Health Insurance Is Dead; Long Live Health Insurance

By Mariner, Wendy K. | American Journal of Law & Medicine, April 1, 2014 | Go to article overview

Health Insurance Is Dead; Long Live Health Insurance


Mariner, Wendy K., American Journal of Law & Medicine


I. INTRODUCTION

Upon the death of a king or queen, the proclamation "the king is dead, long live the king" announces a new monarch's accession to the throne, preserving the sovereign order. As the Patient Protection and Affordable Care Act (ACA)* 1 is implemented, it is tempting to proclaim the reign of a new system of health insurance. But, will it preserve the old order or initiate a new form of governance? As states and insurers grapple with new rules and regulations being issued from the Department of Health and Human Services, the Treasury Department and the Department of Labor, one might believe an entirely new health insurance system is being built. Yet, the ACA is designed to preserve existing forms of public and private health insurance, such as Medicare and private employer group health plans, which will continue to operate much as they have in the recent past.2 What has changed is the role that insurance will play and how that will shape the way we think about health policy.

Under the ACA, health insurance will function more like social insurance than conventional indemnity insurance.3 Consequently, the new queen may look more like a prime minister-no longer reigning as a sovereign, but responsible to her subjects and accountable to their governing institutions. This represents a notable change, but it is less dramatic than one might suspect, as health insurance has long functioned differently from other categories of insurance.

Health insurance no longer operates like conventional life or car insurance, as it did in the 1950s and 1960s, when health insurance began displacing direct cash payments from patients to physicians. Blue Cross and Blue Shield offered indemnity policies to reimburse patients for fees patients paid to physicians and hospitals.4 Even then, however, Blue Cross and Blue Shield characterized their policies not as insurance, but as hospital and medical service payment plans, respectively; and they were governed by state laws similar to, but distinct from, other insurance licensure statutes.5 As healthcare costs rose, commercial insurers entered the market with indemnity policies. In the early years, insurers typically paid whatever prices hospitals and physicians charged, but today's insurers negotiate prices with providers, and large insurers that have substantial bargaining power can set their own prices. Insurers also added managed care components to their plans to control costs,6 and in many cases insurance coverage determines the kind of care that patients receive in practice.

Today, health insurance is no longer simply a class of insurance that covers risks to health, and it has not been so for many years.7 Part II argues that health insurance has become a unique form of insurance-a mechanism to pay for healthcare that uses risk spreading as one of several pricing methods.8 Part III explains how the ACA builds on this important payment function to create a complex social insurance system to finance healthcare for (almost) everyone. Health insurance is now so integrated into the healthcare system that we can no longer have one without the other. This shift poses challenges to laws governing health insurance policies. Part IV, therefore, examines how the ACA draws on various conceptions of insurance to produce a quasi-social insurance system. Such a system poses new challenges to laws governing insurance, not all of which are resolved by the ACA itself. I conclude that, whether or not the ACA is fully implemented, health insurance has already changed-but more nuanced questions remain about whether and how laws governing insurance licensure and claims determinations should also change.

II. CHARACTERISTICS OF HEALTH INSURANCE

Health insurance today differs from other classes of insurance in three critical respects.9 First, it is the primary source of payment for medical care in the United States.10 Second, because everyone needs healthcare, almost everyone needs health insurance to pay for that care. …

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