One more absurdity of Trumpcare.

Some of Trumps’ republican endorsers are still touting Trump Care (this from House Republican, Joe Wilson yesterday at a town hall)

“By having the ability of buying insurance across state lines, association health plans and by increasing the ability of health savings accounts, we would provide choice that Obamacare simply has not presented,” Wilson explained. “And it wouldn’t impact employment, it would give them more choice as well.”

But many in the crowd didn’t appear to buy it, heckling and interrupting the Republican congressman as he tried to speak.

House Republicans across the country, particularly those from rural districts, are facing similar situations this week as they return home from Washington, D.C., for a two-week break.”

This concept, of enabling insurers to sell in any state, that is, across state lines, is a favorite concept for Trump as it enables competition, a panacea for republican idealoques, who think that it would somehow help or solve high health insurance cost. What it demonstrates is a tendency to rigidly adhere to prevalent free market, ideology. And it does sound logical. But it simply demonstrates profound ignorance.


Years ago, health insurance was generally provided by insurers who did frequently cut across state lines. And the insurance was pretty simple. You paid the health insurance company a premium and when you had a claim, you submitted it to them and they would pay it according to their contract. Often  they didn’t pay the full claim, as many claims exceeded what insurers called the “reasonable and customary” limits. In that universe, insurance premiums incessantly increased, year over year, approaching unafordability.

Than, an old concept started to regain popularity, and that was the HMO (Health Maintenance Organization). These organizations started and grew networks of doctors and hospitals who agreed to serve “members” which were the insureds, and they were initially paid a fixed fee based on the headcounts of the members in the network, divided by the  number of doctors and hospitals who joined the network. The key to this was that the networks were clustered around where the bulk of the insureds were living and working. These networks were effectively “insuring” themselves, in that the HMO was really an agreement with regional health providers to provide medical services in return for a fixed monthly fee.

This concept caught on, as it worked remarkably well to lower costs, as employer groups found that they could cover the health needs of their employees at a lower cost than the more traditional system of health insurance. Individuals too were able to buy into these networks. It also was convenient because folks didn’t have to bother with submitting claim forms and rarely had to worry about reasonable and customary claim limits.

For a period of years health insurance premiums paid to these networks was considerably lower than traditional health insurance. It really was a panacea compared to traditional health insurance.

One critical aspect of this system was that health insurance itself became more community based, that is, the health networks that were formed were regional, and generally state oriented. The networks were where their members were.  Anyone would want their doctor close to where they lived and worked. And even now, that is how much of our health insurance works.

For a health insurer to be able to sell in any state without restriction would depend, for its success,  on it forming the same kind of provider network that already exists with a competitor in that state. And why would those doctors and hospitals give that new insurer a better deal, that is, sell their services for less money than their current relationship provides?

One supposes that a now out of state health insurance company could “rent” a network existing in the state it wishes to sell in, basically renting it from another insurer who already had formed a network. And why would that “rent” be lower than the actual cost already being incurred by the pre-existing insurer?

So the idea that health insurers being allowed to sell across state lines would somehow lower premiums is only a canard. In fact, insisting on that idea demonstrates profound ignorance of how our health insurance now works. (this shouldn’t surprise anyone, as so many Trump ideas have been equally absurd).

The other idea being touted as a panacea by Trump is the idea of health savings accounts (HSA’s). An HSA allows folks to put aside funds in a tax deductible account to be used in conjunction with a health insurance plan that has a high front end deductible: Explanation through Kiplinger:

As of 2015, adults with plans featuring deductibles of $1,300 for individuals or $2,600 for families can contribute to a health savings account. For eligibility to be ensured, the policy must make everything subject to the same deductible; for example, the policy cannot have a separate deductible for prescriptions or preventative care, notes Kiplinger.

The maximum contribution to an HSA for individuals is $3,350 or $6,650 for families, reports Kiplinger. If someone in the home is age 55 or older, there’s an additional $1,000 on the contribution cap. Contributions are made pretax when made through an employer, and they are tax-deductible for self-employed taxpayers. The money in the HSA can be used for medical expenses only. Contributions for the tax year must be made by April 15 the following year. HSAs are offered by many different banks and firms; taxpayers can open their accounts anywhere as long as their health insurance policies make them eligible for the account.”

Now the idea of health savings accounts works fairly well for healthy people, anticipating some far off rainy day. But any visit to a doctor or hospital, as well as a chronic illness,  can quickly diminish the value of a health savings account or zero it out entirely.  Moreover, if you examine the premium cost for the high deductible health insurance plan portion, and combine it with the accompanying savings account deposits, the total cost, if you get sick (even a minor illness) is substantially comparable to a fully insured plan, and in many cases more. What you also have created in an HSA is a disincentive to go to the doctor, because the front end deductible, which is paid out of one’s own money, is so high.  Finally, if you are not a well person, the HSA is not only not going to save you money, it will cost you more..

If you are a well, physically fit, active, young person in particular, the HSA is not unappealing. And thus the attraction of these kind of insureds to HSAs  create the phenomena of adverse selection. The health insurance companies receive less premium money from them, meaning that they have to increase premiums on everyone to cover the older and sicker insureds who are making more frequent and large medical claims and using more pharmaceuticals. It is like pushing on a string.

In one of our posts we talked about the real reason for constant increases in health insurance premiums, and it is quite simple. People get sick, chronic sicknesses, in particular metabolic syndrome disorders, such as diabetes and heart disease, as well as cancers, dementia, depression, anxiety, etc., are running rampant in American society, and these illnesses are being addressed by very expensive drugs and extreme and costly treatments. And more often than not, these treatments don’t cure anything, meaning that the medical costs are not one-offs.

Sick people are too often becoming lifetime victims of treatments that fail to make them healthy.

Worse, when they retire, they roll off into Medicare, which is itself in dire straights.

Talk about the high cost of medical insurance too often misses these salient, though obvious,  points.