"Employer-based health insurance coverage is not really insurance"

Friday, January 22, 2010

The following is from a friend of mine who describes himself as "an American abroad who is saddened at how American quality of life compares so poorly on this count compared to the European country with a similar GDP per capita in which he resides." I thought it was well worth sharing (bolding added by me for emphasis).
The most fundamental point to understand about the whole health insurance reform debate is that in America’s current employer-based system, nearly no one is really insured. I am not really insured, and I doubt that you, unless you are very wealthy, are insured either. It is not 45 million uninsured - it is the overwhelming majority of society that is uninsured.

Yes, employer-based health insurance coverage is not really insurance!


1. Because the moment you lose your job, your health insurance is in jeopardy. Yes, there is COBRA, but when one’s income suddenly drops to zero, how is one supposed to continue paying the premiums? (Thankfully, Obama pushed through Congress a 65% subsidy for the first 9 months of COBRA, but this subsidy has now expired.) Only 44% of people who lose their jobs even qualify for unemployment insurance (another scandalous problem), and then even those receiving unemployment insurance often receive only a fraction of what is necessary to cover food, shelter, utilities, let alone health insurance. COBRA payments for a family often exceed the entire monthly unemployment insurance amount. And, COBRA runs out after 18 months, and if the company goes bankrupt, there is no COBRA available. Being unemployed does not qualify you to receive Medicare, and though some states have special insurance programs for low-income children, this is a patchwork with lots of cracks to fall through and inconsistencies. Yes, Massachusetts has nearly-free health insurance set up by the state for low-income people, but there are issues with how quickly the unemployed can enroll, and moreover, many health care providers will not accept the Massachusetts state plans, as was recently reported in The New York Times. And Massachusetts is but one state - no other state even comes close to Massachusetts. (It is bitterly ironic that Massachusetts’ recent senate election may affect the chances of implementing health insurance reform everywhere but Massachusetts.)

2. Isn’t health insurance most important when you are so infirm that you cannot work? Yet, if you become too sick to work, you can lose your job and then you are in the same situation as the unemployed person, except that you may have huge medical bills and difficulty even obtaining proper care unless adequately insured. Your employer can fire you simply for being sick, forcing you to lose insurance rather quickly. Also, many insurance plans (except for the ones that conservatives mock as “gold plated”) have huge deductibles and uncovered expenses, even if the sick person has COBRA coverage. See this New York Times article.

This can, in short order, drain a person’s savings and make it impossible to pay for COBRA coverage, let alone the unpaid bills by the company that is supposed to insure the person. If it is a permanent condition, you might be able to apply for Social Security Disability payments, but this takes months, if not years, is usually rejected before appeal, and is not relevant for people with curable illnesses. And Medicaid only kicks in after two years of being on Social Security Disability. In the meantime, one is disabled with a meager income and NO health insurance.

3. Many employers offer insurance that is not really good enough to be called insurance, and employees do not have other options. Many plans have such high deductibles that people avoid seeking medical treatment (the opposite of what insurance is supposed to provide) or have many exclusions, restrictions, etc. One major health event can leave a person bankrupt, despite such insurance. This recent article from The New York Times exposes many of the problems with high-deductible plans.

As the article notes:
For most people, a high-deductible plan is basically a bet against yourself…You’re betting that you won’t get sick and you won’t have an accident. But isn’t that exactly what insurance is supposed to be? A bet that something might happen, and if it does you’ll be protected?

Yet, the taxation of so-called “Cadillac health insurance plans” now proposed as a reform is supposed to lower costs by encouraging low-cost plans, that is, plans that have high deductibles, co-payments, lots of exclusions, etc. How is that a positive step?

4. Of course, many of those working in small businesses, low-wage jobs, part-time work, irregular work, or those who are self-employed simply do not have access to group insurance plans. Individual plans are exorbitantly expensive (so they exclude those most likely to need them, the working poor), and exclude pre-existing conditions from coverage (the very people who most need insurance). Many people with a history of illness or pre-existing conditions cannot obtain health insurance at any price. Healthcare for these people and their families is characterized by exclusion, waiting until very sick to seek treatment, and bankruptcy or lifelong debt when a major medical event occurs.

5. Those who do not have a job to begin with, such as recently graduating students, also have no access to group health plans - there is no COBRA for those who have not been employed (though maybe some parents pay for a COBRA for university health plans for some recent college graduates from wealthier families).

Insurance is supposed to be about creating peace of mind; a feeling of assurance in one’s life. The current employer-based system does not do that. Where is insurance if you lose your job? Where is insurance if you are too sick to work? Where is insurance if you cannot find a job that provides it? Where is insurance if you work for yourself or even want to take a sabbatical or retire before you are eligible for Medicare?

There are other reasons to end employer-based health insurance: the employer should not have so much power over his or her employees that the threat of being fired carries with it the threat of losing one’s ability to access health care. Entrepreneurs and artists should not be restrained from going where their talents take them because of health insurance concerns. Health insurance should not be a consideration in matters of marriage and divorce. Those with chronic illnesses should be able to lead as full a life as possible. Having a chronic illness is painful enough - it is vicious for a society to impose extra financial costs on those already suffering. Need for medical treatment should never be a cause for bankruptcy or debt. The huge percentage (above 50%) of personal bankruptcies caused by medical bills is deeply damaging to individuals and society.

Health insurance reform must be about ensuring that every citizen and permanent resident of the United States receives medical care, regardless of employment status or income or health condition. Anything less is simply not worthy of the term “insurance.” Perhaps there is a role for private sector companies in that, as contractors for the government, but we will only truly have universal health insurance in the United States when, regardless of what else comes to pass in one’s life, one knows that medical care is guaranteed, young or old, employed or unemployed, sick or healthy, and when one is not penalized financially by the degree of need for medical treatment. Only strong government involvement can make this a reality – an insurance company, operating in a market, has exactly the opposite incentive: to exclude the sick and find ways to pay even the generally healthy as little as possible for health care expenses.

In the end, a capitalist system such as ours does allocate things based on ability to pay. Some people have fancy large houses, some have simple small apartments. But we also have a minimum wage (and food stamps and public housing/vouchers) to ensure that everyone has enough to eat and basic housing. Unlike food and shelter, where the basic cost is the same for everyone, more or less, medical costs fall unevenly. Minimum wages and Earned Income Tax Credits will never be able to deal with medical costs. Some people, because of genetics, accidents, contagion, misfortune, etc. will need $ millions in medical care, and others none at all. Hence, medical care cannot be part of a market system the way that food and shelter are, with subsidies to get everyone to a minimum level. A market-based model simply does not work for the healthcare sector.

Yet, there is one final, and even more important reason for the government to ensure that everyone receives equal and excellent medical care: all human lives are of equal worth in a moral sense. Being rich may provide a luxurious life, but we cannot allow it to be decider of who is left to suffer and who is cared for; who has peace of mind and who lives in constant anxiety about illness; who lives and who dies.

So, the homeless person on the street and the richest of the society deserve the same quality of health care. The rich should not be able to opt out and have better healthcare than everyone else. Indeed, the health care system will get the political and financial support it needs when even the rich have to support it, or they too will be negatively affected. This must be a key part of any reform.

Yes, the costs are substantial, but every other rich country in the world has managed to do this, for a smaller percentage of GDP than the United States already spends on healthcare. The essential fact is that the status quo is not really insurance, and so must be changed not merely because of costs, but because we want to end the savagery that allocates medical care based on ability to pay and so often imposes crushing debt or bankruptcy on the sick and vulnerable.