Tag Archives: insurance

Healthcare in the Senate: Another Example of the DESPERATE Need for Campaign Finance Reform

Time and again we have seen good ideas to benefit the people by regulating companies emerge from Congress in the form of legislation that does exactly the opposite of what it was intended to do, and amounts to nothing short of massive theft by the very industries that were supposed to be regulated.  That certainly appears to be where healthcare reform is headed.

While all the details have not been released yet, by all accounts the Senate has finally killed off the public option and replaced it with weakened non-profits run by for-profit insurance companies and an opportunity for uninsured people age 55-64 to buy into Medicare.  Many progressives have reacted with jubilation to the Medicare proposal because ultimately they would like to see this concept extended to all citizens.  They should be cautious with their enthusiasm.

It is really important to remember the core dynamic of health insurance, which is that statistically speaking, young and healthy people pay for more insurance than they consume in healthcare.  As they get older and sicker, they start consuming more healthcare than they pay for.  When insurance is structured this way, young people are essentially forced to save in advance for their future healthcare costs and the net effect is “low” premiums for everyone.  If young people are not included in the insurance pool and the only people with insurance are those who have very high healthcare costs, then the premiums will be very high because the insurance company essentially ceases to spread risk among the population and begins to be just an unnecessary payment processor, but one that has enormous administrative costs and a requirement to generate a profit.

So now look at what is shaping up in the Senate.

The insurance companies have won a mandate for all people to buy insurance from them.  This guarantees that young, healthy people will be in the insurance pool, which will allow companies to do some combination of A) increase the profits they distribute to their shareholders and B) manage the cost of their insurance premiums.  By giving people age 55-64 the ability to buy into Medicare, the insurance companies have also, probably, increased the ease with which they can force people in this age group out of their insurance pool.  So they have brought in millions of young, healthy, highly profitable customers, and they are getting ready to kick out millions of older, sicker, less profitable customers.  You wonder why they have been saying all day that they won?  This is why.  It is good to be them.  They are now essentially getting ready to sell expensive insurance exclusively to people who have no healthcare costs.

Medicare, on the other hand, is being set up to fail because just the opposite is happening to it.  It is being forced to take on millions of new older, sicker, customers with high healthcare costs but it will not get any younger, healthier customers to which they can spread the costs.  So Medicare is becoming more of a “payer” and less of an “insurer”.  This is going to cause Medicare’s average cost per customer to be much, much higher than the average cost of the private insurers.  Because Medicare coverage for this age group is going to be forced to be self-financing, the premiums are going to be very, very high. The effect will be that as people turn 55 they will be forced out of their lower cost private insurance, where young people subsidize them, and into Medicare which will end up having much higher premiums than they’ve been paying.

And when Americans look at the two systems side by side they will see private insurance with low premiums (they’ll forget that private insurance only has healthy customers) and Medicare with high premiums (they’ll forget that Medicare only has older, sicker customers) and they’ll conclude that “government can’t compete”.  Republicans will have a field day.

The single-payer proponents should be in favor of giving a buy-in to people age 55 -64 only if they know that next year it will be extended to people 45-54, the year after that to people 35-44, the year after that to people 25-34, and the year after that to everyone.  To be excited about what is currently on the table now is to be cheering the tsunami that is about to wash them away.

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Whatever Happened to Private Mortgage Insurance? [PMI]

How many of you have paid PMI when you bought your first (or second, or third) house?  Remember this?  It is the insurance you pay if you don’t have a big enough down payment and it protects the lender in case you default.

Whatever happened to that money?  There have to be hundreds of billions of dollars of PMI premiums collected over the decades.  Where has it been going?

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Public option will NOT automatically cause most companies to drop insurance.

There are exceedingly few companies in the United States today that are required by law to provide insurance for their employees.  So why do they do it when it is such a huge expense?

Companies provide insurance benefits to compete in the labor market.

No matter what the unemployment rate, sooner or later companies have to hire new employees.  When they do, it doesn’t matter whether there are three employees available or three hundred… no company wants the 3rd best.  They compete for the best.  They don’t always win the competition, but they try to.

When was the last time you met an electrical engineer with ten years of experience who would even consider working for some fly-by-night company that doesn’t offer medical benefits?  Or a Director of Advertising.  Or a Senior Database Security Analyst.  Or a Vice President of Finance and Accounting?  Or a District Manager of Food Service Operations?  Or a damn good Administrative Assistant?

To compete for the best talent, companies have to offer the most competitive compensation packages, and in today’s world that means health insurance as a benefit is mandatory.

Now, if a company is paying 15% of its payroll to provide insurance and it finds that it can stop doing that and pay just an 8% penalty… of course it is going to want to do that.  But it is only going to be able to do that if workers find that option to be competitive.  If the best quality employees, the ones with the most choices and options of where to work, feel that the public insurance and private insurance are equally as good, but their out of pocket cost is $300 a month for the company that provides private insurance (because of the employer contribution) but $900 a month for the company that makes them use the public option, they will work for the company that offers them the private insurance.  Until, or unless, the company not offering insurance pays them the $600 a month in cash to make them whole.  Likewise, if the out of pocket costs are the same, but the public insurance turns out not to be as good as the private insurance, the best employees are going to either demand to be compensated financially… or flat out refuse to work there.

