Insurance must provide a safety net
14 02 08 - 13:42
By MARY O. MCWILLIAMS
GUEST COLUMNIST
Insurance is a promise -- a promise to take care of you and your family financially in case of an unforeseen event or expense. Whether that event is an earthquake, a car accident or an illness, insurance in theory is simple: We all put money into a bucket, and those communal funds help pay for the unforeseen events of each contributor.
In the case of health care, we've all been making larger and larger withdrawals from the bucket. Medical costs are skyrocketing. Not only does the cost of medical goods and services outpace inflation most years, we are using a great deal more of them, thanks to wondrous new technologies and medications.
Increasing use of services and rising prices require all of us to put more money in the bucket, which is pricing some people out of health insurance. Our system delivers medical marvels, but it is not working for everyone.
A recent report issued by the consumer advocacy groups Northwest Federation of Community Organizations and Washington Community Action Network claims that Washington's three largest insurers, including Regence BlueShield, are partly to blame.
We don't know the methodology behind their conclusions, so we want to put before all consumers the figures Regence filed with the Office of the Insurance Commissioner for the years covered in the report, 2002 to 2006:
Regence experienced underwriting losses in two of those five years in serving our individual members.
We paid out from 75 cents to 84 cents of every premium dollar in medical claims.
The amount of claims paid out for our individual market members actually doubled during the years the report covers. Regence paid out $90 million to cover individual members' claims in 2002; by 2006, that amount doubled to $181 million.
We doubled the amount of people protected by individual insurance, from 74,000 in 2002 to 144,000 in 2006.
To clarify another issue raised in the report, Washington prohibits using a person's health status to set their rates. Rates must be adjusted across the board. Similarly, when a person signs up for coverage, the premium is not based on health status. Instead, members are pooled together and the cost spread out, so everyone shares the burden. It may take 10 healthy people paying for health insurance to support one chronically ill person whose treatment costs $50,000 a year.
As a not-for-profit, Regence's goal is to make "just enough" money to serve members and provide long-term financial stability. Over the years, we have continued serving more than 1 million members -- when other carriers have dropped out -- because of strong financial reserves.
Reserves are a safety net for members -- like a savings account or "rainy-day fund." In the event of a worst-case scenario, such as a natural disaster or pandemic, it would take relatively few large claims to deplete those reserves. We must be able to pay all claims in a disaster and still remain solvent.
If, on the other hand, we distributed the reserves to members in the form of lower premiums, the effect would be temporary and it wouldn't touch the underlying reasons that drive up medical costs. If we simply distributed the reserves as a cash refund to Washington members, we could give each member perhaps a month or two in premium payments. Again, this temporary solution leaves members without a safety net and fails to address the real problem: rising costs and increasing use of medical services.
So the question is, who pays the doctor, whether the visit is a simple check-up, or a life-saving treatment or surgery? The short answer is that we all do, regardless of who's controlling the dollars.
Artificially forcing down premiums while continuing to pay the high costs of medical care would quickly drain the bucket, and again force health plans to stop insuring individuals, as in the 1990s. During that time, Regence lost $33 million from covering individuals.
We believe everyone has to come to the table to find a solution. For our part, Regence continues to work individually, regionally and nationally to address the underlying causes, by designing tools to engage members and foster value-based choices, while promoting quality and evidence-based medicine.
Ultimately, we all need to work together to address the root causes of rising health care costs, because we're all in this together.
Mary O. McWilliams is president of Regence BlueShield.