Wednesday, November 15, 2006

How I'd fix health care: Part 1

In a previous post, I talked about how I think health care has gotten so advanced that we may not be able to afford it. Of course, that does nothing to suggest a solution. Open enrollment is this month (for most people, I think), and another problem came to light for me during our company's benefits meeting.

A large number of the people I work with have coverage with Health Partners. It and Blue Cross are the two insurers we could choose from the last few years. This year they decided to drop Health Partners, and replace that choice with United Health Care. Because the company I work for has more employees out east, and Health Partners is nonexistent out there, and United Health Care is big out there, they can negotiate better prices with United Health Care. Unfortunately for us in the midwest, United Health Care's prices are a lot higher than Health Partner's. It's a decision that makes sense financially for the company as a whole, but is bad for certain employees (those of us in the midwest).

After the meeting, a thought occurred to me. Why do companies need to negotiate prices? Why do they get better rates if they have more employees? Why would I, as an individual, pay much higher premiums?

Volume discounts they would say. Companies get a break for bringing in more customers.

But that just doesn't make sense to me in this case. Sure, it makes sense for a business making some small number of widgets, to offer them at lower cost to a customer who wanted to buy a large number of them. It makes sense for two reasons. One, it's an incentive to a potential big customer to buy from that company instead of a competitor that doesn't offer a discount. Two, in many cases, it's actually less expensive for a manufacturer to make more at a time of a particular product. These reasons are amplified if your product is of limited demand.

But I don't think that should apply to health care. Virtually everybody wants and needs it. An insurer isn't going to have to worry about getting customers; there's plenty for all reasonably priced, competently run insurers, I would think.

I think insurers should be forced to have one price for a particular type and level of coverage, no matter how many people are signing up for it. Also, as an individual, I should be allowed to pick any insurer that does business where I live. That would be a good thing for the insurers, since they would have access to more potential customers. They could market themselves to everybody in their geographic market, not just to employers that choose to offer them as an option.

This would lead to more competition, which inevitably leads to lower prices and higher quality. Not low enough prices to solve the whole health care crisis, but it would be a very good start.