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A Tale of Two Underwriters

Apr
13
2006

It is the best of times, it is the worst of times, it is the age of wisdom, it is the age of foolishness. …Well not much wisdom actually, but I thought that after all the health care theory I’ve laid down on you at Spot-on in the last few months, I ought to explain how a poor schmuck in the individual market goes about getting health insurance, and I used a schmuck I know exceedingly well – my own self – as a guinea pig—just for your casual enlightenment.

The story starts with your protagonist leaving the cosseted bosom of his employer group policy after the group plan ended in 2002 due to the employer going out of business—note that that means no COBRA, as there’s no plan to buy “into”. But no fear, your brave protagonist was leaving the country for an extended period soon anyway (yup, the post-dot.com trip to Asia) and bought a short-term low-premium high-deductible policy. Those kinds of policy exclude anyone with any type of serious illness, so they’re pretty cheap, and only really get used in the case of trauma – which I provided them by snowboarding into a tree and dinging my knee up pretty well. Some months later, having bought another couple of short term policies—neither of which seemed to care about the knee to tree contact incident and the subsequent surgery—I came back from out of the country and decided that I wanted to work for myself. Or at least that was what the employment market appeared to decide for me.

That meant again finding my own health insurance.


Now at some point it’s wise to move to permanent health insurance, because if you take out short-term (one year) insurance, you get re-underwritten at the policy’s end. So if, for instance, I developed cancer while on the short-term policy I would never be able to buy health insurance and be in real trouble. On the contrary it’s quite hard for permanent insurance policies to kick you off.

I went to the biggest online market for health insurance, eHealthinsurance.com, and went looking. At that time (2003) a $2000 deductible with $3,000 max out of pocket plan was $70 a month. So I applied for that and bought yet another short-term policy with roughly the same benefits at about the same price to go with it while they processed my application. Both, incidentally bought from different parts of the same large company. To protect the guilty we’ll just say that the company was a defensive implement that a medieval warrior might use, but of a particular color. I intended to drop the short term policy when I was approved for the long-term one.

Unfortunately for me, when the warrior’s implement company looked at my records they found out about my knee problems, and decided that when they’d said $70 a month for that coverage, they meant $400, or roughly six times the amount. So I stuck with my short-term policy for a while. I even needed more knee surgery after re-dinging the knee I had done before (although the cost to the warrior implement company was relatively low overall). Still a year later my coverage was about to expire and I became nervous.

Then low and behold I became enough of a media type that a local association, SF Media Alliance, let me into their insurance group, which bought via a buying group for employers called PacAdvantage. Buying groups are a version of an insurance pool which averages out individuals’ risks and experience. The same basic coverage, also through the same warrior’s implement company, was $200 a month. Unfortunately, the only people who would choose to buy coverage via that type of association are the people who can’t get it cheaper in the individual market—remember that was about $70 a month until they found out about my knee.

So by definition these pools lose their healthier members and gain sicker ones all the time, in a process wonks call “adverse selection”. PacAdvantage, realizing that that Media Alliance was full of such people, kicked them out on a technicality leaving several thousand people to the whim of the individual market.  (Funnily enough I had only one physician visit and took less than $50 worth of prescription drugs in the entire 18 months I was in this plan, so my health spending was way below the nation’s average of $6,200 a year, and I was helping their risk profile, but obviously not enough!).

Knowing that this eventuality was coming I yet again bought a short-term individual policy, again with roughly the same benefits, again from the tinted warrior’s implement folks. And then set about seeing how the long-term individual market would regard me this time, some three years on since they last scoffed at me. So I went back to eHealthinsurance and tried again. The process of doing this is a complete gong-show: online-user satisfaction may be their aim, but between the broker and the insurer, it’s a mess. I wrote about that a while back on THCB. However, after filling in the forms, I ended up talking to a broker at eHealthinsurance and was told that it was fine to apply to two or more companies and that often they varied massively in their premiums even though the same person was applying. Remember that comment.

So I ended up applying at two companies; one was again the azure warrior’s implement and the other was partially named after something used by a lepidopterist to catch his prey. Both policies were about $100 a month (before underwriting) for about $2500 max out of pocket. (Yup, prices have gone up in the last 3 years!). Both of them had me complete a long standard form asking about all my doctor visits in the last few years. Both of them sent me another form requesting “more information.” The butterfly company asked me pretty much the same questions I’d already answered.

