Why You Probably Can't Fire Your Health Insurance Provider

When Mitt Romney said yesterday that he likes "being able to fire people who provide services to me," he was talking primarily about health insurers. But there's a reason many people can't easily "fire" their health insurer: Their health insurance is attached to their job. About 45 percent of Americans get health insurance through their workplace, and they don't have many choices to pick from. Now, some employers offer a limited choice of plans and options, but even in those cases it's far from a wide-open marketplace. For the most part, employees are stuck with the health insurance their employer offers.

The reason is that unlike wages, employee health benefits aren't taxed, and they haven't been since World War II. It's essentially a subsidy on employer-purchased health insurance. That means that employers have an incentive to beef up benefits, which helps explain the long-term rise in health spending. It means that employees take what's offered rather than shop for their own insurance on the open market. And in an economy with a lot of job switching, it means that people don't stay with their health insurance plans for a lifetime.

The tax exclusion for employer sponsored benefits has shaped the American health care market for decades, locking people into job-based insurance, decimating the individual health insurance market, and making it difficult for people to pick a health insurance plan early in life and then stick with it. Romney frequently talks about wanting to make health insurance work more like a market, but neither he nor any of the other Republicans have proposed getting rid of the tax exclusion for employer-provided benefits. (Democratic Sen. Ron Wyden, who recently teamed with GOP Rep. Paul Ryan on a joint Medicare reform plan, proposed shifting away from employer-sponsored health insurance as part of The Healthy Americans Act in 2008.) There are obvious political reasons for avoiding the topic: Along with the home mortgage deduction, the tax break for job-based health insurance is among the most popular tax breaks. But it's responsible for a big part of the mess the American health care market is in, and yet no one really wants to touch it. 

Comments

[robc]

neither he nor any of the other Republicans have proposed getting rid of the tax exclusion for employer-provided benefits

none of them? Really?

[03]

"That means that employers have an incentive to beef up benefits, which helps explain the long-term rise in health spending."
_

it aint "beefing-up" to INCREASE deductables & co-pays as most plans have done.

[Peter Suderman]

That's a much more recent trend. Since WWII, the trend, overall, has been for employers to offer more generous benefits.

[Invisible Finger]

"recent" means the last 10-15 years. Who gives a flying fuck about the 70-year trend? It's the CURRENT TREND (last 10-20) years that matters.

By using the "since WWII" trend, you are actually counting a significant percentage of people that died over 20 years ago. It's pointless, unless the point is to obfuscate.

[DesigNate]

Increasing deductibles and co-pays is a move by the insurance company, not the employer.

[romulus augustus]

You are wrong.

[sarcasmic]

Often a large corporation is self-insured, and the job of the insurance company is to manage, not provide.

[Bones]

When I worked for Empire BCBS it was definitely both as they were one and the same.

[rho]

Also contributing to this is the fact that you can't purchase insurance across state lines. This tends to limit your choices of insurers to one or two big insurance companies with deep ties to the State's insurance commissioner.

[Alan Vanneman]

You can't do this because the insurance companies don't want you to be able to do this. Doctors, hospitals, and insurance companies all hate competition and lobby ceaselessly to prevent it. Corporate free speech? You're not against that, are you? I'm not, but it definitely can have a downside.

Also, when do want to fire your insurance company? When you discover that it doesn't cover a rare form of cancer that is now nesting in your left testicle. At which time, of course, it's too late to fire them, because no insurance company will take you. Freedom of contract, remember? In that case, you better hope you're Matt Welch, married to a French chick and eligible for free, high-quality care. (That's Matt talking, not me. I've nver been to France. America is good enough for me!)

[Colonel_Angus]

If they don't cover cancer in the testicle, surely they cover a horrible, knife-inflicted testicle injury?

[Alan Vanneman]

Try it and see.

[Invisible Finger]

You can't do this because the insurance companies don't want you to be able to do this.

Dead wrong.

You can't do it because of state regulations. Some of that was lobbying by doctors, et al, but most of it was Romney-style vote buying forcing insurance companies to cover pre-existing conditions, charge everyone the same rate, etc.

