Wednesday, August 12, 2009

Why Should Insurance Cover Pre-Existing Problems?

President Obama: A recent report actually shows that, in the past three years, over 12 million Americans were discriminated against by health insurance companies because of a pre-existing condition.


MP: Doesn't this demonstrate a basic misunderstanding on the part of President Obama about how private insurance markets work? Consider these examples:

1. You call the State Farm Insurance Company to purchase homeowners insurance the day after your home has been damaged by hail, a flood, a fire, an earthquake, a tornado; or has just been burglarized. Would you expect State Farm to cover those "pre-existing conditions?"

2. You call State Farm the day after your car has been in a major accident, and inquire about getting a quote for car insurance, hoping that your extensive "pre-existing body work" will be covered?

3. You call AAA on your cell phone from the side of the road with a flat tire, and ask about signing up for towing insurance, hoping that your "pre-existing" condition will be covered, and could they please send out a tow truck right away to fix your flat tire?

4. You are offered an extended warranty for your new bigscreen TV at BestBuy, and you decline. A month later, you have major problems with your TV and go back to BestBuy and ask if you can now buy that extended warranty, hoping it will cover your "pre-existing" electronic problems?

If the pre-existing conditions wouldn't be covered in those four examples, why would we expect that health insurance companies should, or would cover pre-existing medical conditions? That's not discrimination, that's just the way insurance markets work.

Originally posted at Carpe Diem.

30 Comments:

At 8/12/2009 11:47 AM, Blogger misterjosh said...

Obama's not stupid, of course he understands it. He just thinks it's unfair, because health care is a human "right." Unfortunately, he can get a lot of people to agree with him.

 
At 8/12/2009 12:10 PM, Blogger Walt G. said...

Most people I talk to, and I talk to a lot of people, expect healthcare costs to be covered regardless of the reason. It is not considered insurance to them but life itself.

The rationale is that we already have a Medicare health care delivery system for seniors and a national defense that covers every American’s freedom--whether they “deserve” it or not—so why shouldn’t health care be delivered in the same fashion. It can be a compelling argument even though it takes an unpopular to some entitlement point-of-view. However, if you think about it, what good is the freedom we so cherish without the corresponding life that goes with it? Personally, I don’t trust the government to do anything right, but I am an old Vietnam War protester and reformed union radical :)

Either way you look at it, though, it creates a lively between the politicians, the health care industry, and the citizenry sharply divided over the issue. It’s hard to believe that it’s been over 16 years since a new President Clinton and his wife gave up on the issue with similar difficulties.

 
At 8/12/2009 12:12 PM, Blogger The Daily Pander said...

There is a huge difference b/t uninsured and uninsurable. The latter is subject to a known outcome, in which case insurance cannot apply. Gov't has a legitmate role in protecting some of the uninsurable (poor person with financially crushing disease: YES. Middle class baby boomer with mildly annoying this or that: NO). Obama is using the word "discriminating" in a highly deceptive way.

 
At 8/12/2009 12:21 PM, Blogger Andy said...

It's funny you use the AAA example, because they actually *will* cover it. In fact that's how I signed up--I had a flat tire and called AAA to sign up right then, and they happily sent me a truck.

 
At 8/12/2009 12:27 PM, Blogger Realist Theorist said...

Our current laws are designed so that most people massively over-insure for a whole lot of costs that they know they're going to spend.

That's like paying my auto-insurance company really high premiums, and the having them reimburse for every oil-change, tire-rotation, headlight change, air-filter and so on. Imagine the bureaucratic nightmare if I want to convince them I want need new shocks even though my car has not hit the official limit. Imagine the huge administrative costs of having car-repair shops deal with the auto-insurance company for each bill. Imagine a "flex-account" where one has to keep track of receipts that you paid out of pocket, and then send them in.

 
At 8/12/2009 12:54 PM, Anonymous Anonymous said...

The way health insurance should work is that many mostly healthy people throughout their lives contribute into a pool of money that is used to pay for medical costs for those few who get sick.

The way it actually works is that many healthy people pay premiums for many years and when they finally get sick they are dropped from the insurance, or their rates go up, or they can't work and lose insurance from their job. When they try to get new insurance to cover their medical costs they learn that all the money they paid when they were young and healthy turns out was just a scam to by the insurance company to make money.

People don't want to pay today for the likelyhood they will get sick today. They want to pay today for the likelyhood they will get sick sometime in their lives.

 
At 8/12/2009 12:54 PM, Blogger Methinks said...

Our current laws are designed so that most people massively over-insure for a whole lot of costs that they know they're going to spend.

Yep. In health insurance is less like insurance and more like insulation.

