Healthy Story update: Why Actor Man is screwed

A while back I wrote about my friend the ActorMan whose coverage ended because he's moving cross country (and COBRA was $300/month, so he didn't buy it.)

I told him to try my sponsor, eHealthInsurance.com, and let me know what happened.

Imagine my disappointment when he emailed me to tell me that the one (that's right, one) plan that the eHealthInsurance.com site spit back to him was even more expensive than his rejected COBRA! I emailed my contact over there immediately. And I wasn't really to nice about it; I was kind of snarky.

To quote me directly, I said:

"What's up with New York City? Any particular reason the biggest city in the country has so little coverage available through ehealthInsurance.com?"

And, as is typical with this blog, I learned something new for the day when I got my answer.

Find out what...

Apparently multiple states in the Northeast have implemented state legislation that had good intent, but has resulted in poor results for people like my friend ActorMan.

The first state mandate is called Guaranteed Issue: Every health insurance carrier must provide health coverage to anyone who asks for it. (This is valid in NY, MA, ME, NH and VT.)

The second state mandate is called Community Rating: Those health insurance carriers can't raise rates without raising them by community. (all the same states above except MA have this mandate, although the definition of "by community" varies...could be zip code, county etc.) The result is one price for all, regardless of age etc. Hey, the price is probably pretty good for older people, not so good for young people, like ActorMan.

Obviously the intent was to protect consumers and prevent people from being unduly denied from getting the health insurance that they are willing to pay for.

Unfortunately, there's ample room for abuse on all sides with these mandates.

First of all, the uninsured can go to the doctor and find out they have something costly, from cancer to pregnancy, and any company must give them a plan. People know they don’t have to have to have health insurance because they can get coverage when they need it, and they take the risk. The end result is that lots of sick people get insurance, and lots of well people hold off.

Of course, being morbid, I asked what would happen if you got hit by a bus, were unconscious and rushed to the ER, where they operated on you without you ever regaining consciousness?

Well, my eHealthInsurance contact is checking for the exact details, but it's complicated even further by HIPPA rules. One of the 'P's in HIPPA is 'Portability', but it could easily stand for 'Privacy.'* And the rules make it nearly impossible for someone else to sign you up for health insurance if you're incapacitated.

[*Changed per valid comment below]

So that is one very big risk you take!

On the other hand it's not very nice that the health insurance carriers are required to have the coverage available to anyone who asks, but they're not required to market it! The fact is they're not that anxious for people to find their individual plans.

eHealthInsurance.com is a marketing arm, so making the plans available to them is making those plans very accessible. And the carriers don't want those plans that accessible.

My EHI buddy was quick to point out to me (I'm sure not for the first or last time) that eHealthInsurance.com is not cheaper than getting that plan direct from the carrier. The benefit is that, as a broker, they will actually represent a client in a dispute with a carrier. And more commonly: the benefit is a lot of choice and the ease of comparing those choices.

In some states, that works out great...California has almost 100 plans to choose from.

In NY? Not so much.

Comments

[Bob]

Don'tcha just love it when law makers get involved in businesses they don't understand?

You got it right. Those are the no-no states where the majority of the consumers get the shaft because of protectionist laws mandating self destructive business practices. There are a few other states, KY & MS where coverage is available but equally as high primarily because of litigation costs.

What (NY, MA, ME, NH, VT) have done is take HIPAA a step further and extended the same mandates placed on group carrier to individual carriers. HIPAA has added almost 50% to the cost of group health insurance for many small businesses. That has forced many small businesses to discontinue health insurance for their employees now is affecting the individual market in some states.

Here's a heads up for your buddy. Online sources have only a handful of carriers and policies that are available to the general public. Coverage may not be any more affordable but at least he will have more than one plan to consider if he looks offline.

As for your "I'm sick, give me a policy now" and other scenarios, you aren't the only one to come up with that scenario. Carriers thought of it too. That's why only a handful even offer coverage in those states, and the ones that do charge 2 - 3x what they would bill for similar coverage in a neighboring state where a free market exists.

And this . . . when states mandate that carriers offer certain coverage the carriers simply withdraw ALL lines of coverage from the state. This makes coverage even more scarce, and more expensive. Most recently we saw that in FL & TX where some carriers wanted to withdraw from the homeowners market. The DOI said no, so the carriers threatened to pull all their lines of coverage.

The DOI reconsidered their position.

We would be much better off if lawmakers would find something better to do with their time than mess with a free market operation.

[hgstern]

Elisa:

Clicked over to you from a comment on my blog. I've only skimmed your site, but it seems pretty interesting; I'll be back.

One small quibble with your ActorMan post: There's only *one* "P" in HIPAA, and it doesn't stand for "Privacy." To be sure, there are some onerous privacy requirements that have arisen out of it, but it was not the primary purpose.

Of course, SarBox has had a similar impact in this area, as well.

Take care!

[Elisa Camahort]

Good point...I should change that to say that it "figuratively stands for privacy."

Thanks for visiting!

[hgstern]

.
WoW! That was QUICK!

I think the change you made was quite appropriate, and appreciate that you did so; there's quite enough misinformation about HIPAA on the web, no sense adding to it ;-)

[Elisa Camahort]

I am nothing if not an obsessive blogger :)