Understanding the Ugly Truth: Health Insurance

[Einhander Sn0m4n]

http://www.dailykos.com/storyonly/2007/9/19/105350/099

Understanding the Ugly Truth: Health Insurance
by Just This
Wed Sep 19, 2007 at 08:01:22 AM PDT

The problem is that people do not understand the problem. People don’t understand the modern business model of health insurance corporations, even the "non-profit" (cough cough choke choke) ones.

As I am new, I will keep repeating I am an economist and health care provider. Strange combination but I studied micro-econ and game theory before I became a therapist. I live in Pittsburgh, and look up and see the Highmark sign every day. The first paragraph of a report on PA’s insurance system says a great deal.

www.pennpirg.org...

Thirteen Pennsylvania not-for-profit organizations and trade unions and the national Consumers Union of the U.S., along with the City of Philadelphia,2 concerned about the impact on policyholders, the uninsured and the general public of the buildup of $4 billion of surplus on the balance sheets of the nonprofit Blue Cross Plans (the Plans), retained IMR Health Economics, LLC, to conduct an independent analysis of the applications filed with the Department in this proceeding

4 BILLION!!! more....

* Just This's diary :: ::
*

The firm’s argument is that surpluses of this level are needed to pay out claims. They will tell you they pay out xxx million a month so they need the surplus and try to avoid mentioning how much they take in a month and how fast they pay it out.

Definition ACL stands for "authorized control level". It is the level of surplus below which state insurance departments are authorized to take whatever action is necessary to protect the interests of policyholders and creditors including liquidation or rehabilitation of the insurer. At 200% ACL or greater, surplus is deemed sufficient to permit insurance companies to operate without special regulatory monitoring or supervision.

It is my understanding that each of the Plans has recommended a minimum threshold
target of 375% ACL consistent with the Blue Cross Blue Shield Association membership and trademark standard.16 None has provided specific justification for that level of surplus.17 A 375% ACL minimum standard is excessive. The 200% ACL (NAIC) standard adopted by the NAIC and the Commonwealth18 provides a more than adequate level of "early warning" protection in today’s environment. In fact, it probably provides considerably more protection than its designers and the NAIC had anticipated when the model was first developed and adopted in the early 1990's. In large measure, this comes about as a result of significant changes in the health insurance business and financial environment which have caused the baseline modeling assumptions to become overly conservative....

The Plans report that as of December 31, 2003 they held (on a parent company-only basis)accumulated capital and surplus totaling $3.96 billion, up $500 million from the prior year. Highmark’s 2003 surplus of $2.2 billion was equivalent to 645% ACL; IBC’s surplus of $841million represented 391% ACL; BCNEPA’s surplus, $405 million was equal to 1006% ACL and CBC’s surplus of $515 million represented 929% ACL.

You can read the report if you want, but the question is what is going on here that they can have huge increases in assets (surpluses) and why would management want to run it like this?

Hugely important point to show the game. Insurers can "lose money" and increase surpluses.

The charts demonstrate that for virtually all of the Plans, surplus has increased steadily over the period 1990-2003 with only a few momentary and minor declines. Even when Plans experienced substantial annual losses (e.g. Highmark, $311 million in 1996) and/or multi-year losses (e.g. Highmark, $568 million of underwriting losses from 1995-1999), surplus has not been eroded. Indeed, in the case of Highmark, surplus grew by $341 million (1995-1999) notwithstanding the substantial, concurrent five-year loss.25 Similarly, in the instance of CBC, the company experienced a cumulative loss over the six-year period, 1997-2002, of $161 million; during the same period, surplus increased by $51 million. These data do not support the thesis that surplus (currently on the order of $4 billion in the aggregate) is justified as protection against reasonably projected risks.

The answer is simple, they are hedge funds. Their goal is to maximize surpluses and investment income. They say this is altruistic so they can provide the underwriting but how they do it matters.

