Tuesday, October 20, 2009
Insurance for Fun and Profit?
Guess I'm in a political mood this week. Here goes another foray, but this time it's longer. It's also into a more discrete topic: health insurance. I am reminded of the need for the debate by the fact that one of my prescriptions is not, I found out by getting a phone call from a computer yesterday, available without prior approval. Never mind that I've gotten oodles of the stuff in the past, or that several competent medical doctors have declared the medication to be necessary. We changed insurance plans, so we need prior approval. De facto, insurance companies are allowed to make medical decisions.
Okay, for the record, I know that I could simply pay for the stuff with my own money and cut them out. That's the reasoning behind letting an HMO make medical decisions without meeting the patient: that they have a right to protect their financial interest in the situation. And, you know what? They're right, that they do. My issue is with the nature of the insurer's financial interest.
Most insurance companies, outside of Minnesota at least, who provide health coverage, are common stock corporations. In Minnesota, when HMOs first appeared, they made it illegal for an HMO to be for profit. That meant that HMO Minnesota, which I had while living there, was sort of like a free clinic for members. I never saw a bill, never had a hassle, got whatever treatment the doctor said I needed and no questions asked. Try that anywhere else, I dare you. The difference is due to the nature of common stock corporations.
Do not get me wrong here: I own common stock. A couple of gaming companies, Ford Motor Company, a sub-penny stock outfit called China Nuvo that we own enough of to influence the stock price if we wanted to, and some mutual funds as well. I like common stock companies, both in principle and in practice. Spreading the risk is a great way to get people to fund ventures they'd be crazy to put money into otherwise. Now, in a common stock corporation, you, as a responsible employee or executive, are required by law and ethics to maximize the value of the stock for the stockholders. That is entirely right, and proper, and for the most part, the way things are run. (I'm going to ignore things like that Enron scandal for today.)
If you are a common stock corporation offering health insurance then you are going to hire at least one person known as an actuary. An actuary is highly skilled in statistical analysis and accounting, and extremely valuable to anyone trying to minimize risk. The actuaries are the people who analyze the various risk factors of would-be policyholders and decide which factors deserve a higher premium, and which factors indicate that you should even get coverage. It's an actuarial decision to require prior approval for a medication. Or to decide that grandma doesn't get the aggressive cancer treatment that might save her life. That sounds like what some alarmist commentators are saying government health care would be like, but in fact that is precisely what private insurance is today, at least outside of Minnesota. The reason being that, in a common stock corporation, you are always looking to maximize value (read: make a profit) for your stockholders. The stockholders are mostly faceless and unknown to you, but you cater to them because legally and ethically that's what you have to do. If it were not for the legal and ethical requirements attached to a common stock corporation, the actuarial facts could be replaced, legitimately, with an overall view of probability, and the overall risk calculated, then spread amongst all policyholders, just the way insurance company ads suggest things are done today even though they aren't.
If anyone is suggesting that a public option for health insurance would be worse than what we've got, they're selling something. Probably something you don't need, in fact. A few pertinent facts include the Veteran's Administration health system, which most vets like, which is a government option from the start; plus, as others have pointed out, the simple fact that, for instance, Ohio State University has not put private colleges out of business. The private ones cost more, and maybe they provide a better education (don't get me started, please.) But my point is that Harvard and Yale and the others continue to exist, even thrive, with a great deal of "public option" education competing away with them. Just think which has more cachet: Ohio State or Yale? I can tell you that not many parents in Vegas worry about getting their kids into Ohio State. Or the University of Nevada, for that matter.
One alarmist threat about health insurance reform is that it will drive up the premiums for those who already have insurance. Sure, and it will, too. Unless we have a public option. See? So take some appropriate action, already. You have one Representative and two Senators. They need to get re-elected. You don't need to be an actuary to see where I'm going with this.
Thanks!
Steve
Okay, for the record, I know that I could simply pay for the stuff with my own money and cut them out. That's the reasoning behind letting an HMO make medical decisions without meeting the patient: that they have a right to protect their financial interest in the situation. And, you know what? They're right, that they do. My issue is with the nature of the insurer's financial interest.
Most insurance companies, outside of Minnesota at least, who provide health coverage, are common stock corporations. In Minnesota, when HMOs first appeared, they made it illegal for an HMO to be for profit. That meant that HMO Minnesota, which I had while living there, was sort of like a free clinic for members. I never saw a bill, never had a hassle, got whatever treatment the doctor said I needed and no questions asked. Try that anywhere else, I dare you. The difference is due to the nature of common stock corporations.
Do not get me wrong here: I own common stock. A couple of gaming companies, Ford Motor Company, a sub-penny stock outfit called China Nuvo that we own enough of to influence the stock price if we wanted to, and some mutual funds as well. I like common stock companies, both in principle and in practice. Spreading the risk is a great way to get people to fund ventures they'd be crazy to put money into otherwise. Now, in a common stock corporation, you, as a responsible employee or executive, are required by law and ethics to maximize the value of the stock for the stockholders. That is entirely right, and proper, and for the most part, the way things are run. (I'm going to ignore things like that Enron scandal for today.)
If you are a common stock corporation offering health insurance then you are going to hire at least one person known as an actuary. An actuary is highly skilled in statistical analysis and accounting, and extremely valuable to anyone trying to minimize risk. The actuaries are the people who analyze the various risk factors of would-be policyholders and decide which factors deserve a higher premium, and which factors indicate that you should even get coverage. It's an actuarial decision to require prior approval for a medication. Or to decide that grandma doesn't get the aggressive cancer treatment that might save her life. That sounds like what some alarmist commentators are saying government health care would be like, but in fact that is precisely what private insurance is today, at least outside of Minnesota. The reason being that, in a common stock corporation, you are always looking to maximize value (read: make a profit) for your stockholders. The stockholders are mostly faceless and unknown to you, but you cater to them because legally and ethically that's what you have to do. If it were not for the legal and ethical requirements attached to a common stock corporation, the actuarial facts could be replaced, legitimately, with an overall view of probability, and the overall risk calculated, then spread amongst all policyholders, just the way insurance company ads suggest things are done today even though they aren't.
If anyone is suggesting that a public option for health insurance would be worse than what we've got, they're selling something. Probably something you don't need, in fact. A few pertinent facts include the Veteran's Administration health system, which most vets like, which is a government option from the start; plus, as others have pointed out, the simple fact that, for instance, Ohio State University has not put private colleges out of business. The private ones cost more, and maybe they provide a better education (don't get me started, please.) But my point is that Harvard and Yale and the others continue to exist, even thrive, with a great deal of "public option" education competing away with them. Just think which has more cachet: Ohio State or Yale? I can tell you that not many parents in Vegas worry about getting their kids into Ohio State. Or the University of Nevada, for that matter.
One alarmist threat about health insurance reform is that it will drive up the premiums for those who already have insurance. Sure, and it will, too. Unless we have a public option. See? So take some appropriate action, already. You have one Representative and two Senators. They need to get re-elected. You don't need to be an actuary to see where I'm going with this.
Thanks!
Steve
Labels: Politics, Social Commentary
