“I think it is very reasonable to have a debate on the executive compensation of the insurance executives. However, I think you also owe it to your readers to raise the issue of executive compensation of hospital executives, and maybe even more revealing – the compensation of physician specialists. I think everyone already thinks that insurers are the bad guys, but there is greater value in raising the question of whether specialists should be paid in the high stratosphere that is the norm. These salaries are generally well-hidden from the public, but as you know are often way above the $500,000/year number you suggested is adequate for executive pay, and is a far greater factor in the high cost of medical care.”

I agree with my friend that the questions I raised about compensation for health plan executives are also important ones for other executives of other non-profit public charities, including hospitals. I don’t know if most hospital board members receive compensation or how much. If they do, then the level of their payment should also be included in any conversation about these issues.

Since physician practices are almost never organized as public charities or not-for profits, there are few publicly available data on physician compensation. But research shows that physicians in the US are certainly paid very well, particularly compared to the average US worker or doctors in other countries. The U.S. spends far more per capita on physician services than other countries, and this is an important reason why overall health care spending is so high in the US.

Dr. Buyse’s comments are thoughtful and raise several interesting issues. First, she’s absolutely right that we need to focus on finding ways to control medical costs, since medical care spending comprises 85-90% of health insurance premiums. Eliminating age rating would reallocate spending but not reduce it. I don’t think this is any reason not to have the conversation but I agree it’s important to be explicit about what goals we would—and would not—achieve by this change.

Second, Dr. Buyse reminds us how many problems are created by having a system of health coverage in which people can opt-out. While the tax penalties associated with the individual mandate now make the cost of opting out higher than it was before, it is still cheaper not to buy health insurance. And younger people, because they value health insurance less, will still choose to opt-out at much higher rates than older people. This is a major reason why other developed countries don’t have voluntary systems of health coverage. (Of course, they generally finance their systems in a way that is based on income and would never think of considering personal characteristics like age in determining how much people pay for health coverage.)

Third, Dr. Buyse rightly points out that eliminating age rating would create challenges and disruptions, at least in the short-run. As someone who was involved in the early 1990s in implementing the law that eliminated health risk rating and other long-standing rating practices in the small employer market, I know that there are “winners” (those who rates go down) and “losers” (those whose rates go up). The losers complain loudly and the winners generally think they are still paying too much for health coverage. It’s very hard to change systems in which some people are advantaged at the expense of others. When the state last made major revisions to permissible underwriting and rating changes in the nongroup and small employer markets, it was done over several years to moderate the impact of the changes. A similar approach would be needed if we moved to eliminate age rating.

I disagree with Dr Buyse about whether or not age rating is discriminatory. From an “actuarial perspective” it’s not—but I don’t think that is the appropriate way to think about the issue. As I pointed out in my posting, there is “actuarial justification” for varying insurance rates on many factors but as a matter of public and social policy, we don’t let insurers use them all. I mentioned two such factors–race and gender– in my post, both of which were commonly used in the past in insurance underwriting, and may, from an actuarial perspective, be predictive of certain types of expense. Given the enormous health disparities that arise from poverty and social inequality, I can think of many characteristics–income, amount of education, zip code of residence, to name a few—that would probably all have actuarial justification. As would having a family history of certain medical conditions, regularly riding a motorcycle or flying small planes, hanging out with friends or family members who smoke, and eating lots of red meat. But as a matter of public policy, we don’t allow insurers to use these factors in setting our health insurance premiums.

Age rating does make health insurance less expensive for younger people, but of course this comes at the expense of making it more costly for older people and not affordable for many of them. (This is a particular problem for older women.) In our current system, the societal cost of permitting age rating as a means of keeping coverage affordable for younger people—and hence required under the individual mandate—is that we leave many older people uninsured. I don’t think this is an acceptable outcome and we need to figure out ways to fix it.

Finally, thank you to Dianne for reminding me that it’s easy in a discussion of health insurance to use language that loses the human dimension. I certainly don’t think of the people who’ve been newly insured under the health reform law—or anyone else– as “cash cows.” For me, the goals of ensuring that people have health coverage are to improve their health, provide financial security for them and their families, promote community health, and improve social equity. It’s important not to lose that focus in any discussion about expanding health coverage—regardless of our disagreements about the way to get there.

