The hidden dangers of low-cost health insurance
The Boston Globe

By Stephen D'Amato | February 22, 2006

THE RECENT announcement by Friendly's Ice Cream Corp. that it is slashing employees' health insurance benefits provoked outrage even though the move will affect fewer than 500 people.

But there is little outrage about proposals in the Legislature that would make it easier for employers to follow the Friendly's example. Perhaps that is because these are ''stealth" proposals -- backed by powerful insurance lobbyists and buried in legislation touted as consumer-friendly overhauls of the healthcare system.

Ironically, Governor Mitt Romney created this opportunity for insurers when he set the worthy goal of insuring all state residents. His mistake was to suggest that premiums can be as low as $200 a month -- magically, without lowering the underlying costs of healthcare. The true cost to consumers is dramatically higher once deductibles, co-insurance, copayments, and benefit limitations are taken into account. It's $200 a month only if you never get sick or see a doctor.

Such stripped-down insurance policies are known as ''catastrophic coverage" because the benefits cover only the most serious and costly medical problems. In both the Senate and House bills, deductibles of at least $2,700 for individuals and $5,450 for families would be approved -- meaning that patients must pay thousands of dollars out of pocket before their insurance coverage kicks in.

That is an improvement for those without any health plan, but it hardly qualifies as comprehensive coverage.

For the majority of Massachusetts consumers who already have health insurance, however, this is a disaster. Employers who provide decent, but expensive, employee health plans may be tempted to switch to these bare-bones policies. Over time, there may be a dramatic shift of healthcare costs from employers to employees.

From the consumer's perspective, this is a far more important issue than the battle over whether employers should be mandated to offer insurance to their employees. Once patients start getting hospital bills for $5,450, and thousands more people avoid necessary treatment rather than pay 100 percent of the cost of doctor visits out of pocket, of course, it will be too late.

A meaningful and honest way to achieve universal health insurance is to acknowledge its real price and adopt proposals that cut the underlying costs. The Senate bill has provisions designed to reduce prescription drug costs, at least until drug company lobbyists try to make those provisions disappear.

Also promising is the concept of an insurance purchasing pool, which appears in both the Senate and House bills. The idea is to lump all the small group policies into one huge group, which presumably would solicit competitive bids from the major health plans. As drafted, however, both bills leave too much room for insurance company mischief. As seniors are learning with the new Medicare prescription drug program, it is virtually impossible for consumers to compare products and prices when insurers are allowed to flood the marketplace with myriad complex plans. Health insurance competition works only if there are a few standardized products offered by all insurers.

There is still time to change the approach to healthcare reform initiated by Romney. But the public needs to know the full story about the bills under consideration. ''Universal coverage" will be a sham if consumers can afford to buy an insurance policy but cannot afford to use it.

Many people who already have health insurance ignore efforts to expand coverage to the uninsured. Those with insurance assume nothing will change for them. Until recently, that is what employees of Friendly's believed.

Stephen D'Amato is a public interest attorney in Cambridge and a former insurance regulator.

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