Friday, July 14, 2006

Got a Few Problems With This . . .

Because both regulations and mandates are made on a state-by-state basis, the cost of insurance varies widely. For example, California is a large state with a fairly competitive insurance market.

A 25-year-old male from Northern California perusing the Web site of the nation's largest independent agent can choose from 84 different plans.

These plans range in price from $468 per year ($4,000 deductible, no co-insurance) to $2,952 per year (HMO with $0 deductible, no co-insurance and $25 office visits).
Unfortunately, not every state is so lucky:

A 25-year-old male living in Kentucky could get an individual insurance policy for $960 per year.

That same male, were he a resident of New Jersey, could expect to pay $5,880 per year for similar coverage.

Kansas would price the policy at $1,548, and New York state would rate it at $5,172.

1) Consumers find it almost impossible to pick the right plan when shopping in their back yard. Here in GA the top 8 carriers offer over 1800 plans & variations. How will consumers pick from possibly 100,000 or more combinations?

2) The cost of care in TX may be higher or lower than similar care in GA. Since claims determine premiums there is a good chance that once price differences are factored in the "savings" may no longer exist.

3) Large numbers of insureds does create economies of scale which can lower administrative costs. But admin fees are usually 15% of the total premium or less. If you shave 5% off admin is the net savings enough to warrant making a change.

4) Large groups such as those proposed COULD offer coverage on a guaranteed issue (no health questions) basis if they like. They could also offer full coverage for pre-ex conditions. If so this will virtually guarantee the pricing will be more than fully underwritten individual coverage.
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