A Look at Preexisting Conditions (Is there a better way to help such people without government?)

The Democrats have been very fond of touting one particular "benefit" of their health care system takeover legislation. Namely, they claim that the mandate which prohibits insurance companies from denying coverage for preexisting conditions will be wildly popular with the American public.

What exactly is a preexisting condition? Unless you happen to be in absolutely perfect health, you probably have a preexisting condition from the perspective of the health care system. If you are overweight, if you consume alcohol or use tobacco, if you wear corrective lenses, dentures, or a hearing aid, you have a preexisting condition. If you are over the age of 50, you are at greater risk for cancer and cardiovascular disease, so technically, this is a preexisting condition from an actuarial standpoint. Technically, being female is a preexisting condition (risk of pregnancy in childbearing years, greater risk of cancer or gynecologic problems after that). If you have a history of seasonal allergies, heartburn, intermittent joint pain, "chronic dry eye," or headaches, you have a preexisting condition.

Granted, we don't usually think of the things listed above as preexisting conditions. If you are receiving medications to treat hypertension, hyperlipidemia, hypothyroidism, osteoarthritis, osteoporosis, gout, GERD, anxiety, or depression, you obviously have a preexisting condition, but we seldom consider these as such. You can follow this into the gray area of diagnoses. Some of us may consider diabetes, asthma, rheumatoid arthritis, chronic pain, atrial fibrillation, bipolar disorder, and epilepsy as preexisting conditions, and they certainly are, but most insurance companies don't necessarily deny coverage because of them. It's all a matter of degree. Diabetes can manifest as mild Type 2 (adult onset), which can be managed with diet and exercise, or it can move all the way to cases that require insulin and multiple other drugs along with careful, frequent monitoring. Asthma may be mild and intermittent, requiring little intervention, or it may require daily dosing of multiple drugs. The same is true for virtually all of these diseases. None of these conditions can be "cured." They are "managed," and management varies by several orders of magnitude.

So what are real preexisting conditions? This is difficult to answer. In some cases, they may be defined as chronic conditions that will almost certainly progress in only one quite predictable direction. Examples would be Alzheimer's disease, AIDS, Parkinson's disease, and cystic fibrosis. In each case, management becomes increasingly expensive and eventual outcome is not changed. Chronic renal failure requiring hemodialysis is a fine example, but it is already covered by Medicare (irrespective of age). History of cancer, myocardial infarction, advanced congestive heart failure, or stroke represents other examples of high-risk preexisting conditions. Most of the risk from these preexisting conditions is absorbed by Medicare. There are, however, many people with all of these diagnoses who have private insurance, so there are no absolute answers. Without private insurance, procedures like transplantation and prosthetic joint-replacement wouldn't exist.

There is little doubt that denial of insurance coverage occurs due to preexisting conditions, but the truth is that this happens far less frequently than the Democrats advertised. Proportionately, very few individuals are denied coverage for preexisting conditions. If you wait until you're diagnosed with leukemia before you try to obtain health insurance, then you'll probably be denied coverage. If you've had insurance for many years and you're diagnosed with leukemia, then you will probably not be denied benefits. In fact, for the right price, you can buy insurance in almost any situation. Consider an auto insurance analogy. If you're a 20-year-old, unmarried male who drives a Corvette Z06 and you have citations for an at-fault accident and two speeding violations on your driving record plus a DUI conviction, you might find buying auto insurance rather difficult. You have "preexisting conditions." You can still purchase coverage, but you'll pay dearly for it. From an actuarial perspective, you present a much higher loss risk for the insurer than the 40-year-old married man who drives a minivan and has a perfect driving record. That is how insurance works. It's all about managing risk. If the government were to step in and mandate that both drivers shall have the same coverage for the same cost, what would be the result? One driver (or group of drivers) would be unfairly penalized and one would be unfairly rewarded.

Often it's not the patient's fault that he has a preexisting condition (although one could argue this in cases of AIDS or lung cancer or cardiovascular disease secondary to smoking). At the same time, it's not everyone else's fault, either. Mandating same-cost coverage for preexisting conditions is not insurance. It is, in fact, public welfare, and it could be managed more effectively, efficiently, and affordably independent of the insurance industry that serves most of the population. For example, take any medium-sized corporation that provides health insurance benefits for its employees and their families. This is its "insurance pool." The insurer evaluates the demographics and calculates the risk, and the corporation arrives at a premium for coverage. Corporations are very good at this. The insurers can usually calculate an appropriate premium to cover all the claims and still make a profit.

