I came across this article by By DOUG ERICKSEN AND ROGER STARK in the Port Orchard Independent Contributor not too long ago. Some of the data reported in the article just didn’t seem right, so I did a little digging for details.
Looks like Ericksen cribbed most of his material from this site: http://www.haciendapub.com/article38.html Originally published in the March/April 2000 issue of the Medical Sentinel. Copyright ©2000 Association of American Physicians and Surgeons.
Ericksen: “The state went from having 19 private health insurers in 1993, to only having three remaining today.”
I can find no article (doesn’t mean it doesn’t exist) that health insurers fled the state. But as to the “three remaining today…”’
See list in Lewis County below – looks like 7 to me, not 3. Could be more, but it’s done by county. A call to the DOI could provide a complete number. http://www.insurance.wa.gov/consumers/health/plans/Lewis.shtml
Individual health plans
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Is Ericson forgetting all the mergers in the last decade? From a 2006 article: “AMA said there have been more than 400 health care insurance mergers during the past decade. Health insurers following consolidations have “presumably eliminated duplicative functions [but] they’re not passing the savings in personnel and administrative costs on to consumers,” Dow Jones/Sun reports. Rate increases are slowing, but they “are higher than ever and growing at a near double-digit pace,” Dow Jones/Sun reports. AMA said it raised antitrust issues with DOJ, which it said did not express interest in pursing the matter, Dow Jones/Sun reports (Dow Jones/Baltimore Sun, 4/18). http://www.emaxhealth.com/72/5561.html
Ericksen: “Washington state also became a magnet for patients from around the country who had serious and expensive medical conditions because they knew they could get immediate health insurance coverage.”
How so, when there are (and have been) only so many “slots” available for people to obtain coverage? Ericksen is not being truthful here about how the plan works.
“The Legislature gave Basic Health 6,500 additional “slots” during session. This brought program capacity to 106,500, with the expectation that enrollment would increase over the remainder of the biennium.” http://www.basichealth.hca.wa.gov/about.html
Ericksen: “People would also change from a low-cost health insurance plan with a high deductible to a high-coverage health insurance plan with a low deductible, receive major medical procedures or treatments, and then change back or drop their coverage.”
He thinks they don’t do that now in private plans? Anyone who knows they can put off a surgery until the next year will be putting it off so they can change the plan’s deductible for that year.
Ericksen: “By 1995, as a result of the Washington Health Services Act, many of the state’s private health insurers had pulled out of the market.”
HB 1046 repeals much of the Health Services Act, substantially altering provisions regarding community rating, and eliminating the minimum benefits package and the employer/individual mandate. However, the Legislature reaffirms provisions on guaranteed issue, portability, limitations on waiting periods for pre-existing conditions, and elimination of individual underwriting.
For a full history of Washington’s Health Services Act: http://www.basichealth.hca.wa.gov/about.html
Ericksen: “By 1999, the individual market had fallen apart — with individuals and families in 30 of Washington’s 39 counties not having any private health insurance options.”
Could it be because many people could no longer afford insurance?
“ABSTRACT: The decline in health insurance coverage among workers from 1979 to 1995 can be accounted for almost entirely by the fact that per capita health care spending rose much more rapidly than personal income during this time period. We simulate health insurance coverage levels for 1996–2005 under alternative assumptions concerning the rate of growth of spending. We conclude that reduction in spending growth creates measurable increases in health insurance coverage for low-income workers and that the rapid increase in health care spending over the past fifteen years has created a large pool of low-income workers for whom health insurance is unaffordable.” http://content.healthaffairs.org/cgi/reprint/18/2/30.pdf
Last report prior to the collapse of the economy:
Savings result in better benefits
Basic Health contracted rates were lower than anticipated for 2007. A portion of the resulting savings were used to pay for enhanced benefits that are expected to reduce overall costs to the health plans over time, while still keeping the trend for BH lower than projected.
Ericksen: “Those insurers that stayed had to raise premiums — by 40 percent in some instances.”
http://www.benefitscafe.com/group/premiumincrease.html (Article is about CA, but the same issues would have been nationwide.)
I. Why is Health Insurance Becoming So Expensive?
The simple answer is that health insurance is expensive because health care is expensive. In truth, many factors impact the cost of health insurance. Specific factors driving rising health care costs include: (Source: AAHP)
• Less competition among health insurance companies
• Higher compensation for hospitals and medical groups;
• High cost technology and drugs;
• Changing demographics of the commercially insured population
• Government mandates.
Less competition among health insurance companies
During the 1990s there was intense competition for health insurance companies and HMOs to increase their share of the market. The competition drove health insurance premiums down and many employers saw rates decrease in the late 1990s. The fierce competition also caused insurance companies to acquire competitors. During the mid to late 1990s, for example, Blue Shield of California acquired CareAmerica, Pacificare acquired Foundation Health Systems, and Aetna acquired Prudential’s health insurance business. Additionally, in 2001 the State Department of Managed Health Care took control of Maxicare and Tower Health, both of which ceased operation. The few remaining health insurance companies now seek profitable business rather than more members. Consequently, employers have few options when their health plan contracts renew and their premiums increase.
Higher compensation for hospitals and medical groups
During the 1990’s doctors formed medical groups to obtain HMO contracts. “During the height of managed care, providers were willing to share risk with health plans…In numerous cases, providers lost money or went bankrupt because they inappropriately allocated the cost of the risk they assumed. Now, most hospitals are refusing risk contracts, instead opting for per-diems or variations of fee-for-service.” (Source: AAHP) Many medical groups closed and those that survived, merged. Hospitals reduced beds and drastically cut costs. Many hospitals merged into associations or became for-profit (e.g., Tenant Hospitals.) Now, some hospitals refuse to participate in carrier networks. Another new phenomenon is hospitals advertising their “centers of excellence,” to encourage patients to remain loyal to the hospital, without regard to a particular insurance company. Consequently, providers are able to obtain higher compensation and insurance companies pass these higher costs on to employers.
High Cost Technology and Drugs
Sophisticated technologies, such as the MRI, help doctors accurately diagnose illness. Revolutionary devices, such as arterial shunts and balloons, help avoid invasive surgery. Miracle drugs reduce cholesterol, relieve allergies, improve health, save lives and keep people out of the hospital. These advances are costly. Not only are they costly, but, in the case of prescription medicine, pharmaceutical companies increase the demand for their medication by advertising directly to consumers. To show the power of these direct-to-consumer (DTC) ads, “one study asked patients what they would do if a doctor refused to prescribe a drug that the patient wanted as a result of a DTC ad. One-fourth of patients said they would seek a prescription elsewhere and 15% said they would consider terminating their relationship with their physician.” Further, “(DTC) advertising has more than tripled in dollar volume from $791 million in 1996 to $2.5 billion in 2000 and doctors and patients demand these drugs.” (Source: Wolfe) Demand for wonder drugs adds to the cost of health insurance.
Changing demographics of the commercially insured population
Baby Boomers are aging and demanding more medical services. “As Americans age into their 40s, 50s and beyond, they consume more medical resources. The biggest surge in Baby Boomers is currently between the ages of 55 and 59…Baby Boomers who used few health care services for two decades are turning to physicians, hospitals, and other providers with increasing regularity.” (Source: AAHP)
Federal and state governments require that health plans include certain benefits. A few examples of these mandates include: health plans paying for the treatment of specific mental illnesses as they would any other illness; health plans paying for a woman to stay a minimum number of days in the hospital following the delivery of a child; and, hospitals staffing a specific ratio of nurses to patients. All would agree that these are important components of health care. However, they cost money and they add to the price of health insurance.
HIPAA, the Health Insurance Portability & Accountability Act of 1996, is an example of a good, but costly, government mandate. HIPAA requires that insurance companies and medical providers protect the privacy of medical information. The protection of medical information is a laudable goal. However, the administrative time and legal fees associated with HIPAA compliance add to the cost of health insurance. Consider that the cost of simply mailing HIPAA compliance notifications to the roughly 10 million commercially insured people in California adds $3.7 million (for postage alone) to the cost of health insurance.