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Merrill Goozner Headshot

Insurance scams

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I let the health care insurance rate story pass yesterday without comment since I knew the press would cover most of the angles. What more can one say when health care insurance premiums, even in a "slowing" mode, grew 7.7 percent in 2005, which was more than twice the rate of inflation and workers wages. I'm reminded of Herbert Stein's famous dictum (for younger readers, he was President Nixon's chief economics adviser), "If something cannot go on forever, it will stop."

But there was one disturbing trend in the data that deserves some additional comment. The press downplayed it, following the lead of Drew Altman, the president of the Kaiser Family Foundation which conducted the survey of employer insurance premiums.

Pointing out that only four percent of Americans have so far signed up for high-deductible insurance plans linked to health savings accounts (the Bush Administration's and market enthusiasts "cure" for skyrocketing health care costs), Altman repeatedly said that talk about "consumer-driven health care is way out in front of the action in the marketplace."

Based on my own experience, I think that's going to change -- and fast. I predict uptake of these plans, especially among the well-off and relatively healthy upper middle class will take off in the next few years. Moreover, many low- and moderate-income people will be forced into these plans. Look at Wal-Mart's announcement yesterday that it would start offering a high-deductible plan with just an $11 monthly premium come January. What does it cover? Not the first $1,000 of routine doctor costs, not the first $1,000 of hospital bills, and not the first $300 of pharmacy costs. Some plan, especially for folks on tight budgets. What will be this week, honey? Take the kids for their shots or groceries?

But why do I say even the upper middle class will start clamoring for these plans? Yesterday morning, my wife asked me what we should do about our health insurance next month. October is when most people with employer-based coverage have to choose their health plans for the coming year.

We're in a PPO and we both hate our primary care physicians, who seem angry as hornets who just had a broom stick stuck in their hive every time we go to see them. Is it us? The insurance companies? Their lot in life as tread-mill primary physicians who must see back-to-back patients hour-after-hour? Who knows? Who cares?

I just want a doctor who is interested in me. So does my wife. So we're looking at choosing a high-deductible "point of service" plan that will enable us to choose any doctor we want. We're already asking all of our friends. "Know somebody you like?"

Now, I'm the first to admit that the vast majority of Americans do not have the luxury of this option. They can't afford the $100 or more out of pocket I will have to pay every time I go to see the doctor (when I find one I like). But I will get a tax deduction for the money we put into our health saving account; and we will get a smaller bi-weekly deduction from our paychecks because the premium on our high-deductible plan will be less than the plan we previously belonged to. Over the course of the year, we may even come out ahead. After all, we're still pretty healthy.

If you're upper middle class (I am), the Bush plan is for you. It reminds me of what a physician friend told me during the 1980s after Ronald Reagan got another tax cut through Congress. "I hate the bastard, but he's been very, very good to me."

Memo to Drew Altman: I predict by next year at this time, that 4 percent will be 6 percent. And within half a decade, it will be near 20 percent, virtually all of them drawn from the ranks of the upper middle class and the super rich. The plans will have successfully siphoned off the healthiest and therefore cheapest part of the insurance marketplace.

Of course, this adverse selection (this is a fancy economists' term for what happens when the least risky, healthiest people opt out of an insurance pool) will further undermine the regular insurance market. Average Americans and the shrinking number of employers who insure them will see their premiums soar ever higher. This will send additional millions into the ranks of the uninsured.

In short, high-deductible plans linked to tax-advantaged health savings accounts will win a niche in the market because when the Titanic is sinking and there aren't enough life boats, it's every person for him or herself and to hell with the folks in steerage. It's the American way.