[Sy]

"Corporate free speech? You're not against that, are you? I'm not, but it definitely can have a downside."

free speech != regulatory capture

[Hazel Meade]

In individuals shopped for their own insurance there would be a lot less of this going on in the market.

It's only because the majority of the market is employer based that plans are written like this.

[R C Dean]

That means that employers have an incentive to beef up benefits,

One supposes, although much of the beefing of health benefits has come in the form of mandates.

[Peter Suderman]

This is also true, and a big part of the cost-inflation picture as well. But because the tax treatment effectively acts as a subsidy relative to pay, it ends up favoring greater benefits ove additional wages .

[Old Soldier]

Maybe I'm lucky, but my wife and I have a few choices every year at open-enrollment time. I have switched from providers I wasn't satisfied with.

[DesigNate]

You are lucky. My wife's company only has one provider and the firm I work for is so small, we don't even HAVE health insurance benefits.

[Tommy_Grand]

You are lucky. Neither my wife nor I have health insurance.

[Obama]

I've put an end to that, you free rider. You'll have insurance or go to jail, mutherfucker.

[Tommy_Grand]

Prisoners still get free healthcare, right?

[Steve Eldridge]

The media scrum over Mitt Romney's statement that he likes "being able to fire people" misses the larger ? and more important ? points about his healthcare policy.

Mr Romney is suggesting changes that have already been made.

Is it really, "repeal and replace" ? or just "Rename and Claim"?

http://thebottom99percent.com/.....ure-fired/

[Surly Chef]

I think it might be you that misses the point of this website.

[m]

Even if it were possible to fire your insurance company, there are serious impediments to being able to hire a replacement: companies won't take high-risk customers or customers with pre-existing conditions. The real problem is that your insurance company gets to fire you.

That practice is scheduled to become illegal in 2014 under the Affordable Care Act, but every Republican presidential candidate has pledged to repeal the ACA and once again allow insurance companies to discriminate based on risk.

[shrike]

And they get to collude like that with an anti-trust exemption. Medical insurance is as outside the free market as any product there is here.

[Bones]

It's also the most regulated. Funny that.

[Karl]

...again allow insurance companies to discriminate based on risk.

I have to wonder. Was that written un-ironically?

[#]

people seem to not get the whole notion of what insurance is. Apparently a company is suppossed to charge a homeowner the same price for a policy where the house is already on fire.

[There is no "we"]

No. You're mandated to buy insurance when you buy the house.

[Sy]

The analogy holds true for automobiles, valuables, houses, etc.

Pointing out a state-mandated law preventing the scenario is being pedantic at best.

[Kwanzaa Cake]

In the insurance industry they call "discriminating based on risk" underwriting.

[adam]

Insurance plans offered through employers (i.e., most of the private market) don't discriminate based on individualized risk, but only on the employer's group profile. In many states, it was illegal long before the ACA to discriminate based on risk in the individual market as well.

[m]

If state regulations are undermined by allowing interstate purchases, healthy consumers will flee to lower-cost policies from unregulated states, making those rules unsustainable.

[Bryan C]

Yes. And?

[#]

and now healthy customers in community rating and guarenteed insurance states, ie New York, already go without insurance and wait until they are sick. The result being a destroyed individual market where onyl the very sick have policies.

[m]

That's what the mandate is designed to solve.

[sarcasmic]

In neighboring NH my health insurance would cost a quarter or less than what I pay here in ME.
What's the difference?
Community rating and guaranteed issue.

[adam]

That may be. I was just pointing out that this supposedly beneficial feature of ACA is limited to a very very small slice of insurance market.

[Colonel_Angus]

So many conditions, for example diabetes, require simple treatments and predictable expenses. These things currently cost more than they should because people demand that insurance pays for it, and the costs are hidden from them. Why not budget for these things yourself, instead?

[Bones]

Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment.

Assessing risk is kind of a big deal.

[sarcasmic]

I would happily take what is spent on my health insulation plan and purchase a high deductible health insurance plan while putting the difference into an HSA.

