Saturday, April 18, 2009

Target Practice

"I want to know what President Obama is going to do about this!"

The client was in full rant. I was seated in front of his cluttered desk. He was too agitated to sit. His Anthem Blue Cross policy, scheduled to renew in May, had taken a significant premium increase. Bill Jones (name changed to keep the attorneys impoverished) wanted me to know how unhappy he was with me, Anthem, and the entire system.

I've been doing this for thirty years. This isn't the first time I have been used for target practice. There are times you just have to let the clients vent.

What made this unusual is that Bill Jones is a licensed insurance agent! He has twenty-five successful years in the business. Even though he specializes in life insurance and investments, Bill still sells five to ten health policies each year. He knows the rules. He understands the concepts. He is a true believer, just as long as we are talking about your money and not his.

Fairness is the key issue of the health care debate. The question is always the same. Is this solution fair to me? We don't want to pay for someone else's claims, but we demand to be part of a pool, hopefully a really big pool, if we have problems.

Health policies, especially small group policies, are underwritten during the application process. The renewals reflect, in part, the group's claims experience. In part, but no where near in total. Still, unhealthy groups pay more than healthy ones. I've had clients tell me that the insurance company shouldn't penalize them just because they have had a triple by-pass, or cancer, or a three month stay at Hazelton, 0r... You get the idea. They are nice people. Money spent on their health care by the insurance companies isn't like money spent on someone else's care.

Let's look at Mr. Jones' company. Officially, the business consists of Bill and one employee. In truth, we are insuring Bill, his wife, and two kids. They take 15 prescription medications. That number increases during allergy season. Some of these prescriptions may be inexpensive generics, but even if all of the medications were cheap, think about the medical conditions these four people must have. Plus, there are a large number of office visits, lab tests and x-rays to diagnose and treat these maladies.

Given the opportunity to insure Mr. Jones and his business, Medical Mutual of Ohio, Aetna, and other companies were hundreds of dollars per month higher than the current carrier. So he will stay with Anthem.

But is it Fair? Depends. Once he cools down, and before he reads this, Mr. Jones may decide that he is getting a fair price. He is getting more in benefit than he is paying in premium. If you are a fellow Anthem policyholder, you might think that it is unfair that you are being forced to subsidize his family's coverage.

Rate increases are proof that insurance companies are doing their job. If costs increase, and they are, then premiums must also increase. That is a tad simplistic, but you get the point. If, or when, the government controls health care, will premiums increase uniformly as cost increase? If not, then the system will spiral towards bankruptcy until someone has the courage to raise premiums (TAXES) to cover escalating costs.

Some day in the future, when the cost of your health insurance increases, will you complain to your agent, your congressional representative, or the President? Which one will come to your office to listen to you vent?



  1. Both good questions - my agent will listen to be vent but will do nothing. The action person is the congressional rep, but even then.

  2. Depending on where the insurance is coming from, a private insurer or the government, there may or may not be something that can be done. We assume that all of OUR problems can be fixed. That is not a realistic assumption. The question is whether you could get someone to try to help you.