Saturday, March 20, 2010

Private Insurance Rates, Measure Reality

A private insurance company has to charge rates that allow it to survive and show a profit to shareholders. Right now profitability is around 6% (one earthquake could turn that negative). As businessman starting up a venture, you want to see at least 12-20% profit. Otherwise put it in the bank and let the bank take the risks. Health insurance sucks as a business venture. A home builder can make 200% so why sell insurance?

Not only do insurers face very low return on equity, any State or Federal legislation could put them out of business. When Insurance companies raise rates, they are showing you the reality of health care costs. Obama is blaming the insurance companies for making health care unaffordable. Is home owner's insurance unaffordable? How about automobile insurance? These insurance carriers have scores of accountants using actuary tables to figure their bottom line daily. In order to survive, they have to charge accordingly.

What do you get with a government health care plan? As with any part of government program, there is no financial responsibility. Our government can’t even balance their own budget. The European health care plans are smoke and mirrors. They don’t charge their citizens the true cost of the insurance, they tack it on to their national debt. Plus there is no competition and a surgeon with a lot of experience can’t charge more than one out of med school.

In this country, a lot of our doctors, new to open heart surgery, get to practice on Medicare patients. Then they move on to cash paying customers. Many doctors won’t take Medicare patients; the government reimbursement rates are too low. Of course a doctor that knows how to play the game could abuse a Medicare patient by sending them  in for 10 different tests and make a pretty good return. This type of doctor, will send a cab to your door to pick you up.

Unlimited health care is unaffordable with any private insurer. It is not any more affordable as a government run enterprise. In Great Britain, the waiting time for surgery is now down to ONLY 18 weeks. It’s kind of like being told you can use the bathroom once every three days; can you wait that long?

The reason a lot of people like Obamacare, is that they know the government has no way to figure the actual costs. The plan will trim a half trillion dollars of benefits to Medicare that the government has been picking up and add it to the premiums to be paid by the wage earners health plan.  Isn't that slick!

Most people could probably afford health care if it was a priority. A priority is a new shiny car, two packs of cigarettes a day and a twelve pack of beer (this would vary, pick your own items). The kids get cereal and a bag of candy. The government figures it this way, everyone will have to pay for insurance or be fined. That way you can’t wait until you are sick to subscribe. So before you get your paycheck, the government is going to take out one pack of cigarettes and a 6 pack of beer every day and two car payments per year. What's  Joe Six-pack's reaction?  The kids get to eat their cereal with water and he cuts back on their candy, clothing, school supplies and they walk to school. Plus he drops his auto insurance. The good news is that if you work under the table, like selling drugs or hooking, you are considered  poor, and qualify for free health care.

I listened to Obama’s speech today and couldn’t believe the rhetoric. Here is an excerpt from it:

At the heart of this debate is the question of whether we’re going to accept a system that works better for the insurance companies than it does for the American people -- (applause) -- because if this vote fails, the insurance industry will continue to run amok. They will continue to deny people coverage. They will continue to deny people care. They will continue to jack up premiums 40 or 50 or 60 percent as they have in the last few weeks without any accountability whatsoever. They know this. And that’s why their lobbyists are stalking the halls of Congress as we speak, and pouring millions of dollars into negative ads. And that’s why they are doing everything they can to kill this bill.

I try to avoid political comments and have been neutral on Obama up to this point. But this President is a Beet Head.  You don’t shoot the messenger. You can bet your bottom dollar that whatever the insurance company deems reasonable for premiums, keeps them in business and no government can do it for less.  

I think this President has an  ego to feed; he wants to write some history. The trouble is, if this passes, we might have a Constitutional convention to rewrite our constitution. There are enough states riled up  about this to make it happen, and that might not be a good thing. The government  printed a ton of money and gave it to their cronies on Wall Street (900 billion dollars). Now Obama complains that it is un-American to make a profit. But threaten to go broke, and they throw money at you, just ask AIG. On the other hand, let's go get those robber drug companies, Rah, Rah, Rah!

