Health Reform Decreases Health Care Choices for Connecticut Youth
Posted: Friday, September 17, 2010
by Alston Balkcom
1800insuranceCT.com
The September mandates will decrease the health care insurance options available for children 18 and under. Across the United States, many private health insurance companies appear to have decided not to insure children 18 and under who purchase standalone policies after September 22nd. Not all carriers have announced their decision on this issue, but many that have are choosing eliminate these types of policies.
Who is the bad guy here? We can put the blame on the insurance companies. However, asking an insurance company to insure unhealthy people is like mandating that banks to underwrite loans for those with bad credit. Our lawmakers may be more deserving of blame than the insurance carriers.
Medical insurance companies do make tons of money but their margins are thin. They don't make tons of money on per policy. Adding just a few additional significantly unhealthy people can make them lose money or make their rates unaffordable.
A basic example would involve an insurance company that insures one hundred people against major illnesses. Each person pays a thousand and twenty dollars a year. One of the insured people has a myocardial infarction annually. It costs the company $100,000. The carrier pays the medical bills and keeps $2,000 as a profit.
Suddenly after a health care reform mandate, they will need to bring on five unhealthy people. Every year one of these five new people has a cardiac arrest that costs an additional $100,000. This means that the insurance carrier doubled its expenses, but not its revenue.
If the insurance carrier responded by raising the price of the coverage, their policyholders might react as well. Some might terminate their policies. Chances are the more profitable people would be much more likely to decide to take a chance. It is a sure thing that their premiums would have to go up again and again as their ratio of healthy to unhealthy policyholders would keep moving in the wrong direction.
When an insurance carrier is forced to take on people without regard to their health history, they run the risk of closing their doors. This could sound ludicrous to you, but big institutions go out of business from time to time.
Perhaps if the US car makers had been more financially responsible, they wouldn't have needed the taxpayers to bail them out. Perhaps lending institutions should have been more prudent a few years ago and not underwritten so many soon-to-be bad loans.
A law of congress cannot change the laws of the marketplace. If an insurance company takes on unprofitable business it will have to raise its prices. If they are forced to raise their rates more than their competitors, they will wind up with fewer customers.
Congress wrote a law that was intended to provide universal health coverage to those under 19. This law has had not given us what they intended. Fewer options for health coverage are now available for children 18 and under.
This has to make our citizens wonder if the upcoming health care reform mandates are going to work just as well. Our senators and congressmen spent a lot of time demonizing the insurance companies. They are no more or less wicked than companies in any other business sector. They spent a lot of time telling us how much money they make in the aggregate. The real issue is what they make per policy.
We've gotten strong rhetoric and at least one poorly thought out mandate. Let's pray that this was the only one mistake. Do you think that is possible?
Alston J Balkcom blogs about healthcare reform on his website.
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Top-level comments on this article: (2 total)Love Obamacare! Love complete socialized medicine more. Will vote accordingly.
I understand the point you are trying to make but insurance companies by definition spread the risk around by dealing in the aggregate. If they did not do that, there would be no insurance. If the insurance companies were only allowed to insure healthy people, then we wouldn't need insurance. That's why we all need to have it to make it profitable. For years now, the health insurance companies have been narrowing the field of those they will cover, leaving increasing numbers of people out without any options. What then is the solution? It's extremely difficult to get health care without coverage yet for those without automatic group coverage from some employer it is increasingly difficult to purchase coverage, leaving them in an incredible Catch 22. If you have to have insurance to be treated then there must be something that guarantees you can get insurance.
You can't take the aggregate issue out of the picture or there is no business of insurance at all.@ Jean
I agree with your points.
However, insurance companies will be put out of business if the consumers are allowed to pick and chose whether or not they insure themselves if the insurers are mandated to cover everyone.
A very small percentage of policyholders are responsible for the majority of all claims. People with the worst health conditions, understandably, will be the first to jump at the chance to be insured.
If the pool of insured only expands in one direction (toward those who have conditions) and not in the other, we will have a system that will implode. Rates will rise and ultimately fewer people will be covered than before.
Hopefully the healthcare reform act will solve these problems once the major mandates go into effect in 2014. I'm crossing my fingers.I really think we have to have a national mandate that EVERYONE must be covered.
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