One Choice Is No Choice

I was licensed with over fifty different insurers. Sure, most of my Cuyahoga County clients acquired their health insurance from one of the half-dozen major carriers, but Gosh there were a lot of choices. That was 10 years ago. Now we have two or three good options in Greater Cleveland. And we’re the lucky ones.

Ohio’s population is spread across eighty-eight counties. We have major metropolitan regions, cities, towns, and rural areas. We all may share the same state government, but we do not share the same health insurance options. Cleveland, Columbus, and Cincinnati have choices. Nineteen Ohio counties will have only one health insurer participating on the Exchange in 2017. One! Twenty-eight Ohio counties will have twice as many insurers, Two.

In nineteen counties, if you don’t like Anthem Blue Cross, you can still choose Anthem Blue Cross. That’s it. And by the way, thank G-d it is Anthem and not some tier 3 level Brand X insurer. But one choice is no choice. Will Anthem’s network cover Your doctor? Your hospital? Be affordable? I can’t answer that until the final rates and plan information are released.

And yet we are still considered fortunate in Ohio. Less than 15,000 current Exchange enrollees reside in a single-insurer county according to the Iowa City Press-Citizen. The national picture is much worse. Five states – Alabama, Alaska, Oklahoma, South Carolina, and Wyoming – are limited to a single insurer for the individual health insurance Exchange. That is five entire states. Several others are limited to a single insurer for most, but not all, of the state. According to a recent New York Times article, 17% of the U.S. population will have only one individual health insurer available in 2017.

Where are the other insurers? We’ve seen companies fail (the government created Co-ops, HealthSpan) and we’ve seen companies abandon the market. Aetna and UnitedHealth Care have been the most vocal about leaving the individual market. UHC and Aetna both reported incredible profits this year. It is important to note that these profits are in spite of, not because of, their individual Exchange business. UnitedHealth Care reported a loss of close to $500 million in 2015 on new individual health policies compliant with the Patient Protection and Affordable Care Act (Obamacare). An Aetna press release of August 15, 2016 details a Second Quarter pretax loss of $200 million.

Neither Aetna nor UnitedHealth Care see any reason to continue to bleed money by selling individual policies on the Exchange. They have a duty to their shareholders to market products that make money. Individual policies do not appear to be profitable under the PPACA.

Where does that leave us? In truth, we are right where I predicted we’d be when I wrote Over The Tree, Close To The Front Of The Green in April 2010. Our “Grandfathered” and “Grandmothered” policies are getting too expensive to keep. The new policies, even with a tax credit subsidy, are too expensive for many Americans. And we have few choices. What is the solution? The answer, for many, is the Public Option.

According to USA Today and the Huffington Post, to cite a couple of sources, the Senate Democrats are pushing for an alternative to the private insurance market, a Public Option. And this isn’t just Bernie Sanders (I-Vt.). Senator Chuck Schumer (D-NY) and Senator Patty Murray (D-WA) are involved in this effort to offer a government plan to all Americans. There is also a parallel concept of expanding Medicare from age 65 to age 55.

As we learned from the disastrous Co-op experiment, the government, and the people the government empowers to run business-like entities, will over-promise and underprice the product. The insurers will not reduce their premiums and increase their losses to compete. They will abandon the market completely and let the public option drown. And then? And then the government will be forced to ride in and save us with a true, Medicare-like product for all of us.

And we will be left with one choice. And one choice is no choice at all.

DAVE

Cunix Insurance

We Don't Need No Regulations

They were at it again. The politicians were railing against unnecessary regulations. Their #1 villains are those damn government bureaucrats who make our products uncompetitive and cost us jobs. They can pontificate for hours but become strangely quiet when pressed to address the benefits of regulation.

We aren’t going to waste time discussing the recent Olympics in Rio, the air quality in Beijing, or the new interest in earthquakes in Oklahoma. This being Health Insurance issues With Dave, we are going to look at prescriptions.

Insurance applications used to ask health questions. EpiPens, like inhalers, appeared on a few applications each year. That changed about ten years ago as more and more clients kept an EpiPen or inhaler just in case. The inhalers were for a sudden asthma attack. The EpiPen was designed to inject the generic hormone epinephrine to prevent anaphylactic shock from an allergic reaction.

What was once rare was now common. By 2013 the federal government was strongly encouraging schools to have an emergency supply of epinephrine (EpiPens).

We have a product that has been around for decades, cost next to nothing to make, and does great business. These things should sell for about the price of a bottle of ketchup. OK, it is a prescription so maybe the price of a case of ketchup.

The EpiPen is sold in two pen sets. Ten years ago a set was a little over $100. Today, over $600. Is the drug more effective? No. Are the ingredients more expensive? No. What changed?

The biggest single change was Medicare Part D (Rx). The 2003 law “exempts Part D drugs from ‘best price’ rebates that drugmakers have been required to give to the state Medicaid programs since 1991” (The Hill). While some may argue that this provision has caused a large increase in the development of senior-related medications, many of us have also noticed that there is a huge market for senior-related products since 10,000 baby boomers turn 65 daily. I believe that the R & D would have come with or without the government handing the pharmaceutical companies the keys to the vault.

The last thirteen years have given us drug company mergers, hostile takeovers, and even a hedge fund guy who increased a little known HIV drug by 5000%. And that takes us back to Mylan Pharmaceuticals and their EpiPen.

Did Mylan develop the EpiPen? Hell No. Mylan purchased a generic drug manufacturer in 2007. The EpiPen was just one of the products they acquired. R & D cost – Zero. Current price? Whatever the market will bear. There is very little that can be done about this. Oh sure, there will be a lot of harrumphing in the Senate. But in the end, there will be some coupons, a slightly lower price, and a promise from Mylan’s CEO to be a better corporate citizen.

What we need is both more and more effective regulation. There are thousands of generic drugs waiting for final approval. This is not effective regulation. And, at the very least, we need to create a pricing formula for decades’ old generic medications.

The EpiPen problem reminds us that we have no way to prevent price gouging and other unscrupulous business practices without regulations. Regulations can be the locked doors that keep honest people honest.

DAVE

www.cunixinsurance.com