Making it Simpler: Reinventing Individual Health Insurance

KISS, as a business imperative, is cited so often it’s passed beyond cliché to become background noise. Keep It Simple Stupid, however, is more of an illusive ideal than a comfortable accomplishment for most businesses. The individual health insurance industry is no exception – yet it needs to be.

 

Consumers buying medical coverage for themselves and their families lack the support network larger enterprises have. They (hopefully) are working with an independent insurance agent who understands their needs and knows the way through the maze of getting coverage, fixing billing problems or getting claims paid. But there’s no human resources department in the living room or colleagues to call upon for help in the kitchen. Worse, for those without an agent, there’s often no one to call for help than the carrier itself.

 

This isn’t necessarily a bad thing. Many people working in carriers’ membership service departments are quite good – once you get past the dreaded phone system. (I just dealt with a customer service rep at the health plan for my small business who solved the problem in one phone call – and was nice about it to boot).

 

The thing is, however, if you need to call for help, then something isn’t working right. Getting health insurance shouldn’t be complicated. Neither should understanding bills or explanations of benefits (EOBs). And doctors and hospitals shouldn’t have to devote so much resources and time into their interactions with health plans.

 

If Google can make searching the web clean and simple, if Apple can make a cell phone/music player/ PDA elegant and straightforward, if Visa and Mastercard can present payment histories in a relatively easy to understand manner, if Southwest can make booking a flight a breeze, then certainly health plans could simplify their processes.

 

A place to start would be with the products themselves. Each carrier describes their benefits in their own terms. Surely there’s a best practice for this kind of thing, but every carrier has its own unique and often idiosyncratic method. The result: agents (and their clients) devote hours to creating their own apples-to-apples comparisons.

 

There are the conspiracy theorists out there who believe this is done to make it more difficult for consumers to understand what they’re buying. I believe their wrong: why assume bad intent when indifference or incompetence explains the situation? When it comes to presenting benefits I think it’s more a case of an inward orientation with a dash of pride of authorship thrown in.

 

Or take provider directories. Many have moved online, but again, there’s a best practice out there that would make finding your doctor even easier. Or claim forms. Every doctor I see (and at my age it’s more than one, now) complains about the paper work. There have been efforts to move claim submittals online, but the problems with the process are more than technical. There’s also a need to simply make the process simpler. There’s a place for uniqueness. Commodity material is rarely that place.

 

Instead, the focus needs to be on something somewhat foreign to most health plans: design. Design has become a hot business concept. Magazines like Fast Company, Inc., Fortune fawn over the concept and those who excel at it. Products like iPods and half the house wares at Target are held up as icons of a new business paradigm.

 

Yet design shouldn’t be the sole purview of gadget manufacturers or fashion designers. Processes can be well designed, too; so can forms. But good design will only come to the work flows and materials of health plans if it’s a priority of their leadership. And that takes some courage. It’s not easy to make being easy a corporate priority, especially when your industry is under fire.

 

Yet those attacks can be seen as a motivator for simplification, too. For example, individual health plans are going to have change the way they underwrite applications. Their ability to discover fraudulent applications is going to be extremely limited once lawmakers get done reforming the rescission process. With no back-up, the importance of underwriting at the front-end becomes even more critical than it already is.

 

This is a great opportunity to make enrollment applications simpler. Again, there are those who claim the applications are complicated to enable carriers to play “gotcha” with their members who later incur claims. They have no facts to back this up, but that hardly matters, especially when these critics get a lot of attention just for making the claim. Which means carriers are going to have to deal with this charge for quite awhile – or until something changes.

 

(What’s more likely to blame for complex applications is the same dynamic that haunts anything created by committee. When lawyers, underwriters, actuaries, and business managers sit down to create a form – especially one that needs to meet regulatory standards – that form is going to be bloated, complicated and annoying. No ulterior motive is required.)

 

Instead of spending time repeatedly repudiating the charge, however, health plans would be better served to move beyond it. The fact is, applications are more cumbersome and complicated than they should be. Carriers should work with their Departments of Insurance and an outside design consultant to come up with standardized and, even more importantly, simplified underwriting forms. The forms should focus on making it as easy as possible for consumers to provide enough information for the carriers to make their underwriting decisions.

