Thursday, July 01, 2010

Buying Insurance PRN

Why pay for insurance when you don't need it? Apparently the folks in Massachusetts have discovered something interesting.

Massachusetts requires carriers to use the same pre-existing condition limitations and waiting period rules in the individual market that they use in the small group market.

“Although health carriers always applied waiting periods or pre-existing limitations for individuals, they did not generally apply them for small employers, due to the administrative burden of doing so,” Welch and Giesa write in their Massachusetts individual health insurance market analysis. “Consequently, when the markets were merged, health carriers stopped applying waiting periods or preexisting condition limitations to individuals. Now individuals become covered from the effective date of purchase for all services.”

There is something to be learned here, but no doubt the rocket surgeons in DC are not paying attention.

Here is another clue.

The analysts found that the average number of covered individuals increased to about 107,000 in 2008, from about 46,000 in 2006.

The total number of “high-cost individual subscribers” – plan members with claims costs of $1,000 or more per month – increased to 7,185 in 2008, from 3,932 in 2006.

The percentage of individuals terminating coverage within their first year increased to 24% in 2008, from 14% in 2006.

In other words, since there is no real penalty (other than the nominal, slap your wrist tax) for delaying the purchase of health insurance until you need it, many do just that.

Buy coverage when they need it, drop it when they are healthy.

This is not gaming the system. Rather, they are simply playing by the rules set up by idiots who designed this system.

What if auto insurance worked this way? Suppose you were required to buy auto insurance and if you didn't you only had to pay a nominal tax.

Simultaneously, you were allowed to purchase auto insurance without penalty, at any time you needed it. If this were the case I see no reason to buy auto insurance on days when I am not driving my car. Even then, I would only buy it AFTER I had a wreck or my car was stolen.

Imagine how much money I could save.

Buying insurance PRN (only when needed) is a wonderful idea brought to you by those brain dead idiots we elected to manage the government.
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