The Option of a Public Insurance Plan and the Specter of More Cost Shifting

Advocates for healthcare reform that includes the creation of a publically funded insurance plan are delighting in news that both AHIP (America’s Health Insurance Plans, the trade group that represents health insurers) and Blue Cross Blue Shield (a federation that represent 39 insurers that sport the Blues ‘brand’) have publically thrown in the towel over guaranteed issue in exchange for an individual mandate. Regular readers of the Disease Management Care Blog, however, know this is old news. This issue was examined by the DMCB back in November of 2008. What’s different this time around is that a) guaranteed issue and b) mandates are being mixed up with the c) option of a publicly funded insurer. Reactions seem to range from ‘this is precisely the kind of cudgel we need to bring these obstructionist insurers to the table’ to ‘aha, we have those evil corporate pirates on the run.’

To get to the bottom of this, the DMCB dared tread where few seem to want to go. It actually read the Aetna’s CEO Ron William’s March 24 statement to the US Senate Health, Education, Labor and Pensions Committee. Go ahead, call them obstructionist, evil, the Devil’s Spawn or [gasp, and this is the worst!] for profit, but when health insurers like Aetna speak, we should listen. Aetna, for example, insures 36.5 million persons with $42 billion in assets and a market cap that exceeds $10 billion. There’s no way Congress is going to marginalize these guys by simply passing a law sometime in the next six months.

What does Mr. Williams have to say? Health insurers figured out years ago that their business is no longer about just collecting premiums and paying doctors and hospitals. Their customers are demanding additional value, such as covering medical innovations and technologies, having inclusive provider networks, promoting transparency and offering chronic disease care, wellness and prevention programs. Examples include Aetna’s $1.8 billion investments in Active Health management and their Care Engine. And while the uninsured are a pressing problem, remember employers are successfully supporting health insurance for a whopping 177 million Americans, many of whom appear to be quite happy with the arrangement. The rising cost of their insurance is less a function of companies like Aetna and more a function of the underlying cost of health care. Employers and insurers have been working together on this for years and have had some notable successes in improving healthcare quality, dampening cost trends, increasing consumer choice, promoting transparency and covering wellness and prevention.

And here’s a telling quote.

“An enforceable individual coverage requirement, combined with subsidies and other changes to make coverage affordable, is the best way to ensure that all Americans have continuous access to insurance coverage and high-quality health care. Since 2005, we at Aetna have been speaking out in support of an individual coverage requirement, as we believe it is the critical step for achieving universal coverage.” (year bolded by the DMCB)

So what is the link to the public plan? If there is guaranteed issue and an individual mandate, Mr. Williams suggests a public plan option would be unnecessary. He may or may not have a point about that, but he then raises a critically important issue that has conveniently gone unmentioned by the anti-insurer cognoscenti.

A public plan would probably set provider payment rates akin to those used in Medicare and Medicaid. That’s because the government has the leverage to squeeze low pricing from providers. That in turn would force the providers to engage in even more cost shifting (estimated to already be as high as $88 billion nationwide) from the public insurance plans to the private insurance plans.

There you have it. The private insurers don't fear a public plan would be more honest, just, quality driven, administratively efficient, cost effective or consumer friendly. They think a public plan will simply build on its long history of what amounts to government supported 'heads I win' (non-negotiable fee schedules), 'tails you lose' (hospitals and doctors will make up for it in the private sector) predatory pricing. That's not keeping the private insurer's honest, that's crushing them.

The DMCB has a lot of admiration for care management programs, agile use of information technology, prevention, wellness, consumerism, novel insurance benefit designs, pay-for-performance, the medical home and the electronic record, but NONE of that will help private insurers - even with billions in the bank - compete against that kind of dynamic.

Or maybe that's the intention?