Empowered Consumers Will Drive Down the Cost of Health Insurance
March 30, 2011
We all know that many Americans do not have health insurance because it costs too much. Even people who can afford it are often denied coverage because of the current state of their health or preexisting conditions. That’s because unless you are guaranteed coverage under your employer’s group plan or a group plan from some other source such as a professional association, you must buy health insurance on the individual market. Without guaranteed issue, good luck with that.
In contrast, consider the experience of purchasing homeowners’ insurance.
Like most American homeowners, I buy homeowners’ insurance from a local agent. When I bought the house I live in now, my real estate agent referred me to someone who was friendly, appeared competent and gave me what seemed like a reasonable quote. I signed a contract on the spot and didn’t think much more about it for the next three years.
Then one day out of the blue, I got a letter from my insurance company – a “Premium Increase Notice.” The notice informed me that my homeowners’ insurance premiums would be going up by 25%. I was stunned. In three years, I had never filed a claim and I had never been late with a premium payment. I called my insurance agent, expecting to learn that the letter was sent to me by mistake.
Instead, my agent began mumbling about “state building regulation changes, “ “recent company losses due to severe weather,” and other extraneous points that had nothing to do with me or my house or how I had used my homeowners’ insurance benefits – which was not at all. Bottom line, the letter was not a mistake, and if I wanted to renew my policy, it would me cost 25% more.
That very day, I became an empowered consumer of homeowners’ insurance. I have never looked back. With some Internet research and a few phone calls, not only was I able to purchase a new policy from another reputable company, I got nearly identical coverage for less money than my previous policy before the premium increase.
What does homeowners’ insurance have to do with health insurance?
If only health insurance was more like homeowners’ insurance. The homeowners’ insurance market is highly competitive and consumers unhappy with their coverage or the price of it can switch carriers and plans at will. We have no such luxury in the individual health insurance market.
For a compelling account of just how bad it can be, I recommend a recent guest editorial New York Times in which a successful CEO chronicles her nightmarish experience when, after the sale of her company, she had to shop for health insurance for her family in the individual market. The editorial is called “Money Won’t Buy You Health Insurance.”
My point is this: If we are serious about controlling health insurance costs in America, it is imperative that we turn more Americans into empowered consumers. To do that, we need a viable individual health plan market with guaranteed issue and standardized plan design – both key provisions of the Patient Protection and Affordable Care Act (PPACA). For good measure, PPACA also includes a provision for state-run health insurance exchanges.
With guaranteed issue, consumers cannot be denied health insurance based on the status of their current health or a preexisting condition. With standardized plan design, they can compare and contrast different plans from different carriers. With exchanges, they can quickly and easily identify and chose a plan that both meets their health care needs and budgets.
I know this from my own experience operating the nation’s largest private Medicare exchange for the past six years. In fact, because Medicare-eligible seniors today are the only group in America with guaranteed issue and standardized plan design, they are the most empowered and the most relevant individual consumers of health insurance in the nation.
Simply put, there is nothing like a little competition between carriers to keep costs down.
Don’t believe me?
The average premium increase in the group health insurance market over the past three was 9-12%. In the Medicare supplement market, it was 2-3%.
Visit Extend Health — the nation’s largest private Medicare exchange.