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Rosy Predictions of New York Insurance Exchange Might be Premature

The New York Times reported last week that New York State’s health plans are set to fall 50 percent in cost, which prompted a fierce debate between right wing critics of the Affordable Care Act (ACA) and its defenders. But missing from the conversation was the fact that insurance companies, who are driven not by the public’s interest but by profits, still control the market.

Proponents of the ACA tout its new requirements, which are supposed to regulate health insurance companies and keep them from, among many things, circumventing anti-trust laws, hiking rates on patients with pre-existing conditions and registering with federally approved health insurance exchanges that offer more transparency for the consumer. More Americans will get the coverage they need, they say, and premiums will go down as risk is spread among a bigger base of ratepayers.

But the system will inevitably bend in favor of the insurance companies, Dr. Margaret Flowers, a pediatrician from Maryland and congressional fellow with Physicians for a National Health Program (PNHP), tells me.

“The catch is that what insurance companies really compete for are the healthiest patients” and “to pay for the least amount of care,” she says. “They’re making all these claims right now but what we have to do is wait and see what happens.

“Either these insurance companies are going to pull out at the last minute” of the exchanges they are a part of “and say ‘we thought it was going to work out but now it looks like it isn’t going to,’ or they’re going to offer skimpy plans,” so that when people “actually need health care, they won’t be able to afford the co-pays or deductibles.”

Flowers also expects many insurers to simply drop hospitals and other medical centers from their networks if they prove not to be very profitable. In Los Angeles, for example, Anthem Blue Cross had planned to carry a large number of public employees through Cedars-Sinai Medical Center and UCLA, but then excluded the hospital from its network because it treated patients that tended to be sicker. As of May, Cedars-Sinai is not part of any network in California.

The same kind of exclusion took place in Massachusetts under the 2006 health care reform law. Also known as Romneycare and heavily influential in shaping the ACA, the Massachusetts health care law shoved a lot of state employees into limited network plans.

“One of the primary defects with the insurance exchange model of reform” in Massachusetts, Dr. Don McCanne wrote on the PNHP blog in 2011, “is that emphasizing affordability of health plans rather than health care itself results in a transformation to ever more inferior insurance products.

“The goal of reform should not be to take away choices in actual health care, nor to shift more of the costs to those who need health care. Yet those are precisely the trends that we are seeing and will continue to see under a model of competition between private health plans.”

Despite the rosy prediction for New York State, Flowers sees the same thing happening to New Yorkers as did happen to the residents of Massachusetts.

“It’s all a game,” she says. “And it may be that they lower their prices before the exchanges,” she says about New York insurance companies, “so people buy their plans,” but “when they find out how many people actually need care, they’ll. . . either find ways to incentivize people to drop their plans or they’ll raise prices.

“It’s too early to tell [about New York],” she finally says. “I think what we’re seeing is a kind of desperation…

“I think what [politicians] are trying to do right now is they’re doing their best job of selling this really crappy legislation.” But “forcing people to purchase private insurance is just not a winning strategy. It’s not going to work.”