Consumer Watch: Commonsense approach to health insurance

Like his counterparts around the country, Pennsylvania Insurance Commissioner Joel Ario had an unusual vantage point for this summer's overheated arguments over health care.

As an appointee of Gov. Rendell and a former consumer advocate, Ario is hardly a nonpartisan observer. But as an insurance regulator since 1994 in Oregon and now here, Ario has learned to appreciate the challenges faced by an industry he believes is sometimes unfairly vilified.

I checked in recently to get Ario's perspective on the state of our Great Debate. As it turns out, he has been busy much of the summer trying to help tamp down the flames.

Last month, Ario joined with other leaders of the National Association of Insurance Commissioners to remind lawmakers that before the partisan sniping began, a "strong consensus" had already emerged on a small set of essential health insurance changes.

Ario says the commissioners, all painfully familiar with the shortcomings of today's system, want basic changes that will give all Americans access to reliable, affordable health-care coverage.

Like President Obama, despite whatever you've heard, the commissioners don't want to undermine the role of private insurers or impose a "government takeover of health care." Both want to make the current system work for everybody.

The state commissioners have agreed to disagree on the importance of a "public option." Ario says that he believes a Medicarelike version can help discipline the private market but that he does not think that is likely right now politically. Nor is it on his short list of essential changes.

I hope Ario is right that Congress can get past the wild rumors and partisan rancor that spread this summer like an ugly strain of swine flu. It would be a tremendous mistake if politics were allowed to block the kind of commonsense changes advocated by Ario and colleagues such as Sandy Praeger, the Kansas commissioner and an elected Republican.

We have a health-care problem in the United States: a Swiss-cheese insurance system that works beautifully for some and bankrupts others, often after denying them basic care until they are so sick that refusing hospitalization would shock our collective consciences. Even then, we treat them in emergency rooms and send them the bills.

We also have a financial problem: Even with our system's holes, we pay far more than any other developed country for health care - far more than second-place Switzerland, which like all those other countries manages to cover everybody and skip the Swiss-cheese approach.

But it is crucial to remember that this is not just a crisis of the uninsured. Perhaps more insidious is the problem of underinsurance - of people who don't realize they lack adequate coverage until they need it.

According to a 2007 survey by the Kaiser Family Foundation, more that 50 percent of people covered by employers' plans face lifetime limits on coverage, typically of $1 million or $2 million. That sounds like a lot until you or a loved one needs costly care for a serious illness, accident, or chronic disease.

What would fix the system? Ario says the key is three simultaneous changes:

Bar discrimination based on "health status" - ending the practice of insurers' denying coverage for "preexisting conditions," or setting prices so high that coverage might as well have been denied.

Require everybody to obtain coverage.

Subsidize coverage for lower-income people unable to afford premiums.

Why not simply bar exclusions and let individuals decide whether they want to take the risk?

"The example I always give is that if you say to somebody, 'I really, really want you to buy flood insurance. I want you to buy it so badly that I'm willing to sell it to you on the same terms and conditions the day after the flood as the day before the flood.' You probably won't sell a lot of flood insurance. People will say, 'Gee, I'll wait until I need it,' " Ario says.

Cost control, he adds, is crucial to the long-run health of the system. But he says the key is better-designed incentives and disincentives, not heartless rationing of care of the kind some warned against during our summer of rhetorical excess.

How can fixing incentives help control spending?

A common example is moving doctors away from fee-for-service reimbursements and toward salary-based systems like those pioneered by institutions such as the Mayo Clinic. Another is tackling the perverse incentives that arise when doctors are allowed to invest in, say, MRI machines and are then tempted to overprescribe their use.

Ario offers an example closer to home: the recent decision by Geisinger Health System, of Danville, Pa., to quit billing heart-surgery patients extra when complications necessitate a second operation.

"They've now combined all their costs and guaranteed people a price, and so they bear the risk of complications rather than the patients' bearing the risk," Ario says.

Befitting his role as a state regulator, Ario is wary of one-size-fits-all national solutions.

But he says there is one essential set of changes we need to accomplish: We need to finally pass a law that makes affordable, reliable insurance available to everybody, and then we need to require everybody to sign up.