HB 2005 came out of the House Insurance Committee this week. It's a bill that Rep. Deluca (D-Pittsburgh) wrote that finally gives us some control of the health insurance industry. Imagine: up to this point, car insurance was better regulated than health insurance. That's like telling a kid not to run with scissors but letting him play with your guns. That could end. Word on the street is that they'll get HB2005 to the floor by the end of the year. That would be good.

Of course, lobbying and politics made it all more complicated than the had been initially planned. I'm not going to put the text of the bill in here, but here's the deal: small employers get nailed on their premiums all the time. Let's say we've got a plumbing company, right? We'll call it Dan & Ray's Plumbing. You've got this great plumber named Jen, and Jen's been working with you for years. Great gal. Works hard. She's in her late 40's. The doctor tells her that she needs a double-bypass. Big bill to your insurance carrier. Suddenly, we're paying a lot more money for all our plumbers, all our shop assistants and all our administrative staff. Premiums can spike like crazy because one of your crew had the audacity to get sick. The nerve.

Sickness is no good for insurance company profits.

The rationale for the unstable rates is that you negotiate with your insurer based on the size of the group you come to your insurer with. If you've got a lot of staff, then you can spread more sickness over more people. Makes sense, as far as it goes.

It's also the way the insurer wants you to think about it.

Think about it this way, though, from the insurers' perspective in-house. Risk isn't really spread over the people in each individual shop. Risk spreads over all the employees in all the businesses buying insurance from that insurance provider. So raising rates against your plumbing agency to fund your crew's one bypass is just a ruse to gouge a little more money of your shop. To them, it's just one by-pass among hundreds. Maybe even thousands.

Under House Bill 2005, insurers can't gouge Dan & Ray's Plumbing quite like that anymore, just because Jen has to get her heart fixed. Your premiums get negotiated based on the average cost of insuring workers in your industry, where your workers live and the individual ages of your workers. A worker in her late 40s or 50s is more likely to get a bypass, so, under this system, that risk was factored into her premium before the gave the order for the bypass. That's why it's bogus to gouge you when the order comes [And, if your the Blues, you can only base premiums on where you live and age]. Remember all the talk in Michael Moore's movie of folks getting their insurance denied because of a pre-existing condition? That's over for folks with employer based coverage. Which is huge.

Dan & Ray's Plumbing can feel a little better about spending its premium money. The new law says that insurers of small shops have to spend at least 85% of our premiums on healthcare. The Blues spend more like 90%. Medicare spends more like 97%. So 85% is plenty doable to cover admin and profits. That's eighty-five cents of every dollar going to pay for doctors, tests, hospitals and drugs.

The State Insurance Commissioner will also have authority over rates. Finally. In other words, if rates gotta go up, insurers have to justify it.

You can call that anti-market, but the market works in a funny way in this system. The patient receives the service that the doctor orders that the insurer pays for that the employer funds. Where's the market mechanism? When I buy the car I pick the car and get the car. When I get a heart transplant, I don't even get to pick the heart and you know I sure as hell don't pay for it. Word? Word.

The fact is, health care's loci of control are so diffuse, that everyone gets to hike up their bills to each other in little bits which adds up to premiums hiking a lot. A third party has to come in with the clout to make everyone play nice because it's never going to happen any other way. Legislation has already been passed that's going to bring down the bills coming from providers. Now, we have to make sure cost savings turn into lower premiums for Dan and Ray's Plumbing.

So tell your legislators to help us get HB 2005 done. Then Dan & Ray's Plumbing will get some relief on its bottom line and it won't have to gouge the politicians as hard the next time their basements flood.