 

And that should be the explicit goal: easy sufficiency. This, in turn, means using simple language in a clear, concise manner. It means laying out the questions in a manner that flows and avoids asking for the same information repeatedly. It’s a lot easier to describe than do (I know, I tried once), but if made a priority, it’s doable.

 

When lawmakers, prosecutors and others are lobbing grenades your way it might be counter-intuitive to use the situation to focus on design. In reality, simplifying the touch points where consumers, agents and medical providers interact with the carrier is an extremely visible way of demonstrating a commitment to change. As important, it’s a vehicle for getting in front of the change that is inevitable.

Executing the Basics: Reinventing Individual Health Insurance

The best strategy in the game, the most inspiring vision in the industry means nothing without execution. And if an organization isn’t executing the basic components of the business, implementing something fancy — culture change, a new business model — isn’t going to get very far.

Executing the basics is the least exciting critical component of any successful business. By definition, a successful business has proven itself. It’s an ongoing concern. Leaders like to lead and that usually involves moving in new, more exciting directions. Over time, attention to the nuts and bolts can wane. The basics become a source for savings. The attention moves from serving the customer to an internal focus on efficiency. After all, resources need to be freed up to fund those new initiatives.

In the context of individual health insurance, the basics include processing applications, issuing bills, paying claims, contracting with doctors, appointing agents, and answering the phone. Most carriers do an adequate job on these items most of the time. All carriers do a lousy job on some of these at some time. Those osciallations in performance are normal and to be expected. What’s unacceptable is that “adequate” is, well, acceptable. Carriers will talk about delivering first class customer service, being partners with their providers and producers, but few, if any, consistently succeed.

The problem, I believe, is two-fold: an inability to measure the return on investment of better service; and an unwillingness for competitors to cooperate.

Providing services, whether it’s underwriting applications, answering questions from insureds and their physicians, or paying commissions, costs money. These dollars can be measured, tallied and monitored. Given the need to keep coverage affordable, the appropriate goal for carriers is to provide these services as efficiently (meaning at the lowest cost) as possible.

These services also have benefits in the form of customer satisfaction, increased efficiencies at the partner level (less time spent in doctors offices tracking down an answer freeing up more time to work with patients), and a negative public image. The problem is that dollars are a lot easier to track than satisfaction or efficiency in someone else’s office. So when carriers do a cost benefit analysis on a new IVR system (IVRs are those automated “press 1″ or “say ‘billing’” phone routing systems) they can measure the savings in personnel costs, but they lack the tools to measure the increased frustration members feel when unable to make the artificial (un)intelligence get them to the right place.

Health plans aren’t the only industry with frustrating phone systems. Sprint, AT&T, Time Warner, DirecTV and Verizon are a few others with IVRs deserving of a shout-out — or shut down, depending on your point of view. But cable and phone utilities are not the standard to which carriers should hold themselves. Nor should the standard be Nordstrom or Starbucks. It should be what consumers define as good customer service, doctors define as good physician service, and producers define as good agent service.

Carriers need to examine their basic operations from the consumer point of view. They need to define customer expectations and then think about ways to deliver those services in a cost-effective way that meets those expectations.

This means shifting the focus from an internal point-of-view to one that looks at operations through the eyes of the consumer (or physician or agent). This isn’t hard: every officer in every health plan should be required to call their customer service departments on a monthly basis. They should get a monthly bill and call in with a question. They should receive an Explanation of Benefits (EOBs) and be asked how much and to whom they would cut a check if it was for real. They should call in to the pre-authorization phone line and follow-up on an application. In other words, they should walk in their customer shoes at least monthly. Then, on a quarterly basis, their staff meetings should focus on what they experienced.

There’s other techniques that work. For example, executives and managers should be required to plug in and listen to phone calls between their service reps and customers. Not occasionally, but in a regular, disciplined way.

Carriers also need to find ways to quantify something more than dollars. Perhaps bonuses should be impacted by customer satisfaction survey results or even public surveys. Or, perhaps they should ask someone. Fortunately for carriers, there’s too many economists in the world with too little to do. Certainly some of them have come up with mathematical formulas for measuring intangibles. Give them a call — they’re hungry for someone to talk to. Make your CFOs sit down with them and come up with a formula that works.

