
I, Health Insurer - cgopalan
http://charlespetzold.com/blog/2013/12/I-Health-Insurer.html
======
twoodfin
It's important to note that New York is one of the states from which ACA looks
better than most:

 _New York 's announcement this week that insurance premiums would drop 50%
next year for individuals buying their own coverage in new online marketplaces
made good talking points for proponents of the Affordable Care Act, but
consumers in most states are unlikely to see similar savings.

That's because only a handful have New York's rules, which — like the federal
law — bar insurers from rejecting people with health problems. Unlike the
federal law, however, New York does not require consumers to purchase
coverage, so over time, mainly older, sicker people, have purchased coverage.
That drove up prices and discouraged younger, healthier people from buying
policies, as did a requirement that insurers charge the same rates regardless
of age or health status.

As a result, premium prices listed for individuals often top $1,000 a month
for some New Yorkers buying their own coverage, making the state's rates among
most expensive in the nation._

[http://www.usatoday.com/story/news/politics/2013/07/20/kaise...](http://www.usatoday.com/story/news/politics/2013/07/20/kaiser-
new-york-insurance-premiums/2570873/)

And the old New York model of a lousy risk pool with unaffordable premiums is
where ACA is potentially headed if the individual mandate "tax" isn't given
much teeth.

~~~
bradleyjg
I've followed NY insurance premiums in the individual and small business
market carefully for the last several years, and it is very hard for me to see
how anyone came up with the 50% drop statistic. The linked article doesn't
really help unfortunately.

The only thing I can think of is that they are comparing apples to oranges.
The standardized plans available in the exchange are somewhat different from
almost all plans that were available last year in the private market. In
particular, and surprising to many not paying close attention, none of the
exchange plans downstate have any out-of-network coverage at all. Not even the
usual and customary rate reimbursement. So while it's true that you could
easily have paid $1000/month or more for an individual health care plan last
year (and remember NY has even stricter community ratings than ACA, everyone
pays the same) it isn't true that the _same_ plan is $500/month on the
exchange.

~~~
humanrebar
I'm not an expert, but I hear that ACA platinum plans cover 90% of costs,
which is a lower coverage level than some pre-ACA plans.

~~~
pbreit
Well, the ACA stipulates 60/70/80/90% for bronze/silver/gold platinum plans.
90% is pretty high but I'm sure there are "some pre-ACA plans" that pay more.

In general, it's preferable for the consumer to "have some skin the game" so
that they might negotiate or increase discretion.

~~~
humanrebar
The difference between fixed-size copays and 10% of expenses for the top 0.5%
of costliest patients is probably a huge number, so the premiums for those
patients would logically decrease though their aggregate out-of-pocket
expenses would go up. The point is that it will be a future cost for some
people who are currently happy about their lowered premiums.

But I actually agree that consumers should have more skin in the game. My
issue is that the statement, "My premiums are lowered!" does not imply that,
"The ACA saved me money!" It's more complex than that, and it's plausible that
many of the people with lowered premiums are getting a worse deal here.

------
WalterBright
Regarding health care being a failure of the free market, I recommend this
(rather long) article for some perspective:

[http://www.theatlantic.com/magazine/archive/2009/09/how-
amer...](http://www.theatlantic.com/magazine/archive/2009/09/how-american-
health-care-killed-my-father/307617/?single_page=true)

~~~
humanrebar
One of the biggest disappointments for me about the ACA was that it didn't
address one of the most obvious problems with the American healthcare system
-- the significant discount for employer-provided healthcare.

~~~
IbJacked
Is employer-provided healthcare discounted, or merely subsidized by the
employer (or both)? The plan through my employer seemed inexpensive, but they
were paying a significant portion of the premium.

~~~
bradleyjg
It depends on exactly what you mean by discounted, but in a very real way the
answer is both.

First there's the obvious, and quite significant, tax benefits to employer
provided healthcare over private purchased healthcare. In the former case,
neither the employer nor the employee pay payroll taxes on their contributions
and the employee portion is also exempted from income tax (the employer also
doesn't pay income tax on its contribution, but it wouldn't for cash salary
either).

Second, more subtly, the group market faces much more favorable underwriting
than the individual market. Even if non-employer group health insurance were
allowed (which it isn't anymore under ACA) such groups are always subject to
self-selection bias and thus are unlikely to be underwritten as as favorably.
However, this point is somewhat tricky because there are both cross-subsidies
and gross economic surpluses, which can be hard to untangle.

------
parennoob
Even _after_ you are fully insured, say with an 80-20 policy, healthcare costs
in the US can be high enough to bankrupt someone, as many people in this
recent thread reported
([http://www.reddit.com/r/pics/comments/1tugnm/i_never_truly_u...](http://www.reddit.com/r/pics/comments/1tugnm/i_never_truly_understood_how_much_healthcare_in/))

This scared me like anything when I first saw it. Any steps that the HN crowd
can suggest to pre-empt such costs (I know that there might be very little you
can do, but figured every little helps.)