For the truth about the MA plan, check out Part I by Trudy Lieberman, a journalist who is not afraid to tell it like it is. I can’t wait to read Part II.

http://www.cjr.org/campaign_desk/health_reform_lessons_from_mas.php

Age rating is not discrimination. The question is whether that classification is fair, founded in sound actuarial evidence and whether its use results in an appropriate spreading of risk that helps keep coverage affordable for the broadest range of individuals. Age rating meets all those tests. It reflects the correlation between age, health status and use of the system, and, because Massachusetts limits the extent to which rates can vary based on age, it also fairly spreads risk between the older and younger populations.

States without any kind of age rating, such as New York, have higher insurance costs than Massachusetts. According to the Kaiser Family Foundation, the average single premium for individuals enrolled through an employer in 2006 (the last year data was available) was more than $150 higher in New York than in Massachusetts. For small businesses, those additional costs are significant. Until the individual mandate is enforced completely, young people will continue to avoid paying for coverage and more will drop from the insured ranks if they are forced to subsidize older populations even more than is already required under the current rating law. As the risk pool gets older under this scenario, older people will end up paying more, not less, for their coverage.

Making changes to the rating rules does nothing to get at the underlying factors driving the cost of health care. Health insurance premiums are driven by health care costs and the bulk of the premium dollar – roughly 90 cents – goes to pay for medical services, such as doctor visits, prescription drugs, and hospital costs. Doing something about how much medical services cost will go a long way towards making health care more affordable as opposed to changing the rules so that younger people pay more.

MA has turned health care into a dreaded nightmare. Too many of us are worse off than we were before Chapter 58. Living in this state for the past three years has been
oppressive. We have to watch our income – in some cases intentionally lower it or keep it low. This creates a new class of poverty and keeps the poorest from trying
to advance themselves.

My neighbors own a small business with ten employees and would like to expand. In fact, they need to do this but can’t b/c they can’t afford to insure their employees. There are many in this boat.

How do any of the above-described situations help the economy and morale? All this does is make us furious, more stressed, and out of frustration, causes us to duck for
cover.

Oh, what our goverment – both state and federal – will do for money from corporations and lobbyists trickling into their pockets! It is shameful. Bailouts to crooks when
Congress knew what was going on all along including the sub-prime time-bomb, more bailouts, bonuses, lying, passing the buck, then feigning anger.

We the people are not feigning anger, and it’s peaking more everyday. To top things off, Obama wants to dump a MA clone with a twist on our backs under the pretext of helping save
the economy. In fact, yesterday he tried out the tired Romney bit about mandating health insurance just like motor vehicle insurance is mandated. If you can’t afford motor
vehicle insurance, then you don’t drive. If you can’t afford health insurance, then whadd’ya do? Leave the country? He’s marketing this like Bush et al sold the invasion of Iraq under the false pretense of WMD and Saddam Hussein being responsible for 9-11.

He says the insurance companies are coming around and will cover pre-existing conditions if the insurance is mandated. Obama, I have breaking news: we don’t take stupid
pills. We know that the insurance companies will always find a way to slip out the back, Jack, and not cover pre-existing anything. There are plenty of ways to skin a cat.

We here in tiny MA have been censored by the collusion of gov’t and media. Folks in the heartland aren’t gonna taking this sitting down once they find out what has hit them
in the face and their pocketbooks.

Aa long as we continue to treat health coverage as an insurance product we will come to the wrong conclusions on how to structure pricing on something which is a social good.

Your argument about the affordability scale falls down when you start to consider other real life expenses. If you take a 64 yr old couple and a 27 yr old couple with the exact same income, their expenses are dramatically different. The 64 yr old couple could be living in a home purchased for 50K and the 27 yr old couple could be buying a home for 500K. One couple could be taking distributions from an IRA, the other saving for college. The younger couple has life and disability insurance to pay. The older couple might not have a mortgage or car payments. This is a pretty common scenario.

To place these groups on the same premium level for insurance is punitive. First you tell them that they have to have insurance but it will be reasonable because they are young. Then you want to change the rules and financially punish them again. Remember that the Connector has outlawed true catastrophic plans and forces everyone to buy RX coverage.

Mass. has already determined that someone’s smoking and health issues are not their problem, but everyone’s problem by removing surcharges for smokers(which is about absurd as anything that I have ever seen) and health conditions. If age rating is removed, I predict that there will be a huge push towards self funded products. I am already seeing my clients requesting those solutions