This government health care plan is what I have referred to in the past as the "Disneyland Plan."  You have no problem getting in, but the length of the lines for each ride are a joke. Grab a number and wait.


Anonymous said...

Your country seems to have alot problems to solve but you did vote Obama into power knowing what he is all about. It's your tree USA and your sitting in it!!! The question is now, what are you all going to do about it!!!

Shift said...

Dear Anon at 9:22,

What country are you from?

USA has a lot of problems. That is true. However, at the present time, most countries have a lot of problems.

I would not trade America's problems for that of eny European country. You should remember that the USA is the strongest nation in both military and economic terms. On top of that we have the best University system in the world.

I think that it is great that you worry about America. Perhaps you will waste your time thinking about how bad things are for us poor Americans and forget to worry about how your own country is doing.

Don't count us out just yet. That would be a stupid mistake. Always has.

Jim in San Marcos said...

Hi Anon 9:22

We are spending too much money as a country and it has to stop. The whole world is facing a currency collapse.

This whole mess will fix itself given time, it's just that the results won't be to our liking.

Doing nothing might be the best option. But to get re elected, you have to appear to have a solution. That's where the problems are.

Jim in San Marcos said...

Hi Shift

Thanks for the support.

We have to block our borders to keep people out. It's the other way around in the rest of the world.

World leaders from all over fly here for surgery. So we must be doing something right.

Take care.

Rob in NS said...


Just hope you can let a Canuck in at some point I might need heart surgery.

Danny Williams will be happy to be called a world leader. Great post Jim pretty much sums up the train wreck that is health care everywhere. The biggest problem in this Country (Canada) is people have absolutely no concept of true costs of care. Since the start of baby boom after second world war our society has been youth oriented. Now as the boomers hurtle into retirement suddenly everyone is staring at the final curtain and are trying to figure out way to extend and pretend. Sort of like the financial crisis and will end the same way if nature takes it course.

Jim in San Marcos said...

Hi Rob

There is another crisis I didn't bother to touch on. The cost of a rest home when dad or mom can't take care of themselves any more. The median price on that is $5,000 per month. My Grandmother spent her last 10 years in one. Medicare and Social Security paid half and her church and my dad paid the other half.

The quality of care in some of the homes is suspect. I remember one patient on oxygen kept on falling out of his wheel chair so they tied him into it. He nearly burned to death while trying to sneak a cigarette.

Another thing I ran across was that the last 10 days of your life, if spent in a hospital, runs about 180k. Don't quote me on that, I can't remember the source.

You're right on about the costs. No one has a clue.

Rob in NS said...


Many people think it is their right to have health care no matter the cost. This entire agenda is driven by the demographics of boomer generation. As for Nursing Homes you are absolutely right about the cost. Some of the patients being cared for would be better off dead. Modern medicine can keep people alive long after life it is worth living. I wonder sometimes if that money would be better spent on preventative medicine. It seems like a waste for everyone. It does raise ethical and moral questions but it is time for society as a whole to have serious conversation about this. As you have mentioned many times on you blog there is only so much money around. As a Canadian, I have hard time with the concept of for profit health care. I should though, because really when you get right down to it, as a taxpayer, I am a shareholder in Medicare. It is in my best interests that money is well spent and does not drive me into bankruptcy. Politicians here are too busy patting themselves on the back and the public at large too ignorant for anyone to step forward with the courage to change the direction of health care. I should point out that level of care here in Nova Scotia is by and large pretty good. I do see a rough road ahead if things don't change. We'll see what happens but now I need to get outside with my beer and enjoy the day.


frakrak said...

Shift you are right on the money, that’s exactly the attitude you need, that is the one thing that separates your country from the rest of the world and always has!

Your country has led the world in innovation, and generally the world has been pulled along in your countries slip stream.