But alas I do not have that option.

Oh well.

[DesigNate]

Ditto.

[#]

me three

[robc]

Im waiting to hear back from the insurance company. If all go well, thats exactly what I will be doing as of Jan 15.

Its good to be the boss.

[Tman]

We have two options to choose from at my employer, the PPO or the HSA plan.

My employer contributes approximately the same amount to either plan, the only real difference is the HSA gives you chance to spend less overall on medical costs provided I don't spend more than $1500 a year.

All of this being said, the premiums and deductibles for my plan have tripled in the last four years. My deductible was $600 three years ago. Now it's $1500. Every price increase is due to the fact that insurance companies are getting forced to cover more people they cannot afford to cover, so the costs get passed to me.

[Old Soldier]

There are lots of drivers of health insurance costs. The authors of the Obamacare legislation made sure to avoid addressing any of them.

[Hazel Meade]

THIS.
I can't think of a single thing in the legislation that seriously addresses drivers of health care costs.

The only thing is the usual liberal solution where every problem looks like a nail: Legislate a quota, fix pirces, and pretend incentives don't exist.

In particular the MLR's, intended as a cost cutting measure, are likely ot drive UP healthcare costs, since insurers can make more money if they spend more money under the MLR's. They are incentivized to blow cash on usless procedures so they'll be able to reduce the percentage that the administrative costs appear to consume.

The bill is rife with perverse incentives most of which are likely to drive up healthcare costs.

[adam]

How do you know why the insurance company is raising premiums, deductibles, etc.?

[l0b0t]

"How do you know why the insurance company is raising premiums, deductibles, etc.?"
P&L statements, quarterly shareholder's reports, and deductive reasoning.

[Matrix]

Wrong! It's greed! That's the only reason, ever, for any company to raise their prices! They only want to hurt working families and make the poor poorer while those fat cats line their pockets! That's what Democrats are always telling me.

[Bones]

Whoa whoa whoa. None of those appear to take anyone's feelings into account!

[adam]

I guess you do a lot more analysis on your insurance company that I do. Even with that information, I'm not sure how you can figure out why your premiums went up. My understanding is that premiums are usually highly tied to the factors like your employers' risk profile, state law, etc., rather than the insurer's financial performance. Can you explain your method?

[Tman]

Adam,

Do you have another reason why costs would go up so drastically in such a short period of time when they have been rising at a much lower and steadier rate for decades before?

Difficulty: It can't be "well, I guess everyone's healthcare just got more expensive all of the sudden".

[l0b0t]

It's called due diligence and if you are willing to contract with an entity without thoroughly vetting that entity then, IMO, you are doing yourself and your employees a tremendous disservice. Here in NYC, coverage mandates (mostly state but some federal and even city) are the primary drivers of increased premiums but the other items you mention also factor in; all of these are discussed in shareholder's reports and P&L statements. You need to realize that health insurance is the LEAST profitable sector of the insurance industry and one of the least profitable industries in the US; Health Insurance providers have margins around 2%-3%, putting them down with retail grocers. Every insurance company with which I have dealt has been most happy to explain in great detail every single increase or service change.

[Go back under your rock]

I guess you do a lot more analysis on your insurance company that I do.

Well that's fucking obvious. Judging by your posts, you've actually never done any analysis of anything ever.

[Tman]

Because for the four years prior to the new healthcare act my costs increased at a much lower rate. I don't think it's a coincidence that premiums and deductibles skyrocketed over the last three years while the same insurance companies were being forced to cover more people with pre-existing conditions that cost way more than that person will pay in.

It bugs the crap out of me that people don't seem to understand that insurance is a risk taking venture. Neither doctors nor hospitals nor insurance companies can exist long term if they just hand out free services regardless of your ability to pay for them. Insurance companies are hoping I don't get sick so they can profit off of me. I don't have a problem with this. I hope to minimize my healthcare costs by staying healthy, and using the tax-free HSA to pay for what I do use.

