those with pre-existing conditions they can get into regular coverage? See also: John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed.
If nothing else, the market ought to tell the McCain health care planners something--out of 465,000 uninsured in Minnesota, only 30,000 are buying the product.
I don't think the voters are going to buy it either.
The Minnesota Risk Pool--Facts and Figures
That is a particularly important question as both McCain and Obama propose reforming American health care by building on the private health insurance system.
One of the solutions being discussed--by McCain among others--is to use state-based risk pools. Under McCain's plan heavily dependent on an individual platform, people who don't have employer-based coverage and healthy enough to qualify for individual health insurance could get a private mainstream plan and people who do not qualify for a standard individual plan could buy into a state-run high risk pool for the uninsurable.
In today's market, these state-run pools can be lifesavers for those who can't otherwise get coverage. But of 47 million uninsured, only about 200,000 people are in these pools nationwide. Sometimes the pools are prohibitively expensive, sometimes they are full and taking no new members, sometimes their coverage is hardly worth it.
One of the states that proponents point to as doing a good job with their risk pool is Minnesota.
Minnesota does have one of the better pools for those who are uninsurable. It offers a wide range of plans with a maximum cost of 125% of comparable market plans that medically underwrite. A family of four can get an HSA-style plan for about $9,000 a year (parents age 35-39). A couple age-60 can get a $2,000 deductible, 80/20 plan for about $12,500 a year. Pre-existing conditions are excluded for six months if you do not have prior creditable coverage.
If you are uninsurable in Minnesota--and can afford those premiums--you are likely facing some pretty high medical costs to make it worth your while. These plans tend to be anti-selection magnets in our voluntary system.
In 2006, there were about 30,000 enrollees in the Minnesota high risk pool (out of 465,000 uninsured in the state). Minnesota had a total program cost of $236 million that year. Of that, $124 million--more than half the funding--came from state subsidies collected by an assessment on insurer premiums. The per enrollee subsidy coming from state government was $4,265. That family of four had a state subsidy of over $16,000 that was added to the $9,000 premium they paid.
So, how does a state-based risk pool work?
In Minnesota, if you are uninsurable you qualify only for the limited state plans, at a cost that is up to 25% more than in the mainstream market, and the state government has to come up with a subsidy of more than $4,000 per participant to make it work--and it still costs you a lot.
If the federal government were to pass a health care reform bill that required the states to set these pools up, as McCain proposes, wouldn't that just be another unfunded state mandate?
I can't figure out why John McCain wants to go to voters with the unappealing notion that those with pre-existing conditions are going to be shipped off to a risk pool like Minnesota's when we could accomplish something better by putting them in mainstream health plans using proven market-based reinsurance principles and underwriting rules.
If assessing insurers for the cost of high risk consumers, as they do in MN, is a good idea why not do it through the front door and promise those with pre-existing conditions they can get into regular coverage? See also: John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed.
If nothing else, the market ought to tell the McCain health care planners something--out of 465,000 uninsured in Minnesota, only 30,000 are buying the product.
I don't think the voters are going to buy it either.
The Minnesota Risk Pool--Facts and Figures
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