Asymmetrical Information

I guess he'd rather pay that money in taxes and not have to think about it.

Holy cow! For a married 30-year old in Indiana (non-smoker, $5K deductible), that's basically my premiums for the year.

I thought that with guaranteed issue and community rating, Derb would pay the same as a 25 year-old triathlete and a 79 year-old with a quadruple bypass? Or do I not understand how this works? Or did his insurer just raise rates for everyone by 81% because the individual market has collapsed that much more in the past year?

Yep, if I'm not mistaken, the Derb lives out on Long Island somewhere.

Non New Yorkers have to understand what a nanny state NY is. You are not permitted to obtain health insurance that is not a Mercedes Benz--no simply catastrophic care coverage allowed. No, the coverage HAS to include doctor's visits, prescriptions, mental health, pregnancy, etc. as well as actual hospitalization. Add that to the fact that medical costs in the metro NY area are really really high so that the doctors* can have a lifestyle that they could have on half-salary elsewhere in the country, and you have a government prescription for high premiums.

And all the other health care workers too. Smartest thing my wife and I did was to move upstate, but keeping our downstate salaries. Not only was our quality of life improved, but we actually began to see some of the money we were earning.

Boy, I thought when my (privately paid for) insurance went from $560 to $640 per year that I had been hosed, but clearly it's nothing like the Derb.

rex, i've also read the insurance in new york state -also- has to cover chiropractors & accupuncture. i'm not sure if the coverage for colloidal silver & unicorn attacks is mandatory, however.

Didn't Mr. Derbyshire move in the past year? If so, the change in location combined with NYs community ratings could account for the dramatic increase in his premiums?

Non New Yorkers have to understand what a nanny state NY is. You are not permitted to obtain health insurance that is not a Mercedes Benz--no simply catastrophic care coverage allowed.

Another consequence is that short-term insurance is simply unavailable in New York. If you get fired, I guess you can pay a zillion dollars for COBRA. But if, say, you're a student who just graduated and your school medical coverage ran out but you haven't started working yet, then sorry, you should have known better than to actually live in this state.

I thought Mr. Derbyshire had a family. I assumed that $857 was the monthly premium to insure his family.

My employer just received notice that the HSA premiums increased on average 21%. In Vermont, an employer-provided HSA with a preventative care wrapper and a $3,000 deductible increased from $749 to $922 for family coverage. Annual premiums and deductible for a family cost $14,364. (The non-HSA plan with $200 deductible and co-pay is now priced at $1,654.32/monthly for family coverage.)

A surprising number of employees hit their deductible this past year.

Anecdotal story re: coverage provided to college students - there's a $5,000 lifetime cap. One auto accident with a head injury and you're placed on the State's Medicaid plan.

Anecdotal story re: coverage provided to college students - there's a $5,000 lifetime cap. One auto accident with a head injury and you're placed on the State's Medicaid plan.

My undergrad insurance was crappy and expensive, so I waived coverage and used an individual plan from another, much cheaper state. (Note to kids/parents: Anyone from a state with a free insurance market going to school in the Northeast should look into this.) The school clinic was included in tuition, which was convenient and all I needed.

My grad insurance was okay, but yes, had only a $250k lifetime maximum per condition. More than $5k and might cover a coronary bypass or a stage I cancer, but I'm glad I didn't need an organ transplant.

And yes, super nerd that I am, I read the plan handbook, every year.

What I don't understand about this explanation is why his policies would nearly double from one year to the next. New York didn't pass these laws to become effective in 2006, did they?

Britain33: Did you perhaps consider that premiums had to be readjusted due to malpractice judgment expenses? Probably not, since you seriously believe they're only 2% of health care costs.

I mean, that may or may not be the answer, but did you consider it?

pm
Did malpractice awards and lawyer fees and court costs double in one year? Add the fees and costs in, and it's got to be 4% at least.

Britain33: Did you perhaps consider that premiums had to be readjusted due to malpractice judgment expenses?

No, but i'll consider it now. Ok, rejected. First of all, malpractice insurance costs track the decline of returns of stock market investments more than anything else, because that's how the insurance companies make their capital pay. Secondly, how much would malpractice costs have had to go up for EVERY doctor in the network in order to lead to a doubling of insurance premiums? Remember, malpractice isn't 100% of the cost of medicine right now, and the horror stories we heard from Pennsylvania last year were concentrated in specialties like Ob-Gyn.

