Thursday, January 5, 2012

Health Reform Slashes Health Insurance Alternatives for Connecticut Children

Posted by Sarah Sweetz Akhza at 3:01 PM
Health Reform Slashes Health Insurance Alternatives for Connecticut Children

The September health care reform mandates will decrease the health care insurance alternatives available for kids.  All over the country, many private medical insurance carriers appear to have decided not to insure youth who purchase standalone policies after September 22nd.  Not all carriers have announced their decision on this issue, but many that have are choosing eliminate these types of policies.

Youth who apply for medical insurance with at one or both parents will not be affected.  children who are covered by  standalone policies that were effective prior to the mandate will be allowed to keep their existing policies.

Who's the bad guy here?  We can fault the insurance carriers.  However, asking an insurance carrier to insure unhealthy people is like asking banks to underwrite loans for people with poor credit scores.  Congress might more at fault than the insurance carriers.

Health care insurance carriers do  make tons of money but their margins are miniscule.  They don't make tons of money on per policy.  Adding just a few additional significantly unprofitable people can make them lose money or make their premiums unaffordable.

A unsophisticated example would involve an insurance carrier that insures one hundred people against cardiac problems.  Each person pays a thousand and twenty dollars a year.  One of the insured people has a heart attack annually.  It costs the carrier 0,000.  The company pays the health care bills .  It earns ,000..

After a new law goes into effect, they have to insure five costly people.  Every year one of these five new people has a myocardial infarction that costs an additional 0,000.  This means that the insurance company doubled its outgoing money, but not its revenue.

If the insurance carrier responded by increasing the cost of the coverage, their policyholders might respond also.  Some would terminate their policies.  Chances are the healthier people would be much more likely to decide to end their policies.  It is a sure thing that their prices would have to go up again and again as their ratio of healthy to unhealthy policyholders would keep moving in the wrong direction.

When an insurance company is mandated to insure people without regard to their medical history, they run the risk of closing their doors.  This could sound ludicrous to you, but big companies go out of business from time to time.

Perhaps if the US car companies had been more financially responsible, they wouldn't have needed our government to bail them out.  Perhaps banks should have been more responsible a few years ago and not underwritten so many soon-to-be bad loans.

A legal mandate cannot change the laws of the marketplace.  If an insurance company takes on unprofitable business it will have to raise its rates.  If they are forced to raise their prices more than their competitors, they will wind up with fewer customers.

Our lawmakers wrote a law that was supposed to provide universal medical coverage to youth.  This law has had the opposite effect.  Fewer options for insurance are now available for children.

This has to make many voters wonder if the other, soon to be enacted health care reform mandates are going to work just as well.  Our senators and congressmen spent a lot of time demonizing the insurance carriers.  They are no more or less wicked than institutions in any other business sector.  They spent a lot of time telling us how much  money they make overall.  The real issue is what they make per insured person.

We've gotten crafty rhetoric and at least one poorly thought out mandate.  Let's hope that this was the only one they got wrong.  Say a prayer.


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