Making Health Insurance Cheaper

Health insurance will be cheaper once Obamacare is in place. Really? Not happening yet, and guess what. It will never happen.
Politicians think because you can drive to North Carolina and buy cheap cigarettes the same principle should apply to health insurance.   
                     
Problem is, health insurance doesn't work that way, and our Georgia politicians are scratching their heads. The AJC reported on new legislation that was supposed to make it easier for Georgian's to purchase health insurance across state lines.

Nobody has even asked to be approved to sell across state lines,” Georgia Insurance Commissioner Ralph Hudgens said. “We’re dumbfounded. We are absolutely dumbfounded.”

Dumbfounded. That's a good word.

Do you suppose anyone under the gold dome has heard of Obamacare?

With all the massive changes that will affect health insurance in 2014 (assuming Obamacare survives the Supreme Court and the November elections) carriers are not making any major moves involving health insurance, especially those that involve huge sums of money in filing fees.

Hudgens, a conservative Republican who strongly supports free-market ideas, said he expected policies sold in states such as Alabama, which have fewer requirements for health plans, to be offered in Georgia after enactment of the law.

Under the new law, health plans approved under the rules of other states could be sold in Georgia, even if they don’t meet Georgia requirements.

However, the companies still would have to be registered in Georgia and prove they are financially solid. And any complaints from policy holders would be resolved in Georgia, instead of forcing customers to go to the state that approved the plan to resolve a dispute.

The health insurance policies and rates would also have to be filed in GA and approved by the Department of Insurance. This is expensive and time consuming.

Any savings that may be achieved due to fewer mandates in Alabama would be offset, at least in part, by network discounts and overall cost of health care in Georgia.

And Alabama is a poor example in this case. Blue Cross of Alabama dominates the state when it comes to health insurance. They control so much of the market very few health insurance carriers even offer their product there. If Alabama Blue were to try and compete for health insurance here they would lose the advantage of their deep network discounts making it impossible to compete against home grown BCBSGA or other health insurance carriers such as Humana, Cigna and other health insurance carriers.

Kyle Jackson, Georgia state director for the National Federation of Independent Business, had high hopes that the new law would help small business operators who buy their own health plans.

“It’s frustrating,” Jackson said. “You can’t force the insurance companies to write these policies. But I know in talking to folks in my membership that there is a real demand ... especially if you are talking about the possibility of some lower-cost health insurance plans that do not have the mandates we have.”

No doubt, mandates add an average of 30% to the cost of health insurance, but the only way to significantly reduce health insurance premiums in most cases is to totally obliterate all mandates.

That won't happen.

[Click here for Mike's response]

Introducing STCi

No, that's not a typo: we've written quite extensively on Long Term Care insurance (LTCi), but this is new to us.

The major challenge with LTCi is the premium. While these plans can be cost-effective, there's no question that they can be, as my sister says, spendy. So, a lot of folks decide that, if they can't afford the plan they want they'll just take a pass altogether. While that's certainly understandable, it can be a big mistake.

But how to resolve the dilemna?

Well, that's where Short Term Care insurance (STCi) comes in:

"Short-term care (also known as Recovery Care or “LTC Lite”) is not a new product but it has been gaining ground in the last 2 years ... With its shorter underwriting cycle, high-issue rates, and low premiums it’s becoming increasing popular"

Unlike traditional or Partnership plans, these policies typically have benefits that last for a year (or even less). On the other hand, unlike the typical 90-day waiting period common to LTCi, these plans boast elimination periods of less than 60 days. So they pay out quicker (albeit for far shorter periods). In fact, they could be used to fill that "gap" in traditional plans.

Underwriting on these plans is claimed to be much quicker than LTCi (although I have no direct knowledge of this. YMMV).

The target market for these plans seems to be those who have already hit "senior" stage (age 65+) and have less than $100,000 in savings and investments. This is a somewhat different makeup from the typical LTCi policyholder.

Is this a panacea? Of course not, but it is a potentially helpful alternative to folks who've considered - and rejected - traditional Long Term Care plans.

How it works: Red wine and health

We've reported on the health benefits of red wine before, specifically the role of resveratrol.

But here's a more detailed look at why it does what it does:

"The ‘miracle ingredient’ resveratrol credited with anti-ageing powers, and the ability to work against cancer, heart disease and obesity, really does boost the body’s supply of cell energy ... But it is only ‘switched on’ in the presence of a gene called SIRT1 that is the key to longevity and energy."

Kind of like how epoxy glues work, where both "pieces" are necessary for the product to work as advertised. The challenge is that it's not clear whether or not everyone has the SIRT1 gene, so it may not be a "universal" panacea.

Still, it's promising news.

Obamacare’s biggest problem? It’s small-ball.

Obama is thinking way too small.  He needs to venture outside the box.  There is a way to provide universal medical insurance for all, and simultaneously end unemployment in the U.S.  To see the way, Obama needs to think big.  Then, with enough hope, he can change everything.

The key concept is “single-employer” i.e., a universal employment system.

