Archives for the 'Insurance' Category
Why the GINA “Genetic Discrimination” Law Is Bad
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At Slate, Eric Posner explains why the Genetic Information Non-Discrimination Act is a bad idea as a basic concept. The law nevertheless recently passed the Senate 95-to-0 and the House 414-to-1 because politicians’ thinking is controlled by labels, not logic or substance, and no one (especially not sanctimonious people) wants to be labeled as being in favor of “discrimination,” as Richard Ford notes.
Prior to its passage, I criticized GINA’s ban on employment discrimination in the National Law Journal for lacking a “direct threat” exception for public safety. The Economist’s blog suggested its ban on insurance discrimination could fundamentally undermine insurance markets and the availability of private health insurance in the long run.
Congress Messes With Insurance
Eli Lehrer has an editorial in today’s Washington Examiner about how ill-considered legislation to create federal “national catastrophe insurance” could lead to American taxpayers shelling out more than $100 billion, on par with Hurricane Katrina. Earlier, he described how the legislation could cause serious financial problems for the country as a whole.
Last month, Congress created a long-run threat to the insurance industry by passing the Genetic Information Non-Discrimination Act (GINA). GINA also regulates employers in ways that I criticized in 2005 in the National Law Journal.
Fat Discrimination Bills Lumber Forward
A Chicago Tribune story notes that a few jurisdictions now ban discrimination against fat people (generally as part of general bans on discrimination based on physical appearance), and that Massachusetts is now considering specifically banning discrimination against fat people (as some municipalities do). (The only federal law touching on the subject is the Americans with Disabilities Act, which some courts have said may cover “morbid obesity” (see Cook v. Rhode Island), but which does not cover ordinary fatness; moreover, some courts say that obesity is not a disability because it is a correctable condition, i.e., you can lose the weight if you try).
Quite apart from the fact that such legislation interferes with employers’ freedom of contract (is it really so unreasonable for a movie studio to cast a thin person rather than a fat person in certain roles, or for an airline to want a thin flight attendant who can move easily up and down the aisle and allow passengers to pass by rather than a fat flight attendant who will block the aisle?), it’s also not clear why such legislation should focus on fat people, who can often control their condition, rather than other people disadvantaged by mother nature, like short people. (I became fat in 1993, but then lost the weight by eliminating alcohol, butter, and extremely fatty foods from my diet. But short people cannot change the fact that they are short).
After all, most Americans are overweight, so it’s not as if fat people are a tiny minority. And being fat is not as disadvantageous (at least for men) as being short. For example, fat people of both sexes are more likely to get married than short men, and short people are less likely to get promotions than people of average height like me.
A women’s studies professor quoted in the article supports fat discrimination legislation as a way of destigmatizing fatness. (Some colleges now have “fat studies” programs, whose professors are often drawn from existing women’s studies programs). But even if that were truly possible, destigmatizing fatness might do more harm than good to public health. In my wife’s native France, obesity rates are lower than in the U.S., and lifespans are longer (despite all the cheese, foie gras, and red meat they eat). Part of the reason is that they simply eat less (not healthier). Why do they eat less? Partly due to the shame factor. My French-born wife’s (thin) best friend told me, with disapproval, that in France, “it is a shame to be fat.” Shame is not a pleasant emotion, but maybe it’s better to be shamed into losing weight than to be dead from obesity-related conditions, like diabetes, heart diseases, and weight-related cancers. Those obesity-related conditions are a legitimate cause for concern for the insurers and employers who end up paying for them.
GINA Law Passes, Will Afflict Insurers and Employers
On April 24, the Senate voted 95-to-0 to pass the Genetic Information Non-Discrimination Act (GINA), which bans insurers and employers from taking genetic information into account. The Economist blog suggests it could doom private individual insurance in the future, as people who test negative for genetic risk factors for diseases refuse to buy health insurance policies that are priced the same for them as for riskier people who test positive for those genetic risk factors, effectively forcing those with lower risks to subsidize those with higher risks. Such adverse selection would cause the market for such insurance policies to dry up.
Last year, I criticized the GINA bill in the National Law Journal for lacking a “direct threat” exception that would allow employers not to use people with hazardous conditions (like a genetic tendency to seizures) for jobs where they could unintentionally cause harm to the public (like a person prone to seizures driving a bus). Existing laws such as the Americans with Disabilities Act contain such an exception. Greg Conko, who studies biotech law and policy, pointed out that there was no need for the GINA bill. He noted there is no pattern of insurers or employers misusing genetic information.
Killing Consumer-Directed Health Care?
One of the most important recent innovations in health care has been the expansion of consumer-directed care, especially through Health Savings Accounts. HSAs offer patients greater control over their money and create an incentive for cost-consciousness. Suddenly people have a reason to shop around and find the best deal for routine care.
