The Opposite Ends of Universal Health Insurance Coverage

The Opposite Ends of Universal Health Insurance Coverage

I’ve been exposed to health care insurance in one shape or form since I was a child. My parents had Blue Cross Blue Shield (BCBS) beginning in the 1950’s. Back then, you had a deductible and then 80% coverage of the physicians’ bills. In 1965, a clause contained in the Social Security Act established the basis for Usual and Customary (UCR) fee schedules. BCBS changed from 80% of the physicians’ charges to 80% of the BCBS “allowable” (Which means, BCBS developed a “fee schedule” based on a formula that calculated a “usual and customary rate” for each thing a doctor did (UCR); this protected both the insurance company and the beneficiary from excessive charging by health care providers (Excessive charging by health care providers? I’m shocked!! LOL!). A future post will get into how providers, especially hospitals, determine their charges.).

In 1966 The American Medical Association developed its first edition of CPT codes (Current Procedural Technologies), which doctors could use to bill health insurance companies, who would, in turn, determine a UCR fee for each CPT code. I’ll get more into CPT and its perverseness in another post. In short, they describe a service a physician can provide and assign a weight to that service. The more complicated the service, the higher the weighting.

This was generally how all the health insurance companies worked, with BCBS being the predominant payer. They were so dominant and had so much influence that, when I practiced in Massachusetts in 1985, a physician, by a law passed in Massachusetts, had to “accept assignment” for all Massachusetts BCBS beneficiaries. Medicare had mandated accepting assignment first. Accepting assignment means that a doctor, hospital, or other health care supplier agrees to or is required by law to accept the Medicare-approved amount as full payment for covered services, and the doctor, hospital or other health care supplier can’t “balance bill” (ask for more money from) a Medicare beneficiary. So, BCBS was so powerful in Massachusetts, they we able to lobby for this for themselves. No other insurance company in Massachusetts enjoyed this benefit. This seemed to offer an unfair market advantage to BCBS. I wonder how much BCBS paid to legislators in Massachusetts to pass such a bill. After all, it’s all about the money.

In the early 1970’s, Health Maintenance Organizations started up after the passing of the Health Maintenance Organization Act of 1973. This started the “co-pay” phase of health insurance. My version of the history of health care insurance will be detailed in another post. HMO’s got a bad reputation for a number of reasons, but they really weren’t as bad as what was going on in the “establishment” side of medicine. Then the PPO’s arrived as an alternative to HMOs. Recently, we now have high deductible health plans that are touted as a new consumer driven type of health plan, but, really, it is a throwback to the 1950’s-1960’s insurances like the BCBS plans described in the first paragraph. The health care insurance industry is re-packaging its 60-year-old core competency and making it look new. How uncreative.

Then came the Accountable Care Act, which is really a law trying to somewhat standardize benefit plans, revise some aspects of health care financing and promote universal coverage. The problem with the ACA is, a lot of health care industry stakeholders had to be placated to get their support to get the bill passed (like, the Pharmaceutical industry, hospitals, AMA and insurance companies). The ACA has some good things (e.g., no pre-existing condition clauses) and some not so good things (e.g., the health insurance exchanges and everything that goes with them).

Now, the Republicans are trying to repeal the ACA and replace it. Their first attempt failed, and, personally, I’m glad it did; it wasn’t a good proposal. It was mainly a combination of reversing everything in the ACA while adding in some political elements to get legislators to vote for it (like not funding Planned Parenthood for a year, which has nothing to do with anything except some congressmen’s personal paradigm).

There are a lot of folks giving their opinions about what the ACA replacement (or improvement) law should look like. I’m going to give you two that are on the opposite ends of the poles of current proposals that are my own personal coverage fantasies.

