Another Meme Bites the Dust

One of the favorite arguments espoused by the promoters of ObamaCare© is that, under our current system, uninsured folks are forced to use the ER as their primary means of care. Under the new regime, it's been argued, not only will there be less folks uninsured, but that the high costs of ER care will be mitigated.

There's one big problem with that assessment, though:

"Uninsured don't go to the ER more than insured."

Ooops.

Turns out, it's more about impatience than insurance:

"ER visits by the uninsured were no more likely to be triaged as non-urgent than visits by privately insured patients or those with Medicaid coverage."

In other words, one of the main arguments underpinning the "we have to do something now" crowd's rationale just got yanked. Oh well, back to the drawing board, right?

The MVNHS© Makes an Arse of Itself

For nine long years, young Jerome Bartens suffered from acute hearing loss. Doctors were stumped, until they finally figured out that it was due to a long-lost cotton ball.

But that's old news.

Apparently, the MVNHS© is now aiming somewhat, um, lower:

"A young mum died after a series of blunders by doctors who failed to spot a six-inch long toilet brush handle embedded in her buttock."

Yes, you read that correctly: the government-issue doc's so esteemed by our own proponents of nationalized health care missed a half-foot long toilet brush handle protruding from a rather obvious place. There is no humor here, only pathos:

"Cindy [the patient] ... spent more than ten hours in surgery at Nottingham's Queens Medical Centre but died from massive blood loss."

Now aren't you looking forward to our own new health care system?

ObamaCare©: Consequences Update

It may be considered bad sportsmanship to "pile on," but sometimes it's necessary. When Queen Nan said we'd have to "pass the bill to see what's in it," she wasn't kidding:

"Massachusetts medical-device companies say they’ll cut back on operational costs - and jobs - after a planned 2.3 percent tax on their products is implemented in 2013, according to a new survey."

The issue is that ObamaCare© mandates a new excise tax on certain classes of medical devices (including certain female-related products). This in turn is creating a chilling effect amongst those companies doing R&D on the next generation of life-saving devices. Which of course is good news for some, since it will mean less demand as these folks die off.

[Hat tip: HotAir]

Which brings us to Florida [ed: nice segue there, Henry], which is not entirely enamored of ObamaCare©'s "individual mandate." In addition to being evil, the mandate may well be an unconstitutional expansion of government power. At least that's what the Sunshine State's Attorney General thinks:

"The power of their argument lies in questioning whether Congress can regulate inactivity — in this case by levying a tax penalty on those who do not obtain health insurance. If so, they ask, what would theoretically prevent the government from mandating all manner of acts in the national interest, say regular exercise or buying an American car?"

A point we've raised numerous times, as well.

There are other less obvious costs, as well. FoIB Lyndsi Thomas directs us to this piece in the well-respected City Journal, where the Manhattan Institute's Center for Medical Progress' Paul Howard "touches on the tax levied on businesses for the partial federal subsidy that they receive for each retiree, the proposed Medicare cuts, $5 billion fund set up to offset health-care expenses for early retirees, and generally how the new law will cost taxpayers far more than expected and send health-care spending into the stratosphere."

Lots of red meat there.

Robin Hood in the Bay State

Robin Hood robbed from the rich and gave to the poor.

At least that is the story line.

The powers that be in Massachusetts have their own version, a bit more Russell Crowe and a bit less Kevin Costner.

In this version, "wealthy" hospitals will be required to "share" their wealth by "contributing" to a fund to help make health insurance for small businesses more affordable.

The bill would let businesses with 50 or fewer workers form cooperatives to purchase insurance at a lower cost. Another provision presses insurers to spend at least 90 percent of premium dollars on care and 10 percent or less on administrative costs.

Some politicians just don't learn.

Senate President Therese Murray said the bill, which passed on a 33-4 vote, will ease instability in the insurance market, smooth out annual fluctuations in premiums and require insurers offer affordable small business plans.

Yes, mandates work so well. That is why attempts to squeeze health insurance carriers in Massachusetts has already delivered more competition and more affordable health insurance.

NOT!

The debate comes a day after the state's four major health insurers said they lost $116 million in the first quarter of the year because of an ongoing dispute with Patrick on small business premiums.

Let's review for those playing along at home.

Four years ago, then Governor Romney signed a new bill aimed at lowering health insurance premiums and providing health insurance for everyone. In that time premiums have risen to the point of making health insurance premiums in Massachusetts among the highest in the nation. There are fewer choices for consumers, not more. Carriers are losing money and threatening to withdraw from the market.

Now the Mass idiots want to increase costs for hospitals which will be paid by . . . consumers and health insurance carriers which will . . . lead to even higher premiums.

Yeah, that's going to work.

Cavalcade of Risk #105 now online...

Nancy Germond hosts this week's Cavalcade of Risk, and it's no train-wreck. Do check it out.

Stupid AMA Trick: The 17% Solution

Do you presume that the AMA (American Medical Association) represents the vast majority of our physicians? I certainly did, until I read this eye-popping stat in the WSJ:

"[G]rowing opposition (to ObamaCare©) makes the actions of the AMA, which represents only 17% of the doctors in the U.S., look very bad."

That's less than one in five doc's, a very small minority of providers. So how did they "earn" the right to speak for all the rest? The simple answer is, they didn't. What they have done is leverage a mutually beneficial (and cozy) relationship with Washington into a much more powerful voice than deserved.

How did they accomplish this, you ask?

Remember those "diagnostic codes" which are used by providers and insurers (including Medicare) to determine reimbursement rates (not costs) for given procedures? Well, the AMA owns the exclusive rights to these codes, on which they earn royalties, and on which every provider is required to rely if they wish to be paid for services rendered by a 3rd party (i.e. insurance). As long as they scratch Congress' and Obama's backs, they continue to reap that benefit.

Their vested interest in ObamaCare© has little to do with covering the uninsured or expanding access to health care (which is a good thing, perhaps, since little of ObamaCare© itself has anything to do with those lofty goals). Instead, it's about maintaining (and, in fact, growing) its own coffers at the expense of the rest of us.

Why am I not surprised?

Connecting the Dots: Thanks, Nan!

Over the past two days, Bob has done yeoman's work bringing us up to speed on some of the scarier provisions of Obamacare©. You know, the ones we had to pass the bill to see? As Bob mentions, this involves the death spiral of employer-based health insurance, the potential death or exit from the marketplace of some (if not many) insurers, and the potentially earlier-than-anticipated demise of at least some of our seasoned citizenry.

As Bobby McFerrin so blissfully advised, though, "don't worry, be happy:"



“We see it as an entrepreneurial bill,” Pelosi said, “a bill that says to someone, if you want to be creative and be a musician or whatever, you can leave your work, focus on your talent, your skill, your passion, your aspirations because you will have health care.”

Get that? Go ahead and quit that low-paying (or high-paying, for that matter) job, because the rest of us will carry your load. One wonders what happens when we reach that tipping point, though: who pays the piper when no one's working? As Margaret Thatcher once thoughtfully observed: "The problem with socialism is that eventually you run out of other people's money."

[Hat Tip: RedState]

UPDATE: The Happy Hospitalist "gets it."

Say Goodbye to Employer Group Health Insurance

If you are looking for a job, especially one that provides group health insurance, don't be surprised if you come up empty. The intent of Obamacare (Patient Protection and Unaffordable Health Care Act) was to  make health insurance more accessible and more affordable.

In fact, it does neither.

