Universal illusory insurance?

by Andrew Sprung

In just the kind of below-the-radar cave-in that health care reform advocates fear from Congress, the Reid health care reform bill permits insurers to place annual caps on a given policyholder's coverage.  That is, it allows for illusory insurance -- the kind that switches off when costs become ruinous. As Stephen Finan, a policy expert with the American Cancer Society Cancer Action Network told the AP:

The primary purpose of insurance is to protect people against catastrophic loss...If you put a limit on benefits, by definition it's going to affect people who are dealing with catastrophic loss.

The apparent motive is not a corporate giveaway per se, but political pressure generated by the misleading sloganeering that passes for political debate in this country.  Ezra Klein explains:

The tradeoff here is slightly higher premiums for everyone versus total financial ruin for the people who absolutely need help the most. Politically, choosing "everyone" rather than "people with cancer" makes sense, because the first group has more votes than the second. But on a policy level, it's nuts. Health-care insurance literally exists to protect us from the worst-case scenarios. This provision says that the Senate bill will protect everyone but the truly worst-case scenarios. If you assume that people support the basic concept of health-care insurance, then they don't, or shouldn't, support this.

But the American people are much more likely to hear that premiums are going up than they are to get a detailed explanation of what they're getting in return for higher premiums, and so the Senate bill is watching its back. In a more sensible political system, however, the two parties would agree to institute a reinsurance program, as Reihan Salam has suggested. Chuck Grassley has broached reinsurance in the past, but he seems more interested in opposing this bill than improving it, so I don't see much chance of him resuscitating the idea.

The pressure to gut coverage rules to meet cost control targets highlights what a long road the U.S. has to travel before we manage genuine universal health insurance. In France, Germany, Japan, Canada, the U.K., and every other wealthy country in the world, a citizen's risk of being bankrupted by health care costs or denied access to a level of treatment available to any fellow citizen is zero. In the United States, the best we can hope for within 5-10 years (and it will be an enormous improvement) is to cover 94% of the population, with premiums that in many cases will cause  significant financial hardship, under coverage rules riddled with  fewer holes than are now allowed but with as-yet-undetermined (and under-reported) gaps remaining. With those limitations, we'll still spend 50--100+% more per capita than the wealthy countries that provide true universal care under a variety of payment systems -- that is, every wealthy country but the U.S.

For all the brouhaha over the public option, the coverage rules governing the exchanges are arguably more important. The House bill bans annual coverage caps. Protecting that ban is worth going to the mat for.