Saturday, December 5, 2009

Insurance companies - Plenty of competition: state lines have nothing to do with it

Open Forum

Insurance companies
Plenty of competition: state lines have nothing to do with it

Howard Sharp
Winchester Star
December 5, 2009

Quite a few years ago, my wife was in need of outpatient surgery for a broken bone that could not be set correctly. After being told many times to be at the hospital no later than 6 a.m., we made sure we were not late. The nurse who got my wife settled told her to relax, as she was scheduled for 1 p.m. What?

I headed for the doc’s office with fire in my eyes. The surgeon’s chief nurse told me that the mix-up was the fault of an insurance company, because the company had not told them if they would let them operate on another patient or not.

That statement did not cool my jets. Arriving back at the surgery location, the doctor presented himself and started telling me where I was wrong. I stopped him and asked how he would feel if it were his wife lying in the bed. He apologized for the scheduling mix-up, and we got on with business.

The point of the story is that insurance companies don’t tell anyone if they can get medical or surgical services. They only state if and how the contract with the insured will pay for such services. For any member of the medical profession to state that an insurance company will not let them perform a procedure is pure ignorance. The decision to perform a medical or surgical procedure is strictly between the physician and the patient.

Insurance contracts, either individual or corporate, are written by attorneys and employees of those insurance companies. These contracts must be approved by the state corporation commission. There’s your McCarran-Ferguson Act, Winchester Star.

Now, besides approving these contracts, the bureau provides other services to the taxpayers. It sees to it insurance agents are tested and duly licensed. The bureau also rides strict herd on these companies to make sure they administer the contracts correctly — including enforcement, if necessary.

The last figure I was aware of showed more than 200 companies licensed to do business in Virginia. I am sure most people have heard of Aetna, Prudential, United Healthcare, Travelers, John Hancock, and Equitable.

The point of this statement is actually a question. What makes Congress, Michael Halseth, and The Winchester Star make statements that companies selling across state lines would make premiums cheaper? All of the larger companies operate in all states and the smaller companies in most. If the current system does not provide for competition, then how many companies does it take?

It’s called risk. All companies must consider prior claims experience for different groups of people, ages of participants, male or female content, and estimated cost for the future. It does not matter what state the company is selling from: the rates have to be predicated on where the contract is being sold to cover the customer.

Some insurance companies are not capable, or do not want take such a risk. Large employer groups are usually rated to a degree on the claims experience of their own employees. Smaller employers are usually rated among other smaller employee groups in an area or across zones in a state. Quite often, there are professional or trade associations that sponsor a pooled group for its members.

So, Winchester Star, the types of pools you mentioned are out there. Yes, there are state mandated benefits to contracts in many states. But there are also federal mandates already involved that will increase with a “national” program. Taking all of this into consideration, I don't see how anyone can say that buying across state lines will make contracts cheaper, or that a law passed in 1945 created a monopoly or stopped competition.

Speaking of competition, what kind of competition does the Winchester Medical Center have, and what kind of financial reserves are they sitting on? What kind of competition do the physicians of this area have? Are these professionals willing to take a large reduction in pay? The odds are high of their incomes taking a large hit with any of the current bills.

Maybe the hospitals, the physicians, and the insurance companies should sit down and work out these financial hang-ups without government being involved. Is it too late? This Big Three of the medical world could cut down greatly on waste and fraud among the three areas to reduce cost greatly. Problem is, they all have a different ox being gored and the “patient/customer” has tired of it, so the politicians have jumped in with both feet to avoid the real issues they need to address.

When people don’t like their medical insurance coverage, they should remember it was likely written by business people with the input of people with hospital administration degrees, and physicians, and signed off on by “lawyers.”

A wise local businessman, Ed Bridgeforth, used to tell me about his “competition. You’ve heard of Coke and Pepsi, haven’t you?” If anyone has heard of the aforementioned insurance companies, then they should understand that, yes, they have plenty of competition, and state lines have very little, if anything, to do with it.

Howard Sharp is a resident of Frederick County.

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