They do it with what can be called the float, much like banks do with the 3 day holds on a check. The Firm takes in maximum premiums and the goal is to delay payment for as long as possible. (Every wonder why there are so many hoops and voice mail trees?) I call for a $1000 MRI approval, I am going to get it for my patient, but it might take me a couple hours over a few days, I might also give up. The Firm is investing that $1000 while we wait so while they are making money, I am wasting money time and the health of my patient.

Even if they paid out 1-1 premium to claim but making our lives hell, they get to freely invest our money and the better they do it, the bigger the profits/salaries/bonuses.

Which leads me to Government as a Single payer as the solution. As we know, the US Government runs on debt not surplus backed by the full faith and credit and government bonds. The single payer, ie government, eg society has incentive for cost control and quality but has no incentive to screw around with everyone on a daily basis. Trust me the people on the other end of Medicare phones, while dealing with horrible paperwork issues, are nothing like the privates’ trained stonewallers.

This then dovetails in why insurance does nothing for prevention and as little screening as they can get away with. It is simple, they do not really care if they have to pay claims; they expect it and it is mandated in the claims/premium ratios. Prevention and screening is payable now, pre disease and pre treatment. If prevention reduces claims, oh shit, it also reduces premiums over the long term.

The model is to maximize premiums and delay claims, invest the float, pad the surplus, repeat repeat repeat. Higher health care costs, creates higher claims, creates higher premiums, more float more investment more profit.

The ugly truth is more disease, more medicine, higher claims.... Higher profit.

It is a great game because heads they win, tails they win, the coin lands on the side and stays there and they win.

It is the business model that is keeping us sick and creating a system that promotes disease not health.

This is the truth, but you won’t here it anywhere in the media or campaign trail. You listening, Hillary et al? You can't fix the problem with the current model because the model is the problem.

If anyone's campaign wants to really talk about it, I can point them in the right direction.

[Darth Wong]

Hillary's approach to health-care is actually a microcosm of the problem with the Democratic party. It's so focused on being "moderate" (meaning that it won't offend those who fear change) that it would accomplish nothing. What will it take for some politician to develop the cojones necessary to stand up and say "OK, I know you don't like government bureaucracies, but as bad as governments can be, the insurance companies are ripping you off far worse, and I've got the numbers to prove it."?

[DPDarkPrimus]

Hillary's approach to health-care is actually a microcosm of the problem with the Democratic party. It's so focused on being "moderate" (meaning that it won't offend those who fear change) that it would accomplish nothing. What will it take for some politician to develop the cojones necessary to stand up and say "OK, I know you don't like government bureaucracies, but as bad as governments can be, the insurance companies are ripping you off far worse, and I've got the numbers to prove it."?

What, and have their premium rates raised?

[brianeyci]

Unfortunately you have to work with the stupid people. I watched CNN the other day just to get a taste of it. and Wolf Blitzer aka Whining Bitchfest posted up a chart of the Democratic plan in 1994 and the flow chart was huge, incomprehensible. Well no shit sherlock, digesting a complicated plan such as national healthcare reform will be difficult, but apparently it worked in 1994 to convince middle America that the Democrats were "breaucratic" and even "socialist" and "communist" because their plan was "too complicated" to be explained in bite sized words on television.

Like it or not governments have to cater to the lowest common denominator, or at least appear to. So the five hundred pages can't be extremely detailed difficult to comprehend with everything worked out in minute detail. It should be twenty pages, principles and policies rather than proceedure, ideas for legislation rather than than the minutae of regulation. The slogan "If you like what you have keep it" is exactly what the right figured out before, that is: figure out a good bite sized sentence and you're halfway to ensuring victory with the retard mob.

Even making a flyer with the words truth in boldface and lies in other boldface with x million have no healthcare in truth and we must raise taxes under lie is probably the limit of redneck intelligence. Oh, and get some Hollywood actors to back you up like Denzil Washington from that movie where the kid dies... or if he's too black get some white people. That's how they're going to win.

[Alan Bolte]

snip

Got it in one, I think. If your solution can't be explained in full to a ten year old, the American people don't want to hear it.

[Broomstick]

It is my understanding that each of the Plans has recommended a minimum threshold
target of 375% ACL consistent with the Blue Cross Blue Shield Association membership and trademark standard.16 None has provided specific justification for that level of surplus.