I would imagine the world can’t wait for your countries demise, so what are you all going to do about it?

Get off your asses and do some house keeping, its not rocket science or putting a man on the moon, you don’t need a revolution, just your attitude!

Don’t let your government legislate any change until you get rid of the unpatriotic swill that is governing!

If Obama care is not the very best for the American people then you know what to do! If it just suites big business or big government then you have your answer.

Remember big business has gutted your countries industrial base, and I suspect their capital doesn’t reside in your country anymore, is that patriotic?

So when are you running for the senate?

Anonymous said...

Just everyone hope and pray that the Dems aren't able to force healthcare through. I hope they fail and the Nov elections come up and get rid of more lib Dems. Then we can put healthcare to rest and concentrate on the real issues that matter for our country in the state that it is in.

Anonymous said...

The health care bill will require you to buy insurance, or pay a fine. Does any one really think that the millions of "undocumented"
(not illegal,of course), will actually comply with that law?
How could it be enforced if someone does not pay taxes and works for cash?

Jim in San Marcos said...

Hi Anon 11:27

If you're illegal and show up at a hospital for care, you'll end up dying on the bus taking you back to Mexico.

I think a lot of people will want to work for cash. Its a win win all around (government excluded). Family businesses will be the new way to go.

Drewbert said...

"Private insurance rates measure reality"

This would be true if we had a system that encouraged competition. We don't. Until insurance is decoupled from employment, until there is competition in the market place, we won't get fair pricing.

I should have bookmarked the link, but I recently read that 30% of your hospital bill for any service goes to pay for those who can't/won't/don't pay. If nothing else, making people get on their own insurance plan instead of piggybacking on everyone else's is a more honest form of accounting for healthcare spending. We will never get a true cost of healthcare until the costs are properly associated with those who use it.

Jim in San Marcos said...

Hi Drewbert

There is no competition in the health care insurance industry. The reason, the profit margins are too low.

Congress just passed the Health Care Bill. What they don't understand is that the insurance companies have just stop writing health care policies.

Fire insurance and Life insurance will still be there. Wonder why? The costs are ascertainable. With health care, you have a blank check.

Of course we can pay for it, that's the part that makes me sick! We can't pay for it we don't have the coin. Watch the government keep printing money and see what happens.

Thank you for your comments.

Anonymous said...

At 15k per family per year, I think I'll just cancel my healthplan and pay the forced 2% IRS penalty. Hopefully, I can write that off my taxes at least.

Anonymous said...

15K Per Family. All I can say is wow.


Jim in San Marcos said...

Hi Rob and Anon 5:27

12 to 15K sounds like a lot. My wife and I with one kid pay indirectly 15K. Our actual contributions are about $3,000 per year. Our employer "pays" the rest.

In reality, the employee pays the full shot. The employer has it figured into your wage. The same goes for Social Secuity.

The only good thing about an employee plan, I am not rated because of my age. If I was privatly insured at my age, I'd need to go for $15,000 deductable to get an affordable monthly premium. Let's face it, the older you get, the more likely you will file a claim.

Anonymous said...

So if current administration wants to get people back to work how does that square with what you say. Employers are the ones left holding the bag. Sounds to me like this so called health care plan with be death from a thousand cuts. Sorry about the pun. This is going to discourage employment. My guess is someone will stand up at some point and say private health care is not working and what is needed is a single payer system like here in Canada. If I had money and wanted to start a business I'd have to be crazy to get into medical insurance. For this to work the young people who don't need health care need to play ball. What else is new though we have been making our kids pay for our bad choices for a long time. At some point the merry-go-round will stop what then?


Jim in San Marcos said...

Hi Rob

It will be bad for employers but it was done very stealthy. This is a time bomb with a 4 year delay. It is designed to go off after Obama is defeated and the Republicans take over. Or if he is re elected to a second term, it will explode after the election.

The real poison is in the "no caps" provision of insurance and having to insure pre existing conditions.

A few years back Georgia passed a law against unfair home loans. No bank would write a loan in the state, they had to reconvene to rescind the law.

If the insurance companies don't live up to the legislation, they could be banned from selling in the state. It kind of reminds me of Brer Rabbit pleading with Brer Bear not to throw him in the Brier Patch. We could end up with no health insurance companies real quick.

I agree with you this is a youth tax. They are the ones presently not paying into the system that will have to start. Being young isn't what it use to be.

Anonymous said...

If mandatory health care stays, won't they have to nullify the constitution? How can we have liberty with a mandatory yearly fee on our bodies?

Jim in San Marcos said...

Hi Anon 10:44

You may have something there. Mandatory health care is a loss of the freedom to choose.

It's kind of like a automobile. Either you want one or you don't. If you do, you pick the model. The government doesn't go out and demand everyone to buy a Ford or else.

Too bad they didn't put a gun control amendment on that bill, it would have never passed.

Maybe they ought to come up with a fat tax. You pay an extra $100 for every pound you are overweight. That could cure half of our health problems, that and some exercise.

Gotta go. Its time for a Big Mac and large order of frys;>)

Thank you for your comments.

Anonymous said...


Thanks for the response.

There is another thing troubling me. Why did they add a clause that exempts them from the plan? The action ranks up there with 'let them eat cake'. It is almost like they are taunting the American people. They could have waiting for the dust to settle and slipped that clause in a few years from now, but they didn't. They are testing something, I just don't know what their end game is.

-10:44:00 PM

Anonymous said...

Sorry, typo. I meant:
"They could have waited"

Drewbert said...

You can still choose not to purchase health insurance, you just don't get the tax credit/deduction if you don't buy it.

The government doesn't force me to buy a house, but I get a tax deduction on my mortgage interest if I do.

The government doesn't force me to give to charity, but I get a tax deduction if I do.

The government doesn't force me to contribute to my 401k, but I get a tax deduction if I do.

Same goes for healthcare. There is a (whatever dollar amount it is today) tax that you can avoid if you purchase healthcare.

To use your automotive analogy, the government does tax you differently depending on which vehicle you buy. Buy a hybrid? get a tax credit. Buy a gas guzzler, pay the gas guzzler tax and also pay more fuel tax per mile.

Jim in San Marcos said...

Hi Drewbert

Tax deductions for doing what the government wants should be avoided like the plague. The government is known for changing the rules every few years.

Future health insurance for a family of 4 could run $12,000 out of pocket. If you choose to not have insurance, it will cost you $2,000 in penalties (it increases in steps starting 4 years from now). If you don't have the $12,000 to spend on insurance, the government will get $2,000 out of you. The $2000 fine (if deductible) would save you $200 in taxes.

The mortgage interest deduction unless you have a huge house payment that is more than 1/3 your gross, isn't much help. You might be better off taking the standard deduction. It doesn't matter which trash can you throw your money in; bank interest or the IRS, it's gone.

The gift tax works great if you have 200 million gross income and want your college to name a wing after you for 100 million dollar donation.

As for the 401K, ask yourself is it really your money, if you need it early, and have to pay a 40% penalty? The government wants to borrow those funds until you get ready to retire. The money saved in taxes will probably be eaten up by inflation in just two years. In 30 years, it will probably keep you in groceries for a week.

How do you save money (in a bank) by spending money to get tax deductions? This concept only determines which trash can you throw it in.

Don't get me wrong, 20 years ago, interest deductions for housing worked well, as did donations to charity. Times have changed.

The question you really have to ask is: Are you being manipulated by government to act in their best interest? Your hybrid car is a good example. Most people keep a car 3 years. It takes 10 years to break even buying a hybrid over a gas guzzler.

My grandfather advised me long ago, it's not hard to earn money, it's just hard to keep it.

Thank you for your comments and take care.