~~~
pbreit
Bankruptcy was specifically created to handle such situations.

~~~
swalkergibson
Ya, because I should go bankrupt due to a drunk driver slamming into me some
random afternoon.

~~~
pbreit
That's extremely rare (in fact, I couldn't find a single instance) and what
drivers insurance is intended to alleviate. It would take a lack of insurance
by the driver (and you, if you were driving), lack of medical insurance, a
particularly expensive-to-treat injury, lack of savings and lack of community
support before we get to bankruptcy.

~~~
swalkergibson
How could you possibly know what the status of any given motor vehicle
accident victim's insurance or financial state is at the point of impact? I
suppose I can break it down further. What if I were walking across the street
and hit by an uninsured motorist (an illegal immigrant, perhaps)? That is a
catastrophic injury that could certainly result in a long-term hospital stay
with potentially multiple life-saving surgeries required (head, neck, spine),
plus physical therapy and likely long-term care needed to manage the
aftermath. Tell me again, why is it that the act of crossing the street should
ruin me physically _and_ financially?

~~~
pbreit
It (probably) shouldn't. But like I said, it's extremely rare (to the point
where I'm not even sure it actually happens). And such an extreme edge case
that it shouldn't debilitate the whole rest of the system.

~~~
swalkergibson
Then disregard that example and simply substitute it for getting sick with
cancer or something if it seems too far-fetched to you, it does not seem that
way to me.

Regardless, medical bills are the leading cause of bankruptcy in the United
States [1]. How can we live in a society where anyone but the wealthiest
individuals could be struck down financially at any moment? How much
entrepreneurship is completely stifled by the need to stay at a particular job
due to proper healthcare coverage? I would venture to guess the answer is
quite a lot.

[1] [http://www.cnbc.com/id/100840148](http://www.cnbc.com/id/100840148)

------
a3n
> With healthcare, the free market has clearly failed. The United States now
> has the highest per capita healthcare costs in the world, but not a
> commensurate level of health, ...

Because you aren't buying health. You're buying health insurance. It may come
with free assumptions, but those are generally worthless, and they are not
health either.

If you want a thing, you should buy that thing. Health insurance is not
health, and absolutely everyone who buys health insurance gets exactly what
they pay for: insurance. Whether that indirectly results in health depends on
the individual policy.

~~~
jjoonathan
> Health insurance is not health, and absolutely everyone who buys health
> insurance gets exactly what they pay for: insurance.

Part of his point is that people often pay for health "insurance" and don't
receive the insurance they thought they were paying for (their "insurance"
provider drops them the moment they get sick).

You can blame people for not being able to understand the plans they are
buying (dozens of pages of dense, industry-specific terminology) but you might
as well blame the sky for being blue.

One of the things the ACA does is make it easy to compare plans so that
insurance companies actually have to compete against one another.

> If you want a thing, you should buy that thing.

There are two problems health insurance solves that make direct purchase of
health care a complete non-starter.

* 1: Most people have insufficient cappitalization to accept the heavily skewed risk profile.

* 2: If you purchase emergency care at the point of provision, you are either forced to accept the terms "offered" by an effective monopoly (if you are conscious) or you are forced to pay whatever the "care" provider wants after the fact (if you are not conscious).

~~~
a3n
> You can blame people for not being able to understand the plans they are
> buying

Hmm, didn't mean to sound like I'm blaming people. I'm mostly just raging
impotently at the fact that for most people the only meaningful way to get at
health care is through health insurance, whose motivation is to not give it to
you, good and hard.

Given the costs and accessibility of modern medicine, I recognize that it
would also be difficult for most people to pay directly. I would prefer,
though, that we did that through a single payer (government) arrangement, the
same way we pay for national defense. (The difference being, of course, that
national defense is required by the Constitution, and health is not.)

------
humanrebar
I was going to write a reasoned rebuttal to this post, but by the time I got
to the bottom, it read like so much astroturf.

