US Health Care Reform, the Insurance Industry, and the European Model

Overview – Health and Insurance
In a review about the US health Care reform as it relates to the Insurance Industry Dr. John Hammond, Ph.D., professor emeritus at the School of Medicine, University of North Carolina-Chapel Hill noted: "In the first half of the 20th century, most health insurance was provided to those who could afford it by state-based, nonprofit Blue Cross/Blue Shield plans. These companies based premiums on a community rating system. The agency took the costs of its enrollees,added a reasonable overhead contribution and divided that by the number of enrollees to calculate the premium. Under this system, the young, healthy enrollees subsidized the cost of the older, more chronically ill enrollees.

At first, the for-profit insurance companies considered health insurance too risky. But by 1955, these companies figured out how to manage the risks and entered the health insurance market. To deal with adverse risk, they developed the concept of pre-existing conditions to exclude the sick from insurance coverage and applied liability-style risk rating to health insurance premiums, which reduced the premiums for the young while making insurance unaffordable for the older population. Thus, risk rating of premiums effectively ended the subsidy of older people by younger people.

The risk-based premium approach is appropriate for auto liability insurance, because people are responsible for their own driving records. But risk rating is totally inappropriate for human beings who cannot control their genetic inheritance, which plays a large role in their overall health. However, risk rating and pre-existing condition exclusions did protect the for-profit health insurance companies from the adverse risk of health insurance by denying access to insurance to those who need it most.

The introduction of risk-based premiums immediately caused major problems for the nonprofit BCBS plans. If they continued the community rating system, they would end up with all the sick (adverse selected population), and all the young healthy enrollees would flock to the cheaper rates of the forprofit risk-based premium system. This forced the nonprofit BCBSs to go to risk-based premiums and act like the for-profits. Today, for example, there is little difference between BCBS of the state of North Carolina and CIGNA.

Another major problem is the total number of health insurance plans offered by the health insurance industry and the lack of any real regulation to ensure that they adequately cover the needs of the enrollees. The huge numbers of plans challenge doctors and hospitals to figure out what services are covered by what plans. Such choice drives the administrative costs for both the insurers and the providers higher than any other health insurance system in the world. It is profitable for the manufacturers of large mainframe computers and billing software vendors, but it adds billions to the administrative costs of the health-care system, and still hospitals cannot get the patients bills straight.

The U.S. health-care system also has the greatest number of administrative personnel of any country in the world. It is no wonder that our per-capita costs are 1.6 times other countries, even though millions have no health insurance. If these administrative costs could be reduced to the European or Canadian level, substantial money would become available to cover a part of the insurance costs of the 52 million to 55 million uninsured Americans for whom health care is difficult or impossible to get.

It is time to acknowledge that there are absolutely no market solutions for the chronically and mentally ill in this US for-profit health insurance system. Boards of directors and executives of for-profit health insurance corporations aim to maximize the income of the corporations for investors. If for-profit and not-for-profit insurance companies with their plethora of plans are kept alive, it will be impossible to control costs, free the billions of dollars that today go to administrative costs and make these funds available for patient care.

All the existing health insurance companies must be eliminated. There certainly is a need for a singlepayer system that covers every person in the country for medical, mental and dental health care. Its cost should be funded by income taxes paid by each adult/family in the US. It should provide universal access to care no matter where you are in the country, with equal quality and quantity and without regard to your wealth or income. It is time to face the reality that affordability and cost control are possible only with a single-payer system.

Proponents for health care reform say the current insurance system is both morally and financially bankrupt and cannot be sustained. It may not be possible to achieve all the necessary reforms quickly, but the direction the US needs to take is clear.”

Is the US Insurance Industry Opposing Health Care Reform?
The Indystar newspaper reports that the Insurance Industry in America want people to believe that a public insurance option will result in poorer quality of health care. They want to take credit for the high quality of health care available in the United States. But this is like Geico taking credit for the Cadillac. The article notes that Insurance companies don't train our doctors, nurses and other healthcare professionals to be the best in the world; and they don't invent medical technologies or develop drugs. The only thing the private insurance industry contributes to the US health care is its high costs — and these costs make access difficult for most and impossible for many. And unfortunately health care will get increasingly more expensive for all of Americans unless Congress passes a bill with a public option. Those in favor of a public option say it would increase competition and keep the private insurance companies honest. They also are of the opinion that the public option is the reason why the Insurance Industry in America wants to scare people away from health-care reform.

On this same issue the Hickory Record writes: UPS and FedEx are doing well competing against the U.S. Postal Service, but insurance companies can't stand the idea of doing the same. What are they afraid of? They seem to be making the exact same arguments today against a public option for health care financing they made against the Medicare program 50 years ago.

What is the US insurance industry's argument against all these accusations?
They say that even though health insurers are facing renewed pressure from President Barack Obama and the Democrats, many in the insurance industry support the president's effort to overhaul the U.S. health-care system.

