02/21/07 - Private health insurance offers us sickly benefits

February 21, 2007
Jim McMeans
The Atlanta Journal-Constitution

President Bush on Dec. 13 vetoed the SCHIP renewal bill that would have expanded government health insurance to thousands more needy and sick children. The president said, "... our nation's goal should be to move children who have no insurance to private coverage, not to move children who have private health coverage to government coverage."

Bush also said, "the bill ... moves our health care system in the wrong direction."

But more than any other factor, private health insurance coverage is the reason why the United States has a dysfunctional health care system in which over 45 million Americans lack coverage and approximately another 40 million have unreliable coverage. Americans who have unreliable coverage are sometimes called the underinsured. A better description is Americans who have private health insurance.

In contrast to what he wishes to impose on his fellow Americans, President Bush has spent much of his adult life with taxpayer-funded health insurance, or as he calls it, "socialized" health care.

As governor of Texas, Bush and his family's health insurance was taxpayer-subsidized. Bush has received health care from the taxpayers as president and he and Laura Bush will continue to enjoy the benefits of "socialized medicine" for the rest of their lives.

Rudy Giuliani is another strong advocate of private health insurance for the common folk. But he has enjoyed taxpayer-subsidized health insurance for almost his entire working life. Giuliani clerked for a federal judge for a year after graduating from law school in 1968, then went to work for the Department of Justice, with a four-year exile at a private law firm during the Carter presidency. He then returned to the Department of Justice from 1981 to the early 1990s before serving as mayor of New York for eight years beginning in 1993.

Is Giuliani running for president because he knows that if he were a typical American prostate cancer survivor working in the private sector, he would not be able to obtain a health insurance policy that would pay for the medical treatment he needs if his cancer reappears?

Tony Snow, who as spokesperson for the Bush administration frequently touted the "benefits" of private health insurance, is another cancer survivor who was fortunate to have government-sponsored, federal taxpayer-subsidized health insurance when his cancer returned. If Snow had left Fox News to begin a career as an independent small businessman instead of going to work for the government, he would not have been able to obtain a health insurance policy from the private health insurance industry that would have covered the treatment of his cancer. Both his life and his family's financial security would have been put at risk.

Private equals predatory

While it's not realistic for the average American to expect to have health insurance as good as the president of the United States, why can't all Americans have health insurance as reliable and affordable as Tony Snow?

When so many individuals who avoid private health insurance are prescribing it for the rest of us, it's important that they understand the consequences of the policies they are advocating for the American people.

Millions of Americans are reasonably happy with their health plans, but for the most part, they don't have private health insurance. Americans who work for the government or for large corporations generally enjoy reliable and reasonably affordable employer sponsored health plans, in which the employer assumes the monetary risk for most or all of the employee's medical costs. In some of these plans, a private health insurance company shuffles the paperwork and negotiates prices with medical professionals, but the health insurance company does not risk its own money. Whether an employee enjoys reliable and affordable health care benefits seems to be determined by whose money is at risk, the employer or the private health insurance company.

Private, for-profit health insurance sold to individuals is almost always predatory health insurance. Millions of Americans like myself already have private health insurance, and unlike President Bush, I wouldn't wish private health insurance on my worst enemy.

Some of the warning signs of predatory health insurance are denying health insurance coverage to those who need it; pre-existing condition limitation clauses; $2,000 and up deductibles that increase by the thousands each year; and finally, premium increases larger than general inflation or medical inflation.

The purpose of the inexplicably large premium increases is to induce the policyholder to drop the policy after three to five years, which according to industry statistics, is when previously healthy policyholders begin to get sick and file claims. The industry term for this practice is "churning." If you have ever been hit with a premium increase larger than the rate of medical inflation, you have been "churned."

Stockholders come first

It may seem incredible to some entrepreneurs that a business would chase away paying customers, but it's true in the health insurance industry. Policyholders are not assets, but liabilities on a private health insurance company's moral balance sheet. A policyholder with a chronic illness can run up hundreds of thousands of dollars worth of medical bills a year while paying less than $10,000 a year in premiums. Like any for-profit business, a commercial health insurance company's first obligation is to the stockholders, not the policyholders, and as a result, private health insurance companies have a conflict of interest with their policyholders. The economic reality is that it is basically impossible to run a for-profit health insurance company honestly and still obtain the 15 percent and higher return on investment demanded by stockholders and board members.

I can testify first hand as to the existence of churning. As a self-employed independent bookseller, over the last 15 years, I have purchased private health insurance policies from five different for-profit health insurance companies. Before you accuse me of being flighty, please note that I have had the same car insurance policy for over 30 years and the same house insurance policy for 20 years.

So why did I take the risk of changing health insurance companies so many times? The truth is I was forced out of each of those policies within three years by yearly premium increases of 20 to 90 percent. At no time during that period did I ever file a claim or even go to the doctor.

In March 2005, I purchased an individual policy for myself from Blue Cross Blue Shield of Georgia. The cost was $165 a month with a $2,000 deductible and a 70/30 co-pay with a maximum of $2,000 out of pocket, not including some other minor miscellaneous co-pays. That was about the typical market price for a policy for a healthy 55-year-old man. Politicians who push consumer choice health plans and catastrophic health insurance policies usually cite similar figures in their speeches.

It's true, as the politicians say, that an individual can sign up for a health insurance policy with a $2,000 deductible for around $200-250 a month depending on age. The problem is he or she can't keep it.

111% premium hike

In October 2005, I was notified that as of Jan. 1, my Blue Cross health insurance premium was being raised to $314 a month, a 90 percent increase in less than one year. Or, I was given the option to raise my deductible from $2,000 to $3,500 and only face a 45 percent premium increase to $240 a month. These increases came at a time when general inflation was approximately 5 percent and medical inflation approximately 10-12 percent.

Did I mention that I never filed a claim or even went to a doctor that year?

I chose to raise the deductible to $3,500 and absorb the 45 percent increase. Fortunately, the co-pay remained $2,000.

In October 2006, I was notified that my premium was being raised to $283 as of Jan. 1, an increase of 18 percent. The new premium of $283 was an increase of 72 percent in my health insurance premium in one year and nine months.

Fortunately, I did not fall ill, did not file a claim or even go to a doctor in 2006.

Now, as of October 2007, I have been notified that my premium is being raised to $349. That figure represents an increase of 111 percent in my Blue Cross health insurance premium in two years and nine months.

I haven't decided yet whether to keep this policy, raise the deductible or try to get another policy. But based on my past experiences with the other four health insurance companies, I believe I can safely predict that my Blue Cross premiums will be increasing next year, an election year, by about 20 percent and the year after by anywhere from 30 to 90 percent.

Americans would be wise to emulate Bush and Giuliani and go to work for the government and obtain taxpayer-subsidized health insurance, or get a job with a large corporation that provides an employer sponsored health care benefit plan.

My advice is to avoid private health insurance like the plague.