Friday, February 06, 2009
Private Insurance Makes Nick's Law More Expensive
Since the election in November, both the state House and state Senate of Oklahoma are now controlled by Republicans for the first time in roughly forever. And while the House and Senate have only been in session for one month, they've already started kowtowing to corporate interests, especially in regards to health care coverage.
"Nick's Law" was a bill that would require health insurers in the state of Oklahoma to cover the diagnosis and treatment of autism in children. On Tuesday the state House Economic Development and Financial Services Committee voted 10-5 along party lines against a motion to send the mandate bill to the House floor. And if killing this bill wasn't enough, they then voted 9-5 for a "do-not-pass motion that under House rules will prevent the mandate idea from being considered again until a new Legislature is seated in 2011", metaphorically shooting the bill a couple extra times in the head just to make sure it's really dead. Elsewhere though there are 18 states with similar autism mandates and many more with legislatures considering mandates right now, which follows the advice Rep John Carey, D-Durant, will be giving to parents of autistic children: "...move to another state."
According to that article, there was a study performed for the state House that said an autism mandate would increase health insurance rates by at least 7.8% and possibly as high as 19.8%. 7.8% to 19.8%!? Without being privy to the methodology of that study, I think that sounds really high and I would like to quibble with it.
According to that article, one mother of an autistic child said that therapies cost $30,000 a year, and another father of an autistic child said he spends up to $5,000 a month, which could be as high as $60,000 a year. For the sake of this back-of-the-envelope calculation, let's use $45,000 a year. And a well-known statistic from autismspeaks.org states that 1 out of 150 children are affected by autism. All other data will come from the Kaiser Family Foundation's statehealthfacts.org.
If there are 971,331 children in Oklahoma, autism could be expected to affect about 6,475 of them. This would make the cost of all treatments for all autistic kids in Oklahoma $291 million per year. There are about 3.5 million people in Oklahoma, only 2,845,529 of them with health insurance coverage. If we assume all autistic kids will have 100% of their therapies covered by health insurance, then we can expect only the 2.8 million people in the state with health insurance will have to pay any more in premiums. This works out to an average of $102 increase per person per year. Currently, the average premium for an individual in Oklahoma is $3,967 ($635 paid by the individual on average, the rest by his/her employer). If the average premium increased $102, the new average due to autism coverage would be $4,069 ($651 paid by the employee), an increase of 2.6%. For the insured employee, the cost of the autism mandate would be on average $1.33 a month. If you told me we could cover autism diagnosis and therapy for all autistic children in Oklahoma and I'd only have to spend roughly a dollar a month extra, I'd totally be down.
Ah, but of course I'm thinking about this from a not-for-profit and governmental sort of viewpoint. It's fine to think about averages and cost spreading in these terms when your pool of customers is as large as an entire state, but if you're only insuring a few hundred thousand people just like 20 other private insurance companies in the state, you have to be prepared for more statistical anomalies. Like what if for some reason autism just happens to affect 1 in 50 children in your particular pool of customers? This could be within one or two or three standard deviations of the 1:150 rate. In order to break even in such a scenario, you would have to increase rates three times higher than the statistical average calculated in the previous paragraph. Now we're up to a 7.8% rate increase for private insurance simply because private insurers can't spread risk like a government insurer could.
Plus, as an insurance company, you don't simply break even with treatments. There are a lot of claims adjusters and management types to pay, and the probably-publicly-traded company needs to earn a profit for its shareholders. Add a few more percentage points to that total, and you could be up to somewhere like 13% increase in premiums. Oh, and the CEO really likes travelling to exotic getaway vacations, corporate meetings in Switzerland, and owning a few houses and boats, and really, who wouldn't? So if you can squeeze just a bit more out of the pool of insured customers, say to the tune of 19.8%, you could have your shareholder meetings in Tahiti, and of course you'd deserve it because you just figured out a way to turn a mental ailment into ungodly sums of money for your company.
So the cost of "Nick's Law" may in fact be a 7.8% to 19.8% increase in private insurance premiums. This is all the more reason why we need universal health insurance. (Maybe after that we can tackle that cost of $45,000 per year per child by putting socialized medicine in place. But first things first.)
(For more, visit nickslawok.blogspot.com)