Too Little, Too Late: The Health Insurance Industry Unveils a New Plan to Reform Health Care

After decades of controlling the dialogue on health care and thwarting health care reform with the now infamous Harry and Louise ads [1], the health insurance industry is vying for control of the conversation at the health reform table. Today America's Health Insurance Plans (AHIP), the insurance industry's trade association, released a "new" reform proposal [2]. But it's essentially more of the same. They have made many of the same proposals before [3].

Not surprisingly, the main focus of their proposals is protecting their profits.

Let's take a look at the proposals they highlighted in their press release [4].

AHIP's first proposal is to create an advisory group to make recommendations on how to control health care costs:

"Controlling costs: A financially sustainable and affordable health care system can only be achieved by bringing underlying medical costs under control...To achieve these goals, health plans are proposing that a public-private advisory group be created to provide specific policy recommendations to Congress on reducing health care costs. This new advisory group would include input from a wide variety of stakeholders to provide objective, independent recommendations."

This delaying tactic shows the health insurance industry is still very behind on health reform policy. Many recommendations on how to bring down health care costs already exist, from offering a public plan [5] to compete on a level playing field with the private plans, to making better use of health information technology [6], to paying providers based on performance [7] instead of based on the number of procedures they perform, to allowing the government to negotiate with drug companies for lower drug prices [8].

The option they are most afraid of is a public insurance plan option that creates true competition in the health insurance and provider markets. Data shows that a few private plans have quasi-monopoly power in most states [9] and the smaller plans are engaged in shadow pricing [10] keeping costs high and driving up their profits with total disregard for the health care needs of people with costly conditions.

In addition, even the largest insurers are either unwilling or unable to negotiate fair rates with large provider groups [11], further driving up our health care costs. A public plan could break these quasi-insurer and provider monopolies to drive competition and rein in costs [12].

An advisory group will only delay and likely kill action. We need true competition as soon as possible from a public plan that puts the public's interest first.

AHIP's second proposal gives insurers the ability to do an end-run around state consumer protections so they can offer stripped down plans with high deductibles that have "affordable" premiums but leave people without access to affordable health care, while asking tax-payers to pick up the slack:

"Helping consumers and purchasers:... Health plans propose that a new portable health plan be available to individuals and small businesses in all states. This affordable "essential benefits plan" would provide coverage for prevention and wellness as well as acute and chronic care. To maintain affordability, the essential benefits plan would not be subject to varying and conflicting state benefit mandates... The proposal also calls for protecting low-income individuals and working families from medical bankruptcy by making available tax credits to those who spend a set percentage of their income on out-of-pocket health care expenses, including premiums and cost-sharing."

Everyone should have health insurance that covers their foreseeable and unforeseeable health care needs, while guaranteeing them financial security. But stripped down health plans with low-cost premiums [13] that force people to gamble that they will stay healthy is no solution.

The issue is not simply about having affordable coverage, it is about getting affordable health care. Too many people with health insurance go broke paying for needed care [14].

The portable plan that AHIP proposes appears to give insurance companies more freedom to limit benefits and shift health care costs to individuals than they currently have by allowing them to bypass strong state consumer protections. That is the opposite of what we need. We need the insurance industry to be more accountable to Americans—not less. We need strong, fair national regulations that protect individuals and ensure they have access to quality affordable care; not a plan that leaves the insurance companies free from the few consumer protections currently available [15] in some states.

In addition, tax credits are a costly and inefficient way to make coverage more widely available and do nothing to rein in health care costs. In fact, they are a sure way to increase insurance company profits with no accountability. Research shows creating a public plan option is a more cost-effective use of tax-payer money [16].

AHIP's third proposal is that insurers will agree to cover people with pre-existing conditions if everyone is forced to buy one of their policies. The insignificance of that self-serving "concession" was the subject of last week's blog post [17], so there is no need to go into again here.

The last proposal AHIP highlights in its press release is a catchall promise to "add value" to the costly and poor value products they have been selling us. Nice of them to decide to do so now that they see health reform is inevitable [18].

"Adding value: ... Health plans commit to streamlining administrative processes and propose making targeted investments in our public health infrastructure. The plan also calls for refocusing our health care system on keeping people healthy, intervening early, and providing coordinated care for chronic conditions; adopting uniform standards for quality, reporting, and information technology; and investing more in research to better understand which treatments and therapies work best—for the nation as a whole and for specific patients."

Health insurers have had decades to streamline their administrative processes [19], and improve preventive care and disease management among their members. They have failed miserably to do so.

The data show there is no economic incentive for them to make these investments.
In fact, they benefit financially from complex administrative protocols that keep people from getting needed care and providers from getting paid in a timely manner [20]. A study from Case Western Reserve and Carnegie Mellon University shows that since people change health plans regularly, insurers have no incentive to invest in people's long-term health [21] through preventive care and disease management because the individual will likely be in another plan by the time the investment pays off in lower health care costs.

A public plan, on the other hand, does have the incentive to invest in prevention and disease management, because everyone will end up in a public plan when they get older [22]—Medicare.

Health insurers have had their chance. They have not been able to deliver cost-effective, affordable health care. It is time for them to stop putting their bottom line above the interests of all Americans and for Congress and the President to take charge on behalf of the American people. It is time for fair rules [23]:

• A public alternative [24] to insurance company coverage that is accountable to us.
• Fair regulation and oversight of insurance companies, with government as a watchdog.