As we struggle to understand and adapt to federal health care reform, can we please agree on the fundamentals? Much of the debate and the more modest conversations about the future of health insurance reform occur in a twilight zone where we use the same words but mean entirely different things.
Insurance has a long and well defined meaning; but, insurance is not the financing of known losses. Health insurance does not equal health care. We are trying to convert insurance into health care financing and some seem confused when the square peg doesn’t fit the round hole.
Washington statutes define insurance as “a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.” As the Washington Supreme court has explained, “insurance is by its nature prospective and not retrospective, as can be seen from the statutory definition of an insurance contract…Insurable events are contingent and uncertain precisely because they are future and not past events.” [Mendoza v. Rivera-Chavez 140 Wn. 2d 659 (2000)]
To state the obvious, if I am sick and I need care and I give you a check for $1,000 and you agree to pay $50,000 for my surgery right now, I have not purchased an insurance policy. I have relied upon the kindness of strangers who will allow me to spend the $1000 they contributed to the same insurer. Can we agree that the following statement constitutes an oxymoron:
“Insurance companies will no longer be allowed to insure a child, but exclude treatments for that child’s pre-existing condition; children with pre-existing conditions may not be denied access to their parents’ health insurance plan.”
Over time through various regulatory reforms, we have converted “insurance” into health care financing and care management. We have allowed the insurer to become the default rationer of care – the claims department as the true “death panel.” We have moved away from the concept of “contingency” – something that might or might not happen. Health care reform completes the movement away from insurance. Why? Because there is no contract for reimbursement of a “determinable contingency” – insurance against the possibility of a loss. Everyone gets a comprehensive health plan for nearly the same price.
Under the short-term health insurance reforms, insurers must sell insurance to children without regard to the possibility of a claim for care. Eventually, insurers must sell “insurance” to anyone without regard to health and without limit on claims for known losses. Worse still, people can buy “insurance,” get care, terminate “insurance,” and face weak penalties for this obvious charade. How do you price that risk?
Once we became comfortable with the notion that health insurance really equaled “access” to care, we began eliminating the elements that make insurance prices correlate to risk of loss. We began by whittling away the various risk factors that insurance companies could use to price the risk of loss – we eliminated sex differences, restricted age rating, banned genetic factors, prohibited surcharges for known diseases, and the use of medical records.
We limited the right of an insurer to say no to a poor risk. We limited the use of exclusions that require people to suffer a future loss. We permitted the purchase of coverage for a known need for care. We did all of these things so that people could have “access” to health care.
In the very worst cases of catastrophic need for care, we invented “high risk insurance pools.” People who desperately need life saving treatments are “sold” an “insurance” plan at the price a healthy person would pay and the insurance industry is presented with the bill to pass along to policyholders through higher premiums. With these slights of hand, you understand the arguments from those who say we should strip away pretense and create a “single payer” for all care and hire the insurance companies as third party administrators who negotiate for and manage care.
With reform, we have drifted to a point where we want an insurance plan to finance and manage non-governmental health care programs defined by regulation. We have agreed by law that insurance companies are best able to design and manage health care financing and delivery systems. With insurance reform, we have avoided a “government run” system.
I accept majority rule; but, can we stop calling this “insurance reform?” Can we agree not to be surprised when healthy people refuse to buy insurance because the price is too high? Can we agree that the trade-off for increased benefits and uniform pricing is a system where we look to the “insurer” to negotiate and ration our care? Can we finally agree that a mandate to buy coverage from a private insurer is the privatization of tax and spend rather than insurance? Can we please stop congratulating ourselves for “preserving” a private system that must design, price, sell, manage, and provide benefits exactly as prescribed by regulation rather than creating a government plan.
I understand why these things were done; but however you feel about reform, can we agree on the meaning of words? Can we call this “insurance transmogrification.”