Tuesday, September 22, 2009

Biden Speaks

Joe (I'm always good for a quote) Biden was allowed out of his cage to speak before the NAIC (National Association of Insurance Commissioners). Here are some tidbits.
tighter regulation of the industry is needed to protect consumers and slow the spiraling cost of medical coverage.
OK, so how does more regulation lead to lower insurance premiums? Every time the government get's involved things get worse and premiums increase, not decrease.

It never fails.
Far from destroying the profitability of health insurance companies, the new regulations envisioned by President Obama would enhance competition and choice for consumers while creating a bounty of new customers, Biden said.
Enhance competition and choice. Everything in HR 3200, and even the Baucus bill, will lead to fewer health insurance companies and fewer plans.

If premiums increase with health care reform, and they will, where will this "bounty" of new customers come from?
Health insurance premiums in states rose between 88 percent and 145 percent in the past decade, far outpacing wages and overall inflation, which increased 38 percent and 28 percent, respectively, over the same period, according to a new Kaiser Family Foundation study cited by the White House.
There is a problem with this kind of study. It fails to explain why health insurance premiums increased.

The answer is simple. Premiums are driven by claims.

More people are submitting more claims at least in part because health care doesn't cost them very much. A $20 doc copay and a $25 Rx copay is all it takes to cover a $200 or more bill.

Medical care inflation is 5 - 7% but premiums rise by a multiple of that because claims are increasing at double digit rates.
Biden said new rules should prevent insurance companies from declining coverage to people with preexisting conditions, should limit out-of-pocket expenses and should not allow companies to drop coverage for patients who are seriously ill.
Coverage is usually not dropped except for failure to pay the premium or fraud.

The other provisions, declining coverage for pre-ex conditions and limiting out of pocket will make health insurance LESS affordable, not more affordable.

On the other side, even the spokesman for AHIP shows his ignorance.
"Premiums track directly with the underlying cost of medical care," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, a lobbying group that represents nearly 1,300 plans.
Premiums track claims, not the cost of medical care.

This may seem like semantics, but the cost of a doc visit or drug is not the issue. It is the total expenditure on claims that impacts premiums.

What kind of idiots are working there?
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