Many large companies have already crunched the numbers and figured out it will be cheaper to drop health insurance and pay a fine than it is to continue the much coveted employee benefit.

Now smaller companies are coming to a similar conclusion.

The Heritage Foundation reports:

Thanks to Obamacare, low-skilled job seekers will find it even harder to find work.  And low-income areas will find it even more difficult to attract new businesses.  That’s the lesson drawn from a new analysis by White Castle, the iconic hamburger chain.

Numbers crunchers there looked at how Obamacare provisions would affect the company’s bottom line.  Of particular interest were provisions that hit employers with a $3,000 per employee penalty—even if they offer health insurance—for workers whose household income is low enough and they get subsidized health coverage through a government-run insurance exchange.

Curiously, the penalty for hiring and offering coverage to a low-income worker is 50% higher than the Obamacare penalty ($2,000 per employee) for NOT offering coverage.

What kind of idiot thought that one up? Assess a larger fine for compliance than for non-compliance.

“The net result would be higher unemployment for low- and moderate-income families and higher health insurance costs for their co-workers—the exact opposite of what the bill’s proponents claim is their goal.”

As the White Castle report shows, Obamacare is more likely to hurt than help low-income workers. Additionally, employer penalties create incentives to drop coverage altogether, making a mockery of President Obama’s promise that “if you like it, you can keep it.”

This is what happens when you put someone in charge who lacks real world experience.

Coming Soon to a State Near You

The problems in Massachusetts are just beginning to surface. The land of Chappaquiddick and RomneyCare is on the verge of having health insurance companies pull out of the game.

Boston reports that the 4 largest health insurance carriers lost more than $150 million in the first quarter of this year.

The cause?

Rate caps.

Blue Cross Blue Shield of Massachusetts, the state's largest health insurer, reported a $65.2 million net loss for the three months ending March 31. Its operating loss was even steeper, $95.5 million. The company drew $55 million from its reserve to cover the anticipated losses from the state-imposed premium cap in the second quarter, accounting for the majority of its operating loss.

So what happens if the carriers continue to lose money?

Bailout or pull out.

Washington, are you listening?

Probably not.

Top Down Management

In business, top down management almost never works, at least not as planned. Anyone who has worked in the corporate world for any time at all knows the brightest minds are not in home offices . . . they are in the field, taking the pulse of the client base.

But Washington either never learned this (not surprising) or simply doesn't care.

You pick.

The latest DC saga comes in the form of, "I'm from the IRS and I am here to help you".

Yeah, that's going to work real well.

The AP reports the IRS is going to launch a campaign to "sell" small business on the idea of providing group health insurance for their employees and taking advantage of the (for a limited time only) tax credit.

The White House estimates up to 4 million small businesses may qualify for the tax credit, but it's not clear how many will be eligible. To begin with, they have to provide health insurance — and many small employers don't. To qualify, companies must pay at least 50 percent of their workers' premiums.

Other than the fact that very few business owners trust Washington, coming up with the cash to fund health insurance is a problem during this deep recession. Tax credits are only meaningful if you have enough revenue to add the expense and headache of providing health insurance for employees and their families.

I wouldn't expect DC to understand that given their track record.

Go back a dozen years or so and Washington decided it was a good idea for everyone to own a home, and pressured banks to make loans to people regardless of their ability to actually, uh, qualify for the loan.

We know how well that worked.

More recently we had Cars for Clunkers. This one worked so well the program ran out of money in a few days and Congress had to refill the coffers with money they didn't have.

But why wouldn't it work when you can trade in a car worth $500 and get $4500 in trade in value?

Following the banking collapse and unconstitutional bailout, Washington once again flexed their fake muscles and demanded that banks resume loans to businesses in order to spur the economy.

What they failed to take into account was a lack of demand for loans, based on the sluggish economy.

Still, that didn't stop Washington from kicking the dog because banks weren't loaning money.

Now we have the oil rig flambe' in the gulf and Washington believes all you have to do to fix the problem is berate the oil company that owns the rig.

Somehow this management style isn't working.

I could be wrong, but I don't think a sales pitch from our buddies at the IRS is going to make businesses suddenly buy group health insurance.

A Death Squad By Any Other Name . . .

When is a death squad not a death squad?

When it is an Independent Payment Advisory Board.

What is the IPAB?

A stealth, 15 member panel appointed by the king, I mean president, to make sure Medicare doesn't spend too much money on health care.

Beginning in 2015, Medicare spending is now supposed to be limited, on a per capita basis, to a fixed growth rate, initially set at a mix of general inflation in the economy and inflation in the health sector. Starting in 2018, the upper limit is set permanently at per capita gross domestic product growth plus one percentage point.

Look at what happens in 2018. Total spending on Medicare will be limited to the GDP rate plus 1%.

What would the cap be if the IPAB had been in place since 2007?

In 2007 the GDP grew at a rate of 2.53%. In 2008 is was a negative 1.83 (-1.83) and in 2009 it was .18.

That means the death panel, I mean IPAB, would have limited total Medicare spending to 3.53%, -.83% and 1.18% for each of those years.

To hit its budgetary targets, the IPAB is strictly limited in what it can recommend and implement. It can’t change cost-sharing for covered Medicare services. Indeed, it can’t change the nature of the Medicare entitlement at all, or any aspect of the beneficiary’s relationship to the program. The only thing it can do is cut Medicare payment rates for those providing services to the beneficiaries.

That means your Medicare doc agrees to take a pay cut.

How well do you think that is going to work?

Like it or not, managed care in the private sector works very well to control costs. In addition to saving money, medical providers that don't meet quality control criteria are voted off the managed care island.

But the government doesn't operate that way. Medicare and other health care entitlement programs will allow anyone into their program.

The federal government has never shown any capacity to exclude otherwise qualified suppliers of services from Medicare. Indeed, the whole point of the fee-for-service model which Congress has so jealously protected over the years is that beneficiaries get to see any licensed provider of their choosing, to whom Medicare pays a fixed reimbursement rate, no questions asked.

Well that's comforting.

But no fear. Going forward CMS can still allow anyone who is willing to work for less to treat Medicare patients.

Isn't that special?

Cavalcade of Risk #105: Call for submissions

The Insurance Copywriter hosts next week's Cavalcade of Risk. Submissions are due this Monday (the 17th). Please remember to include:

■ Your blog's url
■ Your post's url
■ The post's trackback URL (if available)
■ A (brief) summary of the post

And PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like).

You can submit your post via Blog Carnival or email.

Gruesome Carrier Trick

Although it's an infrequent occurrence, insurance companies do go belly up. When this happens, it's up to the Department of Insurance in the state where the carrier is (was?) domiciled to swoop in an attempt to save the day. This is generally done by way of a process called "rehabilitation" which would probably make for an interesting (if overly wonky) post, but that's not why I bring it up.

Recently, the American Community Mutual Insurance Company found itself in dire financial straits, and was forced to withdraw from the marketplace. The Michigan Department of Insurance (DOI) has stepped in, and has assumed "operational control" of the company; that is, they're running the day-to-day operations while looking for a potential buyer (or whatever other mid- to long-range plan they hope to accomplish). When a similar circumstance overtook Shenandoah Life last year, the Virgina DOI immediately notified agents contracted to do business with ShenLife, warning us of dire consequences if we moved our groups to other carriers. What actual enforcement power they may have had in that regard aside [ed: none, really], they at least pro-actively looked to keep the marketplace steady.

Now comes word from FoIB Rick B that Michigan is apparently not following Virgina's lead in that regard. According to Rick:

"There are no flies on the Michigan Blues.

