Vilifying health insurers: a big mistake

Remember the 1980s and early 90s? That’s when HMOs successfully slowed or even reversed health care spending increases with tools such as prior authorization, gatekeepers, restrictive drug formularies, narrow networks and capitation. Employers were happy to save money and also didn’t mind that the HMOs took the blame when patients were unhappy. Then in the mid-90s a backlash against managed care began, leading to the dumbing down of managed care’s cost saving practices and the re-emergence of indemnity insurance by other names (e.g., POS plans). Not surprisingly, costs started rising fast again, a trend that has continued to the present day.

And yet the backlash against managed care continues. Health insurers are being beaten over the head by politicians and others. No doubt some of the criticism is justified, because there are plenty of abuses to be found. But the popular view that cracking down on insurers is going to solve the health care cost crisis is dangerously misguided. Bashing health plans gives others ’especially hospitals, clinics, doctors, patients, employers, politicians and regulators’ a free pass. The big drivers of health care premiums are volume of health care consumed and rising prices, which are not caused by health plans.

Even the debate about pre-existing conditions is not so straightforward. It’s considered a given at this point that health plans shouldn’t discriminate against people with pre-existing conditions. Yet the fact remains that pre-existing conditions drive up the cost of insuring an individual.

Contrast this situation with other areas of insurance. I am in the process of upgrading my disability insurance, and you can be certain the insurance company is taking steps to make sure I’m a good risk. That means asking medical and lifestyle questions and subjecting me to a physical examination that includes blood and urine tests. It’s the same thing with life insurance. Although it’s unfortunate for people in poor health, this system at least keeps premiums affordable for those at low risk.

Don’t get me wrong. I’d also like to see a ban on discrimination based on pre-existing conditions. But this does have to be coupled with mandated coverage in order to bring the whole population into the risk pool.