 
At 8/12/2009 1:04 PM, Blogger bix1951 said...

self-insurance will soon be penalized

how much could we save if all were self-insured?

health insurance was never about providing care
it was always about making sure doctors got paid.

 
At 8/12/2009 1:12 PM, Blogger author said...

It's very simple.

Obama wants "Health Care Assurance", not "Health Care Insurance".

 
At 8/12/2009 2:11 PM, Blogger Ben Eng said...

In today's mostly-non-market based health insurance climate, there is actually a legitimate reason. Because health insurance benefits are tied to employment, coverage is not portable; and COBRA is perceived to be prohibitively expensive, because the employer's subsidy is suddenly withdrawn. A transition from being an employee to being self-employed would require someone with a pre-existing condition to seek new health insurance, and they would face this problem of being uninsurable as an individual.

So it's not quite the same situation as a house disaster. Whereas house disasters are one time events, health issues are often chronic conditions. Thus, the non-portability of health insurance becomes a serious issue, because of that difference.

However, does that difference justify a state-run insurance scheme for taxpayers to cover the uninsurable?

 
At 8/12/2009 2:25 PM, Anonymous Anonymous said...

Hmmm... this sure is caviler: "You little shit, you used your cat as a wheel barrel when you were six, so no coverage for your gout. Bwah-ha-ha-ha!"

Regardless, honesty should be respected, and this is a fair opinion. Just a word for you Republican tough guys, though: life is fine and peachy until it takes a #2 on you, so don't feel bad if a health insurance screener makes a buck off your back.

My eyes roll everytime when I hear a former toughie call into a radio program, practically balling because they got stiffed with a $12,000 bill the health insurance company wouldn't pick up. NOW they become empathetic to others…

A former common sense genius who is now a high-fructose corn syrup junkie.

 
At 8/12/2009 4:16 PM, Blogger rufus said...

Because a "Person" isn't a piece of wood, or metal, or rubber?

 
At 8/12/2009 6:01 PM, Anonymous Dr. T said...

The examples chosen do not match the realities of pre-existing medical conditions.

1. Patient has adult-onset diabetes, non-insulin dependent. He needs regular drugs, regular sugar monitoring, and at least monthly doctor visits. He doesn't need a $150,000 pancreas transplant.

2. A patient has moderately severe rheumatoid arthritis treated medically. She doesn't immediately need knee joint replacements.

3. A patient drops a rock on his foot and needs urgent treatment. No health insurer will say, sign up now and we'll backdate the policy to 12:01 am.

4. A patient discovers she has cancer two weeks after she dropped her insurance coverage. When she tries to sign up for new insurance, the 100% risk of cancer will make her ineligible or will generate a very high premium.

With high deductible (catastrophic coverage) policies, covering pre-existing conditions should be feasible for insurers, as long as no regulations restrict premium-setting. HMO-style coverage would be prohibitively expensive for many pre-existing conditions, which is appropriate. If everyone with pre-existing conditions has to pay for non-hospitalization care out-of-pocket, then market forces will drive down prices. (For example, chemotherapy costs are far above actual costs. They could be cut >100% and oncologists would still profit.)

 
At 8/12/2009 6:26 PM, Anonymous Anonymous said...

Actually in the Auto case there are the assigned risk plans for poor drivers. Some states have high risk pools for pre-existing conditions but others don't set up a national high risk pool or make medicare open to the uninsurable. The issue then is how to keep the costs down to about 10-12% of income for health care for these people, what subsidies from others are needed, just like in the auto case where the premiums don't cover the full risk and insurance acts as a risk spreading mechanism.

 
At 8/12/2009 7:13 PM, Anonymous CompEng said...

I'm with Dr. T on this. If you suffer a catastrophic illness, especially of the chronic variety, you can wind up in permanent bankruptcy unless you happen to make all your money ahead of time. And while you may wish your employer-based plan could protect you from such events, in a world where we're supposed to be changing jobs every 3 years, I don't think that's the reality. Whatever freedom of opportunity exists in society no longer really applies to you if you lose that particular lottery.

Now that's just nature: it's not necessarily anyone's fault. The reasonable discussion is whether something a little more binding than the current insurance is desirable and practical. I think it is. Can the free market get there? Maybe, but we have nothing like a free market in health care or health insurance. If we all agree on feasible parameters, this is one of the areas where government intervention might actually be able to get us where we want to go faster.

 
At 8/12/2009 8:00 PM, Blogger JimJinNJ said...

I don't like or want BO's plan. I believe there are free market solutions that can work and eliminate or mitigate some of the problems with the current system as a whole.