They are already offering agents $150 per-group commission incentives to get ACM groups to switch now through July 1, and $75 per group for those that switch between July 2 to Oct. 1. For individual plan members, they are reimbursing agents on the "A" commission schedule, 15%, for switchers."

So in addition to regular commissions for writing the group, some agents will receive special "signing bonuses" for deliberately undermining whatever efforts the Wolverine State's DOI might have in mind to salvage the harried carrier. As I replied to Rick, these guys give vultures a bad name.

[Hat Tip: FoIB Rick B]

NFIB Gets on the Bus

Obamacare (Patient Protection and Unaffordable Health Care Act) has a new challenger from the torch and pitchfork crowd. The NFIB (National Federation of Independent Business) has joined a suit along with 20 states to challenge the constitutionality of Obamacare.

At one time NFIB was a supporter of the change you won't believe, but they backed down as this abomination took shape.

A groundswell of opposition to the law from small business owners prompted NFIB's decision to join the court challenge, said Karen Harned, a senior lawyer for the group. "The second the law was signed, NFIB was hearing from its members: 'What are you all going to do about this?'," said Harned.

What NFIB and early supporters of Obamacare heard in the rhetoric was more affordable health insurance.

What we got was more bureaucracy, higher taxes, more government intrusion and higher health insurance premiums.

Gosh, like nobody saw that coming.

The mandate is effective in 2014, when new competitive insurance markets open for business. Insurers will then be required to take all applicants, no longer allowed to turn away those in poor health. The government will offer tax credits to help middle-class households pay premiums. And Medicaid will be expanded to cover millions more low-income people.

According to government estimates, about half those to be covered by the new insurance scheme will find themselves on Medicaid. I have clients who have gone on Medicaid only to later return to private insurance once their financial boat is righted and they swear they will never go back.

Individuals who refuse to get health insurance will be hit with a tax penalty, although exceptions are allowed for financial hardship and religious reasons.

God told you not to buy health insurance?

The new law allows government "to regulate you just because you exist," said Danner. "If you can regulate this, where do you stop? Do you tell people, 'We are going to mandate that everybody exercise?' We think this is an overreach by the government. It goes too far, and threatens individual freedom."

Of course it does, but some like living in a nanny state.

Back to Basics: Life Insurance Edition

At a consumer-driven bulletin board to which Bob and I frequently contribute (Bob more than I, since he has more knowledge and experience), I recently became entangled in a kerfluffle involving the misuse of life insurance. The subject at hand (deconstructed here) stands on its own, but I'd like to revisit some fundamentals regarding how permanent (in this case, Whole Life) insurance policies work, and don't work.

The first concern is need: that is, how much life insurance is appropriate for a given individual (or couple, or family). This is paramount: without an assessment of the risk (i.e. the net financial cost of one's demise on one's family or business), it doesn't matter what kind of policy one buys. Simply buying a policy without regard to that underlying metric is a waste of one's time and money.

The second concern, then, is time-frame: that is, for how long will one need the insurance in force. Ideally, the appropriate amount is that which is in force on the day of one's demise. Often, this includes a mix of "term and perm" (permanent), and will be adjusted as one travels life's highway.

Finally, one arrives at the decision that at least some of the insurance will be permanent; to keep things simple, we'll assume it's Whole Life (WL). There are two basic kinds of WL, participating and Non-Participating, Par and Non-Par. Participating policies have a unique and useful feature called "dividends," and it is on these often misunderstood proceeds that we'll focus in this post.

In the life insurance world, "dividends" represent, essentially, a rebate: the insurance company, in determining the cost of insurance for a particular year, miscalculates and is obliged to rebate (or refund) any overage to its policyholders. The key point here is that these are miscalculations, and as such, are not guaranteed from one year to the next. Some companies point proudly to many years of miscalculating insurance costs, and thereby a long history of having to refund these overcharges. But they are equally quick to point out (as required by law), that these refunds are not guaranteed; that is, there is no certainty that next year will yield such a windfall, nor how much it might be.

In addition, these refunds are never to be expressed as "rates of return:" it would be inappropriate to classify a given refund as a percentage, or to imply that this is a valid ROI (return on investment). That's because participating whole life policies are not in fact, "investments," but "protection." The "percentage" is the carrier's rate of return, not the insured's. Anyone categorically stating that a dividend is guaranteed is, at best, misstating their nature and, at worst, lying about it. Which is not to say that dividends are a "bad thing," but simply one of many factors that go into the insurance buying process.

Why all this "inside baseball" about dividends and life insurance? Glad you asked:

If someone offers to you a life insurance plan with a "guaranteed" dividend, run - don't walk - away, because there is no such beast.

HWR: Founding Purpose Edition

"Health policy, funding, insurance, managed care, infrastructure, IT, the uninsured, economics and trends re same are all fair game. We avoid things clinical in nature."

That's the simple, 25 word "mission statement" of the Health Wonk Review. Yet each time I host (and I'm sure others have noticed this, as well), there are more submissions that fall outside these guidelines than within. So for this outing, I chose to ruthlessly apply two rules:

Only posts which actually meet the criteria and included a summary would make the cut.

On a more positive note, I'd like to thank Jetsetter Julie and Judicious Joe for founding this great carnival. I bestow upon them the august and coveted "Award of Wonkery."

And now, this week's (greatly abbreviated) selection of outstandingly wonky posts:

■ Health Policy

Eadwine Walter thinks we're headed toward a nationalized health care delivery system, and offers some insights on how best to understand it.

Channeling Conan O'Brien, Anthony Wright presents a cynic's view of the new reforms and how they'll impact us.

Color John Goodman unimpressed with the latest in cancer scare-mongering.

■ Funding

Adam Fein looks under the hood at CVS/Caremark's growing revenues, and legal problems.

■ Insurance

Ever wondered what, exactly, is a "medical loss ratio?" Jaan Sidorov has, and laments that the folks who crafted the new health care legislation (known around these parts as ObamaCare©) apparently didn't.

Jay Norris has a question of his own: why can't health insurance underwriting be more like that used for life insurance?

Now that we've redefined "adult" as "someone older than 26," Chris Fleming looks at how that will impact early retirees (who might still have young'uns at home).

HWR co-founder Joe Paduda looks at Coventry Healthcare as a model for implementing the new rules, and posits that "risk selection must be replaced by health management."

Our own Bob Vineyard reports that one unintended (?) consequence of ObamaCare© is that major employers will see the "fines" imposed for non-compliance as far more attractive than actual compliance.

■ Infrastructure

Uberwonk David Harlow reports on a Bay State initiative that will require providers to use certified EHR's, and what that portends on a national level.

■ IT

You think that hospital-issue gown lacks privacy? Peggy Salvatore thinks that some record-keeping schemes may be even more embarrassing.

Rich Elmore interviews Greg Parstons, the lead researcher and director for Accenture’s Institute for Health and Public Service Value, about health IT.

■ Economics

Of course Jason Shafrin headlines this category. He starts by recapitulating the conventional wisdom that economists abhor most forms of regulation. Then he asks whether economists would support the requirement that the FDA pre-approve all drugs for use in the U.S.

A Johnson and Johnson subsidiary's factory is shut down, and its products recalled, after an inspection found "dust, grime, and contaminated ingredients." Roy Poses takes to task the less-than-contrite CEO.

■ Trends

Victoria Kennedy puts down her own iPhone long enough to help us out with her Top 5 Health & Medical iPhone apps. Here's hoping that the crisis hotline number isn't busy.

