The President's health reform represents the biggest regulation of a runaway, unchecked industry since the health insurance monopolies came into existence in the mid-20th century. Since that time, they have used their financial and political power to block efforts to include them in the federal government's anti-monopoly laws let alone create a single, rational health insurance program.
The result? Huge profits. Sky-rocketing costs. Unchecked greed. Exclusion of almost 50 million Americans and set of practices that force even the insured to pay for medical care when insurance companies deem the costs too high for their profit margins.
When President Obama signed health reform into law, the era of unregulated insurance monopoly began to end.
Goodbye coverage denial
Healthcare is too important to leave in the hands of private corporations. For example, in 2007 some 12 million insured people were denied coverage for some medical care because their insurance company deemed them to have some preexisting condition. In other words, when these people went to the doctor and made a claim for coverage, the insurance company made a special effort to find any reason no matter how small to refuse to pay the expenses.
They made the effort because the profit margin is higher if the company insures the healthiest people and can find ways to exclude or deny coverage to the sick – you know, the people that need insurance.
As many former insurance industry workers have told Congress and the media, practices of denial of coverage, raising rates for women simply because they're women, rescission, and so on are ways to guarantee not high quality healthcare but rather large profits for the insurance company.
In 2007 and 2008, even with a deepening recession, major insurance monopolies like Aetna, Cigna, Humana, UnitedHealthGroup, and WellPoint saw combined profits of close to $20 billion, according to their own filings with the Securities and Exchange Commission. That's profits. Only five companies. In just two years.
Meanwhile most working Americans have seen their premiums climb three, four, five, sometimes even six times faster than the annual rate of inflation.
There are basically three reasons for such high profits in an industry that by global standards does so poorly in accomplishing its industry objectives. In addition to denial of coverage combined with high premiums, insurance companies have fought to maintain local monopolies, and get government money.
Goodbye Monopolies
According to statistics compiled by the Department of Health and Human Services last summer, the insurance companies had carved out virtual monopolies in a number of states. For example, two companies in Montana control at least 85 percent of the market in that state. In Michigan, a single company controls almost two-thirds of the market. In South Carolina, Georgia, Tennessee, Missouri and several other states, insurance companies have carved out about half of the market. This situation allows them to control prices, politicians, and hog public dollars for healthcare.
Already, monopoly control of local markets is being eroded. This week the federal government launched Healthcare.gov, an interactive website that let's employers and consumers find the healthcare coverage that best suits themselves, their families or their business. With just a few clicks of the mouse, the website allows you to compare prices and coverage, and even to determine your eligibility for public programs like Medicare, Medicaid, or VA benefits.
Browsing Healthcare.gov is almost an enjoyable experience – completely unlike standing in line at the DMV or the Social Security office or even your local bank.
In four years, state "exchanges" will be implemented that bring this virtual marketplace to a whole new level. Health insurance companies that want to participate in those exchanges will have to demonstrate they abide by basic mandated coverage guidelines and costs. They will face increased competition and strong regulatory oversight.
New regulations will force insurance to provide real services and fair prices. If they want to earn profits on sickness and disease, they will do so only if they treat each person fairly and provide the promised coverage.
While this round of health reform did not include a "public option," ideally in the future such an insurance program would further intensify the competition among insurance plans. With little or no profit motive, a public program would keep overhead low, premium growth at a minimum, and provide a meaningful alternative for working families unable or unwilling to afford private insurance.
Goodbye insurance company subsidies
Another financial gift to the health insurance companies comes from the Medicare Advantage plan. Medicare Advantage was created by Bush and the Republicans in 2005 in order to begin to chip away at Medicare and privatize the popular program. In addition, the Republicans created a big taxpayer benefit for the the insurance companies in exchange for their financial support in the elections. Between 1996 and 2008, according to the Center for Responsive Politics, the insurance industry gave Republicans more than $142 million dollars, essentially twice the amount they gave Democrats.
Medicare Advantage basically provides tax dollars to insurance companies to provide insurance to retirees above what Medicare pays. The program provides no better services than Medicare does and isn't any cheaper; it represents little more than a massive federal government pay out of close to $20 billion each year to the insurance companies.
Consider Humana. In the middle of 2009 it reported having close to 1.5 million enrollees in its Medicare Advantage plan. The company's total revenue for just the second quarter of 2009 was almost $8 billion (remember that is only a three month period). It took in more than half that through Medicare Advantage, or $4.15 billion – in just three months.
One of the biggest cost saving measures in health reform will prove to be the scaling back and eventual elimination of government subsidies to the health insurance companies for Medicare Advantage.
Health reform's advantages
Most importantly, once all aspects of the law are put into place, various studies show that the total package will add 32 million to the health insurance rolls. Most of these folks will be low-income wage earners who cannot afford premiums, such as the 13 million employees or owners of small businesses who lack coverage now.
Subsidies to lower- and middle-income wage earners and small business owners through tax credits and expanded eligibility for Medicaid and scaled subsidies for private insurance will cover millions of families.
Reduced costs for businesses will contribute to new job growth, as much as 2.5 to 4 million jobs over the next 10 years, according to the Center for American Progress Action Fund. Experts believe that savings on health benefits will also put some upward pressure on wages as employers find themselves better able to manage healthcare costs.
It is vital to note that this shift in health policy represents an end to taxpayer subsidies to massive and highly profitable insurance companies in favor of working families.
Some critics charge that health reform creates just a big pay out to make people buy insurance products. While this claim is basically true, for most of the currently uninsured it will be at little added cost, will provide them access to affordable healthcare they previously lacked, and will improve the quality of their lives.
Consider what it will mean to a person or a family in the long-run to have regular check-ups, preventive care, and to not have to make choices between buying food or going to the doctor. A number of studies have shown that as many as 22,000 people die annually because they lack care. They don't die because they have a catastrophic event and some hospital refuses them care when they don't produce an insurance card. They die because the lack of insurance forces them to delay or go without basic care. This pattern builds up over years. Suddenly the high blood pressure you've had for 30 years but didn't know about or do anything about because of high medical costs leads to heart disease or death.
For those folks who worry about new big government spending, health reform will reduce the federal deficit by $143 billion in the next 10 years, and by and addition $1.2 trillion in the following decade, according to the Congressional Budget Office.
Regrettably the failure to implement a relatively inexpensive public option will actually cost taxpayers more in the long run. According to the Center for Economic and Policy Research, a public option along the lines proposed by the President and actually passed by the House of Representatives would have reduced the federal debt by $400 billion all by itself. (While health reform as it is will control cost growth and save money, a public option would have done better on this score by reducing the number and amount of government subsidies for families and individuals to buy into the more expensive private market and by keeping the private market in line.)
It's time to get on board
For those people who are justifiably disappointed that a more comprehensive or universal health reform program wasn't put into place, it is time to get on board. With Republicans threatening crazy lawsuits and repeal campaigns, it is time to claim this victory and move forward.
Yes, as long as the private insurance companies dominate the marketplace and long as reform is limited to regulation rather than structural change, there will be abuses. But the meaningful change in how healthcare is done in this country is self-evident.
As the new system unfolds, supporters of truly universal and free healthcare will have to study the best methods for moving forward. Piece by piece a truly universal system can be put in place. A public insurance program, expanded Medicare for preretirement workers, expanded public coverage for different types of care all could build momentum for a more fundamental change in the structure of the system.
On a final note, ethically challenged, right-wing ideologue Grover Norquist is famous for having said that he'd like to see public programs slashed until they were small enough to "drown in a bath tub." Those of us who want to advance meaningful health reform to take up a similar slogan aimed at health insurance companies.