But if you have proof for your theory, I'll reconsider. How much have malpractice costs in New York gone up this year, and how much of that is reflected in insurance costs?

Probably not, since you seriously believe they're only 2% of health care costs.

When did I say that? I haven't thought or talked about malpractice costs in months.

For another data point, my health care insurance (rate plan is for a family of 3 or more, includes medical and dental) costs $1362 per month. My employer is generous enough to pitch in $868 of that.

Rex did't mention the "free" annual mamograms NY health insurers are forced to provide... They made sure there was no competition by forcing everybody to buy a cadillac, whether they need it or not.

Next distortion: It appears that my city, Syracuse, has a 65% occupancy rate in the local hospitals. You show me a business with 35% excess capacity, and I'll show you one with serious overhead problems.

Next scam: I went for my "once every 5 years even though I'm fine" physical. Lab tests - about $550. Negotiated price by my (employer provided) insurance, $127. Either the tests are way overpriced, or my insurance company used their muscle to shift the cost to somebody with less economic clout (Derb) or the lab is going to go out of business.

There are worse things than expensive medicine - like the Canadian system - no medicine unless THEY decide you are worthy. Get the government out, open it up to competition, and watch prices fall.

To amplify what others have already said: a libertarian-minded reader can have loads of fun - and waste a day or two of work - by googling "community pricing" and "guaranteed issue."

Jane, is Joe Bruno's spokesman John McArdle a relative? I don't know how common a name that is in the North Country...

http://blogs.timesunion.com/capitol/?p=3055

Yes, our state government has created this problem by mandating every little detail of what health insurance must cover in this state. I don't think they've included manicures ... yet. After driving up the price enormously and wrecking the economy of Upstate NY, they've decided to solve the problem they've created by doing more of the same. A trial balloon has been floated by a member of Governor-elect Spitzer's transition team to legislate universal health insurance coverage the way Massachusetts did. They're planning to charge any company that isn't providing health insurance for the cost of providing it. I'm going to spend the holidays cleaning up my house in case I have to get it ready to sell. All the jobs are leaving the state anyway. This is just going to speed it up.

Britain33: Did you perhaps consider that premiums had to be readjusted due to malpractice judgment expenses? Probably not, since you seriously believe they're only 2% of health care costs.

So long as you include the word “judgment” (which is only part of the expense of malpractice litigation) then yes, they’re about 2% and they’ve held fairly even. However if you look at “malpractice expenses” (which includes not only the costs of judgments and settlements but all of the costs of malpractice litigation) they have about quadrupled over the last 10 years.

Derbyshire is experiencing how the liberal approach almost killed NYC in the 70s and 80s. Now the entire state is trying to kill itself.

Brittain, BTW, I believe insurance companies are allowed to hold their money in bonds but not stocks, due to laws implemented initially in New York of all places to curtail shenanigans by the likes of JP Morgan. Or do I have my history wrong, Megan?

Britain33 is right: unless Derbyshire moved to New York in the last year, there's no way New York insurance laws that have been on the books for many years explains this year's increase in premium over last year.

Further, is there evidence that health insurance is more expensive in New York than in other states? The Medical Expenditure Panel Survey (MEPS) data suggest otherwise to me, although I concede it's possible that I'm just not reading it right. (I insert that disclaimer because if anything, New York looks too good given the cost of living issues that you would expect would drive up costs independent of any regulatory costs.)

Next distortion: It appears that my city, Syracuse, has a 65% occupancy rate in the local hospitals. You show me a business with 35% excess capacity, and I'll show you one with serious overhead problems.

Nah. They can turn the lights off in the unused rooms. What they have is an NFATO problem!

Next distortion: It appears that my city, Syracuse, has a 65% occupancy rate in the local hospitals. You show me a business with 35% excess capacity, and I'll show you one with serious overhead problems.

Nah. They can turn the lights off in the unused rooms. What they have is an NFATO problem!

Britain33:

No, but i'll consider it now.

As I suspected.