Like John Goodman above, Maggie Mahar isn't too keen on how some cancer stat's are being misused. Her take is a bit different, though, and may well represent an interesting trend itself.

Is there a shortage of doc's, and if so, why? The Notwithstanding Blog has a unique take on why simply increasing the supply of med school students won't solve the problem.

■ And the Wonkiest of All

Austin Frakt submitted this masterpiece: "Making causal inferences in observational studies is more challenging than in randomized experiments. But econometric and statistical techniques have now improved to the point that a knowledgeable practitioner can draw causal conclusions from sound observational research. Though these techniques have already been employed in economics they have not been widely applied or appreciated in health services research. Given their utility and ease of application, that should end."

In true wonk-fashion, I ran this post through Google's translator (Wonkese -> English); click here for the result.

That wraps up this week's 'Review, please join us again on the 27th when we reconvene at David Williams' place.

$115 Billion and counting...

That's the latest guesstimate from the Congressional Budget Office on how much more ObamaCare© will really cost:

"The director of the Congressional Budget Office said Tuesday that the health care reform legislation would cost, over the next ten years, $115 billion more than previously thought."

Right-brainers take note: this is what $1 Billion in crisp new $100 bills looks like:
Now multiply that by 115.

Kinda takes your breath away, doesn't it?

Some Never Learn

Churchill was right. Those who fail to learn history are doomed to repeat it.

Perhaps Massachusetts Gov. Duval Patrick should spend some time studying one of Nixon's failures.

NOT LONG AFTER President Nixon took the unprecedented step of imposing peacetime wage and price controls, the American people learned a basic economic lesson: Artificial controls don’t work unless underlying costs are controlled.

Four decades later, the Patrick administration is imposing controls on small business health insurance rates. The move will prove to be little more than an election-year reprise of Nixon’s failed effort.

Romneycare was passed in 2006 which was supposed to make health insurance more affordable by covering everyone.

Sounds good on paper but in reality, it doesn't work.

For sure, there are people who cannot truly afford health insurance and others who do not qualify based on their medical history. But the latter is not an excuse in Pilgrim country since the state has told health insurance carriers they are required to take anyone who can fog a mirror.

Those who feel they don't need health insurance (because they are healthy) don't buy it while those who are sick will only buy it when it less expensive to pay premiums than to pay for medical care out of pocket.

This type of business model doesn't work.

The Commonwealth Connector, an independent authority meant to act as an insurance plan clearinghouse, was established to provide real choices and information needed to evaluate options. In theory, an informed and robust marketplace would bend the cost curve and get more of the working poor and lower middle class insured.

Gosh this sounds familiar. Kind of like a recent campaign pledge.

But the plan is not working as sold.

First, the Connector focused all its energy on providing nearly free products to the indigent. In contrast, the Connector’s board seemed almost uninterested in market-rate products for small business employees.

The Connector revenues come from selling plans, and selling nearly free products was the path of least resistance. Unsurprisingly, 90 percent of the Connector’s operating revenue has come from the fee it earns for state-subsidized plans.

The words "selling" and "free" do not belong in the same sentence.

the Connector chose to build a top-down bureaucracy rather than leverage the broker and private market community. The quasi-governmental Connector has a $40 million annual budget and 45 employees earning annual salaries that average $100,000. Its board is heavily weighted toward government officials and unions.

Yeah, but $100,000 doesn't really go very far these days, does it?

Utah, the only other state with a health care exchange, demonstrates that there was another path forward.

Utah’s Health Insurance Exchange was started with a $600,000 appropriation and has no board and just two employees. The Exchange provides a technology backbone that enables private entities — brokers and businesses — to take advantage of consumer-based options.

Well yeah, but Utah doesn't have a lot of people so they only need two employees. And don't overlook the fact that Mormon's lead healthy lifestyles. I don't think they eat a lot of beans and lobster in Utah.

Fewer than 1,500 small business employees receive coverage through the Connector. In Utah, with a far smaller population, about 55,000 small business employees have purchased health insurance through the Exchange.

How could they do that without a public option? Everyone knows a public option is needed to instill competition and make premiums affordable.

But I am sure if the folks in Massachusetts hang in their long enough the federal government will bail them out.

Obamacare Begats Mommy and Daddy Care

The Patient Protection and Unaffordable Health Care Act (Obamacare) requires health insurance companies to allow children to stay on (or even return to) Mommy and Daddy's health insurance plan.

This is not news. We have posted this before. But like all of the other financial aspects of Obamacare, the facts don't match the hype.

The Heritage Foundation reports this on KiddieCare.

Beyond keeping the “Big Kids” dependent on Mommy and Daddy, it also directly undercuts the President’s famous campaign promise that American families would see a $2,500 reduction in their annual premiums.

Now, we learn that family premiums will rise about 1 percent in 2012 just from this one provision of the new law. It will cost $3,380 for each dependent in 2011, according to this Associated Press report.

Wonder if Mommy & Daddy will pass that premium increase on to their children, or wait until they officially become adults at the ripe old age of 27?

But wait, there's more!

health insurance premiums will rise from Obamacare’s new taxes on drugs, medical devices and new insurance fees, plus new insurance rating rules and the yet to be determined health benefit levels that the imperial Feds say must be included an acceptable health insurance plan.

So, how is this hopey-changey thing working out for you folks?

President Obama vs WellPoint

On Sunday's radio address, President Obama made some very strong comments about an insurance company attempting to rescind coverage of women who developed breast cancer. Although unstated in his address, the remark was appeared to be targeted at WellPoint.

Today's Wall Street Journal covered WellPoint's response, but the print version omitted the full text of WellPoint's letter. It makes interesting reading...

Letter to President Obama from Angela Braly, WellPoint CEO

Aetna Health Insurance Changes You May Not Have Hoped For

[Welcome Kaiser Health News readers!]

If you have a Georgia health insurance policy from Aetna, there are changes in the wind that you may not like. As a result of the Patient Protection and Unaffordable Health Care Act (Obamacare), the change you hoped for may not be the change you get.

The ink is hardly dry on the law and already Washington is trying to figure out what the law means, and how it will impact health insurance policyholders. In fact, they are making up rules as they go along.

Since Washington has no clue, neither do the health insurance companies. Most of the carriers are taking a wait and see approach before making drastic changes but some have decided to completely abandon the individual major medical market.

So far, Aetna isn't one of them but they are introducing some surprises that will make life difficult.

If you have an Aetna health insurance policy in Georgia, you have have already received a letter telling you of changes that will come about in July. Since Aetna did not bother to tell their agents about the letter, or the changes, we are finding out after the fact.

Here is what you can expect.

If your health insurance policy is more than 12 months old you will be getting a rate increase in July. Even if you just had a policy anniversary or age change increase you are getting another increase in July.

If your policy is less than 12 months old there will not be any changes until the 1st policy anniversary.

If you have an Aetna health insurance policy with doctor and Rx copays, your plan of benefits will change in July as will your rates. In most cases you will be looking at lesser benefits and possibly higher rates.

If you have a high deductible HSA plan there are no changes in benefits but rates may change in July.

The biggest changes will occur for those who have a Value plan or the $0 deductible plan.

We encourage anyone who currently has an Aetna plan to contact a knowledgeable agent that is familiar with plans from Aetna as well as other health insurance companies. In most cases, you will not need to change carriers or plans, but some will benefit from moving to a different plan with a different health insurance company.

Changing to a richer benefit plan within Aetna will require going through the underwriting process once more. Changing to a new health insurance company will require you to submit your medical information to a new carrier for review.