It's a sick joke that the best deal I can get from the government in regards to healthcare is to allow me to use my own money "pre-tax" to pay for services. Meanwhile I pay for everyone else s Medicare and Medicaid.

[adam]

ACA passed in March 2010. The first restrictions that affected private insurers went into effect Sept. 2010, and many of those were already required in many states. Not sure how that would have affected your rates in any years other than 2011 and 2012, at most.

[Tman]

So what else would it have been? And just because the ACA passed in 2010 doesn't mean that insurance companies weren't already building in the new cost structures prior to its approval.

[adam]

Insurace premiums have gone up quickly for certain periods, and then not so much in others. I don't know the reason, but ascribing this particular set of increases to the ACA based on correlation alone (and pretty bad correlation at that) seems pretty weak to me.

[Tman]

So you don't know the reason, yet ignore the most obvious answer as "pretty weak"?

How do you propose that insurance companies pay for services for pre-existing conditions wherein the person receiving the services is going to cost exponentially more than the insurance company will receive in terms of premiums and deductibles?

And for that matter, why in the world would anyone get health insurance when they can just wait until they're sick or get cancer and then get fully covered due to the new laws?

Don't you think that insurance companies are simply going to pass off this new cost to the already paying customers?

If not, what is your other reason for the unprecedented spike in insurance costs?

[T]

What's even more fucked up is that I can't fire my health insurance company, and I've changed jobs four times. All the companies I've worked for are self-insured and use Aetna to manage the benefits. Even if they wander off the reservation for a while, they all end up back with Aetna.

Aetan kind of sucks, BTW.

[sarcasmic]

aye

[Sy]

yes.it.does.

[James Anderson Merritt]

"Aetna? I'm screwed: I met ya."

[Colonel_Angus]

I have a preexisting condition. I am self insured. I can get anything I need in Mexico, or in Little Mexico.

[Barely Suppressed Rage]

Damn free market.

[Res Publica Americana]

Link.

[Bryan C]

"The tax exclusion for employer sponsored benefits has shaped the American health care market for decades, locking people into job-based insurance, decimating the individual health insurance market, and making it difficult for people to pick a health insurance plan early in life and then stick with it."

Ok. So extend the tax exclusion to all medical expenses and insurance costs. Regardless of who purchases them.

[#]

this would be the second best option - and it would be much more politically possible.

[#]

but the other compnent is you have to allow peopel to pool into groups other than their employer (which is now generally illegal). The employer pool allows risk to be shared and for econmies of scale to bring insurance costs down.

If we are all in the individual market we lose that. But we should be able to joina plan with out neghbors, extended family, church, community group, business associations and so forth. You would have a competitive insurance market anyway if that were allowed.

[Jordan]

That sort of suggestion will show you where the statists' true priorities lie. Tax Revenue > everything.

[Tulpa]

Ugh. Is there anyone stupider or more dishonest than a media "economics writer"?

After noting that Romney's comments weren't really that bad because that's how most markets are supposed to work, he screws the pooch:

But ? and it's a big but ? there's not much evidence that the market for health insurance resembles the market for landscapers or restaurants. Anybody who has gone out and bought insurance for themselves as individuals knows that health insurance is a market in which consumers have little choice and almost no power. It's not like buying cars, or shopping around for landscapers, where it's easy to find lots of people who want to come provide the service and are willing to compete on price. In the majority of states, there are at most a few expensive choices for individual policies.

In fact, many customers are afraid their insurance company will fire them. For eleven years, I owned my own insurance in two different states. There were very few choices available, prices rose every year, and customers walked around with a constant sense of anxiety. It was tough (before Obamacare, at least) to fire your insurer if your spouse was three months pregnant, or if your child had a chronic disease, or if you had a pre-existing condition ? because other companies weren't waiting in the wings to offer coverage. And if an insurer doesn't perform to your expectations ? if it refuses to cover a procedure, or uses fine print to get out of a commitment, or simply changes its policies ? consumers don't have any obvious remedies. Once you're locked in, and have established a primary care physician, a pediatrician, and whatever network of specialists you rely on, it is often a challenge to switch. There's no guarantee your doctors will accept a different insurer.

