Just some more interesting thoughts on health care reform to throw into the mix (excerpt from the Washington Independent):

This will shock only those who’ve never had to haggle with an insurance company, but a former employee of an insurance giant gave damning testimony yesterday against his former industry, telling lawmakers that companies like his go out of their way to avoid paying health claims even when they’re legitimate.

“I know from personal experience that members of Congress and the public have good reason to question the honesty and trustworthiness of the insurance industry,” Wendell Potter, Cigna’s former vice president for corporate communications, told members of the Senate Commerce Committee. He continued:

Insurers make promises they have no intention of keeping, they flout regulations designed to protect consumers, and they make it nearly impossible to understand — or even to obtain — information we need.

The deception, of course, is by design. Publicly traded companies don’t exist simply to make profits, they exist to make more profits today than they did yesterday. Why else would anyone invest in them? And in the case of private insurers, what easier way to pad the bottom line than to deny expensive claims by stonewalling confused patients?

Potter expands, somewhat technically, in his written testimony:

The top priority of for-profit companies is to drive up the value of their stock. Stocks fluctuate based on companies’ quarterly reports, which are discussed every three months in conference calls with investors and analysts. On these calls, Wall Street looks investors and analysts look for two key figures: earnings per share and the medical-loss ratio, or medical “benefit” ratio, as the industry now terms it. That is the ratio between what the company actually pays out in claims and what it has left over to cover sales, marketing, underwriting and other administrative expenses and, of course, profits.

To win the favor of powerful analysts, for-profit insurers must prove that they made more money during the previous quarter than a year earlier and that the portion of the premium going to medical costs is falling. Even very profitable companies can see sharp declines in stock prices moments after admitting they’ve failed to trim medical costs.

Update: Here’s some more shady insurance company goodness:

Health insurers have forced consumers to pay billions of dollars in medical bills that the insurers themselves should have paid, according to a report released yesterday by the staff of the Senate Commerce Committee.

The report was part of a multi-pronged assault on the credibility of private insurers by Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.). It came at a time when Rockefeller, President Obama and others are seeking to offer a public alternative to private health plans as part of broad health-care reform legislation. Health insurers are doing everything they can to block the public option.

At a committee hearing yesterday, three health-care specialists testified that insurers go to great lengths to avoid responsibility for sick people, use deliberately incomprehensible documents to mislead consumers about their benefits, and sell “junk” policies that do not cover needed care. Rockefeller said he was exploring “why consumers get such a raw deal from their insurance companies.”

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  1. Gherald says:

    Does this argument extend to private life insurance, flood insurance, fire insurance, rent insurance, investment insurance, etc?

    If the above info is meant to support the creation of a public health plan, why don't we create a public plan for all these other things, too? What's so special about health care? Could it be that, by and large, the benefits of for-profit private insurance outweigh the perils, and that the problems of health care costs has many other contributing reasons (such as the AMA trade union limiting the supply of doctors? http://mjperry.blogspot.com/2009/06/why-are-md-sa… )

    Furthermore, if a public plan is meant to compete with private insurers on fair terms, how is this public plan going to be able to charge competitive premiums if it denies fewer claims and does not deny those with preexisting conditions? Not having to worry about shareholder ROI won't be enough of an offset.

    Do you understand the peril of a public plan that initially competes on fair terms but burns more cash than it takes in (because if not, its premiums would be uncompetitively high?) yet, like Fannie and Freddie, is not allowed to fail, thus eventually (unfairly) taking in more taxpayer subsidies and putting us on the stealth road to national single-payer?

    If, like commenter Schu in the George Will-Nate Silver thread, and Barack Obama in 2003 you think single-payer would be a good idea then supporting a public option makes perfect sense.

    But if, like me, you reject national single-payer and want to fix the existing system, the public option is unhelpful, even harmful. What you want to support to address these problems are blind health insurance exchanges that bid on providing clearly-defined levels of care, regulation to ensure such claims are covered as advertised, and the elimination of employer tax breaks that subsidize health insurance for the well off and have made it relatively more expensive for others. Yes, this will raise premium costs for the healthy and well to do, meaning less care for the middle-upper classes, but that is the price to pay for making more care available to the underinsured and those with expensive conditions.

    Health reform won't be free, and there is only so much waste to be eliminated (irrational liberal exuberance about cost-saving reforms notwithstanding). More money for more and better coverage has to come from somewhere, and any economist with his head screwed on straight (read: not Paul Krugman & Co., who thinks we should increase the net GDP tax rate by 70%) will tell you that this is best done by making healthy people pay more on a streamlined market (reforms like those in the previous graph) than by taxing and spending us on the road to national single-payer.

    • Metavirus says:

      "Does this argument extend to private life insurance, flood insurance, fire insurance, rent insurance, investment insurance, etc? If the above info is meant to support the creation of a public health plan, why don't we create a public plan for all these other things, too?"

      I would think the difference between health insurance and other types of insurance you mention is pretty clear. Health insurance deals with life and death. Investment insurance, for example, deals with compensating people for monetary losses. For the record, we already have a government plan for flood insurance and a government plan for investment insurance.

      • Gherald says:

        Yes I've heard of federal flood insurance, which seems to be a form of subsidy that was offered to encourage the settlement and development of flood-risk lands, or to protect existing settlements and econ. development. It might be a good idea. My initial suspicion is no, because I have a heuristic bias against the unintended consequences of government action, but I have no further knowledge.

        Other than the takeover of AIG, I don't know of a government plan for investment insurance. I wasn't thinking of deposits like those covered by the FDIC; obviously that's been effective in encouraging stability by preventing bank runs, and is one of the few New Deal programs that almost everyone can get behind.