Frankly, some people who bought a plan they liked with Aetna will be stuck and will not have any options. If you chose a Value plan before you may be trapped in a new plan that has a higher deductible than before, fewer allowed doctor visits and no brand name prescription drug coverage.

And you may pay a higher premium as well.

You have every right to blame Aetna but you must also recognize the rules governing health insurance plans have been changed and not for the good. The folks in Washington who make the rules have no idea what they have done to have a negative impact on policyholders. Over the next few months as the new law phases in you can expect even more surprises.

Most will still be able to find affordable health insurance in Georgia, but they may have to look a little harder. That's where we come in. We represent all major health insurance companies in Georgia, California and Ohio and know how to find the best value.

If you have questions about health insurance, hopefully we have answers. If we don't have an immediate answer we know where to go to get a response.

ObamaKidsCare©: Up is Down?

One of the crucial memes during the run-up to O'Care© was that, despite all evidence to the contrary, it was going to result in lower insurance rates. Exactly how expanding coverage for tens of millions of people would result in lower costs for everyone was never actually explained, but we were assured that, once it was passed, we'd see how it would work.

We now know that, despite an initial screwup by the Feds, the provision allowing "children" (and by "children," we mean 26 year-olds) to stay on their parents' insurance plans is in effect. Remember, we were promised that this would reduce costs.

Perhaps not surprisingly, the truth is at odds with the promise:

"Letting young adults stay on their parents' health insurance until they turn 26 will nudge premiums nearly 1 percent higher for employer plans, the government said in an estimate released Monday."

We needn't remind informed readers that when the gummint estimates a 1 percent hike, the real number will be vastly higher. Just one more promise under the bus.

Ode to a Grecian Earn

Sorry for the (horrid) pun, but I have a question. If, as we've been told over and over, we urgently needed top-to-bottom health care "reform," that our current system is so badly broken, and that only the gummint can make it right, then how come:

"Racing to secure financial aid and avoid a debt default, the Greek government has agreed to austerity measures ... removing the state from the marketplace in crucial sectors like health care."

What??!!

A reduced governmental role in the health care sector will increase productivity, lower debt and potentially save the Greek economy?

Who'da thunk it?

[Hat Tip: Hot Air]

Paying Dividends

FoIB and outstanding tax-blogger Joe Kristan is featured in an interesting post at Investors Business Daily:

"Taxpayers owning C corporation stock might also want to take a bullet, figuratively speaking, this year. That’s because the tax rate on dividends will either leap or soar in 2011."

With his trademark wit and keen ability to explain sometimes arcane tax issues to those of us who can barely spell CPA, Joe explains some of the lesser-known downsides to tax news.

May is National Disability Insurance Awareness Month: Take Two

By way of reader Nat Harward, here's even more news-you-can-use. In my post last week, I posited that disability income insurance (DI) is "valuable, but undersold and underbought." Nat tells us that, according to a recent LIFE (Life and Health Insurance Foundation for Education) survey:

■ 25 percent of workers cannot say for certain whether they have disability insurance coverage.

■ Of those who say they do have coverage through their employer, a majority cannot pinpoint how much they have.

■ When asked about what percentage of their salary would be paid to them if they were to become disabled, 39 percent had no idea and wouldn’t guess while 21 percent greatly overestimated their coverage, supposing policies would pay anywhere from 70 to 100 percent.

In a way, that's even more troubling, because it gives folks a false sense of security. And it's really not difficult to find out if one has such coverage, and how much it would actually pay. If one works for a large employer, a call to HR should do the trick; if not, why not ask the boss?

And if you haven't already, please check out the original post on this.

Off to a good start

I have a copy of a letter dated April 19 in which HHS Secretary Kathleen Sebelius asks employers and insurance companies to ignore what the new health care reform law actually says, as regards extended dependent coverage.

Specifically, she asks employers and insurance companies to "maintain coverage for young adults who could be dis-enrolled in May". In effect, Sebelius is saying ignore the law and cover the dependents now, because . . . well, because I’m asking you.

She is doing this because the new health care reform law does not mandate extended dependent coverage until the first policy period that begins after September 22, 2010.

I see this is even more proof – as if more proof were needed - that the Congress never read this monstrosity they created. And if a few of them did read it? Even they clearly did not understand it. Because if they understood it, they would have provided for dependent coverage continuity in the law, avoiding the coverage gap created by the law as written, passed, signed by the President - and now recognized as worthy of being ignored, by none other than the Fair Kathleen.

One assumes the rest of the law is still to be obeyed. Until further notice.

Carnival of Personal Finance is up

Madison at My Dollar Plan presents this week's round-up of helpful personal financial posts. Be sure to check out the video (about a third of the way in) about last week's market freefall.

Be Careful What You Wish For

Some people wanted a change in the way health insurance is managed by carriers. They claim it was unfair that some are able to qualify for health insurance while others are not. They said no one should be denied health insurance.

They got their wish.

The Patient Protection and Affordable Health Care Act (Obamacare) is now law. But somewhere along the way it became clear that "affordable" did not belong.

(Of course those of us who have been in the health insurance business for a while knew that there was no way this plan was going to make health insurance . . . affordable. In fact, just the opposite is happening already.)

the law doesn't limit what the companies can charge, and the Thompsons fear that could leave them in the same predicament: still no insurance for two children because it costs too much.

"If that's the way it's going to shake out, it's not really that helpful," said Mary Thompson.

She checked with her insurer recently and was told Andrew probably would have to have his own policy. "I could be looking at a $500-a-month policy for just the two of them," she said.

Of course the law does not limit what a health insurance company can charge. If it did, you would be hard pressed to find a carrier willing to offer coverage. In fact, some carriers have already dropped out of the market completely, and at least one will no longer write coverage on children as a stand alone policy.

The ban on turning kids down goes into place this fall, a stepping stone to a full prohibition that will protect Americans of all ages in 2014, when new competitive insurance markets go into operation. At that point, insurers also will be barred from charging higher premiums to people in poor health.

Care to guess what happens to premiums in 2014?

ALL premiums will skyrocket.

Marathon runners will pay the same rate as 3 pack a day smokers with COPD. Olympic athletes will pay the same as those that weigh 400 pounds.

This makes as much sense as offering a mortgage to everyone and charging the deadbeat who just filed bankruptcy the same rate as someone with an 800 credit score.

The Thompson's have 3 of 5 family members covered by Humana. Two of their children were denied coverage.

Andrew has ADHD (attention deficit hyperactivity disorder), a common condition that most of the time is controlled with medication. Medication that can often run $100 - $300 per month.

Emily has spina bifida. Even though her condition is mild it is still a condition that many times can be expensive to treat.

They're now paying a little over $500 a month for a policy that leaves them with considerable out-of-pocket costs and doesn't cover two out of five family members. Mary Thompson says they could afford another $100 a month, but anything above that would be a stretch

There is no way a carrier can cover the risk associated with either of those conditions against a premium of $100 per month. So, under current guidelines, the children are denied coverage.

While the Thompson's will probably disagree, the $500 figure "quoted" to cover their two children is probably a bargain.

Perhaps we should refer to Obamacare by a more accurate name. The Patient Protection and Unaffordable Health Care Act.

So be careful what you wish for.

Chest Thumping

Quoting from Obama's weekly radio address, MarketWatch reports:

"Reform is already delivering real benefits to millions of Americans," Obama said in his weekly address.