In support of the Insurance Industry The Wall Street Journal reported : “the US insurance industry conceded months ago to key demands which Mr. Obama has only just begun promoting. And that insurers still have much to gain from an overhaul of the system because they could get millions of new customers.”

“In fact, insurers have already agreed to stop denying coverage to the sick and charging people higher premiums because of their gender or health status, as long as lawmakers pass a requirement that most Americans have to carry health insurance. Such a requirement is part of most of the bills making their way through Congress at the moment.

"We really have enormous agreement about the insurance reforms," said Ron Williams, chief executive of Aetna Inc., one of the nation's largest carriers. Mr. Williams has met with Mr. Obama privately and in small groups six times, the company said, and the CEO has personally pushed for such changes as far back as 2005.

"Consumers don't necessarily understand how the industry has changed and the commitments we've made to eliminate some of the challenges," Mr. Williams said.

Insurance-industry executives are privately complaining that the Obama administration's rhetoric is eroding the consensus they have spent months trying to build with lawmakers, one industry official said. Another point of frustration is that the Senate is moving toward taxing insurers on particularly generous health plans to help pay for expanding coverage of the uninsured.

If health legislation succeeds, the industry would likely get a fresh batch of new customers. In particular, many young and healthy people who currently forgo coverage would be forced to sign up and pay premiums that would offset the cost of insuring older Americans.

Insurers have focused their opposition on some Democrats' push to create a new public healthinsurance plan -- an entity they fear will drive private insurers out of business. House versions of the legislation include a public plan, but the Senate Finance Committee is expected to opt for nonprofit cooperatives that would pose less of a threat to private insurers.”

Public Perception and Reality
Victor Levin who is a professor of neuro-oncology at The University of Texas M. D. Anderson Cancer Center writes in Chron.com: "The US problem does not rest only with insurance and pharmaceutical companies. Many patients on Medicare and Medicaid who live in large American cities find that few physicians are available to meet their needs because many physicians will no longer accept patients covered by government programs. Doctors say they lose money on each patient covered by these programs, and I believe this is true. As a consequence, few young physicians now choose primary care or geriatric medicine. This does not bode well for our aging population and accentuates the need for payment reforms to enhance provider participation in government-sponsored programs.

Some fundamental changes in insurance would have a large impact on the non-insured or poorly insured in the US, especially those at risk of losing their homes and savings as a result of catastrophic illness. Levin also writes he believes that change can be accomplished fairly and in a relatively non-painful and cost-effective way and makes the following suggestions:

• Set insurance rates based on 10-year to 20-year age categories and not on prior sickness so that insurers cannot limit coverage to one or a few categories of low-risk patients. If rates are excessive for an age range, it also might be necessary to couple allowable tax reductions to age.

• Expect insurers to provide coverage for all patients, regardless of age or prior disease within at least one state or, better yet, in a multi-state region. Thus, one would expect that an insurer might cover upward of 10 million people and provide cost-effective and profitable products.

• Establish a three-tiered system of cost and coverage that is based on elements of coverage, not prior sickness. Transparency of marketing and sales of these products is essential to ensure consumers are clearly aware of their selections and purchases. Therefore, plans should make clear exactly what is covered and what is not covered for each tier of coverage. Allow switching of coverage tiers at the time of change of age category and probably at some predetermined time after policy activation.

• Make all insurance transportable from job to job, city to city and state to state. If insured individuals are happy with limits and cost of their coverage, they will not have to worry about insurance cost increase if they change jobs or move.

• Ensure that everyone within a tier and age bracket pays the same premium whether unemployed, selfemployed or employed by a large company.

• Do away with state oversight of health insurance by establishing clear federal guidelines. If insurance companies want to raise rates for everyone in an age bracket, they will need to present their costs and reimbursement experience to a federal agency that will approve any increase required to maintain profitability.

• Define necessary and expected preventive procedures and tests in order to prevent a higher cost for disease treatment and possibly tie the cost of a particular insurance tier to the completion of such testing. Incentives to maintain good health and promote healthier lifestyles are essential to containment of spiraling health care costs.

• Develop transparent rules for experimental treatments and their reimbursement at a national level. Insurance companies should not be required to subsidize clinical research; however, health plans should provide coverage for routine care for patients enrolled in clinical trials. Routine care coverage is what would be provided to the patient regardless of participation in a trial, which 26 states and Medicare already require."

US health care versus the European experience
"Universal" health care plans have been running in many wealthy western countries for decades, and while there are no perfect systems, and cost pressures build up there as well, the satisfaction level to date is generally high, much higher than in the US. While at the same time the costs of these systems are way lower than anything the US has been able to come up with. So why the extensive talk, why does the US need to re-invent the wheel? Just look around and pick a tried and true system, like Norway, France, Germany. They're all cheaper and they all function better. And if you don't believe that, ask yourself why none of these countries is presently involved in exasperating talks about their systems”, says Levin.

