Insurance Startup Oscar Quits Two Markets, Rethinks Obamacare Plans
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There's no way out of this problem except federal laws that sets the prices of services. Ibuprofen has a market price of less than a penny per milligram and that should be the end of the story. It shouldn't be possible to bill them at $100 each just because the patient couldn't object. As long as we have a system where the prices for goods and services come as a complete surprise to everybody, it is impossible to have a working "market" for insurance against risk.
Some of you reading this of course get a good chuckle because they know this is exactly what's happening. One good Attorney General pressing criminal fraud charges in a case like this would get the ball rolling.
So, how do you price the service when it's covered by an insurance policy? This can't really be an unsolved problem. What's interesting here is separating the price discovery problem from the socialization aspect. Can you fix one without necessarily resorting to the other?
So in the ER the price of the drug should reflect the cost to administer it. Or maybe you should be charged a separate daily fee plus cost of supplies. What we want, first and most of all, is price transparency. Frankly the pharmacist and the attending are not paid that much, so where is the money going?
A room full of equipment costs a lost of money, so isn't the solution to introduce different cost rooms based on condition? Too much diversity in the room / environment could be a problem, but right now it seems like they go for absolute uniformity?
You have obviously never enjoyed the services of the US health care system!
We don't get auto, life, home or any other insurance from our companies, nor should we, so why do we still do healthcare? It causes all sorts of problems (starting business, stuck in jobs/quitting is more difficult, ageism, etc). Imagine if all your insurance for your auto, home and life ended when you quit a job, it is silly that healthcare does for people without individual plans.
Also companies like Aetna and BlueCross are company focused, very different than in auto, home or even life insurance where it has to be mostly individual focused (think Geico, Progressive, Nationwide).
We need to disallow getting healthcare from an employer (money can be given to help pay it but as salary). This has to change first otherwise every price control is still set in a closed fantasy market and will never change the game, far disconnected from the user product/service market value.
Health insurance isn't like auto or home insurance, because it's not purely insurance. Some part of it is, because you're insuring against the risk of rare and catastrophic conditions, but a good chunk of it is covering routine care, which is by definition predictable. Under an insurance model, the insured price of a routine procedure would always be slightly higher than the out-of-pocket (uninsured) price.
The phrase "health insurance" is misleading. Real insurance has a negative expected value - you pay slightly more in expectation in exchange for having a lower variance on your possible outcomes. But people don't want that with health "insurance". They want health insurance to cover things that they otherwise wouldn't be able to afford, both routine and catastrophic. That's not insurance, which is why comparing health insurance to any other form of insurance doesn't really make sense.
I'm curious to know what you consider "routine" here? I'm trying to think of what I'd call routine NHS care and the examples I can come up with are childhood vaccinations (not employees), elder care (not employees, medicare in the US), OTC trivia like paracetamol (not exactly covered in either system), and population screening programmes like for breast and other cancers.
Then there's chronic conditions such as asthma and diabetes, and the question of whether people who've lost that particular lottery should have a permanently lower standard of living or not.
The whole point is that this isn't an insurance question. It's a question of how someone should pay for a chronic condition that may be more expensive to treat than they can afford, in some cases. But that's not an insurance question, because it's not about smoothing risk across states of the world. So talking about how health insurance should solve problems like these is a misuse of the term "insurance", and comparing health insurance to auto and home insurance is misleading.
The difference between paying the copays for all those office visits and paying the uninsured-but-not-in-poverty sticker price is massive.
This is the point above about "Imagine if all your insurance for your auto, home and life ended when you quit a job" squared: as a child, your health insurance is completely dependent on your parents' jobs.
That's not really what happens in the US (and hasn't been for a while).
Under the ACA, any involuntary loss of other coverage is a qualifying life event that entitles you to purchase individual or family coverage on the market, just as if it were during the open enrollment period. But even before the ACA, dependents could (and still can be) covered on the old insurance via COBRA for up to 18 months.
So nobody's health insurance is really completely dependent on their job (or their parents' jobs). Their ability to afford the coverage they want may be dependent on their income and financial state, but that's already true of auto, home, and life insurance.
Why? There's not much doctors can do for ear infection. (Or strep throat, or flu).
I guess they don't hand out antibiotics like they used to, but I can remember having strep and getting a prescription for penicillin would knock it out in a day or two, whereas suffering along and letting it run its course could take weeks.
The baby has been constantly screaming and not eating for two days, you're physically and emotionally exhausted, and googling tells you a dozen things that could cause the symptoms, each one ending "make sure you consult your doctor". What do you do?
