It has been over 50 years since this writer attempted to make a living selling health and life insurance as a licensed Florida agent. In the two months I held that job I managed to sell one policy, but the underwriters rejected it for “pre-existing conditions.” At the time, I knew quite a bit about health insurance, but little of it is the same in the 21st century.
Instead of a private, regulated medical insurance industry, we have state-by-state regulated health insurers and the Patient Protection and Affordable Care Act of 2010 (ACA), a federal program reviled as “Obamacare.” Where someone is insured under their employer's policy, disputes are subject to federal, not state, courts as such policies fall under the Employers Retirement Income Securities Act (ERISA).
The ACA was supposed to be tied to the federally mandated Medicaid program, which would assist state pools in providing insurance for those who couldn't buy health insurance in the market. Many states refused federal funds to accept this support, and the whole concept fell apart. While nobody is still talking about “death squads” that would select who got life-saving care and who didn't, the complaints were about high premiums and the “mandatory” coverage requirement.
Will Congress do ‘something’?
It is doubtful that any new health insurance legislation will be produced by Congress this fall. What is the holdup? Basically, Congress can't seem to understand one of the basic tenets of insurance, that to make a risk insurable, there must be a large number of homogeneous exposure units.
For a national health insurance program to work, it must include the healthy and wealthy as well as the sick and poor. Most elderly (perhaps the most expensive exposure units) are already excluded from the pool by Medicare, so that leaves only the vast multitude under 65 as exposure units. As the original ACA allowed young people up to age 26 to remain on their parents’ policies (if they were residents in their parents’ home) that further reduced the size of the eligible pool.
In order for the ACA to work, everyone needs to participate in the healthcare system to spread the risk. (Photo: Shutterstock)
‘Mandatory’ participation is necessary
One of the biggest complaints against the ACA is the mandatory coverage requirement; it imposes a fine on those who fail to participate by either purchasing their own health insurance, having their employer purchase it for them, or joining the ACA program, selecting coverage from a pool of insurers. Many, some suggest primarily young adults who think they’re too healthy to need insurance, opt out and elect to pay the “fine.” But the fine was so small it didn't affect these persons’ wallets in any significant way.
What happens when one of these “uninsured” optimists gets sick or is injured in an accident? With no insurance, their medical and surgical costs are passed on to those who do have insurance in the form of higher premiums; these same responsible citizens who purchased insurance also pay taxes to fund local hospitals and emergency rooms. As medical costs rise, many hospitals are going broke, leaving large areas of the nation without any medical care. Is it not these “uninsureds” who are just as likely to be injured in an accident or need care for child birth or other medical problems? It's not the elderly who are having babies!
Most auto insurers sell Uninsured Motorist Coverage along with other coverages because irresponsible drivers cause accidents and have no insurance to pay the damages. Insured drivers have to pay for these irresponsible people, even in states with “mandatory auto insurance” laws.
Rather than a small fine, whatever program Congress designs needs to include the mandatory coverage requirement, but the fine should be set at a minimum of twice the amount health insurance would have cost these individuals had they followed the law and purchased insurance.
If Congress thinks that's too burdensome on their constituents, they can set up a funding mechanism, in part paid by the fines, to help the poor buy coverage and make the program work. Unless all the “homogeneous exposure units” participate, no healthcare plan will function, and the current chaos will continue.
Ken Brownlee, CPCU, is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claims-adjusting textbooks. Opinions expressed are the author’s own.