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How the insurance companies will game the public option's vaunted health exchanges

Via RDemocrat in Hillbilly Report:

As if the ideas being floated in the Senate were not bad enough, it appears as if even the "exchange" that they have adopted as one of their main components of healthcare reform will have an "escape clause" for Insurance companies. ...

Senate Bill Could Offer Insurance Companies "Exchange" Loophole [WaPo]:

For example, the bill written by the Senate health committee would not require insurers operating outside the marketplace to provide standardized disclosures about what they cover. ....

Perhaps the sharpest dichotomy is that, under the health committee's proposal, certain standards governing the nature and extent of covered benefits would apply only to policies sold inside the exchanges.

Worse still, it appears that under this model the very people who will be hit the hardest are the very folks who desperately needed real reform to begin with:

It would not prohibit health plans outside the exchanges from using marketing practices that discourage the seriously ill from enrolling [that is, it enables "adverse selection], nor would it demand that they offer "a wide choice" of medical providers -- including "essential community providers . . . that serve predominantly low income, medically-underserved individuals," as the bill prescribes for insurers inside the exchanges.

All of those factors contribute to the possibility that insurers might offer cheaper, less comprehensive policies outside the exchanges and entice healthier people to leave the new markets [cherrypicking] That would leave the exchanges [and the taxpayers] responsible for sicker people who are more expensive to insure [while the insurance companies cream off the premiums from people who won't make claims. Yay!].

And the perks for big insurance do not even stop there. The Senate seem to be setting its own exchange up to fail by giving other breaks "outside the exchange":

Similarly, outside the exchange, the bill drafted by the Senate Finance Committee would not regulate the marketing of individual coverage, nor would it require that health plans be rated based on quality and price.

The Senate health committee would give plans operating outside the exchanges another break: Only those inside an exchange would have to pay a surcharge -- as much as 4 percent of premiums -- to defray the exchange's overhead costs. That could allow outside plans to undersell inside plans. In a written response to questions, the committee's Democratic staff said it would not work out that way because plans inside the exchanges would have to spend less on marketing [And how are the exchanges going to break into closed, oliopolistic markets without marketing?]

Which leads one to ask why even create these exchanges if Insurance companies are allowed to just go outside them?? Will the individual working American be able to operate "outside" the mandate if they still cannot find coverage they can afford?? As it turns out they may well end up buying a policy "outside the exchange" that does not comply with the terms of the individual mandate and end up paying for the policy, and penalties:

The secretary of Health and Human Services would be required to establish an "essential health benefits" package, but it would not be essential that policies outside the exchange include those benefits.

Outside the exchanges, people could buy policies that do not provide the basic coverage required to satisfy the terms of the individual mandate (the requirement that everyone have insurance coverage), thus exposing themselves to penalties.

Allowing companies to operate "outside" these exchanges is sheer lunacy. It is yet another attempt to force mandated insurance upon Americans without any protections whatsoever. I want a government plan with fair pricing as a Type 1 Diabetic. If I am left with others with pre-existing conditions in the "exchange" while low risk Americans go outside it, I will still not be able to afford to have coverage, nor pay the fine.

If garbage like this is the best a Democratic Senate can do then I sincerely believe it would be better for Progressives to oppose any bill that allows operating outside of the proposed "exchanges", and of course as I have said all along, oppose any bill that mandates coverage without a strong, viable public option.

The stakes are a lot higher than some want to think. If some garbage reform like this is passed and all comes crashing down then not only will Americans have still not had Universal Healthcare, but the concept will be put back several more generations because many Americans will believe that such a system is simply unattainable.

I believe that may have been the goal all along in the Senate and among many in the House who are completely bought and paid for.

Pretty much. The very, very best we can say of our "progressives" is that they got played.

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cwaltz's picture
Submitted by cwaltz on

to be rooting for Joe Lieberman. I haven't agreed with the man in years on just about anything. That being said as I told my conservative neighbor, I don't care what kills it, as long as what as being passed off as reform dies.......

stephhunter's picture
Submitted by stephhunter on

of the public option is that it's this new idea that they think will work, but it aren't sure. The truth is that it's an idea that's been working well for years and just needs expanded to cover more people.

DCblogger's picture
Submitted by DCblogger on

anyone PR spamming political blogs urgently needs to get out of the PR buisness.

DCblogger's picture
Submitted by DCblogger on

I was planning to link that story from the Hillbilly report, so glad to see that you go there first.