The Netherlands Health Care System could be an example to the US
The Dutch really have it together on health care, they have a system that has now been proposed as a model for the US to emulate. It should be attractive to the US, because in contrast to many other European systems, it's actually based entirely on private insurers, rather than a single-payer or entirely national system. Yet the Dutch system is universal, has far superior ratings of satisfaction with quality of care and access, and still costs a fraction of what the US pays for health care per capita.

The Dutch health care system is fairly simple. The Netherlands Government describe their insurance program as "private health insurance with social conditions".

In this program everyone is required to purchase insurance from highly-regulated private insurance providers. Regulation of the insurers is focused on quality, provision of basic services, and the prevention of discrimination. Insurers are required to accept everyone in their coverage area at a flat rate, no matter what their health status or age. To prevent loss of profitability from chronically-ill patients, they have a risk equalization system so that rather than losing profits from recruiting sicker patients, insurance companies are compensated for providing service to those patients who need it most. And if a citizen wants to change companies, or buy additional insurance they are free to do so.

It's a system that encourages competition, but is regulated to prevent the companies from selecting only healthy patients, or otherwise abusing the system to prevent health care provision to sick people. The incentives are designed to provide excellent care to as many people as possible, cheaply and efficiently, no matter what their health status, rather than what has now become a perverse US system, in which the incentives are to deny care and only sign on the healthy.

In the Netherlands the government even runs a website allowing patients to comparison shop among the different insurance companies and hospitals based upon their ratings for quality, outcomes and performance indicators.

A survey of health satisfaction comparing the US with several other industrialized nations, including the Netherlands, showed that the Netherlands led the pack in most measures of patient satisfaction and provision of care.

If it works in the Netherlands why doesn't it work in the US?
Obviously the question arises that if there are examples of health care which actually work, like that of the Netherlands, why does Washington try re-invent the wheel? The answer is easy. The difference between the US and Western European health care lies exclusively in the political power acquired by corporate industries. In the US case -mainly- a combination of drug manufacturers (closely linked to the chemical industry) and insurance companies (which are in turn closely linked to Wall Street banks).

The US is now just about forced to fabricate its own system because it needs to satisfy the perverted influence industry has on not just health care itself, but also on the political process. US health care spending is over 15% of GDP, and within 10 years it will be 20% (there's your bubble). That means today’s dollar total is about $2.2 trillion (that's Britain's entire GDP), and we're on our way to $3 trillion. “If the US would adopt a Western European system, it might save 50% of these costs. And a few very powerful corporations would lose $1 trillion per year in revenues. That's all you need to know about the reason why there will be no significant reform. Sick people are big business. And big business runs the nation.

The link between drug manufacturing and the chemical industry is obvious. The same chemical giants also have close ties to the military. What is less known are their connections to the food industry. Firms like DuPont, Dow, Syngenta and Monsanto have, under various names and guises, made enormous profits from fertilizers and pesticides ever since the Green Revolution started over half a century ago.

In the past two decades, they have moved into the industry of food itself. Genetically modified seeds are taking agriculture by storm, and they're all property of the world's chemical giants, which are now routinely referred to as agribusinesses. A long cry, at first glance, from the Monsanto that for instance infamously supplied the US army with Agent Orange.

The companies have further solidified their control over all aspects of the US food supply chain by linking up with traditional food conglomerates like Cargill, Tyson and ConAgra, essentially forming a closed circuit of control over world food, a circuit that tightens as time goes by and all seeds are contaminated with GM technologies.

Meanwhile, they remain what they started out as: chemical giants. As such, they control much of US health care. And therefore have a huge influence in Washington, much like Goldman Sachs and General Electric (which, accidentally, also has a large chemical division).

Now, if you were an innocent little simple child, you might conclude from this that all these companies really have to do is make Americans eat the food they control, make sure that food makes them sick, and cash in big again at the other end, in medical care. The corn syrup produced at one end of this "food chain" is in everything these days, and it's a main ingredient in the current obesity epidemic in the US, which brings along large additional medical costs, an estimated $147 billion per year in fact. Obesity habitually leads to diabetes, and you can guess who provides the insulin. A few years ago, the increase in childhood diabetes led one doctor to proclaim that the US is raising a generation of blind amputees. The numbers keep on rising exponentially.

One columnist recently claimed that obesity doesn't cost money, but it saves billions of dollars, because obese people live on average 7 years shorter than their non-obese neighbors. That sort of cynicism and deviousness seems to be the leading policy guideline for both the US industry and government say some critics. Only if most of these barriers are removed from the political and industrial spectrum will the US public health care reform be able to get off the ground in America. “

Fortunately, given the strong persuasive powers of the Obama Administration chances are that some kind of health care system will make it through the US House of Representatives to benefit most Americans.

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