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January 21, 2010


In light of what Brendan and Chait have written, what are we to make of President Obama's statement? Was it a head fake, intended to mislead the public and Congressional Republicans and give House Democrats some respite from public criticism while they go about lining up the votes to pass the Senate bill? Or does it reflect a lack of understanding by the President of the most fundamental principles of health insurance reform, principles that are obvious to Chait and Nyhan? Or, a possible third alternative, is the President simply mouthing the equivalent of platitudes about hope and change, devoid of substance?

As an insurance professional, I am staggered by the ignorance of those creating the so-called "reform." No doubt Sarah Palin and George Bush are also ignorant of health insurance, but they're not proposing to tell us how we can and cannot do it.

For example, cost containment is the opposite of a ban on denying coverage based on pre-existing medical conditions. If people can wait until they're sick to start buying insurance, the price will obviously have to go up. And, providing some sort of government premium supplement to selected recipients doesn't reduce the cost; it just shifts the cost.

Although I don't work in the specific area of health insurance, I feel insulted by President Obama's bigoted comment, "We know...that the health insurance companies are taking advantage of people..." Actually, insurance companies, like other businesses, are trying their best to provide a service to their customers. By and large, health insurance companies are doing so in reasonable fashion. Many of the leading health insurance providers are non-profit organizations. Rule changes enacted by ignoramuses like President Obama are likely to make health insurance worse, rather than better.

As to the inseparabilty of mandates, subsidies, and a ban on pre-existing conditions - I grasp the logic, but Obama himself steadfastly refused to include mandates in his plan during the campaign and bashed Hillary for doing so.

Maybe it is all too obvious but a reminder that Obama has flip-flopped back to his original fantasy might be appropriate here.

And my proposal that would free people from job-lock - legislate that anyone currently holding insurance from Company A cannot be denied comparable insurance from Company B based on pre-existing conditions if the insurance change is due to a change in job status of the insured or a spouse.

That does nothing for the currently uninsured who are holding off on buying insurance until they get sick but solves the problem for a lot of other people.

I don't know whether Tom Maguire's proposal would do more good than harm, but I have a couple of general comments.

Insurance companies like to write insurance. When people are being denied coverage, chances are the reason is that misguided laws are preventing companies from insuring them. In Mr. Maguire’s example, some of the misguided laws creating the problem may be:

1. Employer-paid health care receives special tax benefits, encouraging that approach. If the tax treatments were equalized, we might move to a system where workers bought their own health coverage. Then the portability problem would disappear. IMHO this is somewhat analogous to the problem years ago of company housing preventing workers from leaving a particular company’s employment.

2. Laws restricting interstate sale of health insurance

3. Laws restricting how companies can charge. In particular, when laws force companies to charge some people less for insurance than the comapany can expect to pay in claims, the company won’t wish to insure those people.

It's better to solve a problem by by eliminating or fixing wrong-headed laws, rather than by adding new laws that may create unanticipated new problems.

My second point is that insurance is quite complex. Even insurance professionals often get the design of insurance programs wrong.

One thinks about the football play President Nixon supposedly foisted on the Washington Redskins in 1971. http://espn.go.com/page2/wash/s/allen/020308.html
It failed spectacularly. Yet, Nixon knew much more about football than most of us do about health insurance. He was on the team in school and no doubt spent years of Sundays watching pro games on TV. Most of us wouldn't have the arrogance to tell a top football coach how he must run his offense; I think we should be equally modest about telling health insurance companies how they must operate.

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