The "justification" is that it is written into the licensing agreement that permits them to use the Blue Cross Blue Shield trademark. If their ACL falls below that level then their license can legally be terminated and they will no longer be Blue.

This "surplus" really is earmarked for paying claims and is not used for any other purposes. After the offices of Empire Blue Cross Blue Shield were destroyed in the World Trade Center collapse the claims reserves were not touched to rebuild offices - instead, the rest of the Blue companies across the countries contributed spare office furniture and supplies and the Empire people were in some cases working off folding card tables and using their personal cellphones to conduct business instead of tapping the money earmarked for claims.

Which is not to say that there aren't major issues with paying claims and some fucked up stuff going on various corners of the industry, some not-for-profits might not be so altruistic, and perhaps you can have too large a claims-paying surplus. But his implication that there is no reason for the 375% ACL or that this is somehow "profit" in the usual sense of the word is off base.

[Johonebesus]

The real barrier is the republican propaganda machine. What good does it do to say "I've got the numbers to prove it," when a conservative will get equal time to lie his pants off?

I stopped watching Jim Lehrer when they did a story on the new bankruptcy law. They had two men on, one a consumer advocate, one a lobbyist for the credit industry. The two men gave contradictory figures and statistics. The main sticking point was how many middle-class bankruptcies involved medical bills. Of course the consumer advocate said the number was much higher than the lobbyist. They both couldn't be right. Some-one was mistaken or lying. But the "journalist" did jack diddly shit to help the viewer figure out the truth. She just let each side have their say, asked a few leading questions, and offered no research or tough questions. It was pretty much the same with the swift boat liars. Lehrer let both sides talk, but he didn't say, "this is what our research has uncovered, and you've contradicted yourself here and here, and these witnesses say that...." No, he just let one guest do all the questioning, and left it up to the viewer to try to figure out whom to believe.

In this kind of environment, how can a politician possibly hope to sell a policy that the republicans will fight tooth and nail against?

[Darth Wong]

The real barrier is the republican propaganda machine. What good does it do to say "I've got the numbers to prove it," when a conservative will get equal time to lie his pants off?

I stopped watching Jim Lehrer when they did a story on the new bankruptcy law. They had two men on, one a consumer advocate, one a lobbyist for the credit industry. The two men gave contradictory figures and statistics. The main sticking point was how many middle-class bankruptcies involved medical bills. Of course the consumer advocate said the number was much higher than the lobbyist. They both couldn't be right. Some-one was mistaken or lying. But the "journalist" did jack diddly shit to help the viewer figure out the truth. She just let each side have their say, asked a few leading questions, and offered no research or tough questions. It was pretty much the same with the swift boat liars. Lehrer let both sides talk, but he didn't say, "this is what our research has uncovered, and you've contradicted yourself here and here, and these witnesses say that...." No, he just let one guest do all the questioning, and left it up to the viewer to try to figure out whom to believe.

In this kind of environment, how can a politician possibly hope to sell a policy that the republicans will fight tooth and nail against?

It sounds like the real problem is actually a negligent journalism community.

You know, when I was young I used to think that a publically owned broadcaster like CBC was a waste of taxpayers' money. Thanks to the last 15 years of American media, I have to come to realize how wrong I was. The BBC in Britain and the CBC in Canada are absolutely necessary in order to give us a strong, vibrant alternative to corporate-owned media.

[Johonebesus]

It sounds like the real problem is actually a negligent journalism community.

So far as I'm concerned mainstream media is part of the republican propaganda machine.

[Einhander Sn0m4n]

The BBC in Britain and the CBC in Canada are absolutely necessary in order to give us a strong, vibrant alternative to corporate-owned media.

And that's precisely why any American equivalent gets killed off as 'communism'.

[Starglider]

And that's precisely why any American equivalent gets killed off as 'communism'.

You don't think the PBS model works?

[Dartzap]

The BBC in Britain and the CBC in Canada are absolutely necessary in order to give us a strong, vibrant alternative to corporate-owned media.

