Thanks for your post, Mags, some food for thought there. Are you in the insurance business? You seem to have a good knowledge of how the game is played. I don't pretend to know all the ins and outs of the proposals that are being bantered about. I'm sure there are bad things as well as good things, but I'll just address your points here.
1. Why would the government reserve situation be different from a private insurance one as far as reserves go? In theory, I could see how they'd need even more in reserve, if they were to make inroads in insuring what I would assume to be a lot of people, perhaps more than even the top 2/3 insurers, who have large clientele, for sure. How would pay as you go, as you say, be different from a reserves standpoint?
2. How much is the premium tax? I have no idea, would like to know. I'm guessing currently it's something added to my bill, at the moment, I doubt they just eat it, with the way things are set up now. But I can see your point, an added tax that the government doesn't pay, would be an unfair advantage. But I have to say that the way things are now, the insurers definitely hold a few advantages, that are making them plenty of money, off the backs of everyone that pays.
3. A lot to digest here. My initial question is why would insurance companies pay more to doctors and hospitals than the government would pay? You say it in a matter of fact way, just wondering why specifically you say that. Is it because it doesn't matter too much to them what they pay, because they can currently pass that cost along to consumers, and it's the status quo and way healthcare is handled now? Why would the government pay less? Because they would be able to negotiate and help keep costs down due to representing a larger number of people? Isn't that what competition is all about? Many on the right don't seem to be bothered by lack of competition between the biggest insurance companies, two or three hold most of the cards, and can essentially work together to keep the money high. That's what they do, to make profits - and big ones. Nothing wrong with profit, if it's fair and real competition is in play. Doctors and hospitals charge a lot, insurance companies charge a lot, big pharma charges an incredible amount of money for their products which are usually exclusive and have little competition on many medicines and treatments, and the only people who end up paying a lot for all of this is you and me, and Joe sixpack plumber. I can see your scenario, but there's nothing to make anything happen and change where things are headed. Status quo is killing most of us, and the economy is suffering in part because of it. Is it going to get better by itself?
4. I agree with this point, and I think it's at the root of what's wrong with the current system. The current system works great for a few select companies that are controlling the market, and are shrinking it as much as they can. Controls on this have been lessened, allowing them to do what they want, and buy what they want, subsequently charging what they want. It's far from free market capitalism, it's a closed market, in many respects. I don't think many people agree that a monopoly is good for an economic sector, and as you mention, the government doesn't have to turn a profit. They don't HAVE to do the things the companies do, nor would they have any motivation to do it. The government has always safeguarded the consumer by preventing these kinds of practices. Or at least part of the government has - until recently, when big business has become big business for some politicians and administrations.
Again, I do appreciate your post. It's nice discussing something for a change. And you make some good points.
A lot here to answer. Yes, I'm in the insurance business - been a chief actuary and senior exec for a couple of companies that are in the individual health business.
Insurers, along with claim reserve requirements, are also subject to RBC (Risk Based Capital) requirements. This is to ensure solvency - and these can be large amounts as it is based on the amount of premium inforce. I would doubt the go would be required to hold either of these, as the gov technically can't go insolvent - they just print more money as needed.
Premium tax (Taxes, Licenses and Fees as it is known as) can range from 2.0% of premium to about 4% - it varies by state and can include things like an assessment against the insurer to help pay for a state high risk pool, which provides guaranteed access to any and all residents of the state to an individual insurance plan (not always at a great price however).
Regarding reimbursements - currently the government pays substantially less to Medicare and Medicaid providers than those providers charge the insurance companies. Why? Because the government can demand they do so. Insurance companies cannot make the same demand. Hospital/doctors can choose to "opt out" of Medicare - and not take any of those patients along with the low level of reimbursement that comes along with those patients. Many of them do that today. Because of the low reimbursement level, hospitals/docs charge private insurance patients much more to cover the shortfall they get from Medicare patients (if they opt in for medicare patients). However, if we have a government option that is paying docs/hospitals are the same rates as Medicare today, a number of things are sure to happen: many people would migrate to the public plan as it would be cheaper, private insurance would be more expensive and be purchased primarily by the wealthy, doctors/hospitals would give better docs and better service to the private insurance customers since they are being paid more (likely waiting lines for people on the public option). Fewer doctors would go into the field, since payment levels would drop significanlty overall, and we'd ultimately face a doctor shortage. Granted many people choose to be a doctor because they want to help and heal people - but just as may do it for the money! And, let's not forget the mountain of debt that physicians have when they leave college - it is much higher than the average graduating college student.
I certainly don't think health care is anywhere close to a monopoly - although there are exceptions in some states and rural areas. But most states have multiple companies to buy insurance from. People act like insurance companies make a huge amount of money. They do - but that is mainly due to their size. The profit margin for insurance companies is typically 4-8% - depending on which line of business they are in (small group, large group, individual). Their are many, many other businesses (think clothes, furniture, real estate agents, etc) that have a much higher profit margin than, say 5%.
I'd like to clear up some of the misconceptions that Obama is spewing. He continues to villianize the insurance companies (a recent strategy started about a month ago, since his previous strategy wasn't working):
1. "Preventative coverage and services (mammo's, etc) save this country money by catching diseases early". That is a LIE. It costs more overall to provide that coverage than to pay for the diseases. It may be good public policy, but his statement was a LIE.
2. "Insurance companies cancel you when you get sick". I am speaking for the individual medical marketplace only here (which is my background) - but that again is a LIE. In 1996, HIPAA was passed that guarantees that an individual can keep their plan as long as they pay the premiums, and a company can't cancel you.
3. The big issues are around pre-ex and recission. Pre-ex means you had a health condition prior to purchasing insurance and did not disclose it to the insurer (usually to hide it so you can get coverage). Just like auto insurance, you can't go out and buy insurance if you are guaranteed significant claims because you are already sick. Just like you can't total your car and then call State Farm and buy insurance to get your car replaced or repaired. You must buy insurance BEFORE you get sick/total your car. The system will never work if you wait until you are sick to buy coverage. The resultant premiums are just too high. There are instances (which Obama uses the same 2 examples over and over) where customers lose their coverage after purchasing it because they "hid" a condition that would have affected the insurance companies decision to insure them. Granted, the cases Obama quotes sound bad - and they are supposed to - he's trying to rile people up. But we don't know all the details - just the details he tell's us.
I can tell you, on average, 0.5% of policies that are issued in the individual market are recinded (taken away) due to the person who applied lying on their application. Applicants have every reason to do so - any way to get coverage if they are sick - and now matter how well a company underwrites, they can't ever know as much about their prospective customer's health than that person does themselves.
I truly believe that the vast majority of insurance companies act with integrity and treat their customers well. Which is why so many people are happy with their coverage today. Just like any industry, there are some customers that slip through the cracks and are not treated appropriately - but, again, just like any industry these are the exception and not the norm.
Given how unfunded Medicare and Medicaid is right now, I have 0% confidence that the government could run a health care system for the rest of us.
I whole heartedly agree that we need a way to help those today who don't have coverage because they can't afford it. I just don't think a goverment run system is the way to do it.
Hope I addressed some of your questions Chadman. Back to work for me now.
