Insurers wary of universal health care

August 14, 2009
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(Editor’s note: This is the second installment in a series of Business Journal stories focusing on health care reform issues.)

Insurance companies and agents have found themselves on the defensive against those who back the idea of the ultimate health care reform: a universal, national, government-run program.

“If we have a national health care plan — social welfare — there’s no need for me,” said Steve Wisneski of Creative Benefit Solutions in Muskegon and past president of the West Michigan chapter of the National Association of Health Underwriters.

“National health care will be run with the same efficiency as the post office and the compassion of the Internal Revenue Service,” snapped Dave Morganstern, owner of Associated Insurance Design in Ada.

Just before the August break for Washington, D.C., lawmakers, Speaker of the House Rep. Nancy Pelosi, D-Calif., raised the ire of the insurance industry by labeling its members “villains” and encouraging Democrats to take that message back to their districts.

According to TheHill.com, Pelosi said: “They are the villains in this. They have been part of the problem in a major way.” She went on to accuse insurers of immorally denying coverage to people with pre-existing conditions, fearing competition from a government-run plan and causing costs to spiral.

Pelosi’s rhetoric reflects those who point to the cost of bureaucracy and administration as the culprit in rising costs that have pushed health care spending to 17 percent of the GDP.

“She basically called insurance companies the right hand of Satan and the complete cause of the whole thing and out to harm the American people,” said Robert Hughes, founder of Advantage Benefits Group and chair of the Health Care and Human Resources Committee of the Grand Rapids Area Chamber of Commerce.

Blue Cross Blue Shield of Michigan issued a statement opposing a government-run health plan, not differentiating between a universal, single-payer system and other proposals that would insert a government program, aimed at those unable to afford other health insurance, into the marketplace.

“A government-run plan is unnecessary in reform and will have devastating consequences, especially for private, nonprofit health care in Michigan,” reads the statement from the nonprofit company, the state’s largest insurer.

Along with the national Blue Cross and Blue Shield Association, BCBSM is advocating national reform that provides coverage for everyone, aligns health care costs with the Consumer Price Index, eliminates medical errors and cuts the incidence of diabetes in half.

This particular reform fight has made strange bedfellows of BCBSM and Priority Health, which have been on opposite sides of the individual health insurance reform debate in Lansing but agree on their opposition to a universal federal system.

“If we as health plans are able to come to the table and provide affordable access for our members, I’m not sure what a nationally run health plan would add to the mix,” said Leon Lamoreaux, Priority Health’s vice president for government programs.

Some 158 million Americans have health coverage provided through employers, according to a survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust.

Nationally, 62.3 percent of Americans, compared to 68.9 percent of Michigan residents, have employer-based coverage, according to a Michigan Department of Community Health report released in June. Another 6.9 percent nationally, and 6 percent in Michigan, buy health insurance on their own.

Benefits companies create insurance package benefits for companies to offer to employees by considering the different products and rate structures of a myriad of insurance companies. And the best choice for a company, especially one past the 100-employee mark, may be self-insurance, said Hughes, adding that 80 percent of his customer base chooses to set aside the money to pay health claims itself and hires a third-party company to administer the program.

Jim Kenyon, principal at Pinnacle Health Partners, said his company typically earns between 2 percent and 5 percent of a company’s premium cost for sorting through health coverage proposals and making recommendations.

A study published in the New England Journal of Medicine in 2003 pegged administrative costs at 31 percent of U.S. health care spending in 1999, a figure relied upon by universal health care proponents such as Physicians for a National Health Program. PNHP estimates that moving to a single-payer system would excise $400 billion from health care spending.

But conservative pundits point to a multi-headed, new bureaucracy that would be created under a universal government program.

For those who sell insurance, the remaining book of business, consisting of coverage for areas such as dental, vision, disability and life, would provide less than a living wage, Wisneski contended.

“If the individual agent is eliminated from the delivery of service to the public, who is going to replace what we do?” Kenyon added.

Next week: More on the anticipated area impact of health care reform proposals.

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