And then share the results. Which is the other part of the challenge. Most businesses tend to think that everything they do must be confidential and proprietary. The market is a jungle and every advantage needs to be exploited to survive. In this mindset, advantages are to be hoarded, not diluted by sharing.

The problem is that most customers don’t really care about a lot of these proprietary advantages. An example from a book I read, but now forget the title, describes the foolishness of the auto industry when lawmakers required them to incorporate catalytic converters into their cars. Each auto maker spent many millions of dollars to invent and implement their own design. Yet who has ever purchased a car because of its catalytic converter? The industry could have redirected most of those dollars to features that matter if they had come together and designed a standard converter they all could have used.

This concept of standardizing and sharing resources is much more acceptable in the software world where open source systems like Linux and MySQL are widely used. It’s foreign to most companies, including carriers. 

Yet the opportunity to standardize and share resources is huge in the industry. Applications for coverage, claim forms, EOBs, bills, commission statements aren’t competitive advantages — their Babel-like diversity is merely a source of frustration for users. Better yet, by standardizing them, entrepreneurs could develop tools to increase efficiency for the carriers and convenience for consumers.

Consider: most carriers currently accept online applications from large producers like eHealthinsurance. Yet, as large as eHealthinsurance’s production is, it represents a small percentage of carriers’ overall sales. Why create mechanisms that benefit just a few agencies? Instead, carriers should agree on standards for quoting and case submission systems that works for all health plans in all states. These standards should be freely distributed as open-source software. eHealthinsurance may compete in the market based on its quoting system, but carriers don’t. By creating a publishing low- or no-cost software carriers can more easily implement customer friendly services like automated underwriting, immediate issuance of membership cards and the like.

Standardization doesn’t mean customization isn’t allowed. There are several flavors of Linux commercially available. Similarly, entrepreneurs could take the open-source quoting/submittal software and package them, adding new interfaces and functionality. So long as carriers standardize around the basics, however, they should all save money, increase efficiency and improve customer satisfaction with the industry as a whole. They could then use the freed-up funds to better compete on what does matter to consumers: benefit design, cost of coverage, and the like.

Would this kind of cooperation be legal? It depends on how it’s approached. The standards negotiations can be outsourced to an independent third party. Or they can be convened under the auspices of regulators. In California, Insurance Commissioner Steve Poizner has done something similar and has expressed an interest in helping carriers appropriately address common challenges. So yes, it can be done legally.

Attending to the basics is not exciting, but it can be impactful. Perhaps more importantly, invigorating innovations will fail unless they’re built on a strong foundation. So if the individual health insurance industry is going to reinvent itself, the nuts-and-bolts of the business is where it has to begin.

 

Reinventing Individual Coverage: Defining the Approach

In my previous post I suggested the current political environment provides more than sufficient inspiration for individual health insurance industry to reinvent itself. One of the challenges to actually implementing change is figuring out how to approach the problem. It’s often too easy to get caught up in the details without remembering the goal.

And the goal here is to deliver value to consumers who purchase their own health insurance coverage. This may seem obvious, but in too many cases, industry insiders and reformers at the barricades alike get so caught up in rules and regulations, processes and work flows, structure and platforms that they lose site of this simple truth: at the end of the day we either provide value to consumers … or else.

And it’s a truth that is agnostic as to whether the “we” is a private enterprise or a government agency. We either deliver or we go away.

So instead of structuring the gratuitous advice I intend to offer over the next several posts on specific items (dealing with rescissions, simplifying the application, etc.) I’m going to focus on a few general themes. Specifics may crop up as examples or to help amplify the themes, but it’s the overarching themes that provide a framework for change.

As of now, I’m inclined toward four major themes:

1. Executing the Basics
2. Making it Simpler
3. Sharing Technology
4. Earning Trust

Executing the Basics is all about the nuts-and-bolts of being a health insurer. Processing applications, issuing bills, paying claims, contracting with doctors, appointing agents, and answering the phone.