~~~
pbreit
Please do rebut. Based on the AstroTurf comment, hard to think you will be
convincing at all.

~~~
humanrebar
A quick example is the obvious contradiction in the following quotes from the
blog:

> With healthcare, the free market has clearly failed.

> Does this even qualify as a “free market”? I don’t think so.

Later the post pulls out some talking points about Mitt Romney and some
conservative think tanks, which are definitely relevant if you are trying to
score political points instead of discussing healthcare policy.

The closing section that glosses over the big problems with centralized
planning systems (broken promises with no legal recourse, implementation
issues caused by politics interfering with sound decision making) and finishes
with enthusiastic exclamation points:

> Now this is what a free market looks like!

> Wow!

> This is a time to be proud.

It seems like political cheerleading to me, but maybe I'm missing something.

To summarize this piece, it seems like this guy felt guilty for working at an
insurance company, but now he feels better because the he politically supports
the ACA, which he feels is going pretty well. Is there an apolitical thesis
for this blog post that I'm missing? Why was it written if not to express a
political position?

EDIT: The Romney and think tank thing is clearly an association fallacy. I
don't want to get into pointless political bickering, which is why I was
hesitant to comment in the first place. I brought up that part of the article
because it only serves this sort of tangent instead of furthering the (IMO
much more interesting) discussion of healthcare costs, policy, and incentives.

~~~
jarrett
You said you were trying to offer a rebuttal. So I aim to show that the
counterarguments presented do not rebut the author's main point.

His main point is, roughly: 1) a variety of factors, including fear and
antiselection, made for a broken health insurance market prior to the ACA, and
2) the ACA has substantially mitigated some of those problems.

> A quick example is the obvious contradiction in the following quotes from
> the blog:

The author is using the term in subtly different ways in different contexts.
Not the best rhetoric, I admit. Yet, does his failure to define or
consistently use the term "free market" undermine his thesis? I would venture
not, but I'd be open to a counterargument. Otherwise this objection seems like
just so much caviling.

> Later the post pulls out some talking points about Mitt Romney and some
> conservative think tanks, which are definitely relevant if you are trying to
> score political points instead of discussing healthcare policy.

The Heritage Foundation and Mitt Romney both played significant roles in the
history of healthcare in the US. Historical background is often very useful in
a policy essay. That appears to be the reason the author mentioned them.
You're free to disagree with the author's characterization of their roles. But
you didn't.

> The closing section that glosses over the big problems with centralized
> planning systems (broken promises with no legal recourse, implementation
> issues caused by politics interfering with sound decision making) and
> finishes with enthusiastic exclamation points:

"Broken promises with no legal recourse" would be a pretty good
characterization of pre-ACA health insurance, by the author's account. Why
would you expect the ACA to be any worse in this regard?

My experience has been that private companies very often fall victim to
"implementation issues caused by politics interfering with sound decision
making." I've seen symptoms of that malady in every private health insurance
company with which I've dealt. So, again, what evidence is there that this
problem will be more acute under the ACA?

> It seems like political cheerleading to me, but maybe I'm missing something.

Yes, I believe you did. The article included much substantive information
about the inner workings of health insurance companies and the economic forces
that drive their behaviors. Indeed, there is much more of this sort of thing
than there is political cheerleading, the latter being confined to the final
section.

The presence of _some_ political cheerleading does not indicate the _absence_
of a valid argument. The fact that the author feels strongly about a certain
political issue cannot be used to rebut his argument about that issue.

> To summarize this piece, it seems like this guy felt guilty for working at
> an insurance company, but now he feels better because the he politically
> supports the ACA, which he feels is going pretty well. Is there an
> apolitical thesis for this blog post that I'm missing? Why was it written if
> not to express a political position?