If the premium is too high, a competitor gets the corporation's health insurance business.

Now imagine what would happen if the government were to mandate that this one corporation's health insurance pool had to cover just three additional patients (at the same cost) who were denied coverage elsewhere because they will require a bone marrow transplant. The insurer not only sees its narrow profit margin disappear, but it will go deeply into the red. The next year, the premiums will increase dramatically to compensate for this loss risk. Though the demographics of the insurance pool of the corporation did not change, all employees and their family members will pay more because patients with preexisting conditions have been foisted on their insurance plan. Mandating coverage and who will be covered deprives the insurer of the ability to effectively manage risk. If an insurer can't manage risk, then he can't provide insurance.

What politicians fail to recognize is that benefits paid by private insurance subsidize the underpayments from Medicare and Medicaid. When there is no longer a private insurance industry to shift costs to, severe shortages in the availability of health care will emerge. We're already seeing an increasing number of physicians who are opting out of accepting Medicare. Walgreens in the state of Washington is no longer accepting new Medicaid patients. At the same time, the insurance industry is not guiltless. Insurers should not be able to cancel insurance coverage for those patients who suddenly find that they need the benefits for which they have paid. The insurance industry has also played a huge role in establishing the third-party-payer, comprehensive-coverage paradigm which has served as the single greatest driver of increased health care costs. Still, having the federal government mandating same-cost coverage for preexisting conditions will only hasten the demise of the best health care available on the planet.

Our family used to have health insurance. We paid through the nose for it — in 2007, it cost us $2000 a month. My husband is self-employed. There are no jobs in his field, especially for people his age.

During 2008 and 2009, my husband’s income decreased to 1/3 of what it was in 2007.

Mind you, we did not take vacations. I took the kids tent camping at a state park for years, which was very frugal. Our cars are 9 years old. We don’t have large wardrobes, boats or other recreational vehicles, we didn’t live in a McMansion, we lived low on the hog. We had to. It is expensive to finance a largish family.

We went through our savings. We had to drop the health insurance, which then cost $2500 a month, because we didn’t have the money to pay for it.

The problem is ME - my health. I had double coronary artery bypass surgery when I was 45 years old. My left main artery was 96% blocked. That’s the artery that is called the widow-maker. The other artery was also over 90% blocked.

The cardiologists could not figure out how I was still alive. I had no risk factors for this, which added to the mystery.

Two months after heart surgery, I had an angioplasty in a third artery and a stent put in the left main artery — they were both blocked over 70%. I had a very hard time persuading the doctors to do a cardiac catheterization because I’d just had the bypass surgery. They thought it was the stress of having so many kids and homeschooling that caused my physical problems!

So, I have severe left main artery disease, and no insurance. The drugs I am supposed to be taking cost $600 a month. I am not under a cardiologist’s care because we cannot afford that.

I’ve been looking for a job for over a year. I haven’t found one. We moved to another state 9 months ago, and there are no jobs here, not even at fast food places.

And that’s okay with me. Why? I’m not lazy, but I no longer have the stamina to work two jobs — a paying job and taking care of my house and family.

We had to move to another state because the cost of living in Mass was far too high. We lost our house, which was under water on the mortgage, and we couldn’t sell it due to the housing market. We didn’t have an ARM. We didn’t have a no-money down mortgage. We just couldn’t afford the payments any more. Our rent here is about 40% of our mortgage payment - cheap, because the house is tiny and it is in a rural area.

My husband very regretfully filed for bankruptcy yesterday. It took me a year to persuade him to do that, but it was our only option.

I’ve decided to go with prayer as my option. If I die, too bad. I hope I don’t, because my kids are in high school and they need me.

Thank God the rest of the family is healthy. It is much cheaper for us to get medical care for the kids ($75 per doctor visit) than it is to have health insurance.

Anyway, not all of us who are without health insurance are government teat-suckers. Some of us just plain have bad luck. All the pre-planning in the world would not have prevented what happened to us. We were blindsided by forces beyond our control.

I would like to point out that, although we paid a lot for our health insurance ($2500 a month in 2009), the health insurance paid out a lot more than we ever paid into it.

Treating my heart problems was very expensive.

I was hospitalized for 6 weeks during my first pregnancy. That was very expensive.

