Insurers Really Ought To Stop "Cherry Picking" Applicants!

Here's an actual email I got from a business friend the other day:

"Jon, I never had dental insurance and am looking into family coverage. My spouse needs a $3000 procedure. Any thoughts on whether I should get it and any suggestions on policies?" signed, Mary. (Not the real name but every other word is exactly as I received it.

Here is how I wanted to reply:

"Mary, as a friend and an experienced financial advisor, I would expect you to have a little better grasp of the concept of insurance. You see, buying dental insurance for your 55 year old spouse with a newly diagnosed dental problem is sort of like calling State Farm for homeowner's insurance after the garage is on fire! Now I can only assume you weighed the pros and cons of "never" buying dental insurance over the years. Would you care to guess at the premiums you have saved over that time. Here's just a ballpark figure: family dental at $50/month (a very low number at today's rates) over 30 years = $18000. I would have thought at least some of that money - surely $3000 - might be in your HSA, right?

"Here is what I think you should do. Call someone in Madison or Washington and complain about your inability to get dental coverage because those greedy for-profit insurers "cherry pick" applicants. Demand that government should finance your coverage because it is after all a right. And then when the government responds by putting out of business the agents and insurance company executives who have brought consulting work to you these past 30 years, you - like us - can find a new line of work. See you in the unemployment line."

Of course, I'm reluctant to actually send this reply to my friend. (I'll just post it for everyone to see!!) It does illustrate a related point. High deductible health insurance on a young healthy person can be purchased for less than the cost of monthly cell phone service. Yet millions of young Americans badly prioritize and chose to be uninsured. Later on in life when their health goes south, they consider insurers that underwrite risk to be unfair.

That's a crock!

The Trouble With Health Care Cost Surveys Is That They Don't Survey Health Care Costs!

Lot's of headlines again this week over the release of another new "survey of employer health care costs". Surveys released in the fall help businesses develop strategies for their year end health plan renewals. Details always include median premium figures for single and family coverage, deductible levels, expected cost increases and on and on.

Here's a request to those who conduct the surveys and those who report on them: Please, please, maybe you should conduct a survey of health care cost increases. As just an example, I'd like to see what a normal pregnancy cost 10 years ago and what it costs today and an explanation for the increases. Or, I'd like to see a figure showing the cost per hospital admission 10 years ago and the same figure for today. Instead of surveying the cost of providing employee benefits, wouldn't it be more enlightening to shed a little light on the cost of care?
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As I turned the pages of my paper reading about this survey, I couldn't help notice the number (and size) of ads from hospitals and clinics and physicians extolling the wonders of their services. Try as I might, I couldn't find a single figure on the cost of those services. Now, do you suppose there just might be a connection between the survey results of employer's health benefit costs and these ads for health care? I'm not suggesting that advertising health care is a bad idea but maybe we ought to demand to know the cost!! (And yes, something about quality and outcomes would be nice, too.)

Prerare To Be Surprised

General perceptions often are that health insurers profit only at the expense of their policyholders vis a vis denied claims. This week industry trades reported second quarter results for managed care companies. As a percentage of revenues, earnings for three of the larger managed care companies were as follows:
* Humana 2.0%
* United Health 3.3%
* Wellpoint (Blue Cross) 4.3%

For your consideration: Are those 'excessive' earnings? As a business owner, would you be content with that ROI? More fundamentally, do you believe the profit motive creates incentives to run a health insurance company efficiently; ie. to compete on price and value? There are many who believe government would actually be more efficient than the private sector. Should one become dissatisfied with the financials of their insurer - say for example the executive compensation packages are unacceptable to you as a consumer - isn't it relatively easy to change companies? But what if, after switching to a government run health plan, we become dissatisfied with the inefficiencies of bureaucratic malaise. How do we change plans then?

As a final thought, I'd ask you to compare the above earnings of those who finance health care to the health systems who deliver care. I'm fairly certain you will be surprised.