Need Facts To Back Up My Healthcare Argument

[Yavin4]

I've been arguing with people that the biggest reason why health insurance premiums keep rising every year is directly related to the growing number of uninsured Americans. More uninsure means that hospitals cannot collect payments from a growing segment of the population. This cost is then passed onto their insured customers. Hence, higher premiums.

Also, with less and less businesses buying health insurance, that means that the businesses that do provide coverage will have to pay more to cover their employees. HMOs and insurance companies use that premium to do the following:

(1) Pay for health services
(2) Maintain a fund on hand in order to comply with regulators
(4) Pay for the operational costs of the insurance company
(3) Pay a profit for the HMO and the insurance company

With less people paying that premium, the cost on the people that do will go up.

Now, am I wrong?

[papau]

1. Drop by the SOA.ORG site and check out the Health Actuaries area

with luck there may be a study posted that discusses this.

[rodeodance]

2. employees pay more co-payments and higher premiums --it is NOT just

the employers pay more--the cost is past on to the employee!!

....Also, with less and less businesses buying health insurance, that means that the businesses that do provide coverage will have to pay more to cover their employees....

Also--
"With less people paying that premium, the cost on the people that do will go up"
This is true only in cases where insurance companies take in all potential customers. Today--many only take in the "well" or those with no pre-existing health problems (so keeps the companys cost down).

[China_cat]

3. And it's going to get worse

when the new law prohibiting businesses from deducting insurance premiums paid for their employees from their income tax goes into effect.

[NewJeffCT]

4. a few points

Sorry, I don't have actual facts to back you up, but the "fund on hand" is normally called "reserves" and it could run into the billions for large insurance companies. They're normally calculated by actuaries using specific & detailed methods.

The premium an insurance company takes in is normally invested in bonds, stocks, mortgages, real estate, etc. I used to work for a very large life insurance & financial services company and they had about $100 billion in actual assets - a large percentage of which was in bonds - on about $20 billion in annual premium. A large percentage of the offsetting liabilities were in Reserves. (This is Assets, not Assets Under Management that I hear on those Pacific Life ads)

But, operational expenses (health services, death 'benefits', annuity payments, etc) are the top priority. Kind of morbid that payments on life insurance policies are called 'death benefits'...but, that is another story.

Revenue includes:
Earned premium
Income from investments (ie, interest on bonds, stock dividends, etc)
gains & losses on sales of investments (selling said bond or stock)
other

Losses/Expenses include:
Payments on claims
changes in reserves
commissions to agents
policy costs (it costs money to market, sell, & underwrite a policy)
taxes
other

The difference is the profit or loss.

If an insurance company is shelling out higher claims payments due to higher billings from their network of doctors & pharmacists, it either means the insurance company will take the hit (unlikely) or, have to raise their premium rates to make up the difference or cut payments to doctors & pharmacists. With health insurance premium rising so much faster than inflation, it is kind of obvious who gets screwed the most - the person paying the premium.

It's kind of a vicious circle.

[Yavin4]

5. A Question For You

If a large number of your premium paying customers quit buying insurance, will the premiums go up on your remaining customers?

[Mister K]

6. A few things can happen

They can issue less insurance policies because they must maintain a ratio between reserves (money on hand to pay for claims) and issued policies.

They raise premiums. The problem with raising premiums is that they have to stay competitive with the rest of the market. It may look good on paper, but if less people want the polices, the less money the company will make.

[NewJeffCT]

8. well, I no longer work for that company

But, I would assume that if a large insurance company like Anthem, Wellpoint, Aetna, Cigna, etc. saw a drop in their number of insured they would raise rates on their remaining policyholders to make up *some* of the difference because they would assume their competitors are raising rates as well.

However, if a company has 10 million with health insurance on their rolls one year, and then 9.5 million the next year, the company will normally first try to cut expenses by laying off their own employees, reorganizing, maybe getting out of business in a certain area, or consolidating sales offices, etc. (of course, if the company saves money by cutting expenses & laying off workers, Sr. Management gets big bonuses!)

