My apologies for another wonky health insurance post hot on the heels of the last one, but when there’s a major newspaper op ed on a subject I’ve been ranting about for years I can’t resist…

In today’s Wall Street Journal, Congressman Ed Royce (R., Calif) makes the case for federal regulation of the insurance industry:

Because of a Supreme Court decision nearly 140 years ago, the states have sole regulatory authority of insurance. What has resulted since is a bureaucratic cluster of 51 different regulators (every state, plus the District of Columbia) overseeing their individual jurisdictions, punishing American consumers and insurance providers alike.

At Fractured Atlas we’re living this nightmare every day. Mainly it affects our health care program. Despite our community of over 52,000 arts professionals nationwide, we’re forced to fragment our group into 51 sub-groups. This seriously undermines our negotiating leverage with insurance companies. We also have to wrestle with 51 different health insurance regulatory agencies, which I promise is neither easy nor fun.

The most common justification for state-based insurance regulation is that the state insurance departments are the best providers of consumer protections. In truth, some states get it very right, others get it very wrong, and most are somewhere in between. There’s no reason to believe, however, that federal regulators can’t enact their own adequate consumer protections. And a simplified and streamlined regulatory environment would facilitate much greater competition than currently exists in the market for private insurance, which can only benefit consumers.

I realize that I’m a healthcare policy nerd and that most folks find this stuff boring and impenetrable. That’s one reason why organizations like Fractured Atlas are needed; we deal with the esoteric minutia so you don’t have to.

Still, it never hurts to educate yourself, especially with an election coming up. The Kaiser Family Foundation has developed an excellent website for comparing and contrasting the major candidates healthcare policy platforms.

I’ve been tracking this stuff pretty closely, myself. To a certain extent it’s all fairly predictable. The Republican candidates mainly talk about increased competition and tax incentives for individual purchasers. The major Democratic candidates all offer proposals aimed at achieving universal coverage, generally by strengthening employer-based coverage and providing access to government-sponsored plans.

I could ramble on endlessly about this stuff, but if you’re actually interested, you’re probably better off just reading the proposals themselves (which are all accessible at health08.org).

Still here? Okay, then permit me one tiny bit of wonkishness. There’s been a lot of media coverage lately about the big dispute among the Dems, which is about whether or not to include a mandate that everyone must have insurance (Clinton and Edwards support the idea, Obama opposes it).

I’m basically a libertarian, so the very idea of such a mandate makes me squirm. However, as a practical matter, it’s absolutely essential for these kinds of “universal coverage” models to work. Clinton, Edwards, and Obama all propose new federal regulations which would require health insurance companies to insure people on a guaranteed issue, community rated basis. (Guaranteed issue means they can’t turn you down for coverage. Community rating means everyone pays the same premium, regardless of health status.) The practical problem with both of these well-intentioned concepts is that healthy people quickly figure out that they’re paying artificially higher rates to subsidize coverage for unhealthy people. Many of them, therefore, opt out of the system and decide to take their chances, rather than “overpay” for coverage. This creates a vicious circle of spiraling rate increases, as the risk pool steadily gets less and less healthy and more and more people find coverage too expensive to purchase. We’ve seen this happen in NY State, and it isn’t pretty.

An individual mandate solves this problem. By forcing everyone to have coverage, healthy or not, you stabilize the risk pool and prevent adverse selection. In my semi-educated opinion, the guaranteed issue, community rated model is simply unsustainable without either a mandate or some form of single-payer national coverage. Since the latter seems unlikely to happen in the foreseeable future, mandates are probably the way to go.

It’s not often that events in the auto industry have a major long-term impact on the arts community. However it’s worth taking note of the groundbreaking new contract that GM just signed with the UAW. As this morning’s Wall Street Journal reports:

The labor agreement reached by General Motors Corp. is the most striking example of a bigger trend sweeping U.S. health-care: employers renouncing their decades-old role as chief health-care buyer.

Let us all hope this trend continues and expands! Perhaps more than any other industry in America, workers in the arts are poorly served by an employment-based healthcare system. For the most part, artists are either self-employed, or they enjoy erratic and episodic employment, or they take “day jobs” like waiting tables or temping that rarely provide benefits. Relying on a paternalistic employer to procure and pay for one’s healthcare is simply a lousy model for us.