Having been in solo practice, physician medical groups, health insurance companies and integrated delivery systems, I have a broad experience with how the design of insurance plans affect people. Having continued seeing patients though it all, I’ve seen the personal impact on my patients. Mostly, not good. Being in the top level of insurance companies, I know how they think and act. One thing I learned was, there are so many stakeholders who benefit financially from the current system that making a true change would be monumental. And the stakeholder with the least leverage is YOU, the patient/beneficiary.

So, here is my “conservative” approach and my “liberal” approach. Both would actually work as long as both are founded in one essential rule: Coverage must be mandated for all US citizens. Any diversion from this will result in a system with the current, or worse, deficiencies that we see in the current prevailing models. I say this because not including every citizen of the USA will result in unsustainable costs per covered life. You need the people not consuming any or many resources to balance against people with serious medical conditions. It’s similar to the school system. We all pay for the public school system (through taxation in this instance) whether we have children in it or not. This keeps the cost for families in school at an affordable level. You could also make the case that Fire and Rescue systems are “insurance” against your house burning down or saving you at the time of a personal health emergency. You’re paying for this through your taxes, you don’t pay individually into the system and only those paying in get to have the fire truck respond to their house. You also don’t pay more or less depending on the number of children you have, the size of your house or the number of health conditions you have. Everyone pays the same. And most people never need those services. Everyone gets that service if an event occurs where Fire or Rescue is needed. And, those of us now paying taxes, are pre-paying for our Medicare Part A, which is “free” when you turn 65 y.o. (Not really free, right? You pre-paid for it). Look at your paystub for the Medicare withholding amount. You are paying 1.45% “tax” and your employer is also paying 1.45%. It’s mandated. Almost all other countries mandate some form of health care coverage. The US is an outlier in allowing discretionary coverage.

And for those of you who don’t like mandated insurance coverage, New Hampshire and Virginia are the only states that don’t mandate automobile insurance. I guess you will have to move there. In Massachusetts you have to show proof of insurance before you can register your car.

The descriptions that follow are high level versions. There would obviously be details that would need addressing.

The Conservative Approach

All citizens would be required to participate. If someone were indigent, they would be automatically enrolled in a government-funded program like Medicaid. If you were working and your income was at or below the poverty level (usually about $25,000 a year for a family of four, $12,000 a year for a single person), you would get a government subsidy.

In 2017, the average annual premium for a commercial family plan in the US is about $18,000. In most companies, the employee pays a portion and the employer pays a portion. The average annual premium for a single person is about $6500.

Now, most companies include the benefits they offer employees as part of what they call an employee’s “total compensation”. So, they will tell you your gross salary is, say, $100,000, but that your total personal cost to the company is $130,000 (i.e., you are really getting $130,000 from the company) because of the benefits for which they are paying. If you sign up for them, they cost about 30% of your salary. They don’t mandate that you sign up, of course, but they are willing to pay it if you do.

So, the employers are paying a certain percentage of the 30% for benefits on health insurance. As a theoretical example, let’s say it is ~50% of the 30% or 15% of your salary. If you are making $100, 000 that would be $15,000 and you would be paying $3,000 in premiums deducted from your paycheck. That percentage could be higher or lower depending on how much the health plan costs and what the cost sharing between employer and you are paying.

With my model, the employer would be mandated to pay either a set dollar amount based on actuarial formulas or a  percentage of your salary, approximating what they are paying now for health insurance, into a Health Savings Account (HSA) in your name, and you would be mandated to pay into the HSA (pre-tax dollars and not taxable if you spend it on health care) whatever your portion is. They are taking something like this out of your paycheck already. You would immediately have ~$18,000 tax-free dollars (using the example of the average family cost noted above) to pay medical bills. The employer portion could be a lump sum at the beginning of the year to get you started, then you could accrue your portion during the year from paycheck deductions, just like what happens now. There could be a rule that the employer must contribute at least 50% of the set dollar amount or percentage of salary described above. After all, they say they are really paying you ~130% of your gross salary. Let’s keep it that way!

