Blue Cross Backs Down - And What The Legislature Can Do Now

This is why we have a fourth estate:

Facing a torrent of criticism Tuesday, Blue Cross of California abruptly halted its practice of asking physicians in a letter to look for medical conditions that could be used to cancel patients' insurance coverage.

In a statement issued about 6 p.m., the state's largest for-profit insurer said, "Today we reached out to our provider partners and California regulators and determined this letter is no longer necessary and, in fact, was creating a misimpression and causing some members and providers undue concern.

"As a result, we are discontinuing the dissemination of this letter going forward."

The Los Angeles Times occasionally earns its moniker of the Los Angeles Dog Trainer, but they have covered the many Blue Cross issues with a great deal of honor and professionalism. And they can be proud of the results.

Meanwhile, as comprehensive health care reform goes out the window in California for the coming year, Ezra Klein has a couple ideas about how to make the current private insurance system work a little better. He's right that making insurers compete to offer better care is actually counter-productive, because the costs incurred would outweigh the new memberships. But government can play a role to force insurers to compete in ways positive to both their bottom line and the welfare of their consumers, through some mandated steps:

Universality: Insurers cannot compete effectively unless everyone is in the pool. If the healthy can leave, insurers cannot compete to offer better care. They'll have to compete to attract the healthiest, which means offering the lowest costs, which means insuring the fewest sick people. The system has to be universal.

Community Rating: Insurers cannot be allowed, before offering insurance, to use demographic subslicing to cherrypick the market. That means no more preexisting histories, no complex formulas around age and income and race and region. They offer insurance to anyone who wants it for the exact same price. No exceptions.

Risk Adjustment: Merely having everyone in the system won't be enough, and nor will forcing insurers to do away with their most delicate cherrypicking tools. Insurers will just become sophisticated at advertising on G4 Tech TV, and in snowboarding magazines, and in urban centers -- in places, in other words, where the young and the healthy gather. So atop the universal system, atop the community rating, you need risk adjustment, which means either that insurers are reimbursed more for taking on sicker patients, or, my preferred method (and the one used in Germany), insurers with particularly healthy pools pay into a central fund that redistributes to insurers with less healthy pools. At the end of the day, it has to be as profitable for an insurer to insure a sick person as a healthy one.

Information Transparency: It needs to be easy for individuals to compare insurers on plan comprehensiveness, price, outcomes, etc. That means we need a marketplace where folks can go to shop for insurers, and they need to have standardized comparisons, or non-partisan rating authorities, providing information they can use.

One Market: This is contained in the last point, but there needs to be a singular place, or set of them, where individuals can shop around for insurance. This is hard stuff to find, and harder yet to understand, and real effort needs to go into constructing an easily accessible marketplace that customers can effectively navigate.

And the legislature can absolutely go through the incremental steps to implement these policies and make the current broken system a little more fair and more beneficial. The last two could arguably pass right now.

A little imagination from our leaders in the Legislature can at least improve what we have now.