Ok, rejected. First of all, malpractice insurance costs track the decline of returns of stock market investments more than anything else, because that's how the insurance companies make their capital pay.

False. You're basing your rejection of that theory on the quaint belief that evil greedy capitalists milk wealth from the "real" workers, but most medical malpractice insurers are cooperative, i.e. doctor-owned. Are doctors getting better at milking themselves?

Secondly, how much would malpractice costs have had to go up for EVERY doctor in the network in order to lead to a doubling of insurance premiums?

Zero. All that needs to go up is the *expectation* of future expenses. Throughout the 90's, premiums were "too low". We only know this in retrospect. As evidence comes in, these expectations are revised.

Let's say that an insurer is calculating expected costs. Before last year, he found that if a doctor followed practices-set X (a practice-set is just the general precautions and procedures the doctor follows), he would rarely have to pay a claim. Then a jury award happens last year where several doctors following practices-set X had to pay out large claims, though still only a tiny fraction of total health care expenses. Now, the insurer knows that in the future, more of these will happen, and it is costly to adopt a safer practices-set than X. Oh, and most doctors use X.

What do you think will happen to premiums?

Remember, malpractice isn't 100% of the cost of medicine right now,

True, just 100% or more of the doctor's salary.

and the horror stories we heard from Pennsylvania last year were concentrated in specialties like Ob-Gyn.

True; those would be the low-hanging fruit for trial lawyers.

When did I say that [medical malpractice costs are only 2% of health care costs]?

I don't know. You just strike me as the kind of guy who would fall for that.

Next scam: I went for my "once every 5 years even though I'm fine" physical. Lab tests - about $550. Negotiated price by my (employer provided) insurance, $127. Either the tests are way overpriced, or my insurance company used their muscle to shift the cost to somebody with less economic clout (Derb) or the lab is going to go out of business.

I'm in Manhattan, and I figured that I needed a cholesterol screening, because I eat a dozen eggs a week or so. I hopped on the internet and I was thrilled to find a few mail-order direct-to-consumer testing labs. This way, I figured, I could bypass the doctor and save about $300. My joy was short-lived, however, as I read over and over that State law prohibits direct access testing in New York and New Jersey.

So, I wound up going to a public hospital, waiting in line for half a day, and getting my screening done for free. I wanted to give the tax-paying voters of NY what they deserved, and I wanted to give it to them good and hard.

Even though I bill at $100/hour, on an after-tax basis, I made money waiting in that line.

Really quite preposterous.

alkali:

Your data is on employer-provided insurance. It is the individual market that community rating and guaranteed issue have most thoroughly destroyed.

Person, let me cut and paste this again, because it seems like you missed it.

How much have malpractice costs in New York gone up this year, and how much of that is reflected in insurance costs?

My employer is now paying $1144/mo. for family coverage. Last time it soared was when the local State Rep's wife had a baby and doctor advised, due to some complication, another night in the hospital (which the insurance wouldn't provide.)
Mr. Compassion thought it was awful he had to take his wife home a day early (gee, maybe my wife's health is worth paying out of my own pocket for the extra day?) so he introduced a bill
---which passed---to force all insurers to add a day coverage to maternity. Guess what, now virtually all women, complications or not, choose to stay an extra day!

Without getting into a long discussion about New York as the nation's premiere nanny state or the nationwide health care crisis or any other mega-topic, I'll point out that John Derbyshire is almost invariably going to be paying through the nose for non-group health insurance. He's in the somewhat unusual position of being in his sixties and having two dependent young children. As a result, he is in a high-risk category due to age and also has to pay for family coverage rather than individual coverage (a lot cheaper) or husband-wife coverage (somewhat cheaper).

AT: I wasn't aware of the distinction. This document appears to have data on the individual market. That data does reflect that the guaranteed issue/community rating states (chiefly, MA, NJ, NY) have significantly higher average premiums than the rest.

In brief, "guaranteed issue/community rating" means that the insurer must issue a policy to anyone who applies (that's "guaranteed issue"), and that the price is based not on your particular medical condition but on the applicant pool overall ("community rating"). Doing it this way means that the pool becomes disproportionately sick, leading healthy people to drop their coverage, which makes things even worse. However, doing it the other way means that sick people can't get coverage.

