Did the Health Insurance Industry Blink?


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expert perspective telescopeExpert Perspective by Grahall’s Robert Cirkiel

In an article entitled “Insurers Ease Stance on Pre-Existing Conditions” published in the New York Times published on March 25, 2009,  journalist Robert Pear discusses an announcement by the insurance industry indicating that “it was willing to end the practice of charging higher premiums to sick people if Congress adopted a comprehensive plan that provides coverage to all Americans.” 

Health insurers surprised lawmakers with this concession, but did they “blink”?  Maybe, YES?  The health insurance industry stated it would agree to drop pre existing conditions in premium rating. They did this in order to preclude the advent of a competing Federal health insurance plan. Or maybe, NO?  First of all, in return for this, they will demand a universal coverage mandate. This is key. You can’t include the worst risks at favorable prices without the counter balance of the healthiest risk included in the pool – it just wouldn’t work actuarially. This means 46 million new customers, which ain’t bad. 

 Second, rates will end up being on average higher than they are currently. This gets back to the old “80-20 rule” – in this case meaning that the sickest people who can now be covered will cost more than can be saved by adding the healthiest uninsured people. This also translates into more revenue for them.

 Third, if the Federal government takes the purview of health insurance away from the states, the carriers will have one-fiftieth the regulatory compliance work (actually 1/52 with PR and DC) they have now.
And as a last thought, here’s what we can expect:  more self insurance so that groups can get away from the additional cost of covering somebody else’s sickest people. Email Robert Cirkiel at robert.cirkiel@grahall.com

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