GM’s move (which actually leaves both GM and the union in much stronger positions) is being seen as big domino falling, with other companies and other industries likely to follow suit. So if we, as a society, abandon the notion that people ought to get health insurance from their employers, what are our other options? Well, there are three:

1. individuals go direct to insurance companies;
2. the government (state or federal) picks up the tab for everyone;
3. individuals form large, stable groups through non-employer intermediaries who negotiate and purchase coverage on their behalf.

In my view, any of these is preferable to the status quo, though I believe the third option is a nice middle ground that preserves market forces but doesn’t leave individuals alone to wrestle with opaque, cruel bureaucracies.

The MIT economist, Jonathan Gruber, who consulted on the creation of the Massachusetts healthcare reform plan and who is now working with California on their plan has released a nationalized version of the Massachusetts model.

I’m very impressed with what they’ve been able to pull off politically in Massachusetts, but I do have some serious concerns:

First, it seems to me that before we all agree that the boys and girls in Massachusetts have cracked the proverbial nut, we ought to give their plan a few years of practice to see how it all plays out. I realize no one wants to wait that long, but it’s important to wait for the experiment to be fully implemented before declaring it a success.

Second, I have some doubts about the idea of state purchasing pools for individuals not covered under employer plans. The (perhaps unanswerable) questions I have are:

1. Will insurance companies view these as bona fide risk pools or will they essentially consider it the individual market? Sure, the proposal calls for community rating and guaranteed issue, but that still leaves the door open for individuals to pay more and get less than members of a large employer group.
2. Can we count on state purchasing pools not be manhandled by the insurance companies? If you look at cases where states have contracted with private insurers to provide Medicaid services, the track record isn’t great.
3. Do individual purchasers have any real advocate, or are they essentially left to face the bureaucracy on their own? Will the state pools be able to serve as “intermediaries“?

Until some of this stuff is made clearer (at least to me) I’m still unsold on the Massachusetts model.

There’s little question in my mind that the maelstrom of health care reform proposals we’re suddenly seeing from every corner of the political and business landscape is starting to converge on a two key concepts: 1) universal coverage backed by individual mandates and 2) some kind of public/private hybrid approach that allows the mighty insurance industry to stay largely intact. Ron Wyden’s proposal is the latest and among the most comprehensive attempts to pull these ideas into a single, cohesive concept.

I have to admit to some ambivalence about all this. It’s great that we’ve finally reached a point where meaningful reform ideas are taken seriously and universal coverage is no longer dismissed as socialist bunk. And clearly the current employer-based system is broken and needs to be completely overhauled. But here’s what I worry about: almost every proposal from extreme left to extreme right leaves individuals largely alone to navigate an opaque and imposing bureaucracy (either public or private). Big Government scares me as much as Big Business, and they can both provide for Kafkaesque experiences when trying to get information or conduct routine business.

Sara Horowitz from the Freelancers Union thinks that the missing link in the health care debate is a need for intermediaries. She mentions church groups and the like, but she’s surely thinking of the Freelancers Union as well, which is one of the biggest intermediaries around. Of course, my paycheck comes from Fractured Atlas, which is another big one.

Sara’s post got largely skewered by people who accused her of wanting to impose more bloat on an already bloated system, in the form of middlemen who aren’t directly involved in the health care transaction. These folks do have a point. There is enormous administrative waste and financial inefficiency in our health care system. Anytime you add a link to the chain you risk slowing things down and adding someone else who needs to get paid.

But my extensive personal experience suggests that Sara’s concerns are extremely valid. At Fractured Atlas we deal with artists every day who are lost, confused, and beaten down by the bureaucratic brutality of health insurance. (Heck, I’ve had some pretty horrible experiences with my own personal health insurance, and I’ve been immersed in this stuff for seven years now!) Fractured Atlas is able to penetrate the bureaucracy, advocate on our members’ behalf, and solve problems for a few simple reasons:

1. In the seven years that we’ve been doing this we’ve encountered just about every situation imaginable at least 2-3 times. We’ve learned a lot, from which laws are relevant in which situations to what phone numbers can be used to bypass an autoattendant.
2. Our business is worth millions of dollars each year to the insurance companies we work with. They’re a lot more afraid of pissing us off than they are of losing an individual policyholder.

On a macro level, I can’t deny that middlemen like us do add some costs to the health care delivery system. But as an individual policyholder, I sure as hell wouldn’t want to go it alone.