(More) hard insurance lessons from Massachusetts

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Massachusetts is dropping legal, green-carded immigrants from its subsidies for health insurance and will probably make it harder for poor citizens to get coverage. The state’s small businesses are being slammed with double-digit insurance premium increases, some over 20%. Insurance companies have responded by offering to sell bare-bones small-business plans with deductibles of $4,000 or more and higher co-pays, costing employees far more than the projected savings to their employers. The "cheap" plans would also cut payments to doctors and hospitals, so they would actually be more profitable for insurance companies.

Bottom line: Private insurers will always seek to increase their proft and executive salaries at the expense of our health and our pocketbooks. Industry
whistleblower Wendell Potter, who was an insurance executive for 20 years, recently told a Congressional hearing:

"I know from personal experience that members of Congress and the
public have good reason to question the honesty and trustworthiness of
the insurance industry. Insurers make promises they have no intention
of keeping, they flout regulations designed to protect consumers, and
they make it nearly impossible to understand–or even to
obtain–information we need. As you hold hearings and discuss
legislative proposals over the coming weeks, I encourage you to look
very closely at the role for-profit insurance companies play in making
our health care system both the most expensive and one of the most
dysfunctional in the world." 

Last year, even Massacusetts’ state-run and deeply subsidized insurance exchange called the Connector suffered 10% rate increases, despite its collective buying power. That led to steep cost overruns in premium subsidies for low-income families as the economy tanked and unemployment rose. This year the same premiums are decreasing 2%, in part because the state slashed its own administrative costs, and perhaps in part because the private insurance companies that sell policies through the state suffered public backlash after last year’s double-digit spike.

The line-holding for the subsidized plans, however, may explain this year’s explosive rate increases for small businesses.

One of the mysteries of the Massachusetts experience is why its inability to cut costs and growing hostility to its requirement that the uninsured buy private policies, are not being considered seriously in the national debate. A New York Times story today on Massachusetts’ latest health cuts omits any mention of the role of rising insurance rates and doesn’t try to relate the state’s cost bind to national reform.

Yes, it’s a big and scattered picture, but much of Washington appears to have bought the argument of Massachusetts boosters that the state’s health reform, based entirely on private insurers, is a success. It’s true that the reform has sharply reduced the number of uninsured people in Massachusetts. However, only about 8% of residents were uninsured in 2006, just before the plan went into effect–compared to at least a 15% rate nationally. And most of the state’s insurers are technically nonprofit. The current state uninsured figure is just under 3%, but this will rise as subsidies are yanked from immigrants and families now on Medicaid, whose bureaucratic barriers are being increased.

Masachusetts’ plan, designed by insurance companies, does not regulate health insurance rates. It does not require the kind of primary care coordination that is proven to reduce costs, and lets insurers sell bare-bones policies that in the end cost families much more. Most important, it does not include any public competitor to private insurance. 

If Massachusetts, with a small problem to begin with, risks losing its reforms to ever-rising costs, think what the crash and burn would be on a national scale. Congress cannot produce a stable, decently funded health insurance reform by continuing to bow to the uncompetitive, wasteful private insurance industry.

Consumer Watchdog
Consumer Watchdoghttps://consumerwatchdog.org
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