THE HEALTH INSURANCE INDUSTRY seems afflicted by an ostrich complex. That is the only explanation for the industry's failure to take meaningful part in negotiations over proposals for incorporating catastrophic health insurance benefits into the government's Medicare program.

The bill now being debated in the Senate cuts the industry out. Instead, expenses for acute medical care are paid through Medicare, funded by taxes and additions to Part B Medicare premiums.This should be a warning to the insurers. Both House and Senate debate reveal deep concern about helping people bear the burdensome cost of long-term health care. House Ways and Means Health Subcommittee Chairman Pete Stark, D- Calif., repeats that if he could find the money in this time of budget austerity he would do it tomorrow - no - would have done it yesterday.

Insurers assert that within a few years they will be able to offer reasonably priced group policies to take care of long-term health problems. Give us incentives, they say, and leave the rest to us.

Yet evidence of problems with the private sector's efforts is everywhere. Many individuals now purchase private Medigap health-care policies designed to fill in the gaps left by Medicare. While the policies of major carriers such as Prudential Insurance Co. and Blue Cross-Blue Shield pay out in benefits around 80 percent of premiums collected, the majority of policies are much poorer investments. A General Accounting Office study said that most Medigap policies have loss ratios below the federal guideline of at least 75 percent for group policies and 60 percent for individual policies.

There already has been a move in Congress to have the Federal Trade

Commission study Medigap policies, especially those sold through radio and television ads by celebrities. But the Health Insurance Association of America, by rejecting the catastrophic coverage amendments passed by the House and pending in the Senate to provide more benefits for acute care under Medicare, shows no understanding of the intensity of public feeling on this issue.

Legislators, dividing not on party lines but more on gut reactions, are split between the idea, pushed by the American Association of Retired Persons, that only a federal government program will cover everyone and eliminate expensive duplicative coverage, and the belief that long-term health-care insurance should primarily be a private-sector activity. But the HIAA has been paralyzed and unable to participate constructively in the debate, due to its reluctance to agree to anything that might hurt individual companies offering Medigap plans - no matter how poor the quality of those insurance plans might be.

Blue Cross and Blue Shield Association, which has as much to lose as private for-profit insurers, somehow managed to put aside its private concerns and endorse the Medicare expansion program. But HIAA remains unwilling to take on its members who market high-cost, low-benefit policies to the elderly, although it is those dubious tactics that have led to the demand for creation of a new federal program. By catering to the lowest common denominator, the HIAA is exacerbating a situation in which health insurance salesmen marketing to the elderly are compared to snake oil vendors of times past.

One way or another, Congress is going to pass some sort of comprehensive program for catastrophic health care. If the industry continues to keep its head in the sand, the program that results will surely not be to its liking.

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