Recession Causing Massive Health Insurance Losses
Nayla Kazzi released a report for CAP today showing on the rising number of Americans losing health insurance as the recession drags on. Here’s a chart:
First point: We need health care reform.
Second point: While it’s probably undesirable to do anything that would imperil anyone’s employer-provided coverage in the short-term, it would be highly desirable for reform to light a path away from the current employer-based system.
Third point: This highlights a huge flaw in the way our current system works. Right now, a person who develops a serious medical problem can continue to enjoy health insurance coverage if and only if he or she is able to maintain health insurance continuously. But if you lose your insurance because you get laid off, and then can’t find a new job for a while because of generally bad labor market conditions, then even though you’ll be able to get a new job when the economy revives, you’ll now find that your illness means you can’t get coverage for your medical problem. That’s totally rational business practice, but it completely defeats the purpose of a health care system which is precisely to ensure that sick people can get health care.
41 Responses to “Recession Causing Massive Health Insurance Losses”
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May 4th, 2009 at 5:26 pm
The USA does not have a health care system worthy of the name. That’s the problem.
May 4th, 2009 at 5:26 pm
The purpose of a health care system is to provide profits for insurance companies and other politically powerful groups. Providing health care to sick people is a distraction from the main goal.
May 4th, 2009 at 5:39 pm
Hi-
Question about someone who’s been laid off. Does a person going onto his wife’s policy, rather than using Cobra, lose the pre-existing rollover to the new job?
May 4th, 2009 at 5:41 pm
Nice goal:
it would be highly desirable for reform to light a path away from the current employer-based system
May 4th, 2009 at 5:43 pm
That’s totally rational business practice, but it completely defeats the purpose of a health care system which is precisely to ensure that sick people can get health care.
Yes, but that’s not the purpose of our health care system, which is instead to ensure that insurance companies can make large profits as a useless middleman.
May 4th, 2009 at 5:51 pm
The debate is muddled because of the intentional conflation of two separate entities:
Health Insurance
Health Care
It would be nice if everyone would make it clear which one they will uphold to someone else’s last breath…I’m talking here about Ben Nelson, of course. Long live Mutual of Omaha.
May 4th, 2009 at 5:57 pm
I don’t think I understand what you are saying here. If you are saying a sick person who gets a new job (where the employer provides health insurance) won’t get that health insurance, I think that is incorrect. Your new employer can’t exclude your from their plan. If you are saying that an unemployed sick person can’t get health insurance, well okay then.
May 4th, 2009 at 6:00 pm
Yeah, bobbo is correct. Waiting periods for pre existing conditions are permissible, but once that period expires you have the same coverage as everyone else at your company. They can’t deny you coverage or exclude the pre existing condition.
May 4th, 2009 at 6:06 pm
Waiting periods for pre existing conditions are permissible, but once that period expires you have the same coverage as everyone else at your company.
Well, as long as your illness takes a break during that waiting period you’re all set!
May 4th, 2009 at 6:10 pm
Those are very good points Matt.
First, we don’t necessarily want to eliminate employer-provided coverage, it should remain one option amongst others, but we shouldn’t rely on it for the vast majority of Americans (and I would add that it greatly skews the price of insurance too for those who are shopping independently, just look at what COBRA costs, it’s shocking).
Second, fabulous point about people losing their insurance due to losing their job or losing income and not being able to pay their premium. We need some kind of law that allows for folks in these cases to be uninsured for a defined period (less than 3-5 years) and, when their job/financial situation turns around, be entitled to reinstate their coverage without applying as a new client.
This would a kinda sorta forbearance plan without the part of still paying interest (since you don’t owe anything) that would really help everyday Americans who are struggling or will find themselves struggling in the future, and the insurance companies shouldn’t be able to profit off of their misfortune (though any normal rate increases/medical reviews should still apply in the normal period of time once the client does reinstate).
Issues here would be the logistics of reinstating group coverage for a person who is no longer part of an eligible group, and also whether we should allow for too much pre-existing conditional rate setting in the first place, especially since if we reach the goal of ensuring that all or most American have continuous health insurance coverage, there won’t really be many situations where someone is putting in a new application for health insurance, since they’ve been insured all through their life.
Here again, we get into the dynamics of why people don’t have coverage, which is mainly it’s too damn expensive and people switch jobs a lot (or go without jobs for periods of time).
This also raises the issue of whether all college students should receive complimentary health insurance (somehow, I’m not saying through the school).
May 4th, 2009 at 6:12 pm
Why can’t the market fix this problem, what am I missing?
It seems as though the health insurance companies would prefer to insure as many people as possible to maximize profitability for a variety of reasons, not the least of which is risk allocation.
Insurance companies currently face a situation where they are loosing “customers” as companies fail, workers are laid off and small businesses opt to cancel coverage for employees. Many (if not most) of those who lose benefits and feel the need to have insurance are unable to purchase individual insurance due to high premiums. Those who are young and healthy are disinclined to purchase insurance that would allocate the risk across a larger pool.
Moreover, insurance companies are likely to continue losing “customers” without respect to the plight of the economy as a whole because jobs created going forward are less likely to provide benefits.
So Aren’t insurance companies going to be compelled to come up with a solution to sell their product if they want to stay in business?
May 4th, 2009 at 6:16 pm
Re: Question about someone who’s been laid off. Does a person going onto his wife’s policy, rather than using Cobra, lose the pre-existing rollover to the new job?
No. As long as the person (and his condition) is covered under a policy HIPAA applies.
May 4th, 2009 at 6:16 pm
I would like to have two choices; to die slowly due to bureaucratic neglect or to be raped until death by privateers.
Right now, my only choice is to be raped until death. I would like to have the option to be entangled in some good old fashioned government bureaucracy.
Isn’t that what America is all about? Freedom of choice?
May 4th, 2009 at 6:18 pm
Title of the post:
From the post:
Someone with intelligence would want to end the recession first.
May 4th, 2009 at 6:48 pm
Someone with intelligence would want to end the recession first.
Luckily those who are without care won’t have to worry until the recession is over. Thanks smart person.
May 4th, 2009 at 6:49 pm
You’re missing the fact that the health insurance market IS the problem.
They’ve already implemented their wonderful solution. Deny benefits people who need them, don’t insure anyone who needs health care, and keep 25% of total health care spending so that they can be rich.
May 4th, 2009 at 6:57 pm
Why can’t the market fix this problem, what am I missing? It seems as though the health insurance companies would prefer to insure as many people as possible to maximize profitability for a variety of reasons
What you are missing is that insurance companies don’t want to insure sick people, because then they have to pay for their health care. Well, what they ideally would like is insuring sick people but not paying for their health care — in the words of an old Sylvia cartoon, “Why is this so hard for you to understand? We like collecting premiums, we don’t like paying claims.” But anyway, insurance companies aren’t going to want to take on people who are already sick unless they can avoid paying for the sick people’s treatment. Hence the “preexisting condition” exclusion.
Oversimplifying, if I’m healthy, and I have a 1% chance of developing an illness that costs $20,000 a year to treat, my insurance company can expect to make a profit if it charges me anywhere over $200 a year. But if I’ve already got the illness, they need to charge me $20,000 a year to make a profit. Which is no good for me — it costs just as much as if I was uninsured. So there’s no market incentive that would take care of this problem.
Which is pretty obvious. Why would insurance companies want to pick up customers who will lose them money?
May 4th, 2009 at 7:23 pm
Insurance companies want to make money. It’s government’s job to ensure that they provide the coverage we want in order for them to do so. That isn’t happening, now, especially for folks outside the mainstream.
Today’s employer-based system has got to go, and will, one way or another. Making such a change faces many challenges. The biggest is that millions (10s of millions?) don’t see the need to change, because they work in stable firms over many years. If the crisis convinces some of them that things aren’t as stable as they thought, maybe they’ll be more open to change. We may hope so.
Single-payer is the only real alternative to insurance. I think a reformed insurance system will produce better and more innovative care at lower costs, despite single-payer’s administrative cost advantage. But that’s for another day.
May 4th, 2009 at 7:36 pm
Matt, Pinter could be right, if only insurance companies could get more people to plump for the never-pay policy.
May 4th, 2009 at 7:51 pm
Insurance companies selling their product and staying in business is the problem, not the solution.
May 4th, 2009 at 8:08 pm
It seems as though the health insurance companies would prefer to insure as many people as possible to maximize profitability for a variety of reasons, not the least of which is risk allocation.
No, that’s wrong. Insurance companies prefer to insure as many young, healthy people as possible to maximize profitability for a variety of reasons, not the least of which is risk allocation, which is also why want to insure as few sick and/or older people as possible. The insurance company with ten young healthy customers will make more money than the insurance company with a hundred old sick customers, so the goal isn’t volume, it’s discrimination.
May 4th, 2009 at 8:32 pm
Once we do get to a place where pre-existing conditions won’t disqualify you, and people with health problems don’t have to pay massively more than healthy people, we’ll have to again address products known to make people sick, like cigarettes, and tax them even higher, since we’re already going to have a system in place that encourages health defectors, so at this point we need to penalize this defection at every step we possibly can (without expecting this tax to sustainably bring in a certain amount of revenue, since the ideal would be to greatly decrease the behavior).
This will also go for chemical manufacture, soda pop, you name it, higher taxes on products that demonstrably impact people’s health. It will be imperfect, but if done in the right way could really go part and parcel with our effort to clean up the environment, which inevitably is going to also involve cleaning up what we eat and how we bring food to market.
