Health Insurance and Pre-Existing Conditions

Guest Post by Dr. James Brook, D.O.

Many people seem to not understand what it means to require “insurance” companies to pay for people with pre-existing conditions. To do so would require companies to lose money. When companies lose money doing something, they have to stop doing that thing. Requiring “insurance” companies to pay for large immediate costs for a customer, in return for a much smaller premium, obviously requires them to lose money. I put the word insurance in quotes, because this scenario is not true insurance at all. The purpose of true insurance is to spread risk, so that an individual does not bear the full risk of devastating conditions. A small number of people develop very expensive conditions, and it is unknown beforehand who those people will be. Large numbers of people pool their risk by purchasing insurance. Then those who do incur large costs have those costs absorbed by the larger group of people, through their premiums. Premiums are based on the risk that a person has when entering the insurance pool, to the best of the ability of the insurers to determine the customer’s level of risk. Suppose somebody who had not previously been paying insurance premiums suddenly comes to find out he needs a knee replacement. Under the scenario of requiring “insurance” companies to pay for pre-existing conditions, the company would have to pay for this new customer’s knee replacement, while only being paid a premium that is a very small fraction of the cost of the surgery. The person who got his knee replaced could then stop paying premiums as soon as the surgery bill is paid. A premium has to exceed the predicted cost to the company. To avoid losing money, the company would have to charge an immediate premium that exceeds the cost of the surgery, since the probability of the cost is 100%.

What incentives then apply to patients? They are incented to not buy insurance at all, until costly conditions develop, and then apply for “insurance,” which the company is forced by government to provide. What incentive applies to the company? They are incented to stop doing business, because they are forced to lose money. Both of these things happened under Obamacare. People gamed the system, “insurance” companies lost enormous amounts of money, and they pulled out of the markets. All of this was entirely predictable, and indeed was predicted by many people. It is simple reality, based on incentives. It may feel good to require coverage of pre-existing conditions, but it is magical thinking to think that it can be done, while companies continue to stay in business. It may be heartless for companies to refuse to lose money on their customers, but would you go to work if you were forced to pay your employer to do it? If you are not willing to lose money by working, then you are being heartless to require it of others.

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Dr. James Brook is a Direct Primary Care physician in the state of Idaho, offering affordable primary care to patients willing to pay affordable, direct fees at the point of service.  Visit Dr. Brook’s website for information about his innovative health care model, and to learn more about his health care reform philosophy, clearly illustrated in his book, The High Price of Socialized Medicine.

A Perfect Example of Adverse Selection

People like to speak about those evil insurance companies, not wanting to cover people with pre-existing conditions, but let’s play devil’s advocate for a moment, and look at what happens when the government forces insurance companies to accept all risk, without question.

Here is a perfect example of what we in the insurance world call Adverse Selection, the practice of purchasing insurance when needed, and cancelling when it’s no longer convenient.   In this case, a lawsuit was filed over a massive scheme to game the system.  Even I was fooled by DaVita, when they came to me as a broker.  In fact, the response I received from their insurance counselor when questioning the practice was:

“I understand your concerns over an increased population of high risk patients and agree that they should be spread out amongst carriers depending on their need for additional coverage and what they may be utilizing the coverage for.

There are a multitude of reasons these patients could really use coverage beyond Medicaid.  The biggest reason is access to care.  Being on Medicaid, these patients often cannot even obtain a primary care physician, let alone access to various specialists that could help with co-morbidities that could be keeping them off the transplant list.  Some of the other reasons could be the ability to travel and avoiding the risk of loss of coverage as Medicaid can tend to be very unstable coverage and can be terminated for a multitude of reasons.

As far as total numbers of patients we are looking to assist in enrolling in new plans for 2016.  I have about 35 patients that may be looking for new coverage.  That being said, there are also two other insurance counselors in Colorado with roughly about the same number of patients.” – Nov 4th, 2015 (date of email response from DaVita insurance counselor.  I still have a copy of this email message in my records.)

After receiving the answer above, and calling the insurance company (Anthem) to report and to verify that these enrollments would be within the law,  I agreed to broker a few of DaVita’s clients, as my heart went out to the patients who were in need of better access.  Much to my chagrin, I learned of this lawsuit today, announced by The Denver Post.

DaVita steered poor dialysis patients to private insurers to pump up profits, lawsuit says

Obamacare has created a cesspool of gamers…those who wait until open enrollment to treat non-emergent health issues and cancel shortly thereafter.  In fact, the average life of an Anthem individual plan in 2016 was only 7 months!  To those who haven’t understood why your health insurance rates are so high, now you know!

We ALL have the power to create change… even me!

Guest Post by Denise O’Malley

About 15 years ago I had what I shall call a ‘debate’ with my next-door neighbor who, like me, was a health insurance agent. I boldly told him I know how to solve the medical insurance crisis (yes, it was going on back then); of course he wanted to know my miraculous remedy and rather poo-poo’d my suggestion that ‘wellness’ was the solution.