Making it Simpler recognizes that individuals are not businesses, even when they have the assistance and counsel of a qualified agent. Health insurance coverage is complicated enough. The process of getting and using it, however, shouldn’t be as complicated as it is. Nor should finding the plan that best fits a family’s need. Nor filing a claim. Nor … well, you get the idea.

Sharing Technology stresses that a carriers’ sales and member service technology shouldn’t drive consumers’ buying decision. A health plan’s benefit design, pricing, access to providers and the carriers’ customer service offerings should.  The industry could save millions of dollars by adopting standards that any and all technology providers can use for everything from accepting online applications, issuing online membership cards, processing claims, creating provider directories, etc.

Earning Trust may be the most important theme. After more than a year of every major office holder in the country calling the system broken, after endless legislative hearings, headlines and press conferences attacking the industry, consumer confidence in the industry is lower than its ever been. Worse, this only seems to inspire supposed industry insiders to pile on. The fact is there are problems in any enterprise, public or private. What’s needed is facing them honestly, not to score points.  Most of all, earning trust means raising the standards of behavior and meeting them.

These themes overlap with one another. What works in one area might well impact another. But they provide a general framework for discussing ways to reinvent individual health insurance. At least they are the themes I’ll be addressing over the next several days. Do you have others you think need to be considered? Are these off-target? Please let me know your thoughts by posting a comment. 

Reinventing the Individual Health Insurance Market

The health insurance industry has been under attack for years. There are those who would like to do away with it completely. While those voices have grown louder in recent years their political success has been limited at best. For evidence, just look at the campaign for the Democratic presidential nomination: no major candidate called for a government-run, single-payer system. The two remaining contenders have both explicitly taken such an approach off the table.

Yet there is one aspect of the industry that is under intense attack: the individual market. Again, this isn’t new. In the past, however, most of the attacks have been unfocused or ill-informed. Critics tended to ignore unique aspects of the coverage targeted at individuals and families buying insurance outside of work: it’s a voluntary decision. To maintain affordable premiums carriers must weed out potential buyers who are certain to incur substantial claims.

For example, carriers will often reject an applicant who is a regular user of a particular prescription drug. This strikes many as wrong, if not immoral. Just because someone needs a certain medication is no reason to deny them insurance.

Yet, when the monthly prescription costs exceeds the monthly premium, what else can the carrier do? Insurance is about spreading risk. In a voluntary market where people can choose when to purchase coverage, it means they need to buy insurance before their known risks exceeds the premium. Otherwise, they are simply asking other consumers to subsidize them. This dynamic, known as adverse selection, is at the root of much of the problems facing the individual market.

It’s not the only cause, however. Carriers exacerbated the problem by mishandling their approach to managing adverse selection. The most obvious mistakes involved how rescissions were handled. Even the industry’s most ardent foes admit carriers need to protect themselves from fraud. If an applicant knowingly and intentionally lies about material information on an application for coverage, the carrier should have the right to revoke the coverage.

It’s identifying when the misstatements are knowingly and intentionally that creates a gray area. Carriers chose to be aggressive in applying their right to rescind coverage. Now they’re paying a huge cost for this posture in the form of large fines, law suits and horrendous publicity.

The rescission issue is the hammer being used by lawmakers, regulators and pundits interested in reshaping the individual health insurance market. That their proposals would be more likely to do more harm (in the form of higher prices and less consumer choice) than good seems almost beside the point. They want change. They want it now.

While their changes are often off target their goal may not be. Perhaps the attack on the this market segment is what’s needed to prod the industry to reform itself. Perhaps it’s the motivation needed to reinvent the individual health insurance market, to make it stronger, more valuable and more respected than in the past.

I’ll be writing about the opportunities for reinvigorating the individual market over the next several days. I hope you’ll share your ideas, too. Please post your thoughts on ways to reinvent individual health insurance products, the way they’re sold, administered and used. By the end of this dialogue we’ll at the very least have built a list of alternatives to some of the misguided proposals currently being considered in Sacramento, Washington D.C. and elsewhere. At best, someone who can actually implement the changes may be inspired by your thoughts and meaningful change will follow.

Stay tuned.  