In addition, you would be mandated to buy “catastrophic” insurance that only covers things like hospitalizations and other high cost care like cancer treatment, and they usually have a high deductible. The family premiums for these are currently about $175 a month and have an average deductible of about $6300. The premium for this would come out of your HSA.

If you are a young family of four who is healthy (which they generally are) you could amass almost $100,000 in your HSA in 5 years. If you are a twenty-something and single, you’d have about $60,000 in your HSA by the time you are 30.

And, IT IS YOURS! FOREVER! Unless you have to spend it. And you get interest on it! And the catastrophic insurance protects you from the really large bills, like cancer treatment or a heart attack.

You would pay for your “routine” and lower cost health care out of your HSA account with a credit card.

This model simplifies the administrative aspects of financing health care and significantly reduces administrative costs because it becomes mostly a cash business. You just swipe your HSA credit card. You have no idea how complicated and costly the current administrative system is now. (See my post about Administrative Costs)

With this model, there is no “single payer”. You don’t need insurance exchanges. The government isn’t intervening. It’s a conservative’s dream. And the employers are already paying this, so, it’s not a big hit to them. Since you are paying directly for most services, there could be more price competition, just like other markets (although, there is expert economist opinion that the health care market doesn’t operate the same way other markets do). It could likely spur more transparency in prices and quality.

The Liberal Approach

All citizens would be required to participate. If someone were indigent, they would be automatically enrolled in a government-funded program like Medicaid. If you are working and your income was at or below the poverty level, you would get a government subsidy.

If you were working, the “premium” for insurance would be a tax taken out of your paycheck and sent to the US Government. This is the model of most countries globally.

You get immediate coverage. There may or may not be co-pays. Everyone is in.

There are two ways the money gets disbursed from the government:

Option 1. A single payer gets the money. This could be a government run system (like the VA or Medicare or a combination of the two) or the government could contract with a single private insurance company to administer it. As a matter of fact, the CEO of United Health Group/United Health Care said in the 1990’s that he was positioning United Health Care to be the single payer when the time finally came. One of his goals was to have United Health Care operating in all 50 states.

You would still have the ability to go outside the single payer system at your own personal cost, but it wouldn’t affect your tax liability for the coverage. Everyone’s contribution is the same, just like your contribution to the school system is the same even if you send your kids to private school or don’t have kids.

Option 2. There would continue to be multiple competing health insurance companies. You get to choose which one you want. The government sends a standard premium amount to the company of your choice for a standardized  set of benefits. This is similar to Medicare Advantage where, as a Medicare beneficiary, you get to choose the insurance company and Medicare sends them a standard premium for a standardized set of benefits. The insurance company tries to manage the care so they make money. If you want more than the standard coverage, you pay an extra premium out of pocket. The government already has a system to disburse premiums to insurance companies, so it wouldn’t be a stretch for them to do it for everyone.

Since everyone would have the same benefit design, the administrative costs would be reduced. Since the premium would be dictated by the government, the costs would be more controllable. Since everyone working would be paying, the risk pool would be adequate. Insurance companies would be interested in the second option. The government could negotiate better prices with Pharma and other suppliers. Hospital payments would likely be lower, as the government could fix the fee schedules (like they do now with Medicare) and could allow negotiations between insurance companies and health care providers like physicians and hospitals if the price is lower than the standard fee schedule (back in the 1990’s I negotiated hospital and physician fee schedules to be Medicare rates minus 10-20%!). As you will see in a future post, prices for health care services is the number one reason why our health care costs so much (Commonwealth Fund data). So there seems to be room for lowering prices. Of course, someone would have to take a pay cut, like Specialists, Pharma and hospitals, for example. They would likely lobby aggressively against this model, since….it is all about the money.


All of this is kind of like Occam’s razor, the simplest solution is usually the best. Unfortunately, neither of these is likely to happen, since significant stakeholders are likely to lose business and they have legislators in their pockets or are willing to pay a lot to buy their votes. Remember, Money drives the decisions in our healthcare and political systems. And no one wants to lose his or hers.