Utopia meets Reality

Russell Hutchinson, proprietor of Chatswood Moneyblog, has a thought-provoking post up at the Good Returns financial "news center." In it, he lists all the elements of an "ideal" health insurance plan, and then turns the filter of reality onto it.

Here's a sample:

"[W]e don't yet have the perfect medical product. Consumers rightly see the perfect product as being one that pays for everything and costs nothing. Dialling back just a notch or two from that Nirvana we could sensibly describe what might be a ‘super-premium' medical product ... All of these cover features are available. The only problem is, you can't buy them all from one provider. In fact, I don't think you can even buy them all from less than three providers. If you did buy them all they total two to four times the typical total cost of a more stripped down major-medical product."

Read the whole thing. And definitely stop by Russell's place for a perspective from the Land of the Kiwi.

Rx Pay for Delay

The AARP folks have long opposed what they call "pay-for-delay" drug deals. In simple terms, the pharmaceutical companies will pay competing companies to delay production of generic drugs when a brand name goes off patent.

Proposals to prohibit pay-for-delay agreements will help get less expensive generic drugs to the market more quickly. The U.S. Federal Trade Commission (FTC)—the government agency charged with protecting consumers from anticompetitive business practices—reports that patent settlement agreements between brand-name and generic manufacturers that involve some sort of compensation prohibit generic entry for nearly 17 months longer (on average) than agreements without such payments.  

Eliminating pay-for-delay agreements would also result in substantial savings for consumers and government programs like Medicare and Medicaid, as generic drugs can cost up to 90 percent less than their brand-name counterparts. The FTC estimates that ending pay-for-delay agreements would save $3.5 billion each year for patients, insurers, and government programs.  

Prohibiting pay-for-delay agreements could also improve patient health. Access to generic drugs has been shown to increase medication adherence, which is particularly important for individuals with chronic health problems who rely on multiple medications to help stabilize and manage their conditions. Medicare beneficiaries who fail to take their medications as prescribed are more likely to have costly health complications, creating additional costs for the beneficiaries and the Medicare program.

AARP Public Policy Institute

That's the argument.

Eliminate pay for delay and save billions.

Maybe it will. Maybe it won't.

When laws are changed the assumption is human behavior, or in this case, corporate behavior, will not change.

In the early 90's Congress decided a good way to raise revenue was to impose a luxury tax on yachts and private airplanes. This "tax the rich" approach was a form of class warfare that was supposed to generate millions in new taxes.

The only thing it did was almost wipe out the yacht and private airplane business when the wealthy stopped buying luxury items.

The tax was repealed retroactively but by that time the damage had already been done.

Fast forward to the present, and assume Congress, or the courts, decide the payments to competing drug companies will henceforth be banned.

Do you suppose the drug companies will respond by raising price on brand name drugs in order to maximize profits before the patents expire?

Possibly . . .

Cavalcade of Risk #165: Vegas-Style

Jason Shafrin combines Vegas and the start of the NFL season to present this week's round-up of risk-related bloggetry. What's so unique (and interesting) about this edition is Jason's use of Vegas-style odds as applied to each post.

Very cool.

Don't go away mad, Bart...

Just go away. Stupid stunts like this won't absolve you:



You made it happen, Bart. Man up.

[Hat Tip: RedState]

Clueless

In matters of health insurance, I have come to understand the public is mostly uninformed about the mechanics of health care and health insurance. It seems they are content to remain that way and are satisfied to devote more time to reality TV than reality education.

This is an election year and voters, informed and otherwise, will show support for a candidate of their choice on or before November 6. Sadly, many will cast their vote based on nothing more than the "likability" of the candidate vs. qualifications or ability to lead.

I suspect this is why we are in the mess we are in.

As a veteran of the health insurance industry, I expect more of those who work in our market, and especially those who are part of the editorial staff of an industry periodical.

It appears my expectations are too high.

This became quite evident when the National Underwriter, Life and Health edition arrived in my mailbox a few weeks ago. The new Editor in Chief (Bill Coffin) is much improved over his predecessor. At least in areas where he is unfamiliar he makes very good attempts to balance one side against the other and present the "full" picture.

Not so for at least some of his staff.

A recent article "Sticker Shock" penned by an obviously young and misinformed man disappointed me greatly.

Not only does this person fail to understand the workings of the health care system, he proposes a solution where carriers adopt a baseball type collective bargaining agreement with hospitals and medical providers as a way of lowering the cost of health care.

Mr. Stanley was watching a baseball game when his girlfriend developed abdominal pains that were severe enough to prompt a 9 PM trip to the local ER. The middle of the night ordeal included a 7 hour stay and culminated in a CT scan and a hospital bill for $16,448.

No word if the bill includes additional P.A.R.E. charges for services performed by outside contractors and non-par providers.

As Mr. Stanley observed, one could have purchased a Ford Fiesta for a comparable amount.