2007 Prediction Results

On January 2, 2007 I was foolish enough to post some predictions for the year. At the time I promised to review my results in a year. And here we are, a year later. Just keep in mind these were predictions. I wasn’t saying these things should occur. I was predicting they would occur. 

2007 Prediction #1. More Major Carriers Will Enter the California Individual Health Insurance Marketplace
The theory was sound. The individual health insurance market in California is huge. And with employers dropping coverage it has been getting bigger. Major carriers (I mentioned Humana and Cigna) couldn’t ignore the potential here. And they still can’t, but they certainly didn’t act on it in 2007. My guess is the health care reform debate created enough uncertainty that, combined with opportunities in other state, made California less attractive. In fact, a carrier, Nationwide, left the California individual medical market. So while other carriers might get here eventually, this prediction was a big miss.

2007 Prediction #2. Carriers Will Experiment With New Distribution Strategies
The premise of this conjecture rested on carriers recognizing that online sales weren’t enough in the indivdiual insurance market segment. While that channel would grow in 2007 (see prediction # I sensed a countervailing trend to get more people in the streets talking about individual medical coverage. So I predicted a carrier (didn’t know which one) would supplement its independent agent channel and launch a captive field force. Agents wouldn’t like it, but some carrier’s need to increase market share would drive them to at least experiment with this approach. Turns out 2007 was not a year for carriers to be upsetting agents. In fact, all of the carriers have reached out to agents and their association, the California Association of Health Underwriters, for input and help on health care reform issues. Chalk this up as another miss.

2007 Prediction #3. A Carrier Will Try to Introduce Per Member Compensation
Tying agent compensation to the cost of health care doesn’t make much sense, yet the historical practice of paying agents a percentage of the health insurance premium pay has deep roots. Like many traditional practices they’re hard to change. I thought 2007 would be the year one of the major health insurance carriers would take a stab at it. I was wrong. The desire not to upset their relationships during the health care reform process may have influenced this, or it might be that none of the carriers thought this was an important enough issue to address. In any event, this is clearly miss #3.

2007 Prediction #4. Kaiser Will Seek to Work Closer With Agents in the Individual Market
Kaiser has been thinking about ways to work with independent agents since their small group team successfully added this distribution channel. With Tom Carter and Mitch Ross, among others, in leadership roles there, I felt 2007 would be the year they’d actually move forward with an agent channel. I’m sure they’re still considering it, but their deliberations — which can seem endless even to those inside Kaiser — are ongoing. Sensing a trend here? Strike 4.

2007 Prediction #5. No Major State Health Care Reform in 2007
I launched this blog thinking it would deal with health insurance related topics, but in a general way. That it came to focus on health care reform (to the extent that I renamed the site) was a gradual process. In hindsight it’s kind of interesting (at least to me) that it wasn’t until the fifth prediction that the topic of health care reform came up. Here’s the full text of that forecast: “This is a cheap prediction. While health care reform is at the top of everyone’s agenda in Sacramento, the issue is too big and complicated, there are too many stakeholders involved with too many diverse perspectives, and there are too many other pressing issues demanding attention for the Governor and Legislature to work things out in one year. But watch out for 2008.” Less of a “cheap prediction” than I imagined, but it turned out to be right nonetheless.

2007 Prediction #6. Mandates Become Viable
The idea here was that acceptable health care reform would require reducing the number of uninsured. This would mean requiring all residents to obtain coverage and that, in turn, would mean requiring all carriers to sell coverage to all applicants. These twin mandates were are key components to the health care reform package currently awaiting Senate consideration. And they’ve been a big part of the debate for most of the year. Clearly, mandates are viable. Hit #2.

2007 Prediction #7. More Musical Chairs in Carrier Organizations
There was a lot of changes occurring in the leadership of health plans around this time last year. In this prediction I noted, for example, that Lisa Rubino, had recently left as CEO of Blue Shield’s individual, small group and government program division and would no doubt be recruited quickly. Shortly after this post, Ms. Rubino was named president of Molina Health Plans in California. And while fewer moves among the carriers took place than I was thinking when I originally wrote this one, there were a number of changes. Since I’m the one giving out the scores here, I’m going to count it as a hit — but only barely.

