Quit Playing Games With My Health Care System?

In a completely predictable thoroughly shocking development, it appears that many Massachusetts residents are taking advantage of the state's strict health insurance regulations by buying insurance right before they need expensive procedures and then cancelling their policies soon after.

Thousands of consumers are gaming Massachusetts' 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses. In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state's largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company's data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

Other insurers could not produce such detailed information for short-term customers but said they have witnessed a similar pattern. And, they said, the phenomenon is likely to be repeated on a grander scale when the new national health care law begins requiring most people to have insurance in 2014, unless federal regulators craft regulations to avoid the pitfall.

In theory, the state requires everyone to carry health insurance. But it also allows individuals to pay a penalty in order to opt out. And it seems that's just what many residents are doing.

The problem is, it is less expensive for consumers—especially young and healthy people—to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round. This is also the case under the federal health care overhaul legislation signed by the president, insurers say.

The state's rate-hike-denying governor, Deval Patrick, is apparently attempting to address the problem with rules that restrict health insurance enrollment to twice a year. But that still leaves substantial opportunity for gaming: Anybody who needs expensive procedures more than a couple of times each year is likely to benefit from (and already have) ongoing health insurance. And let's say that someone used up their two enrollments, then found themselves diagnosed with a serious illness. Are we really supposed to believe that state insurance regulators will heartlessly allow those people to be denied access to coverage or care? Tough-luck cases, even for those who may have taken advantage of the system, are what the state's health reforms were designed to prevent.

Meanwhile, I suspect we can expect plenty of similar behavior nationwide once the ACA's insurance regulations kick in. And given that the individual mandate appears to be nearly unenforceable, such behavior may be even more widespread than in Massachusetts.

More on problems with the Massachusetts health care system here, here, and here.