Bruzilla
Well-Known Member
Allow me to enlighten you. There are two types of insurance. Your auto, house, and life insurance are referred to as Covered Risk insurance. The core concept of covered risk is that nothing bad is likely to happen to you. You're going to drive your car and not wreck it, your house isn't going to be destroyed, and you're not going to die an early death. There's a small risk you might, and an insurer calculates that risk, identifies a premium amount, and if nothing happens, they make money and if something does happen they lose money. This is the concept of insurance you seem well versed in.
There are very few Covered Risk health insurance policies as these faded out in the 1970s and 1980s and were pretty much gone by the 1990s. Almost all health insurance policies are what is known as Shared Risk, which differs from Covered Risk primarily in that Shared Risk insurers assume something is going to happen to you. You are going to get sick, you are going to need to see a doctor, you are going to need prescriptions, i.e., you're going to need money. Shared Risk also differs because with Covered Risk insurance, it is the insurer's money that is used to pay claims. With Shared Risk it is the money that members pay in every month in premiums that is used to pay the claims.
The reason health insurers had to move away from the Covered Risk model was the rates that providers (doctors, hospitals, DME suppliers, etc) charged kept going up and up and finally reached a point where a health insurer could no longer operate on a for profit basis and make any money because they would have to increase their premiums to a point where people could no longer afford them. That's why most insurers, including Blue Cross Blue Shield of Florida (and every other BCBS except one in CA) became not-for-profit, member-owned, insurance co-ops over a decade ago. The only insurers that still operate as for-profits are those like Humana and Kaiser-Permanente that also operate hospitals and serve as providers. The insurance side works as a not-for-profit and the provider side works as a for-profit.
So contrary to your assumptions about health insurance, and those of lots of misinformed folks out there, health insurers do not make vast amounts of profits if people don't file claims. Most insurers only retain about 17 cents of every premium dollar that comes in. That's not profit, that 17 cents covers the costs of processing claims, customer service, etc., since they are not-for-profits. The other 83 cents goes right back out the door to the providers, which is why trying to reduce costs by pressuring insurers is a fool's errand when all the cost drivers are on the provider side. And to put this in perspective for you, the Health and Human Services Department, which processes Basic Medicare and Medicare Supplemental claims, retains about 28 cents of every dollar they bring in.
So you, me, and everyone else pays our premiums, and all that money is pooled into a shared risk fund, and when someone needs a claim paid the money is taken out of the fund to pay it. Our premiums are not based on profit requirements as they are with Covered Risk companies. They are determined by looking at the number of members in the pool, the previous year's costs per member/per month (called a PM/PM value), and developing a picture of what rate increases providers are going to be hitting patients with the next year. That sets a basic premium that can be adjusted for higher-risk individuals, group sales, etc., and people start paying in. If there is a surplus at the end of the year, all states allow that surplus to be rolled into the next year's premium to lower costs, invested to make improvements, or returned to members. If there is a loss at the end of the year, the insurer has to cover costs out of mandatory accounts they have to maintain by law to cover overages. So this whole notion that health insurers making money by denying claims is a lot of BS.
As the government is now learning the hard way, the reason insurers have had pre-existing conditions limits isn't because they want to screw sick people, it's because you can't have someone signing up for insurance, paying nothing into the pool, and taking thousands of dollars of benefits out of it. That would be like a bank allowing you to deposit $200 and withdraw $200,000... it wouldn't be open for long. Same deal with health insurance. Shared Risk only works if everyone is sharing equally in the risk, and paying into the pool while only a portion are taking money out. You drop the preexisting conditions requirements, and don't require everyone to join, you're going to have people waiting until they get sick to enroll, which means they start taking money out without putting any in, and it's not going to be long before the insurers end up like that bank I mentioned. This is why the Democrats are in a panic right now. They need tens of millions of healthy folks who won't be submitting claims to put money into the pool to cover the costs of the sick folks are are lining up to sign up, but the healthy folks aren't signing up and likely won't be. This is what will eventually cause the ACA to collapse, just as it would any private insurer.
As for the $7,500 deductible, when I worked for Blue Cross Blue Shield, we rolled out a new product called Healthcare Savings Accounts (HSA), which were classified as high-deductible plans because they had $2,500 to $3,500 deductibles for families. But these high deductibles meant very low premiums, usually well under $200/month, so employers could save money by opting not to pay say $400 a month for a family plan for an employee, but pay say $100, or 1/2 the regular premium, and put another $100 a month into each employee's HSA account, and over a year or two the employee would have enough money in their account to cover any deductible or costs, and that money was the employee's forever. It rolled over each year, earned interest, could be willed to family members, could be borrowed against, etc., and the employer got to reduce their benefits costs. The only downside was what was then considered a sky-high deductible, but now with the ACA requiring $7,500 to $13,500 deductibles for most Bronze plans, which most folks would go into, they make those $2,500-$3,500 deductibles look like peanuts. By the way, guess which type of plans were the first to be eliminated under the ACA? That's right... the HSAs.
Don't be brainwashed by all the chatter about insurance companies. The reason you've been hearing it was because in the 1990s, Hillary Clinton's Hillarycare effort did the right thing and focused on reducing healthcare costs by reducing the amount providers could charge, and once the providers realized she was going to be taking money away from them, they revolted and started telling their patients to call Congress and tell them no Hillarycare because it would mean they couldn't see them any more. So the patients called, Congress listened, and Hillarycare was DOA. That's why the Democrats have made things all about the "insurers and their greed" this time around. Many people hate their insurers because that's who they write the check to. They don't realize that 83% of that check is actually going to the doctors, and those are the guys who actually determine what your premiums are going to be.