True but you still shouldn't get that from the employer, that is part of the pricing problem.
>> ...because you're insuring against the risk of rare and catastrophic conditions, but a good chunk of it is covering routine care
I'd argue that individual insurance is closer to auto insurance as they have high deductibles and you still do have to pay for routine care mostly out of pocket. Maybe health insurance is changing into more of a catastrophic level like auto/home/life where it really only covers above your deductible, which will be high, so routine health checkups are paid mostly by the customer.
Not all companies offer health, dental or vision insurance but people still pay those out of pocket or on individual plans. I'd argue most routine work in most plans today, unless cadillac level, involve the customer paying most of the routine care either as a small part of their premium or at the service as it is below deductible (prescriptions aside, you need insurance to get special backdoor pricing).
Health insurance can be massive in cost, much of that is due to the disconnect from reality as it is hooked through companies/employment. I think fixing that will change how people view health insurance and the prices will match market value better, it could also change perception of how to use healthcare.
Personally I have never felt that routine care is acceptable to use too much as it harms the group/work policy. So even people that have it are sometimes not feeling like they can use it. When it is independent and personal, if you need it you need it and you can use it without affecting your company group policy, probably paying out of pocket most likely for routine work as your deductible will be high. Why have the added stress of health issues possibly affect your job's insurance group for menial routine work? I've had independent insurance for 5+ years now and that was the first time I actually felt like I could use it even though it paid for little, where the work plans I had I never felt like I could use.
Even if you think health insurance is different, it still doesn't mean it should be linked through your job/employer, that causes much of the pricing issues and many other issues associated with employment/survival. It is an ancient way to look at things when people change jobs every 2 years.
I never said that should be the case, but it should also be mentioned you don't need get your insurance from your employer anymore, under the ACA. Employers may provide it as a benefit (just like many other non-cash benefits employers may provide), but nothing's stopping you from purchasing your own insurance separately instead.
> I'd argue that individual insurance is closer to auto insurance as they have high deductibles
That's only true of HDHPs - you can get PPO or HMO plans instead if you prefer.
> Maybe health insurance is changing into more of a catastrophic level like auto/home/life where... routine health checkups are paid mostly by the customer.
Yes, that's how health insurance would operate under an actual insurance model. Routine health checkups involve no risk, so there's nothing to insure against[0].
> Personally I have never felt that routine care is acceptable to use too much as it harms the group/work policy.
This is a moral hazard problem, and it's part of why it's a bad idea to consider coverage of routine care as "insurance".
> [health insurance being] linked through your job/employer... causes much of the pricing issues and many other issues associated with employment/survival.
I'll agree that having health insurance being tied to one's employer is bad (though as I mentioned, that's not really the case anymore). Though the pricing issues are more to do with using an insurance model to price something that is fundamentally not about risk, as well as the problems with the way the billing system is setup. I don't think the fact that having health insurance provided by the employer makes a meaningful impact on pricing in the aggregate (as opposed to in individual cases).
[0] The fact that you can choose whether or not to have your annual checkup is not 'risk' in the insurance sense; it's an issue of either adverse selection or moral hazard, depending on the point at which it occurs.
You could before the ACA it is just the plans were not as robust. I have had independent insurance since 2009. I did it and it was actually scary starting business with this fear. I was initially rejected even though I was healthy, 30 and was applying to the same insurance I just left at my employer. The ACA, for better or worse, made this much, much easier and the plans can't be pulled out from under you or prevent you from getting one. The ACA could be a start to removing insurance from employment and benefit pricing/understanding of market value in health.
>> This is a moral hazard problem, and it's part of why it's a bad idea to consider coverage of routine care as "insurance".
Maybe we need health insurance and healthcare plans separate, it is moving that way in the independent insurance area. The only way for this to happen is to separate it from the employer.
Side note, I worked in games and agencies previously and I saw on two occasions (right to work state) where people were let go who just had health issues that were more serious (heart, one sales guy, one developer). So when people get insurance through their company they think they are covered, but in reality insurers and companies want to pull out of that as soon as possible leaving the individual not insured and not safe. Both were let go shortly after their issues and left with now having to find a plan with a condition (before the ACA). So really, independent insurance is really closer to insurance than employer provided insurance that ends with employment or can be taken from you when you actually need it. Yes there is some buffer with CORBA and other temporary things but it is not safe in terms of being an individual who actually wants insurance in case bad things happens.
If everyone got independent insurance there would be massive changes to pricing and understanding of healthcare and the insurance part (catastrophic). It might even spawn two types of insurance (catastrophic and routine) out of it or industries. Noone should lose the catastrophic side when they leave a job, it is seriously unsafe and not really insurance.
