Do Not Resuscitate:
Why The Health Insurance Industry is Dying and How We Must Replace it

by Dr. John Geyman

DOES OUR INSURANCE ACTUALLY PROTECT US?

In this highly researched and well-written book, Dr. John Geyman lays out in clear language the repeated failure of the private health insurance industry to bring affordable and comprehensive coverage to the American people. He demonstrates with a wealth of facts and figures how the inexorable and continuous rise of health care costs have meant insurance companies must work hard at excluding anyone who might require expensive treatment, reduce coverage for everyone and constantly raise premium rates.

This has led to awareness on the part of the public that their insurance may not protect them from medical bankruptcy. Americans now see that a serious illness can run up huge debt, wipe out their retirement savings and even mean selling their home to pay the bills. With this new public awareness, it is more and more difficult for health insurance companies to paint themselves as having the answer to our health care woes.

FOCUS ON PROFITS, NOT PEOPLE

The insurance industry was not always as focused on profits as it is now. Geyman takes us on a tour through the history of private coverage, showing how the original Blue Cross/Blue Shield plans were about spreading risk across a broad pool and keeping coverage affordable. As commercial carriers came into the market, they brought with them "medical underwriting" which looks at applicants in terms of how much they might cost the company. For-profit companies structured their coverage to minimize their risk (by denying coverage to those who need it the most) and maximize their profits. The Blues could not survive without doing the same thing. Today, most of the Blue Cross companies are for-profit, many having been acquired by one of the big players in health insurance.

While Congress has required employer-sponsored group insurance to take everyone in the group and charge them all the same rate, companies are free to deny coverage to people who apply on their own and to offer unaffordable rates to older, sicker people. Companies have a long list of risk factors that trigger a denial. Some of these: leukemia, schizophrenia, emphysema, obesity, high blood pressure, AIDS… and the list goes on. Here's some reasons used by California insurers in 2006 to deny coverage: attention deficit disorder, breast implants, infertility, herpes, gender reassignment, migraines, miscarriage, bed-wetting, ringworm, varicose veins… and more.

PUBLIC HEALTH INSURANCE PROFITING PRIVATE COMPANIES

Health insurance is largely regulated by the states, so there is great variation in what insurers can do. In many states, for example, coverage can include a lifetime dollar limit. The large players in health insurance operate nationally and can find many ways to game the system. While these companies like to disparage government health care programs, they have been quick to jump on the bandwagon of these same programs when they could profit from them. The Bush administration didn't think it worthwhile to increase funding for SCHIP (the Children's Health Insurance program) but allowed private insurance to profit by offering "Medicare Advantage" policies to Medicare recipients that pays companies an override over the cost of original Medicare, and it gave a windfall to the pharmaceutical industry through its so-called drug benefit; this is a boondoggle that is totally structured to "benefit" only the insurance and drug companies. Insurance companies have also been allowed into Medicaid, which is administered by the states, and, though it is supposed to cover health care for the poor, often has such a low threshhold that few qualify (and when they qualify, they have to constantly requalify).

It is partly this rush to profit from government programs that leads Geyman to his conclusion that the health insurance industry is a dying industry. With Americans demanding reform, the current health insurance industry has two enormous costs that are not present in publicly-funded coverage: The huge profits they take out and their lower efficiency.

AVOIDING "MEDICAL LOSS"

Health insurance companies regard the payments they make for subscribers' health care as "medical loss." Most try to keep this "loss" at under 80% (meaning they keep 20% of premium payment for administration and profit). This reminds me of another practice that I found outrageous when I first read about it. Pharmaceutical companies see opportunity in illness. They refer to various diseases as "markets" - as in "the cancer market" or the "diabetes market." Our disease is their profit center. For insurance companies, their profit center is healthy, younger people, certainly not those who actually need health care - insuring them would increase their "medical loss." These companies operate to retain their profit centers, and profits trump helping people.

