Health insurance costs

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(Host) Vermont’s health care insurance system is the BIG issue in this year’s gubernatorial contest. Commentator Tim McQuiston says it’s ideal for political debate because it affects everyone – individuals and businesses alike.

(McQuiston) A friend of mine says his family medical insurance is now higher than his mortgage. You could get a fancy new car for what I pay every month. And my company could get a fancy car, too, because they pay the other half. Together we’re paying almost a thousand dollars a month. And that’s typical. It’s a volatile issue that no politician can afford to ignore.

The crisis began in the 1980s, so neither gubernatorial candidate really needs to defend his own policies; and, although who is to blame is relevant to those jabs and parries of the political process, what the people, and importantly businesses, really want is a solution to the problem.

I keep mentioning business because, unlike with many other issues, employers and employees are in the same boat on this one; and, to a large extent, they don’t care how the ship of state fixes this mess, as long as it at least BEGINS to fix it.

The nation’s health insurance situation is a disaster, and Vermont’s is one of the worst in the nation. Everyone claims to be the victim in this historical triage – individuals, businesses, insurance companies, and hospitals – but everyone has played a role in making it what it is.

Individuals want the best health care possible, and no one is going to take second-rate medical care for the good of the economy. In fact, the health care industry is one of the driving forces of Vermont’s economy. A lot of people work in this industry, and they get well paid. But, in any case, no one is going to put their individual health at risk.

Insurance companies are also partly to blame. With health care costs rising as the population got older – with AIDS, with expensive new technology – the insurance companies decided to insure only healthy groups. That sounds like a good business plan, right? The sick people were left to Blue Cross or Medicaid – or their own devices. And that put Blue Cross in jeopardy.

Because Vermont is so small, competition alone couldn’t force insurers to serve the entire market. So the Vermont Legislature in 1991 came up with a new law that proved disastrous: Act 52. Basically, if an insurance company wanted to sell health insurance to a company with 50 or fewer employees, it had to price it at the same rate for every such company, in what is called community rating.

The second part of Act 52 stated that the insurer had to cover everyone in that group, regardless of health status. That’s called guaranteed issue. So, basically, they had to cover everyone – and at the same rate. That saved Blue Cross. But most other insurance carriers left the state.

With more obligation on insurance companies and less competition, with more people using more and more expensive health care, health insurance costs are soaring, dragging down both individuals and businesses.

Somebody had better figure out how to fix this and fast.

This is Timothy McQuiston.

Timothy McQuiston is editor of Vermont Business Magazine.

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