Our first babies were triplets and they were born 13 weeks premature, and weighed between 1 lb. 6 oz and 2 lbs. They had significant medical bills from being in the neonatal intensive care unit for 3 months. They were also in serious condition, medically, for the first year, and had 9 surgeries total in their first 6 years of life.

We had an R.N. come to our house for 8 hours a day, and a home health aide for 6 hours a day, all paid for by insurance. Leaving aside the fact that these people were from the bottom of the barrel, and frequently did not show up for work without warning, this was paid for by our insurance.

They are all healthy now, except that one has extensive vision problems due to having retinopathy of prematurity.

The doctors gave us the choice of aborting them because mine was a high risk pregnancy. We would not consider it and we were shocked to be told in detail about the option.

So, I’m glad we had insurance while we had it. I’m in no position to beef about the cost of it to our family.

I liked the general thrust of your idea, and in fact have advocated something like that for years myself.

However, you wrote: “Now if you had a medical condition since childhood, you would obviously have to spend more for insurance....”

Here’s one solution to the pre-existing condition problem that is free-market oriented. Consider first that if anyone in your family has a condition and you get a job with an employer who provides family health insurance, your family member’s pre-existing condition is usually automatically covered anyway. In other words, insurance companies are always routinely taking on such patients as people shift from job to job.

The problem is that if you try to enter the individual market, as you advocate (and I completely agree) then insurance companies WILL deny coverage for pre-existing conditions. Furthermore, in the present individual market, if a number of people get sick in the pool, the pool will start to shrink as premiums escalate to cover them over time. The healthier people just go elsewhere for coverage.

So, what we need to do is first get employers out of the picture, transferring their present health insurance payments to the employees pre-tax, as you advocate (and I agree.)

Next, and THIS IS THE KEY to the whole pre-existing condition mess: By law, whether state-wide, region-wide, or country-wide, dictate that very large pools be formed segregated into 5-year age ranges and sex and not much else, and then again by law dictate that as long as one continues to pay the premium on ANY health insurance policy they will always retain a status of an INSURABLE INDIVIDUAL.

That is, no company will be able to consider their pre-existing conditions when offering them a policy for, say, a 38-year-old male. They will have to price all policies of a certain deductible, copay and coverage at the same rate for all 36-40 year old males who apply provided those applicants hold the status of an “Insurable Individual”.

At the onset of the law, every person would be an “insurable individual” and would have a grace period of, say, 90 days to get insurance with any insurer doing business in the state, region or country (depending on the scope of the law.)

Here’s the next key part: Anyone who failed to pay their insurance company during the grace period, or who later let payments lapse, would LOSE their status as an “insurable individual” and would be subject to being denied coverage for a pre-existing condition or to having to purchase an additional rider paying extra to do so.

Here’s the next key: If ever an insurance company decided that a person’s pre-existing condition no longer warranted denial of coverage for the condition, and the person paid for a policy from them, that person would then again become a fully “insurable individual” once again and no other insurance company could treat them otherwise if they later went insurance shopping.

And finally the last key point: The status of “insurable individual” would become the personal goal of most responsible people. Those who are irresponsible would either suffer the consequences or would have more responsible people looking out for their interests. Those without the means to pay could look to the government to PAY THE PREMIUMS on a bare-bones policy so that they would retain their status as an “insurable individual” until they eventually become able to pay their own way.

Summing up: Giant pools combined with the concept of an “Insurable Individual” would create the backbone of a system on which government could look out for the less fortunate among us by simply covering the premiums on a cheap policy. People would be able to take the risk of going uninsured if they wanted, but most would see the wisdom of at least buying a very bare-bones policy in order to retain their status as an “Insurable Individual”

Grandparents and parents would even start savings account for the kids and grand kids to ensure that they got off to a good start when the entered the insurance market at the age of, say, 21. Kids would enter with the status “Insurable Individual” and would only lose it if they screwed up and didn’t pay premiums. Schools and parents would be drumming into their kids’ heads from age 16 on the importance of retaining that status, and most probably would. Government could then focus on those who just couldn’t. Medicare and Medicaid could be done away with.

Most people would pick HSA plans with high deductibles and copays, the insurance companies would once again be insuring primarily against catastrophic losses, doctors would start quoting single prices for procedures instead of listing every band-aid and cough drop on the charges, and health care costs would plummet due to consumer shopping for services using their own money. Nirvana. America. Wow!

Instead we get Obamacare....sigh

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