2007 Prediction #8. Online Sales Will Continue to Grow
This was the gimme of the lot. The trend of independent agents to move a portion of their sales online is growing. The top producers for virtually every carrier sell exclusively or mostly online. Internet-assisted sales is a permanent part of the individual health insurance landscape. Its influence on small group sales is growing as well. I still believe that local agent who get to know their clients do a better job of finding the right health insurance plans for a particular consumer’s unique needs than any web-based sales site. But I also believe local agents should integrate the Internet into their sales process. Anyway, this was an easy prediction to get right, and I did. So that makes hit #4.

The tally reads four hits and four misses. My prediction skills are either half full or half empty, depending on your personality type. Significantly, I missed on all the predictions dealing with carrier competition, but got both of those involving health care reform right. Narrowing the focus of this blog to health care reform-related issues was a good move.

ABX1-1 Exemption: A Road to New York?

Earlier this month, America’s Health Insurance Plan’s (AHIP) published it’s annual Health Insurance: Overview and Economic Impact in the States. It provides a snapshot of the economic impact health insurance has on state economies along with some interesting statistics. More importantly for those involved in California’s health care reform debate, it offers a warning about the need to get reforms right.

First, some general statistics. The average individual insurance policy in the country costs the average single American $2,613 and the average American family $5,799. Californians hover within two percent of the national average — a little lower for single coverage; a little higher for family policies. Note: the AHIP numbers reported for California strike me as high. The average monthly premium I’ve seen for single individual coverage hovers around $130, substantially below AHIP’s findings. Granted, my data comes mostly from online sales where purchasers tend to skew younger than the general population, and, consequently, pay lower premiums.

When it comes to small group coverage, Californians pay about five percent less than the national average. Nationally, single coverage in this market segment is, on average, $3,732 and family coverage averages $9,768. In California the premiums average $3,552 for singles and $9,768. So, pre-health care reform, California’s premiums are pretty typical. So far, so good.

While comparison to the national average is interesting, what the report clearly indicates is that health care reform, done badly, costs consumers money. Lots of money.

 In New York, for example, where there’s a mandate to sell coverage, but no mandate to buy it, single coverage in the individual market costs $4,734 (85 percent more than in California) and families pay $12,254 (over twice as much). In New Jersey, which has also sacrificed affordability in the name of health care reform, single coverage costs $5,326 (twice as much as Californians pay) and $10,398 (77 percent more).

In California we’re considering a path to higher premiums no less dramatic than our east coast cousins. However, whereas they were explicit about the path they took, in California we’re contemplating a more indirect route to higher premiums. In New York and New Jersey, they consciously chose to create an unbalanced market dynamic, one that encourages folks to wait until they’re in need of health care before buying insurance. This is comparable to allowing drivers to buy auto insurance from the AAA as the tow-truck hauls your car away to the shop).

Assembly Bill X1-1 (Nunez) gets California to a similar result, but more subtlety. The bill includes both, a mandate to sell and a mandate to buy individual coverage. However, it also includes an exception to the buy-side of the equation which makes the mandate nearly irrelevant. ABX1-1 exempts anyone from the obligation to have coverage when the premiums and out-of-pocket costs (deductibles, etc.) exceed 6.5 percent of a family’s gross income. ABX1-1 mitigates the impact of this exemption slightly by providing subsidies to many low- and moderate-income families, but there’s clearly a segment of the population that will be covered by this provision. The question is, how large is that segment? If it’s too numerous, the result will look a lot like Gotham.

Because ABX1-1 fails to define the minimum coverage residents are expected to have, there’s no way of estimating familys’ out-of-pocket exposure. But let’s be conservative and assume $3,000 for an individual and $6,000 for a family (most discussions assume it will be closer to $5,000 and $10,000).  Using the AHIP’s study average premiums, single Californians earning less than $85,615 would be exempted. Using my $1,800 annual premium estimate sets the exemption at $70,150. Either approach amounts to a lot of single Californians.  The average AHIP average for family premium, means those in households earning $182,830 would have the option of waiting until medical care was needed before obtaining coverage.