Obama said insurance companies are already banning the practice of dropping coverage of patients who get sick, ahead of the September deadline, after the administration called on one company to stop revoking policies for women diagnosed with breast caner.

What kind of idiot actually buys into this propaganda?

The practice of rescission was overstated from the start. The new law changes nothing as we posted in an earlier blogpost.

Unjust rescissions were a violation of contract law before and they still are. Rescissions were permissible in the case of fraud or material misrepresentation before the law and they still are.

Change you have been duped into believing.

ObamaCare© vs Jobs

Over at PowerLine, Paul Mirengoff writes that "[e]mployers thus have a strong incentive not to employ more than 50 workers. By avoiding that threshold, they won't have to provide health insurance and will gain a cost advantage over competitors." That's because ObamaCare© requires employers with 50 or more employees (which includes, mathematically, even part-timers) to provide health insurance. Now, regular readers know that employers don't actually pay for health insurance anyway, but I'd like to expand on Paul's point a bit.

If it's a given (and it is) that employers don't pay health insurance or taxes, it follows that they won't pay any fines, either. We noted some weeks ago (far in advance of the MSM) that "employers may consider exiting the employer health market and send employees to state-run insurance exchanges;" so the effect is actually magnified.

Hunh?

Let's revisit that 2006 post on unintended consequences:

"When Joe was hired, his employer budgeted $60,000 for Joe's compensation; $50,000 is paid to Joe as wages, and the other $10,000 is sent to the insurance company and various government agencies (and, of course, some is to defray the costs of vacation and sick days, etc)."

Now let's presume that the cost of insurance has increased, say, 30% in the past 4 years (a reasonable supposition), and Joe's total cost of employment (what his employer puts in his paycheck plus sends to Washington and the insurer) has increased to $66,000 (a modest 10% over 4 years). If $13,000 of that represents his insurance costs, then the $2,000 "penalty" represents an 85% savings. Paying Washington an additional $2,000, but saving $13,000 in insurance premiums is an easy $11,000 net gain to his employer.

Now that's a good deal.

Who Can Find a Virtuous Woman?

Who can find a virtuous woman? for her price is far above rubies.

The heart of her husband doth safely trust in her, so that he shall have no need of spoil.

She will do him good and not evil all the days of her life.

She seeketh wool, and flax, and worketh willingly with her hands.

She is like the merchants' ships; she bringeth her food from afar.

She riseth also while it is yet night, and giveth meat to her household, and a portion to her maidens.

She considereth a field, and buyeth it: with the fruit of her hands she planteth a vineyard.

She girdeth her loins with strength, and strengtheneth her arms.

She perceiveth that her merchandise is good: her candle goeth not out by night.

She layeth her hands to the spindle, and her hands hold the distaff.

She stretcheth out her hand to the poor; yea, she reacheth forth her hands to the needy.

She is not afraid of the snow for her household: for all her household are clothed with scarlet.

She maketh herself coverings of tapestry; her clothing is silk and purple.

Her husband is known in the gates, when he sitteth among the elders of the land.

She maketh fine linen, and selleth it; and delivereth girdles unto the merchant.

Strength and honour are her clothing; and she shall rejoice in time to come.

She openeth her mouth with wisdom; and in her tongue is the law of kindness.

She looketh well to the ways of her household, and eateth not the bread of idleness.

Her children arise up, and call her blessed; her husband also, and he praiseth her.

Many daughters have done virtuously, but thou excellest them all.

Favour is deceitful, and beauty is vain: but a woman that feareth the LORD, she shall be praised.

Give her of the fruit of her hands; and let her own works praise her in the gates.

Proverbs 31:10-31 KJV

This Sunday is Mothers Day. Take the time to reflect on how your life has been influenced by your mother.

Friday COBRA/ARRA Update

As we noted previously, the latest COBRA/ARRA extension peters out at the end of this month. But according to admin guru Ceridian Benefit Services, it's looking increasingly likely that the extension will be, well, extended:

"Recently the Senate Budget Committee passed a bill that outlines the Senate’s health care priorities for the rest of the year. While the budget bill is not law, it signals that the Senate may extend eligibility for unemployment insurance and COBRA premiums subsidy until the end of the year."

No word yet on how we'd actually, you know, pay for that.
health insurance hdhp hsa cobra arra obamacare health care reform hipaa hcr masscare romneycare co-pays rx dental vision disability life insurance long term care ltc ltci sebelius cms smms medicare medicaid schip bonds surety short term medical mini med mini-med limited benefit defined benefit defined contribution deductible copay copays coinsurance co-insurance 80/20

HWR at IB

We have the delightful honor of hosting next week's Health Wonk Review. This is a great opportunity to see your best HWR-related post highlighted and available to a perhaps wider audience than "normal." Submissions should include:

■ Your blog's url
■ Your post's url
■ The post's trackback URL (if available)
■ A (brief) summary of the post

And PLEASE remember: ONLY posts that relate to health "policy, funding, insurance, managed care, infrastructure, IT, the uninsured, economics and trends" will be accepted.

You can submit your post (or even someone else's!) via Blog Carnival. Submissions are due no later than 9AM (Eastern time) next Wednesday (the 12th).

Caution: Short Term Wonkiness Ahead

Short Term Medical (STM) insurance is kind of an interesting product: written for a short, specific length of time (as opposed to year-to-year for "regular" major medical plans), they provide quick, simple and relatively inexpensive coverage for folks between jobs, or in their new job's probationary period, or for recent grads (although that market will probably take a hit due to ObamaCare©). Typical STM's couldn't be simpler: the plan's in effect from Date A to Date B, there's a deductible (which is the real point of this post), and some co-insurance. Doctor's visits, prescriptions, MRI's (and so on) accumulate towards that deductible and co-insurance; once the out-of-pocket maximum is reached, the plan pays 100% up to a specified amount (which may also change due to ObamaCare©).

All of that is by way of background for what I really want to talk about: the nature of the STM deductible. There are really three different iterations:

■ Policy Term

■ Per Cause

■ Per Day

"Policy Term" means that the deductible accumulates over the life of the plan (e.g. 3 months, or 62 days, etc). Per Cause means that there's a separate deductible for each claim (one for the broken arm, one for the stitches, another for the MRI). And Per Day means that each day that there's an expense, the deductible applies.

Now, I've always used plans with the Per Term deductible. This seemed (and seems) to me the easiest to understand and fairest to apply. But I received an email today from a marketer pushing the Per Day configuration, including some pretty compelling evidence that this may be a better way. They made their case with a simple FAQ:

A daily deductible means more out-of-pocket for [the insured].

False. [A Per Day deductible plan] actually minimizes out-of-pocket exposure with a low daily deductible instead of a larger, calendar-year deductible plus coinsurance out-of-pocket. The daily deductible, coupled with the added protection of a manageable out-of-pocket maximum, gives clients comprehensive benefits at an economical price.

And:

A daily deductible will be confusing for [the insured].

False. Once the daily deductible has been met, additional same-day covered charges are paid at 100 percent. The client will be able to clearly understand that his or her total out-of-pocket for a given day is the selected deductible amount.

That makes some sense to me, but I'm curious if any of our readers have had any experience with these types of plans, good or bad, which they'd like to share, as well as any conclusions about whether they're better or worse than Per Term plans.

Student Health Insurance Sucks

A family friend is enrolling at Vanderbilt University in the fall and I was asked about affordable health insurance options. We are providing a "bridge" plan to the fall as requested, but I decided to take a look at the plan endorsed by the university.

