Jonathan Cohn has a very nice piece in the New Republic about Blue Cross, the transition from community rating to risk rating, and the transition from not-for-profit to ginormous profits. I recommend reading it as it explains better than I can why we’re in this mess. In sum, this is a very skewed market. A market based overhaul, while possible, would require a rethinking of our national sense of “goodness” (would we really be willing to let people die on the streets for the sin of being sicker?).

The question for those of us in Alabama is why, when Alabama Blue Cross is a not-for-profit, are our costs not lower. It would seem that not paying attention to the stock prices would make it a kinder, gentler company. After reading this article, I feel I gained a little insight into our unique problems.

First, apparently it may be that competition from the other insurers might be bad. When BC/BS of Alabama was the only game in town, it could afford to offer community ratings because it was a sole source provider. With other insurance companies bidding on insurance for businesses, Blue Cross claims (and they are probably correct) that they must offer rates and packages competitive with these insurers otherwise the HR folks won’t choose BC/BS. This was explained to me by the medical director of a HMO I used to work with when I was pushing him to offer more comprehensive care. he said he could push quality for an entire presentation and then the CEO would point out that the competitors rates were $1.00 per employee lower and what was he going to do about that? Without a benefits floor, it’s all about price.

Secondly, BC/BS is competing with itself. Every year or so, it goes to the client and discusses the new cost of care based on what happened in the company last year. The companies, for the most part, pay for all of their own costs and BC/BS takes a cut off the top (called a third-party adminstration fee). Don’t think the CEOs aren’t aware of which employees have cost them health care dollars and aren’t asking what can be done to alter benefits and render health care less expensive. Again the answer may be “nothing” but my bet is that if BC/BS offers that answer, United Health gives a different answer that may be more than a little draconian.

Lastly, we (Americans and Alabamians) are already paying for the most expensive health care utilizers. Almost 50% of the health care dollar is funded through our taxes and much of that goes to Medicare and Medicaid. Everyone (well 96%) of folks over 65 are Medicare eligible and consume quit a bit of health care in their last 20 – 30 years. Medicaid in Alabama covers the vast majority of premature infants. The goal of all good companies is to reduce risk. The best way to reduce health care risk is to move people who will consume health care completely out of the risk pool. Again, done potentially through manipulating copays and other means.

It looks like some of the tools to reform this system may make it to the President’s desk for signature. If not, the current system is still far from market based despite what some people¬† claim.

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