Bob Laszewski is nobody’s pawn. The health insurance industry analyst has been one of Obamacare’s fiercest and most knowledgeable critics, and his blog — Health Care Policy and Marketplace Review — has been a go-to source for reliable information about the disastrous Affordable Care Act at every phase of its rollout.
Proof that Laszewski doesn’t play favorites can be found in his most recent column (h/t Byron York), in which he eviscerates the two central selling points of Republican insurance reform ideas: selling policies across state lines and association health plans.
His tripartite critique of the notion of premium portability across state lines, the presumed benefits of which have been touted in this space:
There are a number of problems with this idea:
- IF it did attract new carriers to a market, it would be a great way to blow up an existing health insurance market––for example, the high market share legacy Blue Cross plan whose business is in compliance with all of the existing state benefit mandates. A new carrier could conceivably come into the market with much lower rates––because it is offering fewer benefits––attracting the healthy people out of the old more regulated pool leaving the legacy carrier with a sicker pool. Stripping down a health plan is a great time tested way for a predatory insurance company to attract the healthiest consumers at the expense of the legacy carrier who is left with the sickest.
- It’s a 1990s idea that that fails to recognize the business a health plan is in in 2014. Health plans don’t just cross a state line and set up their business like they did decades ago when the insurance license and an ability to play claims was a all a carrier needed to do business. This idea was first suggested by the last of the insurance industry cherry pickers back in the 1990s and it has long outlasted its relevance. Building a new health plan in a market can easily cost hundreds of millions of dollars over a plan’s first few years of operation. The most important thing a health plan now offers is not an insurance contract but rather a comprehensively managed provider network. Just look at the capital costs for the new co-ops under Obamacare that are often receiving something approaching $100 million each to set up a new plan. Georgia, for example, passed such a law in 2011 and not a single new carrier entered the state because going into business in Georgia would be about a lot more than simply having a licensed contract to offer and there just aren’t a lot of cherry pickers left to want to exploit this opportunity.
- It doesn’t solve the problem it identifies. The problem this solution targets is that there are arguably too many benefit mandates unnecessarily driving costs up. So, solve that problem. Why do we even need to enact this convoluted and market obsolete idea? Why even encourage the return of predatory health insurance cherry pickers? Why create a two-tiered market? Why not fix the real problem and create a level playing field for everyone at the same time? I suggest the supporters of this idea first ask the leaders of the insurance industry if they would even do this under the best of circumstances.
At the end of his column, Laszewski writes:
I have been critical of Obamacare because it has looked to me that it was largely created by people who really didn’t understand how the insurance markets work.
Looks like Republicans and Democrats have a lot in common.
Words to ponder?
