daddio914 (daddio914) wrote,

Schadenfreude - let's invest in insurance!

First of all, let me preface this by saying insurance is generally a good thing.  Especially health insurance.  I don't know what I would have done without having adequate health insurance when my youngest son was sick or when I was diagnosed with RA.  However, there are some obvious problems with the status quo.  Many Americans can not afford adequate health insurance.  Many more are on the verge due to skyrocketing costs.  I fall into this second group.

Secondly, in the interest of fair disclosure, let me add that I am beyond fed up with a particular insurance company today.  My employer offers its employees the opportunity to set back pretax dollars in a flexible spending account.  According to the tax code of the United States, money can be set back this way and disbursed on non-reimbursed medical expenses.  Yes, it knocks your medical expenses deductions down, but I'm usually too lazy to fill those out, so using the money pretax makes a lot of sense to me.  One less thing to worry about at tax time.  So at the end of last year when we were offered the opportunity to enroll in our FSA, I took the option. 

I put just enough in that I really wouldn't miss it off my checks, but enough so that when our prescription deductable came due in July that I'd already have most of it set aside by getting reimbursed for the prescription co-pays we paid in the first half of the year. A brilliant plan, if I do say so myself. 

Unfortunately, the insurance company that administers our FSA doesn't show me as an enrolled member of our FSA.  Nevermind that they've been taking money out of my paychecks all year.  Nevermind that the first time they denied my FSA reimbursement request, I had our personell manager contact our agent and work everything out and didn't resubmit my claim until two months later when I was assured that I was now in their system and would promptly receive my reimbursement.  I got another letter from them yesterday stating that I was not enrolled in my company's FSA.  I called them this morning and they confirmed that, according to their records, I am not enrolled in my company's FSA.

It's almost August.  I submitted the original reimbursement request in June.  All I can think today is that someone owes me some fucking money.  With interest -- that money should have been in my hands no later than the first of July.  If it's not in my hands before the beginning of October, that's three months of interest someone has collected on my money because they didn't give it to me when I asked for it.  As far as I'm concerned, that's theft. Plain and simple.

Why do people put up with shenanigans like this from insurance companies?  The first time I heard about "the float" was in association with an insurance company.  That's right. They intentionally drag their feet paying legitimate claims in order to collect an extra day or two in interest (the float) off the money that should be in your doctor's hands.  Actually, some companies will push things past the 90 days that most people think is reasonable for paying such bills.  In fact, one of my previous physicians refused to accept insurance from a particular company because even though they did pay, they never paid within the first 120 days.  That's six months!  Six months they're collecting interest of your money (premiums) that should have already gone to your doctor so s/he could pay the bills and stay in business.  As far as I'm concerned, that's theft on a grand scale.

Now, all of these things really complicate matters when we want to talk about affordable health insurance.  It gets even more complicated when you start talking about how insurance companies make their legitimate money (when they aren't stealing interest money from you or your creditors).  In the simplest terms, insurance companies make their legitimate money by taking in more in premiums than they pay in claims.  So when it comes to something like health insurance, it's in the insurance company's best interest to not pay your claim at all.  Anything their managers think they can get away with denying is denied.

Now you see where the title comes in:  an insurance company profits from the misfortune of others.  Well, I didn't say it was a literal translation.

Yes, I know there are many people who work in the insurance industry, particular in the health care insurance industry, that work hard and try and make a positive difference in people's lives.  A few of them actually succeed at that, but far more fail. They fail because of human greed.

Bear with me... we're still talking about affordable health insurance.  Understanding how insurance companies make money is a very important part of understanding the problem at hand.  Now, if you're an insurance company, and you want to make money, and you know that in order to make money you have to bring in more in premiums than you pay out in claims, what else can you do to make money besides make it hard(er) to collect on a claim?  You can raise the premiums.

One way to raise premiums is to divide and conquer.  The smaller your group, the bigger the increase in premium in relationship to the risk factors of each individual.  So if you have ten perfectly healthy computer engineers at one company and one of them smokes, the insurance company raises all their premiums in response to the potential ill effects the cigarette smoke would have on that one individual.