Now, these are averages and questionable ones at that. But even so, they serve as warning flags. In crafting an affordability exemption, California lawmakers need to consider what it will do to the balance needed to achieve a healthy insurance system. One solution: limit the exemption to the cost of coverage. After all, someone taking the exemption has unlimited exposure to medical costs; with even catastrophic coverage their exposure is capped. Failure to consider the need for balance will result in what New Yorkers bear: a formidable health care reform surcharge.

New York is a nice place to visit, but I wouldn’t want to buy health insurance there. Neither would a lot of other voters. California lawmakers should take note.

The Value of Agents

So far I’ve received only one comment on an earlier post, “Agents Need to Deliver Value — And Let People Know About It.” The author of the comment, Dr. Zagreus Ammon doesn’t have much nice to say about agents and brokers. “Based on my experience, most agents add very little value and are generally a waste of time, effort and oxygen”, he writes. “Being so behind the scenes, they suck a significant amount of money out of the health care system returning little.”  Dr. Ammon, who has practiced in Canada, now works in Maryland and maintains his own blog (The Physician Executive), has given health care a great deal of thought. He’s come to the conclusion a private health care system is preferable to one run by the government. This leads him to begrudgingly conclude that agents are “a necessary evil.”

Needless to say, this isn’t the reputation agents want to be building. Nor, I believe, is it accurate. True, some agents fail to deliver anything worthwhile to their clients. The majority, however, deliver a great deal. Yet here is Dr. Ammon claiming we’re parasites. This opinion is, no doubt, based on his experience. By the nature of such things, his experience with agents is limited, but it’s the only data he has — for now.

I was going to respond to Dr. Ammon, but on reflection I think it would be more interesting to hear from agents and others who read this blog. My guess (and hope) is that it will be a lot. I’m expecting agents will provide examples of how they saved their clients money, how their intervention helped clients get paid on previously denied claims and how they guide clients to the right health plan. In short, I’m expecting agents to explain how we add value to the health care system.

The health care debate is driven in large part by anecdotes. Many of these involve insureds whose claims were denied and had to stand-up to the insurance companies on their own. Agents frequently point out to me that these consumers apparently had not insurance agent. If they had, these agents maintain, the results might have been different. So now’s your chance to provide your own anecdotes — or ask your clients to post something for you. (Just click on the blue comment link at the bottom of this post)

As an agent, you’ve walked the walk. Here’s a chance to talk about it.

Blue Cross of California

First, full disclosure: I was a Senior Vice President at Blue Cross of California, or its parent company WellPoint from September 1997 through November 2005. While my precise responsibilities varied during those eight years, they centered around helping the company grow its Individual and Small Group business. Before joining and since leaving WellPoint, I’ve continued to work with Blue Cross while also having the pleasure of working with its competitors. I greatly respect those carriers, for many of the reasons I respect Blue Cross.

But it’s Blue Cross that has been in the news so much since I started this blog. Yet I’ve purposefully avoided posting on its situation and probably won’t post on it again. It’s too much of a no-win situation for me. If I’m too supportive, then I’m just being defensive. If I’m too harsh, I’m misusing my former insider status.

However, with the Department of Managed Care holding hearings on Blue Cross yesterday, and so many readers knowing of my affiliation with the company, I thought it permissible to make an exception. But this won’t be a post about the the substance of the charges. It’s more personal in nature.

I view the public pilloring of Blue Cross by the Department of Managed Health Care with mixed emotions. I enjoy seeing big companies brought to task as much as the next guy. It’s like watching toothpick thin famous-for-being-celebrity-types doing perp walks. Or watching bombastic politicians busted for the behavior they publicly decry. There’s a karmic aspect of it all that we humans seem to enjoy, the reasurrring balancing of forces in the universe.

So seeing a regulator take Blue Cross to task doesn’t bother me. It’s a part of the process. What prompts me to write, however, is how all this impacts the people of Blue Cross who have accomplished over the years.