Interesting that an economics writer doesn't bother digging deeper to see WHY this market operates so differently. Perhaps because the govt-subsidized coupling of employment and health insurance make it more profitable to market to employers and other "deciders" for blocs of subscribers rather than to individuals?

I mean, look at the auto insurance market. How hyper-individualized is the marketing for that kind of insurance! Probably because they're allowed to refuse insurance to someone who's likely to cost them a lot of money and don't have to pay for dents already on your car when you get the policy.

[Tulpa]

link to article

[Kwanzaa Cake]

"And if an insurer doesn't perform to your expectations ? if it refuses to cover a procedure, or uses fine print to get out of a commitment, or simply changes its policies ? consumers don't have any obvious remedies."

_________________________

In other words you have no "obvious remedies" for an insurer refusing to pay for something it never agreed to pay for in the first place, according to the written fucking insurance policy. It kind of makes sense to have no "obvious remedies" when you haven't been wronged to begin with.

[There is no "we"]

Restatement (Second) Contracts Section 211 Paragraph (3)

The law. Learn some.

[Kwanzaa Cake]

Not to mention the assumption that child birth should be covered by health insurance. Talk about a perfect example of something that's been medicalized beyond recognition and now costs probably 100x what it would if people paid out of pocket. Removing shit like this -- not to mention every damn doctor visit, prescription drug, etc. -- from the realm of insurance would lower costs. But we've become brainwashed into thinking of health insurance as a limitless, pre-paid medical plan under which no procedure should ever cost more than about $100 out of pocket.

[robc]

The new HSA plan Im getting specifically doesnt cover maternity.

As a single male, not a big issue for me, but Im surprised its allowed to exist. Sometimes my state does some stuff right.

[PR]

Count me as one who doesn't understand how treating employer provided vs. individual health insurance differently under the tax code complies with equal protection.

[Russ 2000]

That means that employers have an incentive to beef up benefits, which helps explain the long-term rise in health spending. It means that employees take what's offered rather than shop for their own insurance on the open market.

I didn't shop because when I specifically asked during the late stages of the interview process if I would get a higher offer if I opted out of the insurance program, the answer was NO.

Besides, nearly everyone in the private sector (not counting officer-level and partner-level) isn't getting as much of a "benefit" as claimed since they have to actually pay part of the premium.

[Hazel Meade]

Employers LIKE job lock. Why would they want to give you the freedom to leave their employ without having to worry about health insurance?

[Hazel Meade]

It means that employees take what's offered rather than shop for their own insurance on the open market.

Which means most insurers can get away with inserting a clause that says they can drop the employee as soon as he leaves the job (minus COBRA). Even if he leaves because he's too sick to work.

If everyone purchased insurance on the individual marketthe insurance company could not simply get out of the insurance contract whenever you switch jobs. Forcing you to get into a new insurance contract at a higher price if you have accrued any health problems. This is a really stupid way for insurance to work, and it doesn't work this way in any other market, because in every other insurance market the individual is the one making the decisions.

[Hazel Meade]

Also, employers beef up benefits superficially. They offer a lot to healthy people that won't use the coverage - cheap co-pays and such, but god forbid you actually come down with an illness that makes you unable to work. That's when you find out where they cut costs.

[vector56]

Me and my people (liberals) have been battling you guys for as long as I have been alive. At some point sane people might look for a compromise? I get it, you "free men" don't want to pay for our Fat, lazy brown asses to sit around and "suckle the government tit". The fact that the Military Industrial complex drains that mammary gland dry does not seem to bother you guys as much? That being said, their may be a third way: Cooperatives like the Mondragon Corporation.

http://en.wikipedia.org/wiki/Mondragon_Corporation

It functions in the free market just as if it were any other corporation, but also delivers to the members on the inside the benefits of a cooperative. Heath care Cooperatives would operate the same way; neither would take a dime of your tax dollars. Totally member supported.

[Hazel Meade]

Libertarians have no problem with cooperatives, as long as they can survive without government subsidies. More power to you.