But Congress is preparing to wreck the system. At the behest of a congressional staffer-turned lobbyist, the House has voted to impose on HSAs much of the regulatory bureaucracy evident in health insurance. Reports the Wall Street Journal:
Democrats have made affordable health care a mainstay of their election agenda, but apparently only if you’re willing to get insurance through the government. Witness their stealthy assault on Americans who prefer the private-sector option of Health Savings Accounts.
This week, the House passed legislation that included a provision to require every HSA transaction be reviewed and verified as a legitimate medical expense. Democrats say this is to ensure that consumers are using their tax-free withdrawals for a knee replacement, rather than a new iPod. In reality it adds a layer of bureaucracy that could sharply reduce the appeal and cost savings of HSAs.
A key player here is Ways and Means Health Subcommittee Chairman Pete Stark, whose main purpose in politics is to give the U.S. a government-run health-care system. He is a known opponent of HSAs – once comparing them to “weapons of mass destruction” – because they introduce more individual choice into the health-care marketplace.
Pushing for the provision was a company called Evolution Benefits, which has patented a system for the substantiation of health-care expenses. Evolution’s lobbyist, John McManus, was the former staff director of the Health Subcommittee under Republican Bill Thomas. The company first lobbied for the HSA provision, then withdrew its support when Republicans began to focus on its role. But Ways and Means Chairman Charlie Rangel helped make sure the provision was in the bill, which passed largely on partisan lines.
Leave it to Congress to try to mess up a good thing. It makes you wonder if the politicians want to manufacture a real health care crisis, since it would increase their power.
Bad Teeth and Nationalized Health Care
Fark.com, the world’s best workplace time-waster, links to a story in the Sun about a British couple that will use a 5 million GBP lottery win to buy new teeth for themselves (among other things). A walk down a street anywhere in the UK will reveal that a stereotype has at least some truth: Brits have bad teeth.
It’s not the the British are poor–Greater London is, by per capita income, the wealthiest large area of the European Union and richer than all but a handful of American states. And it isn’t exactly that the UK has a national health insurance system: other countries have socialist or quasi-socialist medical systems and lack a reputation for bad dental health.
My theory is this: Brits grow up thinking that medicine should be “free” and don’t spend enough on dentistry because they believe that anything medical is the government’s job. Thus, they won’t pay for dental care even when they rationally should.
Contrary to what the media, liberals, and conservatives seem to believe, “free-at-point-of-service” health care is not the norm around the world. French, Germans, Japanese, Swiss, Israelis, and most Canadians deal with doctors bills and/or health insurance premiums as much or more than most Americans. The UK, indeed, has the only large truly socialist–that is, wholly integrated, entirely government owned–health care systems in the developed world. Many facilities don’t even have a way of billing people. Although everyone pays for the system via taxes, the system isn’t expensive and (cleverly, in some cases) provides pretty good primary care for a fraction of what other countries spend. (End of life care is another story.)
The National Health Service provides dental care on a limited scale but, because of rationing, non-poor people who really want to see a dentist without waiting months have to pay for it out of pocket or buy private coverage.
The same way that many parents (not unjustifiably) get angry at materials fees and other minor charges assessed by public schools, perhaps many people in the UK, in my experience, bristle at the idea of paying anything for health care. Thus, chronic underinvestment results–the UK, as a whole spends the smallest percentage of GDP on health care of any G-7 country. And, perhaps, it results in bad teeth too.
George McGovern: Be Wary of Lending and Insurance Regulations
Congress is now so bent on overregulation that is that it’s getting a plea for restraint from George McGovern, the 1972 Democratic presidential nominee. In the Wall Street Journal, he warns against rewriting the terms of subprime mortgages to benefit current borrowers, noting that most such loans are “neither delinquent nor in default.” (Congressional proposals now seek to freeze or cut interest rates for many subprime borrowers with adjustable rate mortgages, even if they profited from the extremely low introductory rates they received, can afford the new, higher rates they now will be charged after the expiration of those introductory rates, and would ultimately end up paying less overall than borrowers who obtained fixed-rate mortgages).
He notes that paternalistic regulation to protect current borrowers will backfire against future borrowers, as it often does against consumers. (John Berlau discusses how a mortgage bailout will harm borrowers and the economy here, here, and here). McGovern points to how heavy state regulation of the health-insurance market makes health insurance coverage unaffordable for many uninsured people, because “many people can’t afford the gold-plated health plans that are the only options available in their states,” and because state insurance commissions forbid people to buy less expensive plans across state lines. (Eli Lehrer links to a solution to this problem that would benefit consumers with lower prices and more choices — Optional Federal Charter — here).
McGovern also notes that banning payday lending can backfire by forcing “people in need of immediate money” to pay for current expenses with money they don’t have through more costly means like “skipped credit card payments” and “bounced checks.” (John Berlau explains how payday lending bans can backfire against consumers here).