This does not exist today in the U.S. Instead, we have tens of thousands of separate employers, each with its own employment practices and payrolls. Every grocery store has its own staff – plus separate stocking, pricing, and purchasing arrangements. This separate-grocery business model causes food access and cost problems. For example, some grocers do not offer fresh produce in low-income neighborhoods while suburban grocers stock an ample supply of fresh foods. But more important, the "separate enterprise" business model causes the same access and cost problems for every other type of enterprise, public and private.  This is why high cost is such an obstacle to consumers who want – but often cannot afford - the products of auto manufacturers, drug stores, retail outlets, banking, insurance, hospitals, physicians’ offices, schools, local governments, and thousands of other enterprises.

It is common sense that the more consolidation, the cheaper the cost. Therefore consolidation of the separate-enterprise business model should be the goal. And that means a national, single employer.

Single-employer would be administered by the federal government, and would be our sole national purchaser of labor. Government single employer would eliminate the duplicative and needlessly expensive overhead of our present independent and poorly coordinated employers. The cost of business administration and related payroll costs would drop by 50%.

The trillions saved would permit our government single employer to employ everyone above age 15.

In fact, no one who wants to work would be denied a job. Not just junk jobs, but meaningful, high-paying jobs. The government would assign people to jobs using modern, efficient planning processes without regard to gender, race, national origin or ability to work. Every working-age American will have a job and earn a decent living wage paid from public funds. Result: the curse of unemployment is gone forever, financed by savings from the change to single-employer.

Implementation would be simple – just delegate the details to the Senate and Department of Labor (thus also avoiding one of the Obama’s biggest mistakes in 2009 – permitting the House to write the Obamacare law).

Everyone could then have medical insurance through their employer - the federal government - at less cost than today, giving citizens even more spending money as well as making American goods more competitive.

Mr. Obama – think big.

Cavalcade of Risk #156: Short and sweet edition

FMF hosts this week's roundup of the best risk-related posts you'll find anywhere. Do check it out.

And a big CavRisk Thank You to all the folks who volunteered for summer hosting slots!

Helpful Home Hint

If you're one of the many thousands of homeowners looking at Spring as remodeling season, the Insurance Information Institute urges you to let your insurance agent know.

The primary reason, of course, is so that you don't end up underinsured if there's a subsequent loss (this is, after all, tornado season).

Something else to consider is potential liability if one of the contractors or laborers were injured while on your property. Your agent can help you ask the right questions before there's a problem.

Online Powers

Got an interesting offer in email the other day:

"J.D. Power and Associates will release the results of the 2012 Insurance Shopping Satisfaction Study ... I’d welcome the opportunity to arrange an interview with our study director."

An enticing proposition, to be sure. Turns out, the report is on the changing face of the auto insurance market, but I think we can also draw some conclusions about health insurance from it. After all, these two seemingly disparate lines of business have a lot in common: they're both based on the principle of indemnity, and most folks need (or believe they need) them.

Jeff Perlman, whose email extended the offer, helpfully included a copy of last year's report, which had this news:

"For the first time, a majority of new buyers of auto insurance initiated their policy purchase by applying for a rate quote online."

Can't say I was terribly surprised at this revelation: between the Mayhem Guy, Flo and President Palmer, it's hard not to be tempted. The question, of course, is the role of the agent in the process. It seems that more folks are initiating the process online; this doesn't necessarily mean that they're buying that way.

But that was then (2011) and this is now; what's new this year? The first is really non-news: the number of folks who actually bought off "the 'net" stayed steady at around 43%. This is somewhat misleading: I thought it meant direct from the carrier, but it really means that plus agent sites, social media, that kind of thing.

This share of the distribution channel has remained fairly steady over the past few years. The major development there is that more folks who started the process online were able to successfully make the purchase that way.

The other "big news" that I found quite interesting is that the "auto insurance shopping rate has reached the lowest point in the past five years, with only 25 percent of insurance customers indicating they shopped for a new insurer in the past 12 months, down eight percentage points from 2011."

It wasn't readily apparent why there was such a big drop-off, so I asked Jeremy Bowler (J D Powers' senior director of the global insurance practice) for his thoughts. Jeremy was the director of this study, and we had a very interesting, 45-minute conversation about it.

An almost 10-point drop in consumer interest seems like a big deal, and I wondered what might account for such a change. Jeremy offered two (non-mutually exclusive) hypotheses:

First, diminishing returns and frequent (what Jeremy called "serial") shoppers. What happens is that folks who have been with one carrier for a while look around, and find that they can save many hundreds of dollars on their premiums just by switching. And that's great (for them), but the next year, thinking they can recapture that glory, they're unexpectedly disappointed by the paltry savings to be had. They may have saved $400 in the initial switch, but the next one might save them only $50, and so they decide it's not worth the hassle.

His other thought had to do with carrier strategies. That is, they offer big savings to new customers, and then hit them up with rate increases the next year (Jeremy laughed when I told him that folks in my side of the business call that "the Blue Cross model").

It was an interesting insight into a side of the business that's generally foreign to me.

[Major InsureBlog Thanks to Jeremy Bowler and Jeff Perlman!]