That said, I personally think there must be ways to handle pre-existing conditions. For example, I live in NJ and I am self employed. In NJ, a business needs 2 employees to qualify for a small-group plan. I put my wife on payroll and get BC/BS without any consideration of pre-existing conditions.
It seems that group plans don't require this or maybe (I really don't know) NJ prohibits this.
Seems to me this could be extended to individuals.

In fact I am quite attracted to disconnecting health insurance from employment. This would create a market dynamic that is absent. In addition I would find some way to dismantle the state role in controlling who can sell what kind of insurance. they did it in banking.
But at the end of the day, I believe the US has the resources to provide healthcare to all (legal) citizens without a public plan. Our problem is that Congress is doing a political fix to a largely technical/economic problem. Even a free market, Randian like myself think healthcare is a bit different from a flat tire.

 
At 8/12/2009 8:31 PM, Anonymous Jim Egnor said...

Sorry MP---but your examples and implied constructs really offended me.

I ended up losing my job due to a recent deployment (please don't tell me that this was a violation of federal law---as explained to me my position was removed due to restructuring and so there fore I technically did not lose my job---did I mention I also practiced medicine within a hospital based practice?

So I spend 15 months doing my military bit of fun as an officer then come back home searching for another position. I of course was covered under the Tricare umbrella for a specific duration of time.

Coincidently during my time of contract work at Bragg and looking for a civilian post, my youngest child developed epilepsy.

Based upon your comments, you would find it perfectly acceptable for my son to not have health insurance upon my acceptance of obtaining a new job with new health insurance coverage. And apparently, you feel it's perfectly justified for my child and my myself to have to foot any further bills and medical costs??

I'm sorry.

If you really feel that my particular situation falls under the same categories you delineated, then please notify me personally on my e-mail and I'll be more than happy to unsubscribe to your blog.

 
At 8/13/2009 4:13 AM, Anonymous Anonymous said...

People in the military earn their medical care Walt, through their work. The military must maintain a functioning medical system for the battlefield, so providing care is as much 'training' for them as free provision. Some military doctors do elective surgeries like 'breast implants', but these are important. First, it's training for reconstructive surgery. Second, it's a benefit for service, third, doctors must be coaxed from the private sector into the military and they need to remain proficient in skills which are marketable for when they get out.

For Medicare, seniors have cascades of illnesses and injuries which no insurance could support. They should be forced to pay what they can, including their house if necessary. We should also consider the 'value' of keeping someone alive for a year for millions of dollars who deliberately damaged their bodies their entire lives. What resources do the kids have that they don't want to use for mom and dad? This is less about ability and more about willingness than we think. Could a lifetime of tax free savings for this help? I'd like to think so.

 
At 8/13/2009 4:25 AM, Anonymous Anonymous said...

To all you bleeding heart leftists:

Dig deeply into you owned damned wallet and give generously for other people's healthcare. Keep your grubby hands out of my wallet. Live lightly on the Earth on a food stamp diet, ride a bike instead of owning a car, enroll your kids in public school, buy thrift clothing and give all your extra dough to help others. Get the hell off my back! Taxes to benefit OTHER PEOPLE are the only things holding me back from my dreams. I'm tired of supporting freeloaders.

How many people could be insured by the excess income of Warren Buffett, George Soros, Oprah Winfrey, Peter Lewis, Peter Sperling, Whoopie Goldberg, Obama's book royalties, etc? If I became dictator I'd shake down every limousine liberal for every spare dime they had to give to the poor. Let's see how much longer they maintain productive labor.

 
At 8/13/2009 4:48 AM, Anonymous richard said...

Mark,

> A month later, you have major problems with your TV and go back to BestBuy and ask if you can now buy that extended warranty, hoping it will cover your "pre-existing" electronic problems?

Actually, the law says that you can expect the warranty for a product like this to include this. You don't need an extended warranty, because your defalt warranty will cover it.

 
At 8/13/2009 9:56 AM, Anonymous Anonymous said...

So basically you are saying that a person pays premium for 20 years and gets dignosed with say a heart disease ..so from next year he gets no insurance ... If that is what you are proposing I think all of us shoudl start an insurance company ...collect premium and bear the risk for a year and then - Ta Thank you very much !!!

Huh ?

 
At 8/13/2009 11:07 AM, Blogger misterjosh said...

9:56, Marks example is (if I understand it right) if you have not had health care for the last 20 years, then get diagnosed with heart disease, and THEN apply for health insurance.

In that case, we should not expect that an insurance company would cover that preexisting condition.

 
At 8/13/2009 12:36 PM, Anonymous Chad B said...

Someone please explain to me where in our Constitution it states that the government is obligated to provide health care for all the citizens. We are getting lost in the "social obligation" argument and denying the simple fact that the Constitution is being trampled on by this Bill.

