United Healthcare: Sterilization or No Insurance

“Free Market” sterilization - shocking, but that is what United Healthcare’s (UNH) subsidiary Golden Rule told a 39-year-old women in perfect health. The New York Times “After Caesareans, Some See Higher Insurance Cost” reports that private health insurers either do not issue medically underwritten policies or charge substantially higher premiums to women who have undergone Caesarean deliveries. Given that most individual policies are medically underwritten and 31.1% of deliveries are Caesarean, a large percentage of women of childbearing age are not eligible for health insurance.

The excuse is that it is statistically more likely that a second Caesarean will follow the first, costing an average of $2700 more than vaginal birth. In some states, Golden Rule will treat a Caesarean as a pre-existing condition, and exclude it for three years. Where it cannot be excluded or the exclusion period allowed is shorter, Golden Rule dictates sterilization or no insurance. Where are the pro-lifers when you really need them?

Taking a step back, we are beginning to see how far medical underwriting has gone. Healthy people are no longer guaranteed access to insurance.In addition, health insurance companies can take control of your body. As more people leave the shelter of employer provided insurance, the public will be awakened to the realities of medical underwriting. The noose is getting tighter every day.

Tight medical underwriting has not been all benefit to the insurers. In "United Healthcare: Beyond the Numbers," I wrote that United’s risk based business is shrinking.

With so much talk lately about the public or societal role of Fannie Mae (FNM) and Freddie Mac (FRE) in solving the mortgage crisis, I think we must ask if private health insurers have a role beyond generating profits. New York State had no trouble assigning a public policy role to monoline insurers.

Fannie and Freddie’s regulator has a great deal of latitude over surplus capital requirements and Congress can change the companies “social responsibilities” at will. The companies need to do well (in addition to campaign contributions) to survive.

Why do the health insurers see no need for social responsibility? After all, they cannot export their service to other countries. They depend on the government (Medicare and Medicaid) for a great deal of their revenues and profits, the same way as Fannie and Freddie depend on the implicit guarantee for cheap funding.

The answer is two-fold:

• First, the GSE’s are regulated at the federal level and the health insurers are regulated state by state. The large private insurers can play one state against another, thus setting rates extraordinarily high in guaranteed issue states to dissuade other states from converting.
• Second, there is a difference between being regulated by judgment versus being regulated by rules. It is far easier to avoid social responsibility when insurers just have to follow the rules.

While private insurers want the freedom to reject applicants for any reason, they don’t want the government or nonprofits to offer a backstop for their rejects. Insurers claim that the government and nonprofits would have an unfair advantage by not having to pay taxes. I say that private insurers are obligated to offer policies to all applicants explicably because the U.S. is the only country in the developed world, which does not offer a government alternative. In contractual terms the government is offering a consideration to the private health insurers, so private health insurers must offer a consideration to the public. Otherwise, the current system will not survive.

Disclosure: The author is long FNM and FRE.

Comments

[OliverUgarte]

The author's ignorant comment, "where are the pro-lifer's when you need them?" is ridiculous and has nothing to do with the topic discussed. The pro-life movement is about abortion, which happens after fertilization, not before. It has nothing to do with any form of birth-control.

[Donald E.L. Johnson]

Individual medical underwriting is legal in most states, and insurers have no obligations to lose money, which is what the writer is demanding.

To fix the problem, individual states need to impose community rating on health insurers, but they won't do it because as I've blogged many times, the legislators depend on insurers for campaign contributions. Legislators erroneously believe it is wrong to impose community rating because that would raise premiums for younger, healthier people while lowering premiums for the 54-64 crowd. That would happen, but that is what should happen. The young should help insure the old because the young will be old someday and need affordable insurance.

No, making low-mandate, community rated health insurance more expensive for the young wouldn't increase the number of uninsured. This is because price is not the sole determinant of the number of uninsured in the 19-29 crowd, as I blogged last week.

So, just as politicians can be blamed for high oil prices, they can be blamed for distorting health insurance markets and giving us high health insurance premiums.

[RichardSchweitzer]

The basic errors begin with the conflation of insurance with "Health Care." (pre-paid medical need).

Insurance is the transfer of risk.

Insurors are in the business of SPREADING (not TAKING) risks.

Imagine for a moment a concept in which all medical costs risk insurors could only be organized as mutual insurors. How should they classify the risks all members are required to share?

Contracting to pay the costs of "normal" pregnancies and deliveries is NOT insurance. Such births are not risks of fortutitous events, but the anticipated expenses that can be covered by pre-payments (as was the case in the old format of Blue Cross- Blue Shield, basically Mutual by agreements with participating MDs and Hospitals).

Politicians have legislated the loading of extensive non-risk benefits onto what had been contracts for actual risks. Example: in vitro fertilization; as well as many other "elective" issues.

Ultimately the benefits have to be paid for out of premiums and from the investment of those funds whilst held. The related internal services costs must be covered as well.

We must begin to once again separate the function of insurance contracts from requirements to provide all ranges of health related benefits. If so, a pure insurance function will require proper analysis of each form of risk covered in order to be fair to thsoe amongst whom the risk is spread - the policyholders.

[notsosmart]

sadly,no good answers here.just who is entitled to what when it comes to health care can never really be answered.the fact that the young will be old someday does not matter to them today.you just have to be wealthy & you have no worries re your health. the middle class & the poor will be behind on service & care.