In Defense of Insurance Companies

When President Obama spoke to Congress last week about his agenda for health care reform, he stated that many citizens who sign up and pay for private health insurance find their insurance dropped once they become sick or are unable to keep up with the cost of the premiums.

Not so fast, says Scott Harrington, Wharton professor of health care management, in an opinion piece today in The Wall Street Journal. “The President’s examples of people ‘dropped’ by their insurance companies involve the [cancellation] of policies based on misrepresentation or concealment of information in applications for coverage,” he writes. In other words, people lie about their health or withhold relevant health information when applying for coverage.

Harrington points out that it is standard practice for insurers, when they are setting prices for premiums, to rely on information provided by consumers rather than undertake the costly process of trying to verify each person’s health status. Instead, he notes in his piece, companies “engage in a certain degree of … auditing” after policies have been issued, “including when expensive treatment is sought soon after a policy is issued.”

If there are indeed cases where insurers are wrongly terminating coverage, state and federal governments have a number of options that would allow them to “target abuses without adopting the President’s agenda for federal control of health insurance, or the creation of a government health insurer,” according to Harrington, who also criticized as inaccurate or misleading a number of anecdotes that Obama used to make his case during last week’s speech.

For more opinions on President Obama’s health care reform agenda, see the following articles: