What Are Private Insurance Exchanges?

Stanley Feld M.D.,FACP,MACE

Corporations have been providing healthcare insurance
since after WWII. The cost of healthcare insurance has been rising since.

The increase in premiums became intolerable in the
1980’s when cost shifting occurred. Medicare decreased reimbursement and the
fees were shifted to private insurance.  Several experiments in healthcare coverage
were tried to reduce the cost to employers. All the schemes failed to control
costs.

The schemes include managed care and HMO’s. All the
insurance schemes were defined benefit plans. Employees were immune from
responsibility for themselves or their healthcare dollars.

As the costs have risen to unsustainable levels
corporations have been trying to figure out how to get out of providing
healthcare coverage for their employees as a benefit.

Most employers, large and small, want to limit their
exposure to healthcare premiums and Obamacare penalties.

A movement to limit employment to less than 30 hours
a week to avoid providing healthcare insurance to employees and avoid Obamacare
penalties has become viral.

No one has tackled the real reasons for the rising
healthcare costs. No one has tackled the perverse incentives and advantages
given to the healthcare insurance industry all these years.

I have argued that this perverse incentive can lead
to all the other perverse incentives initiated by the rest of the stakeholders
in the healthcare system in order to survive.

Once more the healthcare insurance industry figured
out how to increase their profits while making it appear they are helping both employers
and employees.

It must be remembered that the healthcare insurance
industry profits through both private insurance and government provided
healthcare coverage.

The industry makes its profits by providing
administrative services. The government outsources the administrative services
to the healthcare insurance industry.

The profit generated in both the private sector and
the government sector is far from transparent.

The healthcare industry’s new scheme converts defined
benefit coverage to defined contribution coverage for healthcare benefits.

In recent months we have seen large corporations
switch their employee healthcare benefits to defined contribution programs.

A partial list of companies includes Walgreens, Home
Depot, Sears, Trader Joes, Xerox and IBM retirees.

Rather than provide a healthcare insurance coverage
benefit through the corporation, the corporation is providing employees with a
defined contribution each year. The employees can then buy their insurance
through their employer’s contracted Private Health Insurance Exchange.

The Private Health Insurance Exchanges are provided
to the corporations by the healthcare insurance industry. There will be a menu
of insurance plans and premium levels employees eligible for coverage can
choose from.

The principals of healthcare coverage include all of
the basic requirements of Obamacare’s Health Insurance Exchanges. Employees
having a preexisting illness must be accepted. However, premiums might be
higher for patients with pre-existing conditions.

The defined contribution amount has not been defined.
It could be a couple of hundred dollars a year to a couple of thousand dollars
a year. In any event it does not sound as if it will be enough to cover the
cost of the healthcare insurance premium.

There will be high deductible plans with patients not
covered for the deductibles and co-pays.

If an employee doesn’t like what he buy in the
companies Private Insurance Exchange, he can always sign up for Obamacare’s
Health Insurance Exchange.

It sounds great for the employer because the employer
can predict costs. It is wonderful for the healthcare insurance industry.

It sounds terrible for the consumer.

It sounds both good and bad for the government. It
depends on how one looks at it.

The Obama administration will have more people sign
up for Obamacare’s Health Insurance Exchanges. The result will be greater
control over the healthcare system. I believe this is the reason the Obama administration has not opposed the Private Health Insurance Exchanges.

However, the consumers signing up for Obamacare Health Insurance Exchanges will be the sickest
consumers. These consumers will use the system more than average.

This will result in an increase in the deficit and
unsustainability of Obamacare. The only way out is to increase premiums and
taxes.

This is called a “redistribution of wealth” because
people making up to $40,000 per year do not pay taxes. If the tax increases are
means tested it will increase the amount of wealth that is redistributed will
increase.

The increase in taxes will decrease economic growth.

At the present time Obamacare’s Healthcare insurance
Exchanges do not have verification software. The system is vulnerable to fraud
and abuse even if it could work.

America is just becoming aware of the fraud and abuse
in the food stamp entitlement program. The food stamp entitlement has double. The
government has not fixed the food stamp program.

It is likely the same thing will happen with the government
run Health Insurance Exchanges. It will drive the federal deficit even higher.

Even though the Private Health Exchanges shift financial
responsibility to the consumer to pay for their own insurance it does not provide
financial incentive for patients to become responsible for their health.

It does not contain educational programs to help
patients deal with their chronic diseases. It does not teach consumers to be
responsible for their health and healthcare dollars.

Obamacare does not provide these incentives either.

The only plan that does is my Ideal Medical Saving
Accounts with employers providing support while shifting responsibility to
consumers by providing incentives for patients to lower the cost of their care.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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