Thanks to negotiations by Aetna (and perhaps some par providers) the net bill was reduced to $12,724 with Aetna paying 80% of that amount.

His girlfriend is covered under her mothers health insurance due to a provision in Obamacare that considers adults under the age of 26 to still be children for insurance purposes. Long before turning 26 you can legally drive a car, serve in the military, order and consume an alcoholic beverage, enter in to financial arrangements that obligate you to pay back borrowed funds but you do not have to buy health insurance if you don't want as long as mommy and daddy will buy it for you.

My first reaction to the article was to say "grow up" but it soon became clear the comments were posted by someone who had no clue about the health care system or health insurance. Apparently that is not a qualification for an associate editor.

His rant about the cost of health care includes comments about the cost of a CT scan in which he wonders if the machine is powered by liquid gold. He does admit one of the reasons why health care, especially in an ER, is expensive is due in part to uncompensated care and admits his girlfriend would be one of those if not for Obamacare and the goodness of her mother who pays the premium.

Mr. Stanley comes up with the idea that, had the illness happened at 9 AM it could have been diagnosed and treated by her PCP with simple antibiotics and the CT scan (as well as the $16k bill) would have been mostly unnecessary.

I suppose Mr. Stanley, or his girlfriend, possess the uncanny ability to diagnose ailments after the fact and arrive at the conclusion that the level of care was overkill in addition to being overly expensive.

His solution is an MLR for hospitals and a baseball type collective bargaining between carriers and medical providers as a way to hold down costs.

Apparently Mr. Stanley believes the health insurance MLR is or will actually work to "bend the health care cost curve" and make health insurance more affordable for everyone.

Regular readers of InsureBlog will know that MLR is not only a total failure but is actually responsible for higher premiums, higher costs for carriers and employers,  and fewer consumer choices.

Perhaps Mr. Stanley should spend some time here where when he is not watching the Mets lose.

Better yet, his skills and expertise would be better suited to seek employment as a sports writer and leave matters of health insurance to those who really have a clue.

ObamaCare's Solyndra

LifeHealthPro has a mushy article on CA passing Co-op legislation.

In the article they mention 19 non-profits offering coverage in 18 states that have already been awarded $1 billion. That leaves $2.8 billion left to be "had".

Like most news articles, they mention that do-nothing conservatives are against it, like they are against everything and already the house is investigating.

"the House Oversight Committee recently announced it would investigate an estimated $845 million announced so far in subsidized loans to 10 CO-OPs operating in 10 states, citing a potential default rate as high as 50 percent."

Potential default rate of 50%; shouldn't all tax payors be against that? Co-ops suffer the same failure of logic that the green energy write-offs did.  The Liberals constantly tell us how greedy business owners are, if these entitled 1%er`s aren't willing to risk their own money then maybe there isn't a good business model to support?

Insurance is very simple: take the claims, add expense and profit and there is your premium. Unless you can fundamentally alter one of those three items there is no way to reduce premiums. As the article mentions co-ops did exist prior to PPACA;

"The country's largest co-op is Health Partners, a Minnesota-based co-op. It offers traditional comprehensive coverage for as low as $88 a month."

If there was a viable opportunity the market is obviously capable of taking it. What is more likely is that connected or quick thinking "non-profits" will start up a co-op with government loans, collect nice salaries, hire friends and family to provide for profit services such as underwriting, marketing, claims, then fold when the money runs out. See the numerous failures under the green jobs program.

The entire PPACA co-op concept doesn't increase the probability of success for these plans, doesn't alter the playing field or laws that current carriers operate under. It just gives away $3.8 billion to those quick enough to apply. I think the tax payors will be lucky if only 50% of them fail.

Life Insurance Awareness Month

September is Life Insurance Awarenesss Month, an effort by a number of industry organizations and insurance carriers to get the message out on why life insurance is important. A few weeks back, we reprised Nick's Story, a very personal account of how the lack of insurance impacted a young man and his family.

Another young man, Buddy Valastro, dreamed of joining his father in the family bakery. That dream seemed to have died with his father, at the incredibly young age of 54:

"Buddy lost his best friend and mentor. And his family lost its breadwinner. Buddy had to drop out of high school to run the family business. That meant 12- to 18-hour workdays, six days a week and overseeing 30 employees."

That's because his dad had owned no life insurance. Things eventually worked out for young Buddy - or as you may know him, The Cake Boss.

On the other hand, any number of other successful business might have failed - or never have even gotten off the ground - without life insurance. Pretty much every life agent knows the story of how James Cash Penney kept his fledgeling business afloat during the Great Depression with the cash values of his life insurance. But there are others, as well:

■ Walt Disney used his life isnurance as collateral to help fund Disneyland

■ And Ray Kroc borrowed against his life insurance policies to help with cash-flow when McDonald's was just a start-up

■ Even home economist Doris Christopher tapped her life insurance policy to get the Pampered Chef cooking along.

All of these folks understood the value of life insurance. Do you?