The individuals representing the company at the hearing are friends and former colleagues of mine. I’ve seen them at work. Yes, it’s true they paid attention to the bottom line. That’s how any enterprise — for-profit or non-profit – stays in business. But I’ve also seen them striving to do the right thing for their members when no one outside the company was watching. I’ve seen them invest sweat, time and resources to improve customer service. I’ve seen how hard they’ve strived to create new ways of helping those with serious diseases improve their quality of life and medical outcomes. I’ve seen the efforts they’ve made — and the risks they’ve taken — to bring to market products which provide strong coverage at the lowest possible price in the face of skyrocketing health care costs.

Blue Cross is not a perfect company. There are no perfect companies — nor perfect people or government agencies, for that matter. They’ve made mistakes and where those mistakes violate law or regulations they should be appropriately punished. Further, Blue Cross has made their situation worse over the years by sporadically descending into moments of hubris and arrogance — and sometimes just plain public relations mindlessness. They’ve also taken risks to make things better, which means at times, they’ve failed and made things worse.

But Blue Cross of California is no Enron. There aren’t people there conspiring to rip off the innocent. It is a company by and large of people trying to do a good job for their members, their business partners and yes, their shareholders. (Traits they share with most of their competitors and respected companies everywhere).

Few things in life are clear cut. There’s a context and subtlety that gets overlooked in the circus-like atmosphere of a public scolding. Maybe every business and every industry needs to go through this now and again. When done right the results can be positive change. At worse, the hot water may help keep the enterprise humble. It’s just a shame that in the process, the people which make up the company and who are trying to do the right thing, can get scalded along the way.

Proof of the Govenor’s Clout

My last post commented on Governor Arnold Schwarzenegger’s political clout and how it will shape the health care reform debate. A recent article provides some proof.

In addition to gloating over the Governor’s seeming inability to get his reform package introduced as legislation (see my previous post), many took glee in the hurdles the Administration faced in obtaining the federal funding he needs to finance his proposal.

No more glee for thee! Mike Leavitt, U.S. Department of Health and Human Services Secretary recently committed the Bush administration to supporting nearly all of the govenor’s $3.7 million request to increase Medi-Cal funding. According to the Sacramento Bee, in an article written by Judy Lin and published on March 15th, the remaining shortfall will be forthcoming once the state submits the proper paperwork. Pretty impressive considering the White House has proposed Medicaid cuts (Medi-Cal is the state’s version of Medicaid).

Maybe any California Governor could have pulled this off. We’ll never know as we only get one governor at a time. At the very least, this breakthrough reinforces the message of my earlier post: it’s not the bills you introduce, it’s the the clout you wield. There’s a long way to go before the end of the health care reform debate in California. With or without legislation embodying his overall plan, the Governor is showing he’s going to shape it.

The Misguided Health Care Reform Surcharge

The last couple of posts have dealt with the guarantee issue requirements in the individual health insurance market, a central component of several health care reform proposals. What I’ve suggested is that guarantee issue, which simply means health insurance carriers have to accept all applicants regardless of their health risk, if done right can lead to universal coverage, but if done wrong can lead to disaster.

The line between right and wrong in this context concerns requiring consumers to be insured. If it’s required, and that requirement is effective, guarantee issue can work. In systems where consumers can wait until after a need for insurance develops you wind up with a mess. The poster children for disaster are New York and New Jersey. Consider the results of a 2005 study conducted by the America’s Health Insurance Plans (AHIP):

Average Annual Individual Health Insurance Premiums:
                                          New Jersey        New York      California
Single Coverage:                $  6,048               $ 3,743         $ 1,885
Family Coverage:                $14,403               $ 9,696         $ 3,972

New Jersey and New York have guarantee issue (and community rating) without a mandate to purchase coverage. California does not — at least, not yet. The result: a consumer in New Jersey buying coverage just for herself pays surcharge for the state’s misguided health care reform of over $4,100. If she moves to New York, the surcharge falls to approximately $1,850.

Families suffer more when health care reform goes bad. A family in New Jersey buying their own coverage pays over $10,400 more than a California family; New Yorkers pay over $5,700 more.

Think of the impact of a 350% surcharge on a family’s budget — or on a state’s economy. Promoting guarantee issue in the individual market as a key to achieving universal health care coverage is both noble and reasonable — if it’s done right. If done wrong, the state and its citizens will pay the price.