Consumers Want Insurance Choice
An important new study from the American Consumer Institute shows that consumers, on the whole, want broader choice of insurance plans.
Right now, insurance remains the only industry that’s regulated almost entirely on the state level. Proposals for an Optional Federal Charter offer one promising way to give consumers more choice. Structured properly, it could do a lot of good.
But We Already Have It. . .
Doug,
I agree with your criticisms of the about the problems with the Swedish health care system. But, of course, we have pretty much the same thing here. The government–through Medicaid, SCHIP, and occasionally Medicare–already provides health insurance to almost half of all children. Medicare “takes care” of all of the old and disabled. Many efforts to graft “private” features onto these programs–all of SCHIP and Medicare Advantage–can sometimes be worse than the pure-government programs that preceded them.
The Canadian Health care system, a bugbear to much of the Right, is not very different from the American system: it’s somewhat better for preventative care, somewhat less likely to waste money on MRIs for every broken bone, and somewhat worse at end-of-life care. Like the U.S. system, it’s made up of private doctors and private hospitals who get paid mostly by the government. There’s a little more political juice in the Canadian system (waiting lists disappear for the powerful) but, because its smaller and simpler, the Canadian government bureaucracy is generally less intrusive on the way that doctors practice day-to-day. Continue reading this post »
Many People Don’t Need Health Insurance
As usual, politicians are complaining about the fact that 47 million Americans supposedly don’t have health insurance. But many young people just don’t need health insurance or health care. In my 20s, I never went to the doctor or dentist (except once when I cut my scalp on a sharp object in a Los Angeles parking garage; the garage owner paid me a small settlement as a result, even though it was partly the result of my own negligence, and I didn’t demand any money), even though I had employer-provided health insurance during most of that time. I never suffered any ill effects as a result.
Betsy McCaughey, New York’s former lieutenant governor, has an op ed today in The Wall Street Journal, in which she points out that mandatory health insurance is a ripoff for young people, and that it effectively forces them to subsidize the health care of older people. She also points out that many uninsured people are voluntarily uninsured, and that roughly half of the uninsured either have incomes above $75,000 per year, or are eligible for existing health-care programs like Medicaid if they would only sign up. For those who don’t have access to the Journal, her article is summarized here.
Why Not a National Health Insurance Market?
Trying to “fix” health care is not easy, since it’s a bizarre amalgam of private provision of insurance and public spending and regulation, completely distorted by the counterproductive incentives of pervasive third-party payment. But one very simple step would be to simply have a national market in health insurance. Explains Merrill Mathews of the Council for Affordable Health Insurance in The Wall Street Journal (subscription required):
Why can’t people living in New Jersey buy health insurance available to residents of, say, Pennsylvania?
Rep. John Shadegg, an Arizona Republican, thinks they should — and today will reintroduce legislation to make that possible.
The Health Care Choice Act would allow residents in one state to buy health insurance that is available in and regulated by another state. If enacted, the law would create a competitive, 50-state market for health insurance, likely making it cheaper. It would do this without imposing a large cost on taxpayers and without creating a new government bureaucracy.
This should be a no-brainer for Congress. But a few years ago, Mr. Shadegg went looking for a Democratic cosponsor for his bill. He found one who initially signed on, then withdrew under pressure from Democratic House leaders who wanted to dismiss the Shadegg bill with the excuse that it lacked bipartisan support.
CIGNA Mistakes? Maybe, but Murder…?
Posted by Michelle MintonImagine you are going on vacation and you pay your neighbor to tend to the hanging plants you have outside of your house. While you’re gone the weather turns and a frost sets in, eventually killing all of your plants. You return home and are understandably distraught to find out that your neighbor neglected to bring your plants indoors, allowing them to perish in the harsh elements. You promptly file vandalism charges against your neighbor for the damage done to your plants. I’d wager that no court, (even one in California) would agree to hear a case on those grounds. I am willing to bet, however, that California courts will entertain the murder charges that the family of Nataline Sarkisyan plans to file against their health care provider, CIGNA.
Suffering from leukemia, complications from a previous procedure, and a failing liver, 17 year old Nataline died on Thursday December, 20th after her family removed her from life support. The family plans to sue CIGNA becuase they claim that she would not have died had CIGNA approved coverage for the liver transplant that she needed. CIGNA, at first denied the request, claiming that because of Nataline’s illness, the complications from a previous surgery, and likely interaction of medications, that a liver transplant in her case would be “experimental” and the likelihood of success small–putting the surgery beyond the scope of the family’s coverage under CIGNA. But, after protests and loads of negative publicity, CIGNA decided to reverse it’s decision and grant the transplant. Nataline died hours after the decision (after her family removed her from life support).