I've worked for large companies and small ones. Never once has it occurred to me nor would I entertain the idea of not taking full advantage of a benefit that is explicitly provided as part of my compensation package.
I don't necessarily disagree about your broader point of insurance and its connection to jobs, but so long as that's the reality I'm going to work within that reality.
This was a massive lightbulb for me. For decades, I've always thought it normal and healthy that employers provided health insurance as a way to compete in the employment market. Your post triggered that lightbulb and now I don't know what to think, but thanks for shaking me awake.
source: https://en.wikipedia.org/wiki/Health_insurance_in_the_United...
Bearing in mind I'm English, so there's risk of ignorance here...
My understanding is that Insurance companies have agreed pricing deals with providers? That was the point of restricting access to certain providers etc within schemes - so that they could keep users in a relatively controlled pricing system.
Realistically though - pricing needs to be agreed at a national level and then have all providers/insurers included. Of course, this prevents strategies like vertical integration but frankly I don't see that as a great loss.
That's why you end up with preferred providers and in-network/out-of-network providers.
Where things get interesting is that rates are often dependent upon negotiating power. If you're a big insurer and you can push a lot of volume to a provider, you have more power to push reimbursement lower. If you're a provider in an area where they are lots of other providers, you lose leverage vs. being the only provider in a semi-rural area.
The USA is a big country, with vastly different demographics across it. Medical provider costs (especially wages) are going to be vastly higher in some locales than others. Also, the risks in some areas (complications due to pneumonia, for example) are going to vary by region. So it can't really be a single national list.
> There's no way out of this problem except
The fact that operations like Oscar currently don't fit well is not very high on the list of problems that need to be fixed.
> if ... how can you not be screwed?
Well you can limit your enrollment and allow your reserves to grow so that haha that's not how you get in the unicorn club.
First, no insurer pays $5000 for Ibuprofen, the same way no (sane) customer pays sticker price when buying a car. That number is intended as the starting point for negotiation with the insurer, and they all know that.
Secondly, the reason that this negotiation is necessary is, indirectly, because of a federal agency artificially setting the prices of services. Medicare owns 40% of the payer market and also reimburses about 7% less than COGS. That is, not counting for the fact that any practice has overhead and SG&A (labor) that it needs to pay for, Medicare reimburses 7% less than what it costs providers to cover their own direct costs of supplies. Basic accounting tells you that's not sustainable unless you overcharge the rest of your patients.
So, they make up for it by doing this awkward dance where they attempt to overcharge the private insurers by 50x or more, and then the private insures come back and say, "no, how about we only pay you 300% what Medicare reimburses", and then they agree on that.
Government should be for the bare minimum of things a market can't provide, and subsidizing insurance plans for the needy and poor would be a lot better than the government, through I'm sure just some twisted set of unintended consequences, setting MINIMUM prices.
Medicare is actually split into four separate regions, each with its own reimbursement rates.
Here's the thing with ACA -- it's a consistent set of terms and conditions that you can shop against. Some of the terms might not exist otherwise, particularly eliminating pre-existing conditions. Ideally insurance companies would price the plans correctly, operate efficiently, and break even. Then Americans would benefit from access to plans with these shared terms.
But here's the scary thing, that $100 million a year could be from 10-100 expensive patients. Unlimited Lifetime Benefits is a pretty awesome term. I really don't know how you write a policy like that.
It is strange to think you could face the independent mandate while also not having any ACA plan to choose from in your marketplace? Is the mandate specifically waived in these cases?
Well, if by "break even" you include the opportunity cost on their capital, yes, though that's not an accounting break-even.
I can only speak for Switzerland, but an educated guess is that this is the default just in about every European health insurance system.
And no, you can't be denied (basic) insurance (which covers everything necessary) for a pre-existing condition.
The limits in many European systems appear to be on self-determination. There are real barriers in some circumstances to getting second and third and fourth opinions, additional tests, treatment for infants born premature before a certain week, novel and unproven procedures, etc.
I don't know which healthcare model is preferable. It appears to me the US and European models grew under different historical circumstances and have different failure modes.
Again, not trying to spark debate. Just contributing a personal perspective having lived on both sides.
I'm OK with it too (in fact have used it since my previous employer offered insurance, so why not) as long as people understand that it's a convenience for people for whom time is more important than money and who want to get prompt treatment for things that are important enough to stop you working but not enough to kill you.
