It has been nearly 18 months since the passage of the Patient Protection and Affordable Healthcare Act, the single most significant legislative change to be passed in our lifetimes. Hopefully by now, most Americans are aware – and President Obama himself has admitted -- that the 2600-odd pages of legislation known as the “Healthcare Reform Bill” ultimately constitute nothing other than an attempt at health insurance reform. The primary goal of the bill, cost containment, was an abject failure, and there are only minimal references to the pressing issues of quality and access. The resultant bill is little more than a continuation of the complex shell game we have been playing with regard to who is going to pay, who they are going to pay it to, and when they are going to pay it.
Unfortunately, a further essential flaw of the reform legislation is that it fails to address the fundamental, underlying fallacy of healthcare insurance in this country. Insurance, as a product, is excellent for mitigating and diversifying risk, and accounting for unpredictable and catastrophic events. It is not an economically viable solution, however, to address routine and/or maintenance issues. In addition, insurance premiums are normally predicated on some calculation of one’s overall risk profile. Automobile insurance, home-owners insurance, and life insurance policies all reflect these basic constructs. For reasons that are not entirely clear, however, we apply an entirely different set of expectations when it comes to healthcare insurance.
Take automobile insurance as an example; it is illegal to drive a car in most states without carrying car insurance. We expect that the policy will off-set the costs if significant car damage is incurred as a result of an accident or an act of nature. Yet, when one goes to fill up the car with gas, change the oil, or rotate the tires, there is no expectation that one’s car insurance would pay the bill. Likewise, one cannot obtain a home mortgage without carrying homeowner’s insurance. The policy is meant to protect the homeowner in the event of catastrophic damage from fire, storms, vandalism, etc. -- But when you repaint the house or mow the lawn, there is no expectation that this would be covered. So why then, should healthcare insurance be anticipated to pay for routine expenditures on maintenance items like annual physicals, routine blood pressure checks, pap smears and immunizations?
Can you imagine what car insurance would cost if you wanted it to cover every fill-up and trip to the Jiffy-Lube? How affordable would homeowner’s insurance be if you had a rider that covered snow plowing and routine lawn care?
Can you imagine what car insurance would cost if you wanted it to cover every fill-up and trip to the Jiffy-Lube? How affordable would homeowner’s insurance be if you had a rider that covered snow plowing and routine lawn care?
It appears that healthcare “insurance”, the way most Americans expect it to be, is a misnomer; we want to pay the low rates associated with “insurance”, but be protected as if we have a “pay ahead” plan – one where all of our healthcare needs are covered, from the routine and expected to the catastrophic. Such a policy can be nothing other than astronomically expensive.
Furthermore, healthcare insurance is the only insurance where risk profile is not a routine factor in the calculation of premiums. One can essentially guarantee an increase in car insurance rates after obtaining multiple speeding tickets, while completion of a safe driving course or ice-driving school will generally result in a reduction. Failure to install smoke detectors or buying a home located in a flood plain will most certainly result in higher homeowner’s insurance premiums. Sky diving, race car driving and heli-skiing will generate an entirely different life insurance premium than a less aggressive risk profile.
If we applied this same model to healthcare insurance then, shouldn’t smokers, and those who are sedentary by choice, pay a premium for those life-style choices? We know that certain modifiable, life-style behaviors such as smoking, failure to wear seat belts, physical inactivity, etc. drive excess healthcare costs, yet this sort of “profiling”, when applied to healthcare insurance, has been seen as discrimination and anathema.
If we applied this same model to healthcare insurance then, shouldn’t smokers, and those who are sedentary by choice, pay a premium for those life-style choices? We know that certain modifiable, life-style behaviors such as smoking, failure to wear seat belts, physical inactivity, etc. drive excess healthcare costs, yet this sort of “profiling”, when applied to healthcare insurance, has been seen as discrimination and anathema.
Americans are going to need to get their heads around the concept of personal responsibility when it comes to healthcare. Healthcare insurance, like every other form of insurance, simply cannot cover soup to nuts and remain affordable. That model also defies the very concept of “insurance”. On the other hand, we can promote the use of individual savings mechanisms such as Health Savings Accounts (HAS’s) that provide a way for individuals to accrue pre-tax dollars in an account that they then control to cover downstream healthcare costs. This supplemental savings, when added to standard catastrophic insurance, allows individuals plan and save ahead for routine and maintenance healthcare items.
Likewise, lifestyle choices and personal behaviors must be factored in to the determination of risk profile and therefore, premiums. While we can’t expect people to pay more for things that are not within their control, such as a family risk of colon cancer or a personal history of congestive heart failure, we should incentivize and reward those who choose not to smoke or to remain physically fit by offering them a lower insurance premium.
The President and Congress failed us miserably in passing the wholly inadequate and highly flawed healthcare reform legislation last year. Much time and effort will be required to defund, repeal and replace misguided and convoluted provisions within the bill. That said, no healthcare reform, whether presented on behalf of conservatives or liberals, has a hope of success until Americans reset expectations when it comes to the very fundamentals of healthcare insurance.