And that's precisely why any American equivalent gets killed off as 'communism'.

You may like to know that the Beeb is boosting its presence in the US, with US-specific news using the same editorial guidelines as the World Service. So whilst there will be some celeb related news, you'll get to enjoy being told that: the world is collapsing, your country is a giant ball of bollocks, your health care sucks, kids are a bunch of bastards, all politicians are liars, all celebrities are bastards/gods Religion is great/bollocks and everything I just said but the opposite, if its anything like the standard beeb over here.

Have fun being depressed

[Guardsman Bass]

Hillary's approach to health-care is actually a microcosm of the problem with the Democratic party. It's so focused on being "moderate" (meaning that it won't offend those who fear change) that it would accomplish nothing. What will it take for some politician to develop the cojones necessary to stand up and say "OK, I know you don't like government bureaucracies, but as bad as governments can be, the insurance companies are ripping you off far worse, and I've got the numbers to prove it."?

Most likely, you'll have to get one of Ye Olde Liberal Coast States to do it first. Maybe Massachusetts, if their "universal make-everyone-buy-health-insurance" plan falls through. Isn't that basically what happened in Saskatchewan, which got the ball rolling on Universal care in Canada?

[Johonebesus]

And that's precisely why any American equivalent gets killed off as 'communism'.

You don't think the PBS model works?

See my above post for an example. From what I understand, the BBC and CBC are set up to be largely independent of the government, to protect them from politics. PBS isn't. It is funded, in part, by the Corporation for Public Broadcasting, which is itself funded directly by annual appropriations from Congress, and is headed by political appointees. Bill Moyers, who was involved in the creation of PBS, once lamented that Johnson was convinced not to follow the BBC model so as to keep it dependent on the politicians.

[Keevan_Colton]

Yet another thing to thank Lord Reith for, it was pretty much his personal dedication that kept the BBC free from government control in the early days. He's also the one that set out the mandate to educate, inform and entertain as the basis of public service broadcasting. We lucked out having him in the early days.

[Broomstick]

The BBC in Britain and the CBC in Canada are absolutely necessary in order to give us a strong, vibrant alternative to corporate-owned media.

And that's precisely why any American equivalent gets killed off as 'communism'.

You may like to know that the Beeb is boosting its presence in the US, with US-specific news using the same editorial guidelines as the World Service.

Some of us Americans have been watching the Beeb for a couple decades. Actually, when I was a kid I probably watched as much Canadian and BBC news as American, but then we did live within 20-25 km of the border most of my childhood and my parents were/are flaming liberals, supporters of PBS (which was the source of most BBC/British TV seen in the US prior to cable/satellite), and attempted to give me a variety of information sources.

Which might be why I'm so atypical in many ways.

[Patrick Degan]

Hillary's approach to health-care is actually a microcosm of the problem with the Democratic party. It's so focused on being "moderate" (meaning that it won't offend those who fear change) that it would accomplish nothing. What will it take for some politician to develop the cojones necessary to stand up and say "OK, I know you don't like government bureaucracies, but as bad as governments can be, the insurance companies are ripping you off far worse, and I've got the numbers to prove it."?

Indeed. To this day, I still couldn't tell you just what Hillary's model for healthcare entailed except the impression I got at the time that it would do for the American medical industry what the Pentagon has done for the defence contractors i.e. create a protected industry. Even at that, I might be wrong in that impression. What I do know was that the whole scheme was so ridiculously complicated that it was bound to fall of its own weight. And it did.

[Guardsman Bass]

Hillary's approach to health-care is actually a microcosm of the problem with the Democratic party. It's so focused on being "moderate" (meaning that it won't offend those who fear change) that it would accomplish nothing. What will it take for some politician to develop the cojones necessary to stand up and say "OK, I know you don't like government bureaucracies, but as bad as governments can be, the insurance companies are ripping you off far worse, and I've got the numbers to prove it."?

