It’s fun to blame the health insurance industry for all the problems with our health care payment and delivery system. They sometimes deserve the blame too; but, one charge that just won’t stick is that the industry is an unregulated, out of control business. These arguments mimic those you hear about banks – if only there was a law, the financial meltdown would not have happened. Of course the argument ignores the alphabet soup of regulatory agencies who fell asleep as the system careened out of control. Like most arguments, the truth is always in the middle.

In most states, and particularly in Washington State, laws affect nearly every aspect of health insurance. Just creating and running an insurance company requires rigorous regulatory review and approval. Not just anyone can get a license to design and market insurance. The people who sell insurance are regulated. The plan designs are regulated and must be approved by the Insurance Commissioner. The price for coverage is reviewed by the Insurance Commissioner. Health insurance plans even have rules that govern how much profit is allowed (loss ratios). There are rules governing contracts between companies and doctors and hospitals; rules governing claims processing; rules governing consumer complaints; rules governing mandated benefits; rules governing the creation of health care networks; rules governing consumer disclosures; and rules governing marketing. There are even math rules for calculating how much to charge for health plans.

So let’s be clear, it’s not the absence of rules. It’s whether the rules are the right rules. It’s how the rules get enforced and whether there are enough “cops” to enforce the rules. The fact of the matter is that I make a living helping people figure out how to obey these rules. A lot or people are trying to figure out what the law requires:  doctors, insurers, employers, consumers and brokers. It’s not easy figuring out whether a new product or a particular sales practice will be legal or will be approved by a regulatory agency. What’s worse is that laws tend to get layered onto older rules until there are so many insurance rules someone has to be paid to figure out which rules to follow. For example, in Washington, if you are an insurance company rather than a “Blues” plan like Premera Blue Cross, the rules for filing the same type of health plan with the Insurance Commissioner are different for each company because of historic differences in regulation. The differences exist not because it makes sense to do it that way but because it’s easier just to add a new law when the public complains rather than sort it all out and get rid of the old rules.

As we wait and watch for federal health care reform to unfold or unravel, consider this – every health plan, premium, application or form, every disclosure statement, and nearly every insurance company process that is already scrutinized, filed or approved by regulators must be repeated to accommodate the new federal statutes and the regulations to follow. How much do you think that will cost? How many of those dollars will set a bone, dispense a drug, or heal a wound?

While we can always do a better job regulating, let’s not pretend the insurance business is the wild, wild west of open and unfettered competition. It is a highly regulated industry that sometimes works and sometimes doesn’t.


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