Having had two students in college already I knew that health insurance plans pushed by universities are usually inexpensive and fine until you really need them. If you are seriously injured or develop a severe illness you will be lucky if the student health insurance plan covers 30% of your medical bills.

While college students as a whole are usually healthy they sometimes have a tendency toward what adults consider "reckless" behavior that can have a serious impact on their health. And, although rare, college students do get sick, and sometimes are even afflicted with disease normally considered to be reserved for older adults such as various forms of cancer.

So how does the Vandy health insurance plan stack up to a REAL major medical insurance plan?

Not even close.

For a 12 month premium of only $2,021 the student is enrolled in a non-renewable 12 month term health insurance plan.

What is a term health insurance plan?

One that runs for one year (or less) and terminates at the beginning of the next school year.

Some might ask "what is wrong with that?".

A lot.

What happens if your health changes toward the end of the term but you are going to need ongoing coverage?

If you are able to re-enroll as a student you can take out a new policy, but your pre-existing medical condition(s) will not be covered until the new policy is in effect for 6 months. Prior to 6 months you have coverage that is capped at $2500.

If you are not able to re-enroll, you will not be eligible for this plan and possibly will be denied coverage by traditional health insurance companies if your medical condition is serious.

So why not bypass the Vandy health insurance plan and simply buy your own major medical coverage?

No problem. Vanderbilt will allow you to submit a request for waiver of their plan as long as your other coverage meets their guidelines.

Be underwritten by an insurance company based in the United States (international insurance companies are

not accepted).

Have claims paid by a claims administrator based in the United States.

Provide access to local doctors, specialists, hospitals and other health care providers in the Vanderbilt

University area.

Have low or no deductibles (the student insurance plan has a $200 deductible per policy year).

Cover inpatient and outpatient hospital expenses, outpatient surgical expenses, inpatient and outpatient

mental health, prescription drugs, laboratory tests and x-rays, physical therapy, ambulance, maternity and

home health care.

Provide coverage for Medical Evacuation and Repatriation of Remains.

Must provide coverage for the period of August 12, 2009 to August 11, 2010

In other words, you won't find a policy outside of the university that matches those criteria, but you are welcome to try.

Their "great" plan with a $200 deductible with med evac and repatriation of mortal remains may sound wonderful, and it is, until you get really sick and need it.

The $200 deductible sounds great but the $100,000 cap on benefits will fall short in the event of a major change in your health. A serious accident can easily run up $100,000 in medical bills in 60 days or less. And what if your health changes toward the end of the policy term?

Well at least you have a $2500 benefit as long as you are able to enroll for the next school year.

While low deductibles and 90% coinsurance sounds great those benefits do you no good if you run out of coverage before you fully recover.

I have run into this before with grad students at other universities. The school sets up some kind of sweetheart deal with an insurance agency to market exclusive coverage to students and the coverage sucks. If you cannot get a waiver, you are stuck with paying for a plan that can fall way short and pray that you never really need to use the plan.

Universities that push these plans should be drawn and quartered.

We have looked at student health insurance plans before and what we found is not pretty. Consider the case of Ziqu Liu. We blogged on this in April, 2008. Liu was enrolled in school and diagnosed with osteosarcoma, a rare form of cancer that is expensive to treat. The cost of Liu's care was estimated at $300,000 but only $50,000 would be covered by his student health insurance plan.

We certainly hope our friend enjoys good health while in school and doesn't have to use this horrible student health insurance plan. Vanderbilt University and other schools that peddle these lousy plans should be held accountable for insisting that students purchase these limited benefit plans.

If you have a student that will be enrolled in a university, we strongly encourage you to look at other health insurance alternatives.

Sorry, That Number is no Longer in Service

Ever wonder what "big business" thinks of Obamacare and why they may be supportive of this change?

Perhaps it is because they can save a lot of money, and headache, by simply dropping health insurance for their workforce and paying the fine.

CNN/Money is reporting that folks like AT&T, Verizon and others are giving serious consideration to ending the long time practice of including health insurance in their wage package.

Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill's critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.

No reason to believe the rocket surgeons in Washington expected that to happen.

Some would say this was part of their master plan to take over health care. Personally, I don't believe they are that smart.

This follows the law of unintended consequences.

And here is the real kick in the ass. The penalties they collect won't even come close to funding Obamacare.

AT&T produced a PowerPoint slide entitled "Medical Cost Versus No Coverage Penalty." A document prepared for Verizon by consulting firm Hewitt Resources stated, "Even though the proposed assessments [on companies that do not provide health care] are material, they are modest when compared to the average cost of health care," and that to avoid costs and regulations, "employers may consider exiting the health care market and send employees to the Exchanges."

Reminds me of Alice's Restaurant where Office Obie walked in with "twenty seven eight-by-ten color glossy pictures with circles and arrows and a paragraph on the back of each one."

The difference here being, instead a judge walking in with a seeing eye dog it is the Congress Critters who won't be able to see what they have done.

In a competitive labor market, the employers that shed their plans will need to give their employees a big raise, and those raises could be higher, even after taxes, than the premiums the employees will pay in the exchanges.

Don't count on it Bocso. As long as unemployment remains high and the economy sluggish, I would not anticipate "big raises".

As Oliver Hardy was so fond of saying, this is another fine mess you have gotten us in to.

The name is Bond, Surety Bond

No, we're not talking about James Bond's younger brother, but a very specialized area of insurance. Surety is a promise to pay, which sounds a lot like "insurance." But surety bonds are a bit more complex than "regular" policies.

And that's as far as this blogger's willing to go with the idea. Recently, we were offered some insights into this rather arcane area of insurance by Kevin Kaiser, a principal for Surety Bonds Dot Com, a nationwide leader in that sector of our business. Take it away, Kevin:

Although surety bonds are different than insurance, the two often get confused. It doesn’t help that “surety bonds” and “surety insurance” mean the same thing, which tends to confuse consumers. Making use of surety bonds guarantees project owners and contractors fulfill any and all contractual agreements.

■ The primary difference

Even though money could change hands, surety bonds are not insurance. Surety bonds involve three parties, whereas most insurance policies rely on policy holders’ premiums that cover any losses. Instead of placing the risk with one party, insurance policies usually distribute the risk over its policy holders.

■ How surety bonds work

Let’s consider an example. A city’s parks and recreation department wants to build an outdoor pool for the summer months. The city hires a contractor who gets a payment bond.

■ Surety bonds’ payments

Now, if the contractor fails to hold up its end of the contract, workers and subcontractors still get paid. The surety guarantees that the contractor pays any subcontractor who files a claim against the bond. Most surety bonds include a clause that requires the contractor (principal) to make such repayments when the surety pays out a claim. Thus, the city and surety do not assume any financial risk in the unlikelihood of the contractor’s default.

It seldom happens, but the surety has to cover costs if the principal cannot. Thanks to stringent underwriting procedures, surety companies eliminate unpredictable companies.

■ The cost of surety bonds

Surety bonds do not anticipate financial loss like insurance does. Consequently bond premiums typically finance underwriting and other prequalification services. The cost of the premium depends on the surety company, the type of bond applied for and the applicant’s financial history. One to four percent is a sound estimate of premium costs, but if a surety company classifies an applicant as high-risk, the premium falls between five and 20 percent of the bond amount.

■ Getting a surety bond

Applicants with mediocre credit or a fledgling business can still obtain a surety bond. Of course, lower credit scores make applicants more likely to be labeled high-risk [ed: we understand that this is the case with, for example, home and auto insurance, as well]. Some startup companies may be legally required to get a bond to pay for an operation license. To determine what kind of bond an applicant receives surety companies consider credit, references, reputation, financial reserves and the ability to operate among other things.