Indeed. To this day, I still couldn't tell you just what Hillary's model for healthcare entailed except the impression I got at the time that it would do for the American medical industry what the Pentagon has done for the defence contractors i.e. create a protected industry. Even at that, I might be wrong in that impression. What I do know was that the whole scheme was so ridiculously complicated that it was bound to fall of its own weight. And it did.

Here is a summary of her Health Care proposal.

[CJvR]

Why bother to campaign on such a hard to sell issue? Go to the elections with stuff like "bigger flags for war widdows" and then carry out the big complex stuff once you are seated. Have it in place before the next election preferably and then it will be up to the other side to explain why their idea is better.

[brianeyci]

Because she can't escape her past. Any Republican would bring up the healthcare issue even if she didn't, because of her hard work in the past decade, and ask her what the hell was going on. This isn't the first time, and if she didn't mention it this time she would look like a sell out violating her principles.

Not to mention Americans are fed up with their healthcare service and actually want change. Believe it or not, they want something to be done about the millions of uninsured people, and many are fed up with their current healthcare coverage. They just don't know what kind of change they want, and don't want the change to be any form of red without the white and blue.

[Patrick Degan]

Hillary's approach to health-care is actually a microcosm of the problem with the Democratic party. It's so focused on being "moderate" (meaning that it won't offend those who fear change) that it would accomplish nothing. What will it take for some politician to develop the cojones necessary to stand up and say "OK, I know you don't like government bureaucracies, but as bad as governments can be, the insurance companies are ripping you off far worse, and I've got the numbers to prove it."?

Indeed. To this day, I still couldn't tell you just what Hillary's model for healthcare entailed except the impression I got at the time that it would do for the American medical industry what the Pentagon has done for the defence contractors i.e. create a protected industry. Even at that, I might be wrong in that impression. What I do know was that the whole scheme was so ridiculously complicated that it was bound to fall of its own weight. And it did.

Here is a summary of her Health Care proposal.

Yes, the .pdf shows that she seems to have learned something from the failure of the 1993-94 scheme but still is not as basic and comprehensive as a real national heathcare system would be.

[Nathan F]

It sounds like the real problem is actually a negligent journalism community.

So far as I'm concerned mainstream media is part of the republican propaganda machine.

I disagree wholeheartedly on the basis that the majority of the mainstream media (sans-FNC) seems to take a pretty stout anti-Bush stance. Even so, I tend to get my news from the BBC, der Spiegel, the Economist, the New York Times, and the Wall Street Journal, along with the occasional Washington Post and Philadelphia Inquirer, or a peak at al Jazzera (taken with a grain of salt, generally...). It's always a good idea to be varied in your news consumption, especially by bringing in international sources, because it's all skewed to hell and back one way or the other. It's a big mistake to listen to just Fox, CNN, the CBC, BBC, or whatever your personal preference might be.

[Darth Wong]

I disagree wholeheartedly on the basis that the majority of the mainstream media (sans-FNC) seems to take a pretty stout anti-Bush stance.

A position they just coincidentally adopted when the right-wing establishment decided to turn on Bush as well, by making him the fall guy for all the consequences of their policies. Right-wing bullshit is alive and well in America, and that includes an almost pathological opposition to socialized health care.

[Nathan F]

I disagree wholeheartedly on the basis that the majority of the mainstream media (sans-FNC) seems to take a pretty stout anti-Bush stance.

A position they just coincidentally adopted when the right-wing establishment decided to turn on Bush as well, by making him the fall guy for all the consequences of their policies. Right-wing bullshit is alive and well in America, and that includes an almost pathological opposition to socialized health care.

I don't have the stats on hand with me at the moment, but if I recall correctly, it was something like a 2 to 1 margin in 2004 of journalists that supported Kerry over Bush.

To be entirely honest, though, I think it probably has more to do that Republicans were in control for so long, and there was a Republican president. Journalists naturally seem to try to go for (or against, I suppose) those that are in power.

[Guardsman Bass]

Was that in terms of positive coverage for Kerry as opposed to Bush, or simply in terms of how they were polled? It's quite possible for journalists to be liberal, and still get stuck with coverage biased in favor of Republicans because of conservative editors.