For those of you that care—and both companies did—I have a list of complaints. And they may or may not matter to my future health. The first is gout, but that is well controlled by a cheap medication, and there’s no real alternative treatment if it gets much worse. You live with it or you deal with the pain. The second is the succession of knee surgeries on my left knee. As far as I’m concerned it’s as cured as it’s going to be, but there are no guarantees—one of my physical therapists tore her ACL crossing the street! So I filled in the form and sent it back, pointing out to them that I’d  already told them that information. Note that you could have terminal cancer, but so long as you didn’t know and a doctor hadn’t spotted it, you might be OK filling in this form!

Meanwhile, the warrior’s implement guys were instead after my medical records. Anyone who knows this country’s system understands that there’s no such thing as a medical record. There are various incomplete manila folders anywhere you’ve ever seen a  doctor. Extracting them from physicians’ offices costs up to $50 a time and is a right pain in the rear. There’s actually a set of companies that does just that! And there’s nothing like a national “health credit reporting bureau” such as mortgage companies use. So after getting my permission (using yet another form, sent to yet another separate company) and making three requests to my beleagured doctor’s office to get the form of a patient they see once every two years, the warrior’s implement guys got my records. Ignore for the moment that they were my insurer for the previous two and a half years, which is longer than the average American stays with one plan, so they should have plenty of information about me in their system anyway.

Meanwhile, back to the paper (record) chase. They dragged up a five-year old blood test that suggested that I might have high cholesterol (but not high enough for my doctor to tell me to do anything about it), and a complaint that I had a groin strain. So I might have a heart attack in thirty years time, and I can’t go mountain biking because my gonads hurt. Of course they don’t know that I’ve lost thirty pounds in the last 18 months and am about to get married which makes me statistically healthier! But then they never asked!

So what’s the result? It’s as logical as you would expect. The butterfly company approved me at the “perfect” rate, and I’ve been a happy customer for a month. The warrior’s implement company didn’t even offer me a worse rate, they just rejected me completely!

Actually not quite. By law (something called HIPAA) all insurers have to cover ex-group plan members who lose insurance through no fault of their own, but at something over $400 a month for a $4,500 deductible. These days as a domestic partner, it would be cheaper for me to jump on my fiancee’s cushy and expensive low-deductible work plan and pay the full fare. Incidentally the warrior’s implement is a non-profit company, and the butterfly-catcher dudes are for-profit. Just more proof that that distinction is meaningless.

My conclusion is that the individual market is a complete disaster for people that are sick, or that are healthy but insurers think might be sick, and by definition is therefore useless as a venue for insurance. Remember that the concept of pooled social insurance is to average out risks and costs. But what’s even more incredible is that given basically the same information, two highly sophisticated health plans come to dramatically opposite conclusions. And as was pointed out recently, some other azure insurers carrying Christian symbols are going back cancelling policies based on alleged “misinformation” on those applications. Frankly I’d forgotten about the groin strain visit five years ago, but luckily the butterfly guys only asked me about the last three years (even though I told them about the first knee surgery from four years ago). Who knows, maybe they’ll come after me if I need lots of groin care in the next few years? In any event it’s crazy to ask people for that much information, but given the current incentives in the individual market one company at least feels they must.

After all, my guess is that my prognosis is pretty much the same as any other middle-aged man’s. A sensible health insurance system would insist on a standard package of benefits being offered to everyone, with no underwriting allowed. I would have to pay more than I’m paying now, but people who were sick would be able to get insurance. Either the government could do this via the tax system, or there could be a mandate as Massachusetts seems to be trying. But no-one should be priced out, and no-one should be allowed to opt out.

And health insurers could then fire all those underwriters with their incompetent information gathering processes, and instead get on with the business of promoting better care for their members. Something that they know something about and—if encouraged properly—could do much, much better. Who knows, perhaps … I see a beautiful city and a brilliant people rising from this abyss, and, in their struggles to be truly free, in their triumphs and defeats, through long years to come, I see the evil of this time and of the previous time of which this is the natural birth, gradually making expiation for itself and wearing out.
High-minded literary credit inserted at editor’s insistence: Charles Dickens, A Tale of Two Cities.

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