No. That's not exactly fair.  The libertarians among my friends would even say that that is a kind of theft, as well.  Would insurance premiums based on each individual's risk factors be fair?  Not really. It would be the best-case scenario for the insurance companies.  They would have to make enough money off you so that if anything happened to you, they wouldn't lose any money.

As in the case with many things, smaller is more expensive.  In the case of health care insurance, smaller means there are fewer people sharing the risks, and this translates into bigger profits for the insurance companies.  The reverse is also true.  If you look at the costs of health insurance for employees of larger companies, of companies that participate in larger groups, of any way that people have come up with to increase the number of people that they share risk with, the cost of health care insurance premiums go down.

So what do you think the secret to affordable health care is?  Getting everyone into the same pool.  It's that simple.  If we shared the risk across the entire population, the costs of health care insurance would go down.  This also holds true for any other kind of insurance imaginable.

So how do we get everyone into the same pool?

There could be a regulatory change.  Insurance companies would have to set their premiums based on the amortization of risk across the entire population rather than the small groups and clusters that they do now.  Unfortunately this would drive some insurance companies out of business, leaving many more people without health insurance. 

In fact, a regulatory change like this would ultimately lend itself toward the establishment of a health insurance monopoly.  Why? Because if you have to spread the risk out across the entire population you have to collect premiums from the entire population in order to be able to turn a profit.

So how about we take an even bolder step and further regulate health insurance companies to be non-profit businesses?  It makes some sense.  If there was no incentive to turn a profit, though, many companies would no longer be interested in providing health care insurance and many more people would be left without adequate health insurance.

Direct regulatory changes aren't going to solve the problems with health care insurance.  Neither are government band-aids designed as hand-outs to people who can't afford insurance.  That's only going to exacerbate the problem by raising the taxes of the people who can barely afford insurance as it is. People like me.

But we can look outside the box for a solution to the problem of affordable health care in the United States.  A single National Health Care Insurance Company would be able to employ many of the people who will lose their jobs when the insurance industry loses its privilege of providing health care insurance due to the way the privilege has been abused in recent years. 

In addition to providing the benefit of the largest possible risk-sharing pool with the lowest possible health care insurance premiums, a NHCIC could also be used to phase out government-run programs like Medicare, Medicaid, and WIC though the use of need-based premium discounts, planned overpayment (like a retirement fund for your health insurance), and a holistic approach to health care that includes education and incentives for maintaining a healthy diet and healthy lifestyle.  This would, in turn, eventually lower taxes as these massively-funded programs are phased out.

The costs of this solution lie elsewhere.  The price of the efficiency of a single-point provider for health care insurance would be in lost jobs.  Many employed in the health care insurance industry would have to find other employment.  Eventually, a fair number of government bureaucrats would also enter the ranks of the unemployed.  If the people in our government wanted to be serious about reducing the cost of health care insurance, they could funnel the band-aid money into retraining programs for these people so that they can find jobs in other sectors of the economy, lessening any potential negative impact such a sweeping change would be bound to have.

Many of my capitalist friends will bemoan the lack of choice; the lack of competition.  Unfortunately, the way insurance works, competition only serves to increase the price paid by the consumer, and what kind of choice is choosing who is going to steal your money anyway?  It is but the illusion of choice.  A single-point provider can actually offer the individual far more choice in tailoring their coverage to their needs than is typically available to participants in any current insurance plan.

Politicians will shy away from such a bold plan because the insurance industry is a powerful lobby that contributes vast gobs of cash (yes, that is a technical term) to their election campaigns.  They run the risk of the opposition getting the money that would have otherwise been intended for them, which in their world amounts to a double-whammy (yes, another technical term).

Ultimately, that means that I've just wasted my time in writing all this, and now I've wasted your time in reading it.  Unless this idea or something similar actually catches on.  Then we've paid but the smallest price for the biggest reward, haven't we?

(edited to correct mild grammar issues and remove LJ-Cut)
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