Saturday, June 30, 2012

The Death of Private Health Insurance

I just heard someone touting Obama care stating this would end the outrageous premiums the insurance companies were charging. Remembering back to an interview with the head of Blue Cross in February of 2010 here is an excerpt from my blog post two years ago.

Last Wednesday a Congressional committee grilled Angela Braly the CEO of Wellpoint Health Insurance (Anthem Blue Cross). House member Bart Stupak was upset that Angela was paid a million a year and the Company made 2.7 billion dollars. The fact that it was a 4 percent return on investment, didn’t sink through Representative Stupak’s head. He kept referring to the 2.7 billion dollar profit, being a lot of poor people’s insurance premiums; that was just too much profit for a private insurance company. He thought that a 39 percent increase in premiums was outrageous. As an investor, a 4% return is pretty poor also. Common sense suggests that no company would raise rates 39 percent just to make a profit. Irritating your policy holders doesn't help when it comes to renewals.

In the investment world, a 20 percent return is more of the norm. The question arises why play here if you can make more money elsewhere? The other point to ponder, if there is gobs of money to be made in health care, there would be more competition for those big bucks.

The point that impressed me at this interview was the fact that a private company trying to make a profit, was charging rates that allowed it to survive. To some the rates seemed exorbitant. But that is always the case when you can’t afford the premiums. The private sector has to know all the costs of doing business. Make a wrong estimate and the company is out of business.

Some of the provisions of Obamacare spell the end of health insurance. No limits on claim amounts and no denial for previous conditions, cannot be tolerated in a for profit insurance business model. These values have to be defined. It is grand and noble to want to cover every condition, but as a business model, it cannot survive. As a government model it can survive, governments do not need to make a profit. Can Blue Cross compete against the government model?

The Democrats point to the "unfortunate" 50 million people who are uninsured. Without doing any research, I would guess the group of people from the age of 18 to 40, are the 50 million people without coverage. At their age, they're immortal, why buy health insurance? But with them paying premiums into the system, the insurance companies could offer lower rates to everyone. These young people are not about to buy health insurance, they’ll pay the tax.

Once the government destroys the health insurance industry by eliminating their ability to make a profit, then Obamacare will be free to charge (TAX) whatever they need to kick the can further down the road. The neat thing about this, raising health care rates will be done by a committee not Congress, so it won’t be considered a tax increase. We the people will have no control over it. We will pay for steak and end up getting dog food. Government run programs are a little like public restrooms, they get used and abused.

There is no reason for a company to sell health insurance if they can’t make a reasonable profit. And of course any business where the government tells you what you can or can’t charge for, is one to be avoided, especially if they are the competition. Big government it going to teach private health care insurance a lesson. John Q Public gets to keep their present health insurance until it goes out of business. It’s a little like signing up for a cruise around the world-- it’s when they pass out the oars, that you realize this isn’t quite what you had in mind. Plus the fun part, you won't know the costs of the tour until after the cruise.

Copyright 2012 by Jim Brubaker


Anonymous said...

Every other major democratic country is able to provide health care for it's citizens. Special interests won't let that happen here. The experiment, however noble, will fail.

Maybe if we stooped subsidizing big oil and big banks...and closed a few of our 900 military bases around the world (like 800 of them)...we could afford to take care of our citizens.

Jim in San Marcos said...

Hi Anon 6:33

Providing health care and paying for it are two different issues. Waiting 18 months for cancer surgery in Great Britain, or being put on a 9 month waiting list for coronary bypass surgery in Canada, kind of sucks. You might not live long enough to have the surgery.

When you have complex surgery in a health care system, are you the doctors first surgery case? Many people from foreign lands come to the US for surgery. Good surgeons can demand more money for their skill and experience. That concept doesn't even exist in socialize medicine. Every doctor gets the same fee for the same operation.

We can lower our standards and offer rationed health care like the rest of the world. Reality and Utopia are two different worlds and only one of them exists.

You want to make health care more affordable, you have to cut Medicare and Social Security, thats where the real dollars are. Of course I chuckle when I think of anyone attempting that.

Anonymous said...

Only the most wealthy get to choose their doctors for surgery here in the states. Meanwhile...we have as many bad doctors as anywhere evidenced by malpractice suits. Having to wait for care is the generic comeback but I've seen evidence to the contrary.
30% of insurance costs go to administration. The real death panels are the insurance companies denying claims. Claim deniers are paid bonuses...the more they deny the bigger the bonus.
We already pay for those who can't afford to's added to your health care insurance premium.
Fraud in our health care system is rampant.
The insurance company lobbists' are literally writing the health care legislation. One dollar one vote. Don't expect things to get any better. Things will get bad...then they'll get worse. It's a mess.

Anonymous said...


A little OT

dearieme said...

"...Waiting 18 months for cancer surgery in Great Britain...": on the other hand I was diagnosed as needing an operation on an eye last month, and had it the next day.

Jim in San Marcos said...

Hi Dearieme

Welcome back.

I got that 18 month figure watching one the PBS weekly showings of Prime Minister Gordon Brown in discussions with the House of Commons-- They were complaining about the time lag for scheduled surgery's. The last I heard, was that they've shortened the time to less than 18 months.

A while back I remember reading that British surgeons were overworked with high case loads. The government raised their wages and this led to surgeons taking more time off, which increased the workload even more.

I think that the wait depends a lot on the type of surgery and the number of surgeons in that field.

I get suspicious when they offer treatment right away over here. Usually a root canal takes two appointments a week apart to get it done. I guess that dentistry is real slow here. My last two root canals, I went in for an evaluation, and before I got out of the chair to arrange for my next appointment, he had had a cancellation and was free to work on me now. The words "We can do it now." were not what I wanted to hear.

I hope the surgery went OK.

Take care.

Jim in San Marcos said...

Hi Anon 6:10

Thank you for the link. I enjoyed it.

Anonymous said...

An astounding 98,000 people die in the US from preventable medical errors each year. In addition, close to 100,000 people die from preventable hospital-acquired infections each year. And that’s just the ones we know about. 20 states currently do not have any medical error reporting system to speak of. In addition, 45 states, including D.C., don't provide hospital-specific data, either because they don't provide access or because they don't even bother to collect the information.

Anonymous said...

The health care struggle is not about political philosophy, its about money - as is almost all politics at all levels. The Democrats want to set up a system where the government can squeeze the excess costs out of the current system so it can provide better care to more people. The Republicans want to increase the profits of health insurers and providers, even if millions of Americans have to go without decent health care coverage.

Anonymous said...

Have an ex-pat friend who had stints put in his coronary arteries at Bumrungrad hospital in Bangkok. It cost $13K. Most of the cost was for the stints. Same operation here…$100K+…if your lucky. The hospital is clean, efficient, and served by some of the best doctors in the world. In the US…it’s all about the money…much less to do with health care.

Jim in San Marcos said...

Hi Anon 6:41

Look at it this way, there are millions of Americans who would rather spend the $300 a month on something other than health care--like car payments.

Don't assume that everyone wants or even needs health care insurance. During my first 50years, I went to the doctor twice for stitches. I was uninsured, but health maintence wasn't a big cost item. 40 million people might have different ideas on what to spend those dollars on.

Jim in San Marcos said...

Hi Anon 7:08

No argument from me. Newsweek several years ago ran an article on triple bypass surgery in India. The cost was 30K plus airfare. I've seen varying figures for bypass surgery ranging from 50K to 85K in the US. My father and father in law both died after or during bypass surgery, and both were under Medicare not private insurance

I'm not sure what the actual cost would be for a bypass operation for an insured patient not on Medicare.

Anonymous said...

It is a well-established fact that the chief cause of personal bankruptcy in the USA is unpayable medical bills on the part of people who have health insurance. True health care reform would be the vigorous application of Department of Justice attorneys on the doctors, pharma companies, insurers, hospitals, and HMOs who are engaged in routine, systematic swindling.

Jim in San Marcos said...

Hi Anon 7:16

I agree with half of what you said " cause of personal bankruptcy in the USA is unpayable medical bills." But when you add "(by) people who have health insurance." I have to disagree.

Prosecution of violators would be welcome, but sadly the infrastructure isn't in place. Most of the violations would fall under the civil codes and a complaint would have to be filed to get the wheels in motion. Its not against the law to overcharge someone, you see it all the time.

Anonymous said...

Is ObamaCare a tax on the middle class? No, not if you get your health insurance through your job. No, not if you are on Medicare. No, not if you are on Medicaid. No, not if you already are paying for your own health insurance (but your premium will probably come down a bit). That takes care of about 80% of all of you – the ones who already have health insurance. If you are one of the 50 million who don't have insurance, you are probably a single parent with two kids and make around $35,000. Your penalty for not having health insurance is about $1,400 – but you'll receive a premium credit and the very most you'll have to pay is about $2,200 – for a policy that would ordinarily cost $12,000. Some tax.

Jim in San Marcos said...

Hi Anon 6:00

Let's assume you are right. The woman with two kids earning 35K living paycheck to paycheck now has to come up with $2,200 per year after taxes. There goes the cable TV, the extra food, day care, car insurance, soccer, basketball, band and toys.

The health insurance is going to change her life and her kids in ways you never thought of.

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