As we don’t yet know all the details surrounding Nataline’s death, I will abstain from assigning blame, but I want to address those other commentators who place responsibility for her death squarely on CIGNA. Put simply, insurers have no responsibility to save lives. That is not what we pay them for. The only duty an insurer has is to pay for medicine and procedures agreed upon in the contract. If CIGNA broke the contract it had with the Sarkisyans, then by all means they ought to be sued, but not for murder, manslaughter, nor negligent homicide. CIGNA did not cause Nataline’s leukemia, and it did not prevent the family from receiving the transplant they claim would have saved her life, they simply declined to pay for it. The family had no right to CIGNA’s funding beyond the contract that they signed with the insurer, and by CIGNA’s account, the surgery was beyond their plan. Understanding that the surgery would have cost a massive amount of money, potentially a hundred thousand dollars or more, the family still had a choice to find alternative means of funding for the surgery.
The bottom line is that CIGNA, and any other insurer, is only responsible for providing financial coverage as their contract stipulates; nothing more.
Rent seeking or lack of private insurance markets?
Posted by Lene JohansenMonsanto has talked the federal government into giving farmers a break on their crop insurance if they use crops that produce pesticides. If other companies are involved in this too, it is a good thing–it is reasonable that lower risk crops should have a lower premium. It is not reasonable that only Monsanto’s pesticide producing crops should be considered lower risk.
The greens are crying foul though; they claim this is rent seeking and corruption, government should not “endorse a product” they argue.
I would have to agree, but they have defined the problem wrong. The government should not be involved in crop insurance in the first place. If this was a private market, the risk assessment would not be considered a political move on the part of USDA.
Private or Government Health Care: Who Gets to Choose?
Posted by Doug BandowThere may be no less appreciated industry than insurance. We hate paying for it and hope never to use it. If we make a claim, the company is devoted to protecting its own interest irrespective of what we want.
The health insurance industry naturally yields up more than a few “Roger Moore” moments, examples of denial of benefits which, no matter the justification, look like examples of greedy corporations sacrificing helpless people. Cigna has recently been hit over its initial denial of a liver transplant to a young leukemia patient.
But there are no easy choices, and a government takeover of the medical system doesn’t make the decisions any easier. Observes Investor’s Business Daily:
Any insurer, public or private, would have had to make the same tough calls that Cigna did. It’s natural for patients and their families to want to try anything to save lives. It’s natural for physicians to want to at least give experiments a chance. But the public can’t expect to allow these desires full rein unless it is willing to pay much more — in premiums or taxes. It needs economic gatekeepers, whether or not it likes their decisions.
And when it comes to the business of gatekeeping, there are really only two models. One is private insurance, which works best when many insurers vie for the consumer’s business and are judged on how cost-effectively they meet the consumers’ needs. A national market for health insurance, which won’t happen until Congress ends the balkanized state regulation of insurance, would give the public a real choice among competitive firms.
The other model is a government-run system, in which insurers are either replaced by a monopoly public payer or they are reduced to contractors given allotments of a government-run risk pool.
In both models, the tough calls would still have to be made. The difference is that the first would give people a choice, and the second would not.
Insurance as Public Service
Posted by Doug Bandow“Consumer advocates”–who spend their time demanding that everyone toss money at anyone who “consumes” a product or service, are on the march, this time against insurers. Apparently they have just discovered the ill effects of Hurricane Andrew in 1992–reduced insurance coverage.
The storm stunned insurance companies and, after paying out more than $22 billion in claims in inflation-adjusted dollars, they began rewriting policies to protect themselves as much as homeowners. They also developed computer programs intended to limit payouts on claims.
As a result, American homeowners are having to make do with much less coverage at steadily rising prices. In Miami and other places along the coast, insurance prices have skyrocketed, deepening the national slowdown in home sales.
The insurers say they have had to take defensive measures to stay in business and pay claims as operating costs have climbed. “If you’re being overly generous in covering risks and you’re not taking in sufficient premium, it doesn’t make business sense,” said Richard Ward, the chief executive of Lloyd’s of London, a large insurer of homes and businesses in the United States.
This view of insurance horrifies “consumer advocates,” who apparently believe the job of insurers is to pay claims irrespective of merit. The Times adds:
The cutbacks in coverage, consumer advocates say, have contributed to the slow recovery of the Gulf Coast from Hurricane Katrina and will most likely hamper recovery from the recent wildfires in California.
“You have a different mentality at the insurance companies,” said Andrew Barile, a consultant who has spent his life in the industry. “They no longer worry about the public service aspect. They’re concentrating on the bottom line.”
Does it occur to anyone that perhaps the Gulf Coast is not the wisest place to encourage intensive development? Or fire-prone, semi-aird sections of California? And that if people want to live there, it makes sense for them to bear more of the risk?
Insurers should be held responsible for the policies that they write. But we shouldn’t expect them to subsidize risky development. They are, appropriately, private profit-making ventures, not public utilities.
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