May 4th, 2009 at 8:44 pm
I do not pretend to know the answers to our health care problems.That is why i read this blog and others.i am trying to find information about solutions.
I do know though ,that any solution should disconnect health insurance from what job you work.
Many jobs do not provide health insurance[restaraunts, and construction for instance].As for the ones that do. I have known too many people that have stayed in a job that they hate, just because of the health insurance. We have all known people in that situation.
If someone hates their job, and are only staying in it for the health insurance, than they are probably not very productive.We have thousands and thousands of Americans who are trapped in the wrong sort of job for them , because of this.
As i said i do not know the answers.But i appreciate the people who write in to the comments section about this issue.There are many interesting comments. Thank you.
May 4th, 2009 at 9:11 pm
I think that is incorrect. Your new employer can’t exclude your from their plan. If you are saying that an unemployed sick person can’t get health insurance, well okay then.
Still, unless the firm is really large (and so has thousands of employees on its plan), the addition of a person with a costly pre-existing condition can result in a noticeable increase in premiums. For a really small company the increase could be huge. So, although I’m sure it’s illegal, I’m pretty confident new hires who cause premiums to get raised likely get laid off in this country with regularity. It’s just that some other reason is given.
May 4th, 2009 at 9:14 pm
So, although I’m sure it’s illegal, I’m pretty confident new hires who cause premiums to get raised likely get laid off in this country with regularity. It’s just that some other reason is given.
Also, this dynamic must really exacerbate age discrimination, and you can’t hide your age in a job interview. Any business owner with a shred of common sense will surely be aware it’s cheaper to add a 30 year old his firm’s insurance plan than a 50 year old.
May 4th, 2009 at 10:15 pm
Question for MattY: how many of those people are actually Americans as you say, i.e., how many are U.S. citizens? How many are actually citizens of foreign countries?
Note to the reader: if MattY ignores that topic for five more posts, he’ll win the Soros Medaillion d’Argent. That, combined with the fact that he’s completely intellectually dishonest, means that he’ll never answer those questions.
May 4th, 2009 at 10:36 pm
US healthcare system: “Don’t get Sick”, also “Pay lots of money to insurers that refuse to provide you insurance.”
But seriously, some insurers will still cover your pre-existing conditions. Your employer has a stake in keeping you healthy, so they tend to get plans that do that, at least in the short term. I have a coworker who has cystic fibrosis, diagnosed long before getting a job with my employer and my employer’s insurer is paying for all her expensive medical treatments. But admittedly, we have awesome insurance.
May 4th, 2009 at 10:39 pm
Question for MattY: how many of those people are actually Americans as you say, i.e., how many are U.S. citizens?
Question for you. Who cares? Why is that even relevant? Foreigners pay taxes, and get sick, and get fucked over by the system just as citizens do.
May 4th, 2009 at 11:01 pm
My husband got laid off and we have insurance for about 2 more weeks.
I had to have an operation and pushed to have it done before May and we stocked up for 3 months of our medicines we take.
It’s scary because we know finding insurance will be expensive and I probably won’t get coverage anyway.
Pre-existing.
My husband did check around and one agent told him that if he could keep Cobra to do so. Anywhere else, including his agency, would cost double what we’d pay for Cobra – which is obscene.
I think of my family in France on my mother’s side. My cousins enjoy the best health care around and don’t have these worries over cost.
I simply cannot understand how anyone can be against health care reform for this country. It’s crazy and makes zero sense.
May 4th, 2009 at 11:21 pm
Question for Lonewacko: are you off your meds, or just overdosing on them to deal with the fact that blogwhoring white nationalists aren’t the shiznit any more?
May 5th, 2009 at 12:51 am
@29 vwcat: “I simply cannot understand how anyone can be against health care reform for this country.”
At this point in history our country has become a giant testing ground, an experiment, really, in how quickly private interests can strip and possess public assets.
Health care is just one battleground in a larger struggle but it seems that if health care is lost all is lost. If our Nation abrogates its responsibility to care for its sick, its elderly, its people; it is no longer a nation and is instead just a collection of wolves and sheep.
May 5th, 2009 at 1:57 am
Damn it, nobody seems to get the difference, and the significance of that difference, between protecting people against catastrophic financial loss and commonly recurring range of medical expenses that people can expect. The crisis is mainly in the first of those. Provide universal social insurance against unpredictable catastrophic loss — for discussion, let’s say $5000 annually for an individual, $10,000 family — and the biggest social problem — fear of losses that can never be handled and will wipe out a lifetime of prudent savings — will be solved.
Insurance for the “gap” underneath the catastrophic layer will be about half the cost of current policies — probably less — because there will be a ceiling on the costs the insurance provider will ever have to pay out. Of course, $5000 or $10,000 is huge to a low income family, so subsidization of these “gap” policies will be necessary for many Americans.