I don't have time to get into a discussion of the merits right now, but it seems to me that if the reason for higher individual and family health insurance premiums in New York is guaranteed issue/community rating, it is imprecise at best to describe the problem as a "thicket" of "regulations." The issue isn't bureaucratic inefficiency. The issue is that New York has chosen to structure the health insurance market very differently from other states. Whether that is a good or bad idea, it doesn't really make sense to discuss it in terms of meddling bureaucrats.

In any event, all of this has nothing to do with why Derbyshire's premium went up this year, unless -- as Brad DeLong speculates -- Derbyshire's insurer is in an adverse selection death spiral. (Essentially, healthy people are dropping coverage from that insurer, causing premiums to go up, which in turn causes more healthy people to drop coverage.)

Peter:

I'm pretty sure that's just his individual rate. A family rate would be a lot more. I think his wife has benefits through work.

Britain33, did you miss where I explained that malpractice costs could increase not at all, and insurance costs still go up?

I don't have access to New York's health insurance statistics. I was just positing one reason why health insurance could go up that much in one year. (A reason that never once occurred to you, by the way.) It's definitely a better suggestion than, "Gee, I guess the insurance company decided to milk more profits out of their victims" that you seem to wnat to go along with.

Good gravy, Person, I wasn't even talking about malpractice until you slammed me for believing something to do with 2%, and now you're viciously ripping apart some other caricature of some five-word phrase I included above. I don't know why you've fixated on me and my opinions of the malpractice insurance industry, but at this point I'm just a spectator.

My employer formerly used Horizon Healthcare. Horizon is abandoning the NY market as of January '07. We were formerly paying Horizon $1400/month for a family plan.

I've since moved to NH. Until I figure things out, we're under temporary insurance for $300/month.

The whole health care industry is ready to implode. Anything we can do to hasten this implosion is good. It's a friggin' disaster.

Was Derbyshire getting insurance on a multi-year contract? It would explain a lot if 81% was the first raise after 3 years rather than a single-year raise.

Another factor is that, if I understand the individual insurance business correctly, D. is in a "pool" with others that first bought insurance from this company at about the same time. They're all getting older, which will raise costs and rates faster than the overall rise in medical costs. But the killer factor is what happens if the healthy people take themselves out of the pool - by switching to another company, moving out of state, or simply dropping coverage because they're now old enough for Medicare. Now, you've got a shrinking pool of customers paying in, but most of the original costs, because even after huge rate increases it's still a good deal if your medical bills are huge.

If we all pitch in and make John Derbyshire our charity this year, I'm sure we could make a difference.
http://jonswift.blogspot.com/2006/12/john-derbyshires-wonderful-life.html

You people consider this to be a regulatory issue!? Are you on crack or just old-fashioned coke? Brad DeLong is not only a full professor of economics at Berkeley, but he has
worked professionally in the field of health care reform. And since you're all so busy scratching each others' backs instead of paying attention to the work of people who don't toe the line of to your political prejudices, this cluebat from the world of, you know, real study of economics (what a concept, huh?) between your beady eyes may come as a surprise to you. Read it and weep. "John Derbyshire encounters the free market in health care" and "we liberals have lots of reasons and arguments for why we would not expect free markets in health insurance to work very well, and Derbyshire has just encountered one of them." End of story; game over, man, game over. Your supposed mixed-economy issues are irrelevant here, Derbyshire's unpleasant surprise is simply pure free market death spiral perversity, and even you goose-stepping brainwashed drooling marketroid fanatics should be able to admit that now.

It's been more than fifty years since Milton Friedman started harping on that tired claim that the US health care system is far from a free market! It's beyond pathetic to bring it up today. The Economist, feh, shiny fishwrapper for shills, sellouts, and clueless chumps whose blinkered political fanaticism leads them to ignore reputable economics and grasp at old-fashioned straws to snort their old-fashioned coke. Even if they didn't pollute the body politic with their dirty lobbying money, they'd raise everyone's health care costs just from the way everyone else busts a gut laughing at their dumb ideas.

Santa Claus is not a Republicapitalist, the truth prevails, and the study of economics turns people into modern Democrats. Deal with it.

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