In theory, it’s really a very simple concept… medical claim cost is the only big-item variable in an insurance contract. If that number goes down, premiums have the capability to go down. Right?

How do you reduce medical claims?

Don’t have them… or at least reduce the frequency of them.

Fast forward to last night. I was sharing my theory with someone who was very intrigued and she asked,

Whose responsibility is it to get medical claim costs down?

I looked at her, rather surprised by the question, and said “It’s your responsibility, and hers and his (pointing at others in the room), and it’s mine.”

Another woman in the discussion exclaimed “Some medical expenses are unavoidable! You can’t ignore medical care when you need it.”

Of course not”, said I.  “But it is still our responsibility.”

TAKING RESPONSIBILITY

There are many articles on the Internet about how you can oversee, manage, and reduce the medical bills you DO incur and I will let you discover those for yourself. My passion – and what my company is all about – is about knowing when to use western medical care and avoiding the need for expensive medical care through healthy habits and living a healthy lifestyle.

YOU / WE HAVE BEEN TRAINED TO INCUR MEDICAL CLAIMS

Yes, it’s true. As a society, you’ve been trained that when you feel bad, pick a provider out of your medical insurance plan directory and go… usually for a low co-payment.

We’ve been trained to believe the medical plan should cover everything from the sniffly nose to the big illnesses. Fact is, that’s not what it was originally intended to do.

I define insurance as the transfer of a perceived financial risk… and it was intended to cover illnesses that could financially devastate a family with expensive treatments and hospitalization. I am a firm believer that is what it SHOULD do… not cover the expenses that are not financially devastating.

And the latter are frequently avoidable by living a healthy lifestyle. In other words, embracing ‘wellness’.

WHAT DO I MEAN BY ‘WELLNESS’?

We all probably have a different definition, but there are commonalities: eat right, drink water, move your body, find balance and peace, reduce your stress, and don’t put things into your body that are bad for you.

Many of us hire professionals to help us on the journey to wellness: nutrition experts, personal trainers, coaches and counselors of all types, massage therapists, and the list goes on and on.

Unfortunately, services related to attaining or maintaining optimal health can’t be paid with tax favored dollars from Health Savings Accounts or Flexible Spending Accounts, or even on your income tax return. According to Internal Revenue Code Section 213, where medical care is defined, qualified expenses must be specific to illness or injury. Get a note from your doctor and it might be covered, for a year… but why should you have to go see a doctor and get a prescription just to be well?

IT’S TIME TO CHANGE WHAT CONSTITUTES QUALIFIED MEDICAL EXPENSES

According to the National Center for Complementary and Integrative Health (a division of the Centers for Disease Control/CDC), 59 million Americans spend money out-of-pocket on health services for both illness and wellness that are not covered by medical insurance… to the tune of $30.2 BILLION dollars a year!

I’m on a mission to change the definition of what a qualified medical expense is and have proposed my Congressman introduce legislation to read in part:

To amend Internal Revenue Code Section 213(d) to expand the definition of qualified medical expenses to improve expansion and utilization of Health Savings Accounts, and other purposes.

SEC. 213. Amend Paragraph (d)(1)(A) to read “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or services for the purpose of attaining and maintaining optimal wellness.”

Quite frankly, I surprised myself in getting an appointment with my Congressman’s office to present my proposal. I hate politics and, in fact, I feel very naive dipping my toes into this pond. What I have discovered is an openness to SOLUTIONS to fit their agenda, which goes hand-in-hand with my personal philosophy of ‘Don’t Complain Unless You Also Propose a Solution.’ 

Granted, I had to find the hot button to get his attention, and that was the magical words “Health Savings Account (HSA)”… what many of our legislators believe to be the solution to the medical insurance crisis. I’m just taking a different approach than attacking the Internal Revenue Code specific to HSA’s… I’m going directly to the root cause – a concept all good medical practitioners employ to heal you instead of treating your symptoms. My solution is in a different part of the Code and defines qualified medical expenses used for the HSA rules. Follow me?

WE ALL HAVE THE POWER TO CREATE CHANGE… EVEN LITTLE ‘OLE ME!

I harbor no false illusions that this little change in the tax code will solve the medical insurance crisis… but it’s a start. The lesson here is…

  • I saw a need but didn’t know how to go about creating the solution.
  • Eventually (albeit 15 years later), the solution came to me.
  • I did my homework… I researched, and researched, and researched.
  • I spoke up.

My proposal may never go anywhere or it may get introduced but whither away and die.

Or it may make it all the way and change the law so millions of American’s can save money while pursuing activities to attain and maintain optimum wellness… and maybe, just maybe, reduce medical claim costs in the process so insurance premiums can go down.

Want to join me in this journey? Contact me!

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Denise O’Malley is the Founder of You Define Wellness! in Centennial, CO. You Define Wellness! is a unique employee benefit program that bridges the gap between what medical insurance lacks, and where corporate wellness programs crack. Utilizing a provider network with more than 100 modalities, employees define wellness based on their personal needs, wants, and values while adopting healthy habits and lifestyles through regular usage.