• Maybe self-insurers can lead the way – ctd.

    As if on cue, Ezra Klein has a piece on how the Cleveland Clinic is doing what I wrote about earlier. He brings up a valid point about discrimination:

    In one sense, the clinic has achieved the health policy ideal: cutting health-care costs by making people healthier. But consider how the clinic has done it — tying premiums to personal decisions, firing smokers, tracking employee metrics, eliminating popular sodas and foods from campus. By making it harder and more expensive for employees to be unhealthy, the clinic has radically overstepped the traditional, laissez-faire approach of employers to their workers’ personal habits.

    It also opens the door to onerous forms of discrimination. The clinic no longer hires smokers. Will the obese eventually face similar hurdles? What about fans of fast food?

    The experiment might work at a famed medical center where the CEO plausibly argues that aggressive leadership in health care is central to the institution’s mission. But would it work at General Motors? Caterpillar? Wal-Mart? Medicaid and Medicare?

    This is, of course, a real concern. As Austin has pointed out to me, insurance companies have been very good at risk selecting, and there’s no reason to think large employers wouldn’t be good at it, too. They could choose to preferentially hire healthier people or drive out the unhealthy ones. But let’s be clear. These kind of pressures, and this kind of discrimination, have likely been going on for some time, and will continue to go on in the future. Companies can either choose to continue down that path, or work towards getting their employees to be healthier. I’d rather they choose the latter.

    We also need to make sure that people aren’t penalized for things they can’t control. We need to also be careful not to punish sickness. But I can be convinced that we can potentially penalize people for not at least trying to be healthy, especially when companies go out of their way to offer gym and Weight Watchers memberships. Even the ACA allows us to charge people who smoke more for their insurance.

    So, as always, we will need to be vigilant, and make sure companies don’t go too far. But that doesn’t mean they shouldn’t try. I’m sure there more to consider here, and I welcome your thoughts

    UPDATE: I should add that although we’ve got sidetracked onto wellness, I was more optimistic about self-insurers being innovative on the insurance side. I’d love to see one really adopt a robust value-based approach and really encourage the use of more cost-effective therapies.

    • As your references point out, it is always possible for the managers of any population subset (public or private) to game the system by selecting low risk patients. This doesn’t really solve the problem for the population as a whole.
      The only solution is to put everyone in the same risk pool and then apply regulation and public health education to improve the health of the entire population. Anything less just shifts risk around (or gives a lucky few the benefit of health promotion campaigns) and leaves the rest of the population with substandard care.

    • Regarding innovation, it can also be achieved by not-for-profit insurers.
      Blue Cross lost its federal tax exempt status (primarily 501(c)(4)) in 1986 when Congress passed IRC section 501(m).
      There are two tests an insurer must meet to qualify for nrt-for-profit status.
      The organizational test and the operational test.
      The first test is primarily met by providing products which are NOT provided commercially.
      The second test is met primarily by how the products are marketed.
      If the insurer distinguishes itself in these 2 areas, it can achieve and maintain its 501(c)(4) status.
      I have IRS links for anyone who is interested.
      Don Levit