The public vs. health insurance companies

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Over the weekend, the state Attorney General’s Office and Insurance Division struck a deal with Blue Cross Blue Shield that will allow the company to raise its rates by an average of 21 percent. BCBS is the state’s largest private insurer in rural areas.

But 50 people gathered at a Public Regulation Commission meeting Monday had expected a public hearing on the company’s request to hike its rates. Commissioner Jason Marks took objection to the deal, saying it should have been negotiated in public. And State Senator Dede Feldman said the State Legislature may look at how the State Insurance Office sets rates.

So this week’s question is: Should the process of setting insurance rates be more transparent to the public? Should it be more difficult for companies to raise rates?

SARAH WELSH, executive director of the NM Foundation for Open Government:

Yes, the process should be more transparent. Chavez’s promise to post proposed rate hikes online is a start.

This story is a good example of the political and public-relations consequences of cutting the public out of the discussion – regardless of what the government’s intentions are. Maybe this is a good settlement. Maybe everyone was acting in the best interest of consumers, as they say. But if that’s true, then why not argue the case in public? Why scramble to ink a deal over the weekend, pre-empting the public hearing? Why upset a roomful of your most impassioned constituents? For those of us who are a bit cynical, that behavior raises a lot of questions and makes it harder to swallow any assurances to ‘just trust us, it’s for your own good.’ And we shouldn’t have to offer our blind trust – that’s the point of open government in a democracy.

(Full disclosure: I have a BCBS individual policy, and so far I have not been affected by the rate increase.)

BILL TURNER, hydrologist and former director of the Middle Rio Grande Conservancy District:

The process must be transparent.  It wasn’t regardless of whether the PRC had to grant the increase.   That was wrong.  More back room deals outside of public scrutiny.  Companies and their accountants and actuaries raise rates after careful study.  My beef is that the cost of medical care includes egregious waste.  Look around your doctor’s office.  Most of the personnel there simply push paper for a few doctors.  Paper pushers outnumber the doctors.  Also, why must I visit a new doctor twice, once to say hi and the other for the service.  My son is a doctor and the reason they do it is so they can get paid to pontificate over your medical history.  Why not a central history register accessible with a password from the insured?  I travel 30 miles to Belen to see a doctor who only inconvenienced me once and he was terrific.

Second, in surgeries, in my experience, much of the “kit” they use gets thrown away yet it is charged for.  Waste.  I am sure your readership can name other examples of waste like going to the doctor without using any common sense.  Everyone gets colds.  Who needs a doctor for that.  We have become a society of pill pushers.  During residency my son was told by a doctor to pick a few favorite pills and prescribe them for everything.  They will do in 90 percent of cases.  Fortunately, that is not his style.  Plenty of bed rest, aspirin, cool baths, applesauce, toast, and chicken soup. Everyone gets normal respiratory and gastrointestinal problems.  It is unpleasant but it is good for the maintenance of the immune system.  I get to catch up on my sleep.   A hot gallon bottle over a boil will pop it cleaner than a doctor every could. And, its free.  Never blow your nose.  That can cause bad sinus trouble.  Use a neti pot. I learned many little remedies from my father who was a doctor. No doubt curanderas have many ancient remedies.  Actupuncture and ancient Chinese medicine may be less expensive than the emergency ward where they treat you with any darn thing they want without your approval and you say, my insurance will cover it.

My employees are covered by Blue Cross and I am seriously considering either terminating the coverage or asking them to pick up the difference.  There seems to be too little oversight of physician and hospital practices, so we pay for the egregious waste.  We desperately need tort reform. I am just getting started but I’ll leave it there.

PAUL GESSING, president of the Rio Grande Foundation:

As a current Blue Cross customer, owning a Health Savings Account in the individual market (the one that is facing increases), I have a keen interest in this topic. That said, I think the problem here is not one of transparency, it is one of rising health care costs and Blue Cross (a mutual insurance company, owned by its customers; profits must be reinvested in the business or given to customers) facing the need to cover costs in this individual marketplace.

While not having access to their books, it is impossible for me to confirm the “need” (or lack thereof) for Blue Cross’s rate hike. Ultimately, however, these public hearings are not an efficient way to determine this. Instead, we need to reduce regulations and implement policies to make New Mexico a competitive health insurance market with multiple insurers doing business here. A competitive market will obviate the need for a “transparent” hearing process because consumers will purchase the best, most-cost effective option.