All the argument about whether or not we will get a “public plan” will be clarified if we distinguish between a public plan for catastrophic loss and one for lesser amounts of annual costs. Opposition to a public plan for catastrophic loss (which leaves the field [the "gap"] underneath such costs free to all insurers who want to compete in that space, and to any employer who wants to support its workforce with a health insurance component) can be made to be politically catastrophic. Democrats who oppose such a plan will have a hard time surviving a primary, and it will be a death knell from publc life for Republicans. But as long as we fail to distinguish between the two functions, the more the opponents can confuse everyone.
May 5th, 2009 at 6:32 am
Re: So, although I’m sure it’s illegal, I’m pretty confident new hires who cause premiums to get raised likely get laid off in this country with regularity.
A company does not know who is causing its premiums to increase. It is in fact illegal for the insurer to report such information and for the employer to ask.
Re: Also, this dynamic must really exacerbate age discrimination, and you can’t hide your age in a job interview.
Several states now have “community rating” laws requiring that everyone be charged the same premium for the same policy. It would interesting to see if this has had any effect on age discrmination in hiring in those states.
May 5th, 2009 at 6:58 am
> A company does not know who is causing its
> premiums to increase. It is in fact illegal
> for the insurer to report such information
> and for the employer to ask.
Perhaps in theory, but when you are working for a 500-employee company and the health plan committee includes the President and CFO they might be legally obligated to keep two compartments in their minds but in reality they do know which of their employees are generating the plan expenses.
Cranky
May 5th, 2009 at 8:38 am
[...] Matt Yglesias comments, Right now, a person who develops a serious medical problem can continue to enjoy health insurance coverage if and only if he or she is able to maintain health insurance continuously. But if you lose your insurance because you get laid off, and then can’t find a new job for a while because of generally bad labor market conditions, then even though you’ll be able to get a new job when the economy revives, you’ll now find that your illness means you can’t get coverage for your medical problem. That’s totally rational business practice, but it completely defeats the purpose of a health care system which is precisely to ensure that sick people can get health care. [...]
May 5th, 2009 at 9:06 am
Actually I don’t think this is true. Most group plans, which employers generally use, are not allowed to exclude “pre-existing conditions”.
I think you should check on this because it is my understanding it’s only private insurance where this really applies.
May 5th, 2009 at 9:58 am
I don’t get the issue with our health care system. Most commoners already live to be 65, or even older. Do they really need to live any longer?
May 5th, 2009 at 11:52 am
RE: #11 and subsequent comments about market basis for insurance company.
My father worked insurance all his life, and I gleaned from him that insurance profitability is mostly about short term loans to business (”industrial paper”). I believe that the risk pool is run basically at cost (or there about) and money is made on the “paper”.
Without a doubt reducing claims is in the company’s interests, but regarding #11’s suggestion that there is a market fix, I think the market could care less, as long as there is a sufficient pool for the loans.
On a related note, it seems altogether to common to look only for a market fix, no matter how poor or inadaquate.
May 5th, 2009 at 1:33 pm
A company does not know who is causing its premiums to increase. It is in fact illegal for the insurer to report such information and for the employer to ask.
Really? So I don’t know that my assistant has recently been diagnosed with a debilitating and lifelong medical condition that is causing him to miss one day of work a week for treatment and that I’m sure is generating lots and lots of medical bills?
May 5th, 2009 at 1:51 pm
Joe @ 38,
I get that the commercial paper may be the profit center, but the money they are lending comes from the sale of insurance policies. My point was that as more people lose their insurance benefits from work, the risk will become greater for the insurer. The risk increases because those parties with the greatest incentive to purchase insurance will also be the parties most likely to cost the insurance company money (namely those at the highest risk of illness). Thus, the shrinking pool of insured people will have a disproportionately negative impact on the insurance companies. A reduction in premiums, whether or not the risk pool is run at cost, will result in a reduction of capital available for conversion into industrial paper.
When I asked why the market could not fix the problem, it was a genuine question, I was asking to see if anyone was aware of a regulatory structure or market imbalance that prevents insurance companies from marketing their products in a manner that will expand the pool of insured people by selling insurance products at a price point that makes them attractive to uninsured consumers.
May 6th, 2009 at 1:47 pm
Key points: health insurance is a business, with the sole purpose to maximize profits. It is NOT necessarily a socially responsible business. That is why it has failed Americans. Sadly, we can’t rely on a market correction in the health insurance industry to provide health care for Americans who are not covered. It will take massive government initiative, and funding to provide appropriate health care. This is not the health care system I wanted to participate in when I became a physician, but I hate the current system. I guess government mandated/run health insurance is the only answer.