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Michael McRaith is director of the Illinois Department of Insurance.
Michael McRaith is director of the Illinois Department of Insurance.

Challenged journey

Despite partisan conflict and mandates, healthcare insurance is a lifeline


By Michael McRaith
Posted: May 23, 2011 - 12:01 am ET
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We choose our homes and our cars, but not one of us chooses cancer or heart disease. Yet, health insurance is the only product in America for which an entire marketplace of sellers refuses to offer to a consumer who wants to buy, has the means to buy, and is legally eligible to buy.

In no place is this more apparent than Illinois. In Illinois, individuals are denied coverage for any reason other than “race, color, religion or national origin” or, as those in pre-Medicare years have learned, on grounds that are opaque if not mythic. The need for healthcare often forces some of our most capable professionals to forgo talent, ambition and self-employment in pursuit of health insurance for an ill dependent needing the guaranty of group coverage.

The entirely for-profit health insurance industry in Illinois, including a mutual and stock companies, is often belied by the dulcet tones and slick themes of massive advertising campaigns. Health insurers annually pay tens of millions for marketing on television and radio, and for sponsorships of Chicago's professional and college sports teams. All the while, fewer families receive coverage offers.

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Illinois health insurers have amassed capital at unprecedented levels. The largest health insurer in our state reported a 2010 surplus of $7.8 billion. The top six health insurers in Illinois reported national totals of at least $28 billion in surplus. Solvency and financial strength have been dwarfed by capital accumulation.

For at least 10 years, small- and mid-size insurers have been leaving the Illinois market, or have been purchased by the larger insurers. A moderately competitive market 10 years ago is now “highly concentrated,” leaving families and employers stranded in an inefficient market that offers less choice and higher cost.

Consumers pay more for less coverage. Reimbursements by payers to doctors and hospitals are less than ever. Commissions and fees paid by insurers to agents and brokers are less than ever.

Insurers often argue that healthcare benefit “mandates” drive the cost of premiums. More important, the irrefutable premise is that a benefit “mandate” equals healthcare. It is beyond true that healthcare costs money. Patients pay premiums and need healthcare.

Therefore, the essential question is whether the cost of the mandated healthcare should be borne by the insurer or by the patient.

For example, families with an autistic child want to provide that child with early treatment, services and therapy—ultimately the opportunity for an independent adulthood. Few families can afford the cost of continuing childhood care.

A benefit mandate serves the purpose of spreading the cost across the insurer’s risk pool, making that child’s independent adulthood affordable for that family. Prior to the mandate, Illinois families incurred massive debt, took second and third mortgages, and confronted personal bankruptcy.

Benefit mandates allow risk pools to absorb the cost of a patient’s needed healthcare. The numbers demonstrate that benefit mandates do not adversely impact an insurers’ ability to accumulate surplus capital.

We know Americans want insurers to cover the sick or injured. We also observe that some view the so-called “individual mandate” as an unwanted intervention by the government.

The coverage “mandate” serves an important insurance purpose—forcing the healthy to buy insurance before suffering an injury or being diagnosed with illness. If we could buy insurance after being diagnosed, many hard-working families would understandably not pay a premium until illness struck. Since insurers would almost exclusively be covering the sick or injured, dilatory participation by the healthy in the insurance pool would explode the already high cost of insurance.

This is known proverbially as a “death spiral”: Insurance markets would be destroyed within months.

In other words, the coverage mandate forces the healthy to buy insurance in order to preserve, not displace, the private insurance market. When we are healthy, we pay premiums and balance the cost of those who are sick. The alternative to the coverage mandate is, of course, a government coverage program, a direction largely rejected by Congress.

Those who argue the mandate is “government gone too far” appear unwilling to acknowledge that elimination of the mandate would necessitate expansion of government health programs. If we want insurers to cover the sick, and if we want to limit the government role in healthcare, then the individual mandate must stand.

As we stare to the point of blindness at healthcare statistics, as we listen with increasing numbness to the political diatribe, and as we answer 10,000 medical questions, we cannot escape the ineluctable reality of healthcare. Push to the margins all the arguments and we are talking about people: people who we know, who we care about, people who we love. We are talking about our neighbors, friends and family.

Even with the din of partisan conflict, every community feels the quiet but relentless drumbeat that pounds for financial security, for quality of life and for life itself.

Even as we pray for their healing, we must never forget the challenged journey of our child with autism, our sister fighting breast cancer, our partner fighting depression, or our parent fighting heart disease.

Healthcare is not some amorphous chattel—healthcare is life.


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