Ultimately, this debate at its core is about how to reduce health care costs. President Obama and Congress have just given the insurance companies exactly what they have been clamoring for — a legal mandate to purchase their product, financed by taxpayers. Unfortunately, this does nothing to attack the cost issue which is that a vast majority of Americans do not directly pay the costs of much of their health care. Until we abolish the third-party-payer system and encourage people to shop around and use only the care that they need and are willing to pay for, we’ll be stuck with health care costs spiraling out of control. With regard to passing along the costs of health care, Blue Cross is just the middleman (and messenger). We can’t shoot the messenger when the problems come from Washington and Santa Fe.

CARTER BUNDY, political action representative, AFSCME:

There should be more transparency in all parts of New Mexico policy-making, and this is no exception. As to raising rates, this is going to remain a problem as long as there is a for-profit middleman and we don’t take other serious measures to curb rising health care costs in the public and private sectors alike. One of the things left out in this round of reform is more predictability for provider liability. Yes, I’m advocating for some kind of tort reform, but not caps. If big damages are needed for bad actors, they should stay as part of the mix. But we do need real predictability if we’re going to reduce the amount of defensive medicine being practiced, which is unquestionably a big driver of costs.

We also need to fundamentally re-evaluate our pay-for-volume system that gives financial incentives to providers to buy all the most expensive machines and then use them too frequently. Some of the overuse is due to defensive medicine, but no matter how well-intentioned providers are, there’s no getting around the fact that there are massive financial carrots and sticks that both push providers to overuse the system (quick aside: there’s NO evidence that patients are the ones pushing overuse. Most patients are in such a poor position from an information standpoint that they couldn’t possibly be the primary force behind overuse, which is exactly why the normally sound idea of adding to consumer costs for use simply doesn’t apply in this area–consumers will do whatever their provider tells them is the best course due to the information asymmetry and the importance of health).

Two other issues on insurance costs with current reform: One of the real flaws in health care reform is that the insurance companies are going to charge what the market will bear, as does any good for-profit organization (and even the “non-profits” in this field effectively act as “for-profits”–they try to maximize revenue while minimizing costs, even if it means not treating people who are sick). The flaw is that by having subsidies (a necessary part of any individual mandate, which is itself a necessity if we’re going to say that companies have to cover sick people), the system will now allow insurers to keep raising their rates knowing that the cost will be picked up by someone who is legally mandated to pick up those costs and has deep pockets–the government.

I know I’m admitting to a flaw in the system, and anti-reformers will crow that even the AFSCME guy sees a problem with it. But it’s a valid criticism of the plan, and something that has to be addressed going forward no matter which party controls Congress or the White House. And fixing this flaw won’t be easy.

The other big flaw relating to the individual mandate and insurance prices is that the “penalties” for not having coverage are peanuts. Smart people, especially if they’re young and healthy, may decide that they’d rather pay the small penalties and then sign up for coverage as soon as they get sick. That will in turn make insurance company risk pools worse, meaning insurance companies will have to charge higher premiums (even leaving aside their desire for bigger profits, it’s simply costlier to insure sicker people. This is going to be a legitimate reason for raising rates). Fortunately, the substantive answer to this flaw is far easier–raise the penalty so that people are incented to participate instead of being incented to step out of the system if they’re healthy. But a sound, simple substantive solution is sometimes a politically tough one, and that’s certainly the case here.

JIM BACA, blogger, former director of the U.S. Bureau of Land Management, Albuquerque mayor, state land commissioner and recently retired natural resources trustee:

Of course, there should be transparency on setting of insurance rates in New Mexico.  There should be public hearings on these rate setting processes.  However, I wouldn’t hold your breath for tremendous turnouts of the public at such hearings.  They just normally are not motivated enough to attend these monotonous and jargon-filled testimonies.  Those who will show up at these meetings are nonprofit watchdog agencies and insurance industry attorneys,  lobbyists and representatives.  (It is strange the Attorney General’s Office participated in sinking the hearing process recently.) That is just the way it works.  But, having the opportunity to attend such hearings is a good thing and should be afforded the public.