Tuesday, May 09, 2006

3/29/2006 - The Uninsured

It's been a while since I have written a political post, but currently I have fodder. There are more than 40,000,000 uninsured Americans and Senator Enzi (WY-R) has a plan to fix that. This plan has a quality which I have come to associate with a certain segment of the Republican party. It combines a very good idea -- one to which few would object -- with a more controversial idea which is highly doctrinary.

Firs the good idea. A significant number of the uninsred are either employees of small companies or their dependents. Enzi would like to allow otherwise unrelated small employers to band together to buy insurance as a block. This has the potential to be a serious win-win. The block now has market power which allows them to seek coverage they might not otherwise be able to afford. This is also a win for the insurers, because they suddenly have a market that did not exist yesterday.

[Note #1 - Just because you build it, you have no guarantee that they will come. Associating unrelated companies creates a situation in which confusing and impsoing financial questions will arise. For example, how will premiums be allocated and paid? How will experience rating occur? Who will be liable for bad debts? Etc. On the other side of the equation, this kind of associated business is famous for being among the riskiest sort of thing to insure because you have no guarantee that the risk characteristics which you underwrote will remain constant when new members join the association.]

Now for the controversial part. The second plan to make it easier for these employers to buy insurance is to "streamline the regulation process," otherwise known as replacing state regulation with federal regulation.

[Note #2 - Opponents of the bill generally refer to this as allowing insurers and employers to "get around state regulation." That's not a fair characterization. There will still be regulation, but more on that later.]

One might ask the following question: who should be regulating insurance? When you go to your local agent to buy car insurance, it makes sense that this transaction might be regulated by your state. When Starbucks buys insurance for all of its 2,000,000 kiosks, it seems like the transaction ought to be governed by the Feds, as is all interstate commerce. The funny thing is that some court case, around 60 years ago, determined that insurance wasn't interstate commerce, under any circumstance, so it continues to be state regulated.

Now imagine an association that crosses state lines. You can imagine that it would be cumbersome for the insurer to produce a policy that will be compliant in each state for each insured. So it's not the craziest idea to suggest that inserting Federal regulation will increase the number of small employers who can afford to buy insurance.

So what's the problem? We know what state regulation does. We don't know what Federal regulation does, because it does not yet exist. The bill, as far as I can tell, asserts that there will be Federal regulation and directs congress to oversee the creation of such a thing.

[Note 3 - By now I have read a fair number of bills related to the insurance industry. This was the toughest by far. It goes through great lengths to specify who is affected by the bill which made it very difficult to read, alas]

So the risk is that Federal regulation may allow insurers to do things like, refuse to cover well-baby care, or charge more for people with genetic conditions. It may not, but it would be foolish to assume that none of these sorts of changes will be made, since they are precisely the sort of regulations that it make it cumbersome to produce policies today. For those who currently don't have insurance, I have to guess that poorly regulated insurance is better than no insurance. But the problem is that it is likely that some employers who currently buy insurance would join an association if it could reduce costs, even if it leads to some decrease in coverage.

So what should we policitically active Americans do?

Well, here's old' J.G.'s advice:

Call your senator or representative and tell him or her that you approve of the first part. There's no guarantee that it will improve the situation, but it seems a good bet. Tell your senator or rep that you disapprove of the second. It is unconscionable for Congress to expect insruance regulations to fall out of the sky and work. What's more, the first part can be passed without the second. This is essentially the environement that Fortune 500 employers face today (buying a single policy that is regulated by each of the 50 states and DC).

10,600 soapbox standing steps today. Shame, shame.

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