 
At 8/13/2009 12:36 PM, Anonymous Anonymous said...

"To all you bleeding heart leftists:"

Goddamm it, taking money from Michael Dell, Eric Prince or Rush Limbaugh is the same as taking it from me. I would know because I'm a quantum physicist - the Sigmund Freud of quantum physicists.

That leftist son of a bitch Warren Buffet, how dare he criticize Bush's tax cuts for the rich! When I become president, I'm going to take every goddamm dime from that Bolshevik’s pocket.

Don't you dare tread on my right to keep piling my hard-earned dimes into pockets of health insurance nobles, like Stephen Hemsley. I want the health insurance industry to decide my fate, to suck out my monetary worth. Not the government.

 
At 8/13/2009 2:02 PM, Blogger JimJinNJ said...

reply to ChadB--"
Someone please explain to me where in our Constitution it states that the government is obligated to provide health care for all the citizens. We are getting lost in the "social obligation" argument and denying the simple fact that the Constitution is being trampled on by this Bill."

It doesn't say that--agreed. The current bill is a piece of crap--socialist, fascist crap at that.

But...
We crossed that "obligation" threshold a long time ago. To many times for too many things I might add.

If I was the dictator, I'd repeal about 2/3's of the government largess/social obligations that currently exist. And I use a bit of that to buy insurance policies for those 5-10 million citizens who can't afford one. Call me a softee but that is my idea of charity. In fact, I like a system whereby several families band together and buy a policy for a needy family. Setting aside the administrative nightmare of that, at least it is charity plain and simple.

But some way, and lets hope its not the friggin bill, we can get people medical care. HOw about we drop the silly federally subsidized student loans, ag payments, industry bailouts and subsidies, congressional jets, several dozen parks, etc etc. surely that stuff should be lower on our priority list than simple healthcare for those who need it.

they should get what their fellow citizens are willing to give them. If that means something other than a first and last dollar coverage for every conceivable state of the art Rx or procedure, fine.
No public plan however. There's got to be a way. This set of principles on MarketTicker.com is a good starter for me.
http://www.google.com/reader/view/#stream/user%2F01095098861625056018%2Fstate%2Fcom.google%2Fstarred
It is worth a read.

 
At 8/20/2009 11:18 AM, Blogger Michael Ejercito said...


My eyes roll everytime when I hear a former toughie call into a radio program, practically balling because they got stiffed with a $12,000 bill the health insurance company wouldn't pick up. NOW they become empathetic to others…

Which radio programs would they be?

 
At 8/20/2009 11:21 AM, Blogger Michael Ejercito said...


Based upon your comments, you would find it perfectly acceptable for my son to not have health insurance upon my acceptance of obtaining a new job with new health insurance coverage. And apparently, you feel it's perfectly justified for my child and my myself to have to foot any further bills and medical costs??

Why did you not continue with yourn old health care coverage then?

 
At 3/04/2010 5:59 PM, Blogger Jon Innes said...

The insurance companies are scam artists. Why do I say that? Because I had a very expensive PPO when my wife was injured in a car accident. The insurance company did not pay, and still refuses to pay due to what I consider to be loop holes. I still pay out of pocket for medicine her Dr. prescribes, because our PPO won't. That's wrong.

 
At 3/23/2010 4:45 PM, Blogger gs4010 said...

God granted me the right to HealthCare...therefore I want HealthCare!!!

Healthcare is a service...not a right. Insurance companies don't have a secret money tree growing in all their buildings. That's what OBAMA needs to understand. That is why insurance companies deny people with pre-existing conditions coverage... they're a sponge... just like all the people in line for welfare money. It sux but thats just the way it is. I wonder whats gonna happen to healthcare when the govt runs out of tax money to provide everyone healthcare?

 
At 4/21/2010 10:25 PM, Anonymous Anonymous said...

Healthcare should not be run like a business, but like a service provided for the good of the people who need it. To ask why private businesses should be required to take risks is barking up the wrong tree -- the entire structure of the system is designed to take advantage of the gullible, ignore the needy, and blame the desperate. Risk assessment and profits shouldn't be factored into maintaining or improving the quality of someone's physical livelihood.

Illness is not a predictor of an individual's worth to society. A large percentage of Americans are living with diabetes, lupus, rheumatoid arthritis, IBD, and other chronic diseases, yet they still teach our children, fix our cars, and manage our businesses. To cleave a person's medical expense from their total contribution and describe it in terms of "loss" to a company is dehumanizing and beyond unethical. It's very much like comparing a chronically ill person to a malfunctioning television or dented car. . . .

 

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