Same with life insurance or property/casualty (P&C) insurance... though, I think life insurance tends to be more stable as people buy it for the long-term and lock in rates. Health insurance and P&C are normally 1 year at a time.

[yellowdogintexas]

10. yes and no.

if you have a big national association group made up of smaller entities, like say American Bar Association, and all these law firms drop the plan because they can't deduct premiums, then it could impact the premiums charged to those that remain in the plan.


on the other hand, the fees charged to a group like say Walgreens employees, should stay fairly stable as those fees are based on their group history and size..this would be a huge group, so risk is spread out in a bigger population. In this example we would assume that Walgreen continues to offer benefits to its (pulling a number out of the air) 50000 employees nationwide. The underwriter may offer a different plan that has higher copays, higher deductible, and may charge the whole group a slightly increased rate. In a really big group, the premium increase is going to be somewhat less per employee..and of course at that point it is up to the employer how much of the premium they will absorb and how much pass on to the employee.

If your plan is a self funded plan, the employer is taking the premiums from all employees from CEO down to janitor and mailboy, and holding its own reserve, from which medical bills are paid, according to however the plan is set up. Usually there is a per person cap.
This type of plan really depends on the health of the general population in the group staying fairly good, because if you collect $3000 in premiums from every employee and only spend 40% of that in medical payments, and admin costs, the other 60% stays in the fund to keep it seeded for the big expenses that do happen.
Since most of the premium expense actually stays in house, this type of plan could be impacted to a lesser degree by the elimination of the tax break. Of course the ratio of employer to employee contribution is going to shift too, with more burden on the employee...depends on how benevolent the employer is in the first place.

One thing the self funded companies do is take out a catastrophic group plan that picks up when someone's individual annual cap is exceeded..like say a big cancer incident w/chemo/bone marrow transplant or a major injury.

Hope I haven't confused your issue too much, I have spent the last 30 years working with one form of medical insurance or another, claims and CSR, including Medicare

[yellowdogintexas]

7. Also, the uninsured will put off seeking treatment until they

absolutely have to, then start at the emergency room because ER's can't turn you away. The result is extremely high cost for something that if it had been treated with the doctor when symptoms first began could have been fixed, and a a greatly reduced cost.

Prime example in my opinion: upper respiratory infections that develop into conditions requiring antibiotics, go untreated and become conditions requiring hospitalization.

also kids goind untreated for a cold/allergy/etc and develop a godzilla type ear infection which always ends up in the ER because the kid can't stop screaming from the pain

GI conditions fall into this category also.

Diabetes goes undiagosed until it becomes life threatening.

Cancers that could be treated w/simple lesion removal become metastatic.

etc.

[politicat]

9. Insurance companies also raise premiums when the stock market tanks.

keeps their profit margins healthy.

Further, the cost of health care has gone up because our ability to treat has gotten better, but the treatments are more expensive. Back in the old days, there was no cure for cancer so the treatment was palliative - treat the symptoms and let the patient die comfortably. Now, we can treat the disease, but radiation and chemo are more expensive than pain medication.

Pcat

[sandnsea]

11. And when they insure companies like Enron

I know my auto insurance went up a couple years ago and it was directly because of losses due to insuring Enron or Worldcom or one of those companies.

[Yavin4]

12. Another Question for Insurance Industry Vets

So, my basic point is that the growing number of uninsured is causing the premiums on the insured to rise for two reasons:

(1) Uninsured do get treatment until there's an emergency, and since they cannot pay for their treatment, the hospital recoups that cost from the paying customers.

(2) Less buyers of health insurance means that premiums will go up because insurance companies need a certain premium number just to stay in business.

Am I correct?

For instance, WalMart is the number one largest private sector employer in America, and because they offer very limited benefits or no benefits at all, that makes the premiums on other businesses rise. WalMart employees will have the same health demos as the American population in total. Their employees will get pregnant, get into car accidents, have high blood pressure, have diabetes, have cancer, etc. So, someone will have to pay for their care, either the government or the private premium paying public.