Why health insurance coops may not work.

In recent weeks people at all levels have been talking about the wonderful things health coops can do. For those of you unfamiliar with the concept, a health coop is in reality an insurance company owned by the policy holders. See the wiki article on health insurance cooperative for a short and fairly unbiased exposition of this concept.

http://en.wikipedia.org/wiki/Health_cooperative

Sounds good, right? On the surface, yes, but when one dips below the surface one finds some troubling things, not unexpected to anyone who knows anything at all about insurance theory.

The one that people point to as an example is the Group Health Cooperative, (GHC) headquartered in Seattle. Let’s assume that you want to join GHC. What do you have to do? Well, make an application, of course. You can enroll by mail, and this URL shows what you need to do:

http://www.ghc.org/health_plans/index.jhtml?reposid=/common/healthPlans/ifp_enroll.html

Wow. You have to fill out a health questionnaire, not only for yourself but for every member of your family. The form you have to fill out is the one used by the Washington State Health Insurance Pool, which exists to provide insurance. The biggest part of that form is disclosure of pre-existing condition for over 200 health issues, ranging from blindness to cancer to ADHD to AIDS. Why are you filling this out? It’s a cooperative, membership is voluntary, and you are volunteering to be a member.

Oh, it’s voluntary all right, but not in the way you might think. It’s voluntary on their part whether they accept you. They are going to score your health questionnaire, and if you flunk they are not going to insure you. Don’t believe it? Start by looking here:

http://www.ghc.org/health_plans/pdf/IandF2009/52IF09.pdf

Acceptance of application: Group Health’s* acceptance of you and your dependents for coverage is based upon the score determined by the Washington State Health Insurance Pool (WSHIP) Standard Health Questionnaire(s) unless
exempt by the questionnaire’s requirements unless an exemption under the law applies. In order to process your application, Group Health must receive the Individual & Family plan application signed by you and your spouse/domestic partner, the signed questionnaire(s) for each family member to be enrolled, and a Certificate of Creditable Coverage (if available).

The WSHIP score runs from zero up, and if you or any of your family members score over 325 then you will be diverted into the WSHIP program for people who can’t get health insurance in the private marketplace because they are at 325 or above.

Here’s the score sheet:

https://www.wship.org/Docs/SHQ%20Scores%20sort%20by%20alpha%20-%2001%2021%2008.pdf

Take a look. If you have AIDS you automatically score 325.

Down’s syndrome 325

Type 1 diabetes: 234 to 325 points

Obesity (BMI 40 or above) 325 points

You get the picture. GHC is not going to insure you if you have certain preexisting conditions. And there are a lot of them that are automatically 325 points. Take a look. And if you have several conditions that total up to 325 you are out of luck.

What’s the point of all this? It’s to show you that even in the most seemingly benign of organizations they are still skimming the well people off and leaving the sick ones to go and get into a substandard plan elsewhere. Of course their premiums are based on insuring healthy people, and in spite of this they lost millions of dollars last year. Go look at their annual report for 2008. They lost over 8 million bucks, where the previous year they made about $72 million. Interestingly enough, other information indicates they took a monstrous bath in the securities market, leading to the loss for 2008.

This practice of skimming off the good risks is one of the things that the proposed health insurance reforms would do away with.

Food for thought.