The author offers technical arguments concerning a matter of public policy. He
then states a political opinion which follows logically from those technical
arguments. There's nothing invalid about this pattern of reasoning or
argumentation.

~~~
humanrebar
> Yet, does his failure to define or consistently use the term "free market"
> undermine his thesis?

Yes, since one of his main points was that the free market failed in this
case. Even allowing that he imprecisely described a distorted market pre-ACA,
he clearly prefers a differently-distorted market post-ACA without much
justification about why this time it will work out in the end. Anecdotal
evidence about quoted premiums (not even considering out-of-pocket expenses
going forward) is not convincing.

> Historical background is often very useful in a policy essay.

He cherry-picks his historical background then. A better background would
discuss the employer-provided healthcare mess, the financial insolvency and
increasing costs for Medicare and Medicaid, and the perverse incentives of
related programs like Social Security Disability. Even if going into the
Republican/Democrat history, it's a limited view. He left out more piecemeal
initiatives like Medicare Part D, health insurance co-ops, and subsidized
high-risk pools.

So I disagree that the limited historical background the author provides is
value-added. On the contrary, that talking point detracts from his thesis.

> Broken promises with no legal recourse" would be a pretty good
> characterization of pre-ACA health insurance, by the author's account. Why
> would you expect the ACA to be any worse in this regard?

You can sue an insurance company if it advertises one thing and then changes
the deal after you sign up. People, the author included, are not keeping their
plans and doctors. I was pointing out that this bait-and-switch will happen in
either system, but companies can be held civilly liable for making bad
promises.

> So, again, what evidence is there that this problem will be more acute under
> the ACA?

What evidence is there that it will be less acute? To me the convincing prima
facia case is that ACA will at least be more of the same in this regard.

> The fact that the author feels strongly about a certain political issue
> cannot be used to rebut his argument about that issue.

I think you're missing my point. I actually thought the first half of the
piece was interesting. But by the time I reached the end of the piece, it
seemed to me that the beginning of the piece was just a roundabout setup to
his final point about how ACA is great and cathartic to the author.

> The author offers technical arguments concerning a matter of public policy.

Some. But he also offer personal anecdotes about how he felt guilty that a
family friend couldn't get insurance. And many of his arguments are appeals to
fairness more than they are descriptions of incentives and outcomes.

> He then states a political opinion which follows logically from those
> technical arguments.

That's the thing. It's a political opinion, so it doesn't follow logically.
Even his logic is suspect. There are matters of fact that aren't considered
(employer-provided healthcare, healthcare costs for state governments,
healthcare subsidies, price regulations, policies changing between states).
There are arguments that aren't, strictly speaking, logical (association
fallacies, false dichotomies, straw men).

A logical conclusion would be more modest, technical, and have fewer
exclamation points.

~~~
jjoonathan
> he clearly prefers a differently-distorted market post-ACA without much
> justification about why this time it will work out in the end.

He very precisely describes how parts of the ACA address different modes of
market failure he observed. The existing-condition regulations prevent the
bandwagon effect and corporate freeloading (only covering healthy people). The
individual mandate prevents individual freeloading (retaining fallback
benefits without paying into the system).

See, health care markets have a long history of failing (or at the very least
failing to deliver value in comparison to their single-payer counterparts). We
already know "undistorted" markets where care providers sell directly to
patients don't work for emergency services (you have consent issues with
unconscious people AND the nearest hospital is always an effective monopoly
and can price gouge accordingly). The "undistorted" market already failed to
deliver value. Health insurance companies tried to fix the problem but it
turned out that deceiving customers into buying shit plans was a better
business strategy than legitimate innovation. Again, the "undistorted" market
already failed to deliver value.

The US strategy amounts to trying different permutations of regulations until
we find one that allows the free-market to work. So far, it has been a whack-
a-mole experiment that costs ~$1.5T and >40,000 lives per year (in comparison
to single-payer systems). When does it end? Do you really want to pay 2x for
care today in order to gamble on the possibility that eventually the correct
combination of regulations will be discovered that creates an efficient free-
market system?

> companies can be held civilly liable for making bad promises.

Then why were they getting away with it?

His observations of what the companies were getting away with contradict your
claim that the courts were able to keep them in check. The ACA attempts to
keep them in check by making it harder for them to dupe users in the first
place (that's what the standardized silver/gold/platinum plans are all about).

> it seemed to me that the beginning of the piece was just a roundabout setup
> to his final point about how ACA is great

He uses evidence to support his thesis. How does that detract from his
argument?

> [In addition to technical arguments,] he also offer personal anecdotes

Anecdotal evidence doesn't invalidate his technical arguments. Also, the
support it provides his arguments can only be ignored in the face of _better_
evidence. Do you have any?

> many of his arguments are appeals to fairness more than they are
> descriptions of incentives and outcomes.

Outcomes are judged by fairness. The "technical arguments" you just referred
to describe incentives. The hell are you complaining about?

> It's a political opinion, so it doesn't follow logically.

One of the funny things about logic is that it knows its own limits (Godel
Incompleteness). Unless you have a strict logical rebuttal, why should I
discard his argument for yours (which, as far as I can tell, is based on faith
rather than observations, experience, anecdotes, and analysis)?

> A logical conclusion would be more modest, technical, and have fewer
> exclamation points.

A logical conclusion that suffices to guide policy decisions doesn't exist. We
must get over ourselves and make do with the best that we have.