If it turns out that the public option insurance is as good as the private insurance, and that after paying the 8% penalty and whatever amount they have to pay employees in cash to continue to be competitive it is still economically beneficial for them to do that… well, that will be the proof of the pudding that government can do it better!  We should all applaud.  The employees will be happy, the company will be happy, the taxpayers will be happy… everyone will be happy except the insurance company CEO that can no longer command a $10 million a year annual salary.

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The Fat Fifty (health insurance execs)

Together, the annual salary + bonuses of the top 50 health insurance executives in America is a whopping $193.5 million.  The two richest among them, Stephen Hemsley of UnitedHealth Group and Ronald Williams of Aetna have stock options with a market value of $1 billion.  The other 48 between them have stock options with a market value of another half a billion dollars.

Before we say these individuals have the morals of alley cats we need to put ourselves in their shoes.  If I, for one, pulled in $9.8 million a year as Angela Braly, CEO of Wellpoint does, I would fight like a cornered pitbull to keep it.  And if I had $750 million in stock options dependent on my company maintaining its current level of profitability, as Stephen Hemsley of UnitedHealth Group does, I frankly probably wouldn’t care whether or not people died every day if that was the cost of keeping my options.  I would lie, cheat, steal, run blatantly false and deceptive TV ads, fund “think tanks” that don’t think, and bite people on their necks if that’s what it took.

It isn’t these peoples’ morality… it is simply their humanity.  Most of us, in their place, would do the same despicable, indescribably destructive, dishonest, anti-social, borderline homicidal acts that they are doing now to block real healthcare reform for at least another generation.

So we need to understand that the healthcare battle being waged isn’t personal.  It isn’t 300 million Americans out to get 50 immoral individuals.  It is 300 million Americans who are being maimed, bankrupted, and killed by 50 humans doing pretty much what any humans would do if they found themselves in their exhalted shoes.

Anyway, here are the Health Insurance 50, with their annual compensation (as of last year) and the market value of their stock options according to Reuters.  When you’re listening to the ads about socialist medicine and waiting lines… just remember that it is these 50 people funding them and making the decisions to run them… and think what you’d be willing to say if you were in their shoes.

Company Executive/Director FY Total Comp Market Value of Stock Options
Aetna Ronald Williams $24,300,100 $227,330,300
Aetna William Casazza $2,677,780 $529,094
Aetna Mark Bertolinni $7,873,120
Aetna Joseph Zubretsky $5,566,280
Aetna Reisman, Lonny $2,446,290
Cigna Cordani, David $4,321,160 $2,744,360
Cigna Hanway, H. Edward $12,236,700 $30,463,020
Cigna Murabito, John $1,951,090 $9,197,530
Cigna Petren, Carol $2,184,670
Wellpoint Braly, Angela $9,844,212
Wellpoint DeVeydt, Wayne $3,023,907
Wellpoint Fluegel, Bradley $2,264,581
Wellpoint Glasscock, Larry $8,832,708 $77,005,112
Wellpoint Goulet, Kenneth $2,428,361 $218,686
Wellpoint Lewis, Dijuana $2,579,813
Coventry Guertin, Shawn $3,769,810 $13,090,720
Coventry McGarry, James $1,547,290 $4,615,990
Coventry Wise, Allen $13,052,800 $26,400,800
Coventry Zielinski, Thomas $2,168,740 $2,557,310
Centene Eggert, Mark $1,378,332
Centene Goldman, Carol $1,146,983 $196,479
Centene Hunter, Jesse $699,385
Centene Neidorff, Michael $8,774,483 $9,758,616
Centene Scheffel, William $1,725,015 $774,037
Centene Slusser, Eric $1,532,692
Amerigroup Baldwin, Stanley $1,316,170 $567,308
Amerigroup Carlson, James $5,292,550 $3,244,691
Amerigroup Truess, James $3,206,890
Amerigroup Whitley-Taylor, Linda $1,170,220
Amerigroup Zoretic, Richard $2,418,720 $353,400
Humana Bloem, James $1,772,850 $12,536,160
Humana Goodman, Bruce $1,588,050 $9,130,650
Humana McCallister, Michael $4,764,310 $61,567,458
Humana Murray, James $2,467,360 $23,419,710
Health Net Capezza, Joseph $1,151,800
Health Net Gellert, Jay $4,425,360 $62,291,400
Health Net Mayhew, Karin $1,649,760 $1,510,920
Health Net Tiano, Linda $1,266,250
Health Net Woys, James $1,887,560 $14,905,223
Universal American Barasch, Richard $1,564,290 $12,452,450
Universal American Bryant, Gary $1,090,860 $7,319,070
Universal American Carpenter, Theodore $817,343 $262,800
Universal American Jacobs, Gary $561,187 $948,800
Universal American Waegelein, Robert $980,185 $5,919,580
Universal American Wardle, John $497,842
UnitedHealth Group Hemsley, Stephen $3,241,042 $750,465,894
UnitedHