The problem is that people do not understand the problem. People don’t understand the modern business model of health insurance corporations, even the "non-profit" (cough cough choke choke) ones.
As I am new, I will keep repeating I am an economist and health care provider. Strange combination but I studied micro-econ and game theory before I became a therapist. I live in Pittsburgh, and look up and see the Highmark sign every day. The first paragraph of a report on PA’s insurance system says a great deal.
Thirteen Pennsylvania not-for-profit organizations and trade unions and the national Consumers Union of the U.S., along with the City of Philadelphia,2 concerned about the impact on policyholders, the uninsured and the general public of the buildup of $4 billion of surplus on the balance sheets of the nonprofit Blue Cross Plans (the Plans), retained IMR Health Economics, LLC, to conduct an independent analysis of the applications filed with the Department in this proceeding
4 BILLION!!! more....
The firm’s argument is that surpluses of this level are needed to pay out claims. They will tell you they pay out xxx million a month so they need the surplus and try to avoid mentioning how much they take in a month and how fast they pay it out.
Definition ACL stands for "authorized control level". It is the level of surplus below which state insurance departments are authorized to take whatever action is necessary to protect the interests of policyholders and creditors including liquidation or rehabilitation of the insurer. At 200% ACL or greater, surplus is deemed sufficient to permit insurance companies to operate without special regulatory monitoring or supervision.
It is my understanding that each of the Plans has recommended a minimum threshold
target of 375% ACL consistent with the Blue Cross Blue Shield Association membership and trademark standard.16 None has provided specific justification for that level of surplus.17 A 375% ACL minimum standard is excessive. The 200% ACL (NAIC) standard adopted by the NAIC and the Commonwealth18 provides a more than adequate level of "early warning" protection in today’s environment. In fact, it probably provides considerably more protection than its designers and the NAIC had anticipated when the model was first developed and adopted in the early 1990's. In large measure, this comes about as a result of significant changes in the health insurance business and financial environment which have caused the baseline modeling assumptions to become overly conservative....
The Plans report that as of December 31, 2003 they held (on a parent company-only basis)accumulated capital and surplus totaling $3.96 billion, up $500 million from the prior year. Highmark’s 2003 surplus of $2.2 billion was equivalent to 645% ACL; IBC’s surplus of $841million represented 391% ACL; BCNEPA’s surplus, $405 million was equal to 1006% ACL and CBC’s surplus of $515 million represented 929% ACL.
You can read the report if you want, but the question is what is going on here that they can have huge increases in assets (surpluses) and why would management want to run it like this?
Hugely important point to show the game. Insurers can "lose money" and increase surpluses.
The charts demonstrate that for virtually all of the Plans, surplus has increased steadily over the period 1990-2003 with only a few momentary and minor declines. Even when Plans experienced substantial annual losses (e.g. Highmark, $311 million in 1996) and/or multi-year losses (e.g. Highmark, $568 million of underwriting losses from 1995-1999), surplus has not been eroded. Indeed, in the case of Highmark, surplus grew by $341 million (1995-1999) notwithstanding the substantial, concurrent five-year loss.25 Similarly, in the instance of CBC, the company experienced a cumulative loss over the six-year period, 1997-2002, of $161 million; during the same period, surplus increased by $51 million. These data do not support the thesis that surplus (currently on the order of $4 billion in the aggregate) is justified as protection against reasonably projected risks.
The answer is simple, they are hedge funds. Their goal is to maximize surpluses and investment income. They say this is altruistic so they can provide the underwriting but how they do it matters.
They do it with what can be called the float, much like banks do with the 3 day holds on a check. The Firm takes in maximum premiums and the goal is to delay payment for as long as possible. (Every wonder why there are so many hoops and voice mail trees?) I call for a $1000 MRI approval, I am going to get it for my patient, but it might take me a couple hours over a few days, I might also give up. The Firm is investing that $1000 while we wait so while they are making money, I am wasting money time and the health of my patient.
Even if they paid out 1-1 premium to claim but making our lives hell, they get to freely invest our money and the better they do it, the bigger the profits/salaries/bonuses.
Which leads me to Government as a Single payer as the solution. As we know, the US Government runs on debt not surplus backed by the full faith and credit and government bonds. The single payer, ie government, eg society has incentive for cost control and quality but has no incentive to screw around with everyone on a daily basis. Trust me the people on the other end of Medicare phones, while dealing with horrible paperwork issues, are nothing like the privates’ trained stonewallers.
This then dovetails in why insurance does nothing for prevention and as little screening as they can get away with. It is simple, they do not really care if they have to pay claims; they expect it and it is mandated in the claims/premium ratios. Prevention and screening is payable now, pre disease and pre treatment. If prevention reduces claims, oh shit, it also reduces premiums over the long term.
The model is to maximize premiums and delay claims, invest the float, pad the surplus, repeat repeat repeat. Higher health care costs, creates higher claims, creates higher premiums, more float more investment more profit.
The ugly truth is more disease, more medicine, higher claims.... Higher profit.
It is a great game because heads they win, tails they win, the coin lands on the side and stays there and they win.
It is the business model that is keeping us sick and creating a system that promotes disease not health.
This is the truth, but you won’t here it anywhere in the media or campaign trail. You listening, Hillary et al? You can't fix the problem with the current model because the model is the problem.
If anyone's campaign wants to really talk about it, I can point them in the right direction.