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Health care

01/30/07 12:00AM By Allen Gilbert
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(HOST) Other issues have bumped health care reform from the top of the Legislature's agenda. But commentator Allen Gilbert thinks a close eye needs to be kept on some recent developments.

(GILBERT) Everyone agrees that last year's health care reform efforts in the Legislature were relatively small steps towards solving a huge problem. We haven't heard much about the next steps to be taken, such as how to control premium increases for people who already have insurance. Other issues are getting attention at the state house. But we should be keeping a close eye on health care developments, and learning from some recent incidents.

This fall, members of the Vermont League of Cities and Towns faced premium increases of thirty-six percent from the Leagues insurer, Blue Cross and Blue Shield. That prompted the League to shift to Cigna, a Blue Cross-Blue Shield competitor. Not wanting to lose such a big chunk of business, Blue-Cross/Blue Shield then began wooing certain League members, offering reduced rates.

It's hard to know if the plans, and the services, offered by the two companies are identical. So conclusions about whether competition has reduced costs are hard to reach. What is known, however, is that utilization helped to drive the thirty-six percent increases originally sought by Blue Cross. "Utilization" means how many people go to the doctor, how often, and for what services. Just as car insurance goes up if drivers have accidents, health care premiums go up if people get sick.

When the League turned to Cigna and negotiated a better deal, Blue Cross realized it had reached too far. It scaled back its premiums - but only for specific League members. Eventually, about half the League's largest members accepted the offers. Cigna, meanwhile, negotiated different rates with different League members. Increases are pegged at about twelve percent.

This is a complex situation, bordering on "cherry-picking" - a practice whereby an insurer maximizes chances for profitability by picking the healthiest customers. Fewer claims mean more profit for the insurer.

One of the towns that left the League's health plan noted that it's getting a good rate in part because of low claims. The low claims rate was attributed to effective wellness programs. That's great news. But it doesn't help an employer with an employee who sustains a traumatic brain injury, or an employee who - despite a healthy lifestyle - develops cancer.

We all want to believe that we can control our health destinies, and therefore control how much we pay for health insurance. We want cheaper rates, which insurers are happy to provide -- as long as we're healthy. But as soon as we get sick, those cheap rates disappear. The risk of unbearable premiums can be reduced only by spreading costs among a large pool - not a small, selective group.

Premiums can also be moderated by keeping a close eye on administrative costs. The revelation that the Blue Cross CEO earned upwards of $850,000 last year caused quite a stir. An investigation is underway. Is such a salary justified at a nonprofit? It's worth pondering as health care reform slowly moves forward.

Allen Gilbert is a former journalist, teacher, and consultant currently serving as executive director of the ACLU of Vermont.

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