        I'm not sure how healthcare being a matter of life and death is an argument for MORE government involvement, unless you think legislatures and bureaucracies are better at resolving these issues than doctors and patients and their health plan of choice. Which wouldn't make you very pro-choice.

        Anyway, I think there are more interesting points in my above comment than the first question about other types of insurance.

        • Metavirus says:

          Sorry I can only post snippets in response. Been pretty busy today.

          As for the investor insurance angle, check out this on SIPC <a href="http://en.wikipedia.org/wiki/Securities_Investor_Protection_Corporation” target=”_blank”>http://en.wikipedia.org/wiki/Securities_Investor_

          "SIPC serves two primary roles in the event that a broker-dealer fails. First, SIPC acts to organize the distribution of customer cash and securities to investors. Second, to the extent a customer's cash and/or securities are unavailable, SIPC provides insurance coverage up to $500,000 of the customer's net equity balance, including up to $100,000 in cash.

          This is very similar to another highly successful government insurance program, FDIC <a href="http://en.wikipedia.org/wiki/Federal_Deposit_Insu…” target=”_blank”>http://en.wikipedia.org/wiki/Federal_Deposit_Insu

          "The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. "

          P.S. On this point:

          "I'm not sure how healthcare being a matter of life and death is an argument for MORE government involvement, unless you think legislatures and bureaucracies are better at resolving these issues than doctors and patients and their health plan of choice,"

          my answer is simply that I do not trust health insurance companies (which already stand in between me and my doctor) to make these decisions. The health insurance companies have proven, over the last few decades, to be absolutely undeserving of our trust. They failed. As a result, I am open to the government stepping in and providing another option, which they already do very successfully through the VA, Medicare and for members of the federal government.

          It's actually pretty simple for me. It's not so much that I have this magical trust in government, it's that I absolutely do not trust the health insurance companies anymore and this lack of trust has made me more agreeable to a government plan.

          P.P.S. I realized just now that my reasoning above is very similar to the crisis of faith story I wrote in my article "A Heartfelt Testament from Someone Who Lost Faith in the GOP". Check it out if you're so inclined for some more background on my thinking.

          • Gherald says:

            Ah, wasn't familiar with the SIPC. From the wiki intro, it seems it's not government agency--it's a nonprofit, and only government-mandated that there be one. Essentially it's a form of regulation to ensure protection against malfeasance.

            I think there are plenty of improvements that could be done to smooth the regulation of the healthcare industry, incl. to protect against insurance company malfeasance. But this is an argument for making systemic changes--not for creating a parallel public choice for those who "do not trust health insurance companies," which will be even more susceptible to political pressure from powerful interests like the AARP and AMA, which are closer to the root of the problem.

            I'm at least as concerned about the AMA limiting the supply of doctors (see link above) as I am about the evilness of insurance companies trying to make a profit under expensive conditions.

            • Metavirus says:

              yeah, SIPC is technically private but its insurance is government guaranteed.

              i hear what you're saying about systemic reform but all I can really say, beyond what I said above, is that we've tried systemic reform a number of times. maybe you don't remember but there was a time not too long ago when HMOs were supposed to be the panacea that would cure all our health care system ills. we all know how that turned out.

              without a government option, all we're left with is another round of complete and utter reliance on the good will of health insurance companies to play nice. sure, they'll play nice for 5-10 years and when everyone looks away again, everything will get even worse than it is today.

  2. Schu says:

    Health insurance and to a lesser degree, life insurance are slated in the direction of the company verses the clamant. When you are lumping together all these different types of insurance you are comparing apples to oranges and creating a smoke screen. If you property insurance company goes bust, like many did in Indiana in 1966 because of the Palm Sunday tornadoes, you can get church members and neighbors to help rebuild. When the health insurance company denies your treatment you can die. Big difference. The health insurance industry in the United States has such a bad record about fighting claims that it makes any of the examples of universal coverage in European look good. Arguing about the economic stability of this group of vultures is a losing proposition.

  3. Pat Williams says:

    Health insurance should NEVER be for profit. The only way to make a profit is to cherry pick the healthy and cut the losses targeting those who become ill. Ergo, it should only be provided by non-profit entities. Cut out the middlemen and use our government as the single payer insurer the way most industrialized nations do. Certainly, it costs. But it is a whole lot cheaper by half than what we have now with far better care and outcomes. Compare 30% administrative costs using the for profit insurers to less than 3% administrative costs. In any event, we must not do without a government insurance option to turn to. My family had employer insurance for decades until my husband had diabetic complications. Surprise! Bye bye job and insurance. That is the way it works in America. It is long past time to clean up this mess. Health care is a necessity.

  4. Schu says:

    A classic example of our health insurance company’s policies can be found with the old Partners Insurance Company of Indiana. This was a thought of company in Northern Indiana that people used to hold up as an example of what an insurance company should be. Then a woodworker in Goshen Indiana had to have a transplant, and all of the associated medical treatments. Partners paid for his transplant and medication, and then raised the cost of health insurance for everyone under that plan to more than they made gross, to make back the costs of the treatment. As soon as people started showing their paystubs to the local news business started canceling their Partners contracts right and left. The business was out of business because they tried to recap their loses to quickly.

  5. Alabama Boyng Boyng says:

    I am disabled at present but when I worked I had Blue Cross at two different jobs and they never would pay for anything ever. I have had medicare with a medicaid supplement for 17 years now and they have always paid everything that I ever needed. Everyone should have Medicare. This federal program works great and all this fear mongering about "trusting your care to those awful government bureaucrats" is strictly BS. Our government is corrupt but it is corrupted by corporate America and not because government is inherently corrupt . It is a good thing to remain vigilant about overseeing government but Americans need to understand that our real enemies are in the boardroom not the White house.

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