The executive order signed Thursday by President Donald Trump is still very light on details and there is tremendous interpretation still to be made from the regulatory bodies that will be charged with interpreting the changes. From a high level, the law would relax the regulations around employers joining together for the purpose of gaining advantages in insurance pricing. As with most such changes, there are upsides and downsides.
The upside, as I see it, is pretty narrow. The only real impact would be if banding together would pull them out of the community-rated market, and allow them to be rated on the actual health of the population. Current community rating has all members of the pool paying the same rate regardless of industry, age, gender or health.
The downsides, however, are pretty voluminous. First, in relation to the upside pointed out earlier, this could pull all the healthy people out of the community rated pool and further destabilize those markets.
But, there is a broader issue at play here. Every executive order, bill or attempt to fix the system continues to point to insurance as the cause of the problem and therefore attempts to fix it through regulating insurance markets, relaxing regulation already in place, forcing broader coverage, limiting out of pockets. etc. What it fails to address effectively, or even at all in most attempts, is the actual cost and quality of care we consume. Our low quality, high cost insurance is not the cause of our problems, but rather the result. And until we address the underlying problems, we will not effectively solve this.
Pennies on the dollar
We know 80%-85% of premiums must go to actual medical care. And while some may argue (and I personally agree) that there are significantly better options out there on managing that spend than the large, traditional players, all we are then focusing on with this legislation is the 15%, since a large group of people will consume the exact same medical care at the exact same providers at the exact same costs as a smaller group. And every carrier (or even the government) will have overhead, usually around 10%. So now we are applying the law of large numbers on 5% of costs? We are tripping over dollars here to get to pennies.
By every measure out there, we are the highest cost country per capita on healthcare by very long margin, and among the worst outcomes, with the most unnecessary procedures, preventable deaths, prescriptions fills and inefficiencies. So how can we ever have efficient, affordable insurance when this is what it is paying for?
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