Paul Krugman described how, even without a public option, the health reforms Barack Obama is proposing would be a drastic improvement over the current system in today’s New York Times. Krugman argues that the reforms which are part of the bill would essentially turn the American health care system into something that resembles the approach Switzerland and Holland take. He’s right, however combining a national co-op with an insurance exchange could result in a strong, universal health care system which puts patients before profits.

If the health care reform bill creates an insurance exchange with minimum standards for benefits, payments, and (most importantly) medical losses, who administers the plan is basically irrelevant. Controlling artificial manipulation of the insurance industry’s medical loss ratio is important because it would prevent many of the outrageous abuses which currently plague our system.

Former insurance executive Wendell Potter described how insurance companies artificially alter the medical loss ratio in order to please Wall Street investors on Bill Moyers’ Journal:

"Well, there’s a measure of profitability that investors look to, and it’s called a medical loss ratio…it’s a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims…

So, investors want that to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they’ll punish them. Investors will start leaving in droves…

And they think that this company has not done a good job of managing medical expenses. It has not denied enough claims. It has not kicked enough people off the rolls. And that’s what– that is what happens, what these companies do, to make sure that they satisfy Wall Street’s expectations with the medical loss ratio."

The practical effect of for-profit insurers obsession with Wall Street profits is borne out by the experience of people like Patty Bates. Bates was a small business owner and cancer patient who threatened HealthNet’s profitability:

"Health Net dropped her in January 2004, (and) Bates was stuck with more than $129,000 in medical bills and was forced to stop chemotherapy for several months until she found a charity to pay for it."

HealthNet was fined $1 million by a California state agency for abuses like the one it perpetrated on Bates.

HR 3200 would essentially end artificial manipulation of the medical loss ratio in order to make a quick buck and please investors. HR 3200 includes a provision which requires all insurers on the national insurance exchange to meet a minimum medical loss ratio. This provision would provide teeth to the bill’s prohibition of discrimination against Americans with pre-existing conditions, and the bill’s ban on the absurd practice of rescission. If a public option, or even a national non-profit co-op, is abiding by a minimum medical loss ratio, which can’t be arbitrarily altered to beat Wall Street’s expectations by throwing cancer patients on the street, health care reform will work very well.

If we put patients before profits, we will have better outcomes and spend less money. Over time, a reduction in health care costs will make us more competitive with the Europeans when it comes to manufacturing goods.

The resulting system would be a hybrid of the Dutch and German systems. Like the health care system in Holland, there would still be for-profit insurers. However, the existence of a private, non-profit co-op which has to follow the payment schedule and medical loss ratio negotiated by the HHS Secretary would add a bit of the German system to create a uniquely American mixing pot health insurance system. In Germany, a large contingent of private, not-for-profit insurers administer a health insurance framework which is set by the federal government.

A co-op that operates under a national framework can be successful. This non-profit model is successful in many western European countries. But it is not the lame, state-based co-ops of Kent Conrad’s dreams; Conrad’s state-base co-ops wouldn’t have a large enough pool to alter the market, reduce costs and increase access. The end game is upon us, but for our side to be successful, we need the House to pass a strong bill with stringent regulations on the insurance industry and a strong public option, administered by the federal government. That’s why you should call your congressperson and tell them to support HR 3200