Health insurance agents are some of the few people in the United States who have any idea how complicated reforming U.S. health insurance markets really is.
Jessica Waltman, director of state government affairs at the National Association of Health Underwriters, Arlington, Va., explained here at NAHUs annual convention that reforming the individual and small group markets is even more complicated than most of the agents realize.
“If you dont take a comprehensive approach to reform, youre still going to have a problem,” Waltman warned at a convention seminar.
Major benefits consulting firms say U.S. major medical rates have increased 13% this year, but Waltman noted that NAHU member agents believe the real average increase was much higher.
“Its a scary environment out there,” Waltman said.
The environment is particularly scary in states that have enacted well-intentioned but misguided reforms in an effort to reform the individual and small group markets, Waltman said.
Health insurance trade groups often complain about state laws and regulations requiring carriers in the small-group market to provide benefits such as rich mental health benefits.
Because benefits mandates increase overall health coverage rates by about 15%, fighting benefits mandates is important, but, “if you drop off 15%, that only gets you so far,” Waltman said. “Thats not the only cost driver.”
Waltman suggested that the recent rapid increase in the underlying cost of health care is a second important cost driver.
Waltman, like many other health finance experts, blames the increase in health care costs on the backlash against managed care; a generation of consumers, weaned on health maintenance organizations, who think a visit to the doctor only costs $10; and skyrocketing prescription drug prices.
But Waltman also discussed two other, more obscure cost drivers: the dominance of some health carriers in their local markets, and the crisis in U.S. long-term care financing.
Lack of competition in the major medical market causes serious problems in some communities, because the dominant health carrier often uses its clout to force doctors and hospitals to accept enormous discounts, Waltman said.
Once the providers in a community agree to accept very low reimbursement rates from the biggest health insurer, they have to try to make up the difference by demanding higher reimbursement rates from the health insurers with smaller market shares, Waltman said.
Meanwhile, she said, the typical state Medicaid program, which is supposed to be the health insurance program for the poor, spends about 15% of its states budget, and 75% of the Medicaid program budget, on long-term care.
Because so little cash is left over to pay for acute and preventive medical care, the typical Medicaid program must persuade doctors and hospitals to accept unrealistically low rates, and the providers make up for those low rates by demanding higher rates from private insurers, Waltman said.