The time it takes for a surety to approve a bond depends on the type of bond, restrictions of the surety and the underwriting process. After paying the premium, applicants will probably get the bond in one or two days. Processing a surety bond may take up to four days, though some sureties approve bonds immediately.

Thanks, Kevin! I have to admit, I’d never really considered the surety side of the biz before; this helps make it a bit more accessible.

ObamaCare© Lacks Teeth

In what's sure to be disappointing news to Austin Powers, it turns out that key portions of ObamaCare© don't apply to stand-alone dental coverage (I guess the ADA's lobby was all gummed up). For example, restrictions on annual and lifetime benefits caps don't apply, nor does the requirement to carry 20-somethings.

That really bites.

[Hat Tip: The Dental Care Plus Group]

EMR: Homespun Privacy?

Sometimes, two seemingly disparate items hit my radar simultaneously, and it's interesting to see if there's a "connection" of some kind. Of course, some of these are more obvious than others, as in this case.

My friend Holly R sent me the link to a new, free program that organizes and stores your medical info on your computer. We've seen that on-line services like Google let you centralize your personal health data, but they also raise (legitimate) privacy concerns. On the other hand:

"HeyDoc! ... lets you organize detailed data about your health. But all of it is stored on your computer. It remains under your control. You can use it however you'd like."

That last part may be the most important: "You can use it however you'd like."

When you control the data, you get to make those decisions. Contrast that concept with:

"Vice President Joe Biden, touting the importance of electronic health records, on Tuesday announced $220 million in grants for 15 communities to pave the way for wide-scale use of health information technology."

These programs may sound similar to HeyDoc!, but there's at least one big difference:

"Under the government policies, patients will not be able to opt out of having an electronic health record, said Sue Blevin, president of the Institute for Health Freedom."

Given how easily credit and other information has been compromised, that seems a legitimate concern. I'd feel a lot more sanguine about this idea if it weren't so Orwellian. This administration seems quite comfortable forcing people to toe the line (cf: Individual Mandate). I thought they were "pro-choice."

Cavalcade of Risk #104: What's on the menu?

Jason Shafrin, aka The Healthcare Economist, presents a tantalizing buffet of delectably risky posts. Try the veal, he's here all week.

May is National Disability Income Awareness Month

We talk a lot about health insurance (to pay the docs and hospitals) and life insurance (to pay the funeral home and provide funds for those left behind), but we don't write a lot about disability (or income replacement) insurance. This valuable, but undersold and underbought, coverage can help put food on the table and keep a roof overhead if one is seriously hurt or ill.

Many people believe - erroneously - that Social Security is all the safety net they need. Of course, a lot of folks also believe - erroneously - that Medicare will pay for their long term care needs. Neither of these are really true in practice, which is why it's so important to understand what disability insurance can (and can't) do, and how much one might need.

Fortunately, the folks at the Life and Health Insurance Foundation for Education (LIFE) have set up a helpful, easily navigable website so folks can get a clear picture of how this kind of coverage works. Called LifeHappens, there are all kinds of tools and resources available, including videos like this:



Do check it out.

Grand Rounds: The 1st (Annual?) Non Narcissist, Non Personally Aggrandizing Edition

This one's special: as usual, there are some terrific medblog posts. But the Grunt Doc has added a twist: he requested that we "don’t send me a post of yours, send a post of someone elses’." Want to know who I "nominated?" Then click on over.

Callous

Last weekend, we went out to dinner in Palo Alto with some friends. As we were walking back to our car, we passed a well-dressed lady at an outside restaurant with her chihuahua sitting on her lap. On the next block were a couple of homeless men sitting on the sidewalk, asking for money and holding various cardboard signs.

David turned to me, "You know, I bet that dog gets better health care than those homeless guys."

I replied, "Probably, but the dog gets put down when it develops an expensive enough medical condition."

I'm curious. Can anybody cite authoritative stats (and the source) on the average lifetime cost of treating an indigent person through the Medicaid/MediCal/Medicare/MediEtcetera/VA systems?

Congressional ObamaCare© Screw-up, Cont'd

Several weeks ago, we reported that the Congressional Research Service had concluded that ObamaCare© "may remove members of Congress and Congressional staff” from their current coverage, in the Federal Employees Health Benefits Program, before any alternatives are available."

As if that wasn't bad enough, now comes word from the CRS that "[ObamaCare©] could impose tens of millions of dollars in fines on Congress, state and local governments."

But that's not even the worst of it:

"[A] slew of states are challenging the health-care law’s legality in court. If governments were found to be exempt in court, a ruling could establish one set of rules for the private sector and another more lenient set for the rapidly expanding public sector."

In short, there are now even more constitutional questions than just the individual mandate. And on top of that (gee, it's not like we want to pile on, it's just so darned easy), "[a] spokesperson for Speaker Nancy Pelosi admitted the government would be considered an “employer” under the law, thus subject to the fines."

In short, no one really knows. And as Bob's pointed out, there are actual, legal deadlines looming. What happens when (I think we're past "if") these aren't met?

A good friend forwarded an email invitation he'd received from a local insurance agency. These rocket surgeons boast that they'll "provide ... the most complete, accurate and up-to-date information available ... After this seminar, you will know what is fact, what is fiction, and you will understand the reality of what is "yet to be determined."

Quite an accomplishment, considering the folks that actually wrote this train-wreck don't have a clue. Could be worth it for entertainment value, though.

Twisting in the Wind

The guy who's face is on the $100 bill signed the Declaration of Independence then said "We must hang together, gentlemen...else, we shall most assuredly hang separately". A fitting statement. Almost prophetic considering something similar is happening today with Obamacare.

In less than 3 months phase 1 of Obamacare rolls out with the introduction of a national risk pool (Obamapool). So far at least 15 states have said no thank you to the HHS Sebelius when she extended an invitation to join her in the pool.

The indecisive Charlie Crist is the latest to say no to Obamapool.

In a letter late Friday to Health and Human Services Secretary Kathleen Sebelius, Crist said he agreed that states and the federal government must cooperate in expanding healthcare for Americans but said "unfortunately Florida is not in a position to authorize new financial obligations."

"We are in the process of balancing our budget on the final day of the 2010 legislative session," he wrote. "As governor of Florida, I cannot commit any state resources to participate in the federal temporary high-risk health insurance program."

That is the second sensible thing he has said in a week.

The other was his announcement to run as an independent in the upcoming Senate race following his visit to a palm reader who told him he had no chance to win as a Republican.

The Obamablitzkrieg is running into obstacles before it even get's out of the gate. All these grandiose ideas of health insurance for all are not working at the state level. Washington can write checks even without any money in the bank but states can't do that and the autocrats in DC either don't know that or choose to ignore it.

Not only are states balking at the Obamapool, but so far there aren't any insurance carriers that have stepped up to the plate either.

There is $5 billion dollars of play money being held by HHS for use as seed money to fund Obamapool. Even with the rules that make it impossible for anyone to join who has creditable coverage now, something tells me that money will run out long before the pools are set to expire in 2014.

"The bottom line is that all Americans who meet the eligibility criteria will have the opportunity to join a high-risk pool program," Jenny Backus, acting assistant secretary for public affairs, wrote in an HHS blog post Friday.

"Will have an opportunity" . . .

Makes it sound like a lottery drawing, doesn't it?