Look, if you're actually interested in scholarly analysis of this kind of
thing, here's a good starting place: [http://www.pnhp.org/facts/single-payer-
resources](http://www.pnhp.org/facts/single-payer-resources)

I haven't found a paper-aggregation of comparable quality for the "other side"
of the argument (I'm familiar with the 1989 Heritage Foundation memo, not much
else). If you could reciprocate with such an aggregation, I'd be much obliged.

------
jonaldomo
I couldn't agree more with the statement: 'Insurance is fraught with
paradoxes.'

------
sehugg
_One of the actuaries where I worked wrote a paper or gave a talk somewhere
that I found very thought-provoking. In the future, he said, healthcare costs
might rise to be as high as 50% or even 90% of GDP, and there would be nothing
intrinsically wrong with that. It would simply reflect our evolving priorities
of valuing good health more than anything else in our lives._

If this is a real person giving a real talk that was taken seriously by other
professionals, then that is terrifying (it's already ~20% GDP and climbing).

~~~
ojbyrne
Why necessarily? If GDP grew overnight by 10x, and 90% of that went to health
care, and as a result (hypothetically) we lived to an average life span of
300, would that not be a positive result?

~~~
humanrebar
Because then the entire country would essentially be working to stay alive and
healthy instead of towards loftier goals.

------
pbreit
Single-payer is inappropriate for the USA. Many other countries have made non-
single-payer systems work well. Otherwise, a refreshing article.

Our current system is the most free-market in the developed world and near the
bottom in most categories (most expensive with worst outcomes).

~~~
aaronbrethorst
> Single-payer is inappropriate for the USA.

Citation needed.

~~~
sirkneeland
Well the most efficiently functioning welfare states are ones that serve small
and homogeneous populations. The United States is neither small nor
homogeneous (and it is incredibly geographically dispersed for extra kicks).

The largest country in Europe (Germany) has a population that is less than 1/3
the that of the United States, and more homogeneous than every US state (let
alone all of them combined) with the possible exception of Vermont.

And I bet even within Europe you would find the best and most efficient
healthcare, education and other public services come from the smaller
countries. Finland and Norway likely to better than Germany and France.

Given how many of us deal with challenges of "scaling up" tech, processes and
organizations as part of our jobs, I'm surprised more people don't really seem
to consider the practical limitations of scale for projects of government.

~~~
bryanlarsen
Canada is larger, more geographically dispersed and less homogeneous than the
United States, and yet manages to have a functioning single-payer medical
system.

~~~
pbreit
Larger by land mass, perhaps, but much smaller by most other measures. And
substantially more homogenous (not sure how you're getting a different
impression). "Functioning" is maybe a decent description and a pretty low
target.

~~~
wmoxam
> And substantially more homogenous (not sure how you're getting a different
> impression)

Not sure what you define as 'homogenous' but over 20% of Canada's population
is foreign born, and less than 57% are english speaking by mother tongue.

~~~
pbreit
I would not consider 80% white Western European to be as diverse as the US. I
don't think the Canadian French thing contributes a whole lot to diversity.

------
ap22213
So many health care posts and rebuttals these days. Surely a highly important
issue for us collectively. But, also so political, and as a side-effect so
prone to defensive stances.

As hackers, perhaps a good approach to these types of arguments, would be to
throw out far-out ideas, if even just to push the collective pointer one way
or another.

So here's my far out idea:

Maybe, instead of a single payer system, the gov't should pay each family a
penalty fee (scaled exponentially) for each each family member that precedes
the average, current life expectancy target (or even acquires a terminal
illness). This will shift focus to the very sick or those at risk of being
very sick. And, it would thereby eliminate any particular diseases or genetic
limitations that push down the life expectancy. Of course, the unintended
consequences would be that some family members would start killing off other
family members for benefit. But, this would just highlight psychopaths, and
thus be a win-win long run.

------
ed_blackburn
I am UK citizen and see the NHS (universal, nationalised, funded from
taxation) morphing to accommodate more market led enterprise.

I often wonder how other nations health systems work. The American system is
often ridiculed anedotally in the UK as an unfair example.

------
wehadfun
not related to the article, but I love the simplicity of the site. No Facebook
plugins, twitter BS, huge images, ...

Even the comment section didn't have a any crap. beautiful.

------
dllthomas
"If a misstatement is discovered, the policy would be declared null and void,
and _any premiums paid would be refunded._ "

... not in my experience.

------
gcb0
everyone with half a brain can see the system is awful at healing people...
But everyone attributes it to incompetence while forgetting that the US,
besides nazi Germany, was the only country to have eugenics into law.