Private insurance is massively less efficient than public insurance because of the large workforce needed to do underwriting, claims processing and denials. Some companies even do "rescissions" -- canceling someone's insurance when they get sick by claiming they lied or misrepresented something on their application. Between 2000 and 2005, despite a drop in the number of people with private insurance, their workforce grew by one third. How can this industry possibly bring down the cost of health care and provide affordable coverage? They can't. Geyman explains that the industry "is pricing itself beyond the reach of a declining private market, even as it seeks out a broader, subsidized role in public programs."

WHAT VALUE?

Geyman discusses something not mentioned by supporters of reform that involves keeping private insurance, and that is the fact that they are allowed to offer so-called "insurance" that is so skimpy it really provides no protection. Many are marketing "Limited Benefit Policies" (LBP) to younger and lower-paid workers. Aetna Affordable Health Choices caps hospital benefits at $2000 and accident/ER benefits at $1000. I know from my own experience in an ER a few years ago that bills are typically much higher than that (mine was around $2500 for 4 hours in the ER!) and that $2000 hospital cap will barely pay for the aspirin and bed pan.

Interestingly, Geyman also mentions "Medigap" plans as low value. My husband turned 65 one year ago and we studied the government Medicare website to get information on these plans. I was delighted to find that these plans are regulated according to what's covered and identified by letter (plan A, plan B, etc). We looked at all of them, got costs from different companies and looked at my husband's usual use of medical services and concluded that these plans were not a good deal. Over the long run, we would be better off paying out of pocket costs not covered by Medicare. We concluded the same thing about the so-called drug benefit. None of the plans were cheaper than just paying for the relatively inexpensive medications my husband takes.

Another sleazy trend not mentioned by Geyman is the rise of "health care discount" programs that often masquerade as insurance. People sign up at reasonable rates, get a nice plastic card for their wallet, then find all they have is a discount on health care services, if they can find a provider who will actually give them the discount (it may be the same discount they could negotiate on their own). I am also personally alarmed at the ads on TV that exploit the rising fear over health care costs. These commercials openly cite high health care costs and one even quotes the Harvard study showing that medical bills are the leading cause of personal bankruptcy. They hope your fear of being a health care victim will get you to buy whatever they are selling. Beware!

THE SAME OLD IDEAS: THEY DON'T WORK

Geyman explores the various incremental reforms that have been tried and shows how none have solved the problem. During the 2008 presidential campaign, we heard about "mandates" that, along with community rating (charging everyone the same rate) and guaranteed issue (having to take all who apply), was supposed to insure everyone and bring down costs. But employer mandates are ineffective because of the inherent weaknesses and unfairness in a system relying on employer-sponsored insurance. The "individual mandate" as implemented in Massachusetts has proved unworkable as well, as the state agency (the Connector) tasked with making sure everyone has coverage has exempted thousands of people from the fines because they cannot offer these people any coverage they can actually afford.

The idea that insurance companies will "compete for your business" is an absurdity, given the priorities of health insurance companies (low "medical loss" and high profits for shareholders). Geyman states the problem clearly:

"…private insurers don't compete with each other by delivering better care at lower cost. That would be in line with what is understood as a classical form of competition where the consumer comes out on top. Insurance competition is different: Who can avoid the most enrollees with higher medical costs, and who is most effective at delaying or denying payment when they can?"

READ THIS BOOK!

This book was written before the financial meltdown and the election of President Obama, but Geyman mentions the possibility of serious recession a number of times in the book. Geyman has done his homework. Every chapter has a huge bibliography, with all sources listed. The book is full of charts and tables. Geyman is not just expressing his own negative opinion of the industry, but writes from facts. I highly recommend this book as the best exposition of why private insurance cannot get us to universal, affordable health care.

Americans have never needed health care reform more than they do today, with so many on fragile financial ground. Most of us are one illness away from financial disaster. The insurance industry, the pharmaceutical industry and the medical device industry will all fight any meaningful reform, and we will probably see a rollout of Harry and Louise type ads once again, warning us about the dangers of "socialized medicine." But this time, the public might be a bit more aware of how insurance companies actually operate and in whose interests. Harry and Louise might have changed their tune as well and maybe they are ready to reject the false promises of a failed industry.

Do Not Resuscitate: Why The Health Insurance Industry is Dying and How We Must Replace it