Having heard all of the horror stories from the US I was quite worried until he eventually told me how much I had to pay extra - pretty sure it was £4.20. :-)
Best of luck to you and for your kid.
I received less than a week's notice that my insurance plan was ending despite them knowing for almost 2 weeks before notifying me.
1: http://dfr.oregon.gov/public-resources/Pages/co-op-faqs.aspx
At least they're letting the ACA insureds transfer their out-of-pocket amounts to another provider.
Yea thankfully they are transferring those! Took them almost 3 weeks to do so for me; I'm glad I didn't have any major costs during that period.
The remains of LLH are also suing the Federal government for around $70m, because part of the original setup was that the government would cover (some portion of?) losses for the first few years through the risk pools regardless of the amount going into those pools; that was subsequently changed to "we'll divvy up the amount in the pools to companies according to their losses but we won't supplement as originally expected."
I honestly believe that at the end of the day nothing can be done about either Healthcare or higher education or anything like that without cutting costs. Anything we can do to reduce cost is potentially good. I want effective salary "cap" above which you'd pay 90% odd tax.
We could do something that would actually work: Deregulate the industry, enhance legal protection for healthcare workers (to keep the lawyers from driving prices up again). Let health insurers decide rates and demographics they wish to cover. Legalize discounts for people with healthy habits, and penalties for those who don't have them. And instead of trying to tax the health insurance companies into covering people with expensive health conditions, we could actually fund medicare (instead of both Democrats and Republicans continuously slashing it's payments to healthcare workers). Competition for the "healthy" people would stabilize quickly and insurance companies would be forced to grow profits by creating plans individualised for not so healthy people. Really the only regulation needed would be ones around a couple of moral issues, maybe something like: no dropping people for health conditions that aren't preventable... or have different classes of insurance like the do in the auto industry.
One only has to look at how competitive the life insurance market to see this work in action right now. Even with someone that has COPD can get affordable life insurance with after a health screening.
It was a better-than-nothing, sabotaged effort from the start. Still, dat existing condition coverage..
I haven't really understood why America finds that this law doesn't hold over its population. And I've also looked at outcomes and found that once you start looking at costs/bed and patient coverage, any other first world country with a working single payer system provides significantly better outcomes.
The things that America does better are things like cutting edge cancer care, or cutting edge X treatment, but these are accessible to the richest of the rich (and I've seen family members who can afford it vs family members who can't - we are talking 1% of a nation).
So why do things like "make plans for not so healthy people" come up as concepts.
The probability for a non healthy person to get sick is 1. At this point its like a scholarship to go to get medical care.
If I were a medicare company, I would instead keep shafting the healthy people, fight tooth and nail to keep that population, and call it a day. For the sick people - why bother? (1)
I really don't get America when it comes to this (and many other things, which you guys used to be world leaders in)
Why?
And edit: And to prevent (1), you would have to create regulation, something expressly disagreed with in the parent comment.
Matter of fact, when I have pursued this with others or read threads, people come up with yet more complex market systems to deal with the skewed incentives, in order to avoid regulation.
You're probably (I don't know) talking about large insurers being able to aggregate non-correlated risk into a nice non-risky positive expectation of profit.
But of course econ 101 loves nothing more than to look at the margin, and if the marginal client simply lowers expected profit, you better fracture him out. But you clearly know that, so what are you talking about?
More competition results in a worse functioning market. Therefore for ideal outcomes you don't create separate insurers, and no one moves out.
My question isn't on the economics, to be honest. My question is on the weird cultural idiosyncrasy. I don't really understand that (and by that I mean I understand its "political", but the math and success of it is pretty clear, so how is the topic successfully made confusing).
That's the real magic at play, and thats what I'd like insight about.
No, your question isn't, mine is. I still don't really know what "Econ 101" (i.e., basic) market failure you're talking about. Can you explain like I knew enough jargon to understand an Econ 101 explanation but slept through that one lesson?
Intrinsic economies of scale producing oligopolistic structures in insurance – I've seen that mentioned as a market failure, but it would be strange to fix a tendency towards oligopoly by legalizing it into a total monopoly, no? So you're not talking about that.
You seem to have a detailed plan. Do you know of any example countries where healthcare went that route successfully?
Assuming you mean "expand medicare to cover everyone so that people with expensive conditions aren't left to die in the street", this is .. the UK system.
Insurance becomes an optional extra for people who don't want to wait and want more than the necessary minimum of attention. Everyone else gets care if they need it.
With the others like Blue Cross, UHC compass, etc they never seem to cover all my doctors. Or they have a ridiculous clause where you need a referral from your family doctor to see a specialist.