As someone who works in the insurance industry, a few people have asked me questions about the Federal Government’s recent involvement in, and possible future take over of health insurance in the US. So I wanted to address a few of the issues.
What do you think of when you hear the word Healthcare? For many people, healthcare has become synonymous with health insurance. While it may seem a trivial matter of semantics, think of the hundreds of millions of dollars advertisers spend each year in market research to select the perfect wording for their sales pitches. By virtue of this ever so small choice of phraseology over the years, Americans have started to subconsciously accept that Healthcare and Health Insurance are one and the same. That there can be no health care without insurance. This is a perversion of common sense that snuck up so gradually, we failed to notice. There is no other field in which the terms Care and Insurance are used synonymously. No one thinks of car care as being the same as car insurance. No one would consider home care equivalent to homeowners insurance. And while your hygienist might recommend proper dental care, she’ll never tell you to practice good dental insurance by flossing regularly.
But why does is matter, you might ask? Who cares if I say healthcare when I’m referring to health insurance? Well, that is why your health insurance premiums are so high. It’s not even insurance anymore. Insurance is meant to be used for emergencies. It’s a group of people each pitching in a little money, so that if disaster strikes one of them, there will be enough money in the pool to cover it. The current health insurance system in America is not insurance. It’s just a massive exchange of money. You (or your employer) pay the health insurance co. ridiculous sums of money each month. Your doctor in turn, charges ridiculous sums of money for minor office visits and routine procedures. The health insurance company then pays the doctor a small fraction of what they billed, and the cycle perpetuates. Getting insurance involved for a quick strep-throat test at the doctors office would be the equivalent of calling your car insurance company and filing a claim each time you ran low on gas, or needed an oil change. Insurance is not meant to cover the small stuff. And that’s why your car insurance premium is only a fraction of what your family pays for health insurance each month. If we only used health insurance for true emergencies (extended hospital stays, etc.), premiums would plummet. Doctors could charge about 1/3 of what they currently charge (that’s all the insurance companies pay them anyway). And insurance companies could save billions by not having to process countless $15 doctors visit/prescription claims anymore.
Another argument I’ve heard for forcing everyone to buy health insurance is that the government already requires you to buy car insurance, and homeowners insurance, etc. So why not health insurance?
The law only mandates that you buy liability insurance for your cars. In other words, you only have to have insurance to protect other people. The law does not require you to have comprehensive, collision, medical payments, or any other type of insurance that would protect you. And homeowners insurance is only required by the mortgage company. Own a house free and clear? No one will make you insure it. And if your mortgage company buys insurance for you, they’ll often just insure the house itself (their property), while leaving out your personal belongings, liability coverage, etc. In other words, there is no requirement in this country that you insure/protect yourself with private insurance.
And last but not least, “How will the Federal Government manage health insurance?” Fortunately we know exactly how the government will handle a national insurance program, because they’re already running one. Flood Insurance. In 1968 the Federal Government took over flood insurance for the entire country. Just like they’re trying to do with Health Insurance today. They still run it through private insurance companies, but premium amounts, claim payments, etc. are all determined by the Federal Government. And to say they do a terrible job, is the insurance understatement of the year. Flood insurance (the only government run insurance program), is the one exception to the rule I stated above. In which you’re not required to buy insurance to protect yourself. Well, when the government collects the premiums, surprise surprise, it’s mandatory. Another huge weakness in the government run program that you’d never see from the private insurance sector, is the amount of coverage available. In private insurance, you can insure your home for whatever it’s worth. But with the Federal Government’s insurance program, you can only get up to $250k of coverage. I have a client with a $4 Million house. Very cautious guy. He buys good homeowners insurance, earthquake insurance, has an umbrella policy, etc. Naturally he wanted flood insurance too. And when I told him $250k was the maximum amount of flood insurance the government would allow him to buy, he stated “That won’t even pay to redo my living room.”
First the government eliminated all competition and forced people to buy flood insurance exclusively through them. Then they made the purchase of their product required by law. Then they cutback on how much insurance people were able to buy, even when clearly the amount was insufficient for many people. Getting a little scared for them to take over health insurance? Just wait ‘til you read this…
This is a copy of a letter our agency received from Travelers Insurance Co., one of the private companies authorized to sell flood insurance through the Federal Government.
Basically it’s stating that the entire country was without flood insurance for several weeks. The entire program had a coverage lapse because Congress didn’t get around to extending it. This means that during this time period, no one in the country could buy or sell a house in a flood zone. Anyone who’d dutifully paid their premium for a flood policy and had a claim during that time period…had no coverage. I read this letter aloud at our agency staff meeting. And everyone’s jaws fell to the floor. Because each of our employees knows the absolute worst thing they can possibly do is to let a customer’s policy lapse. Even for a day. Even for a matter of hours. They all know that if they let a single customer’s policy lapse for a day, there’s a good chance they’d be fired. And here the entire country’s flood insurance policies lapsed for several weeks. Amazingly, this wasn’t a one time occurrence. We’ve gotten 4 of these letters the past several months. And each time Congress only extends the program an additional 28 days. Then they don’t get around to renewing it, or extending it for a longer period of time, and it lapses for a few days at the end of almost every month.
So if you believe that history repeats itself, we can expect the Federal Government to run the National Health Insurance program in much the same way as they’ve run the National Flood Insurance program. First, they’ll say whatever it takes to get it pushed through politically. Then they’ll quickly eliminate all competition from private insurance companies. Then it will become mandatory to purchase their insurance. Next they’ll raise premiums AND increase out of pocket expenses (in the past year the Flood Insurance program raised premiums 8%, and increased the mandatory deductible from $500 to between $1,000-$2,000). Then they’ll limit the coverage you’re allowed to buy. If they’ll only insure a $4 Million house for $250k, how much do you think they’ll insure your health for? And finally, they’ll likely let the Federal Health Insurance program lapse periodically just like they have the flood insurance program (while people are still reeling from the effects of Katrina no less). Better make sure you don’t get sick the last weekend of each month, or when Congress is on vacation, because the entire country just may be without health insurance.
While you are taking a bath, your mom will soak all of your chocolate covered clothes in the sink.
When you get out of the bath, you will ask to put on your church shoes and a diaper.
You walk into the kitchen and track brownie mix onto the carpet, so you decide to clean up.
Mom helps by getting out the mop, but you are scared and hide in the corner.
Then, the timer goes off, and you take what was left of the brownies out of the oven.
You are too excited to see them, so you slip on the wet floor, fall down, and cry.
All of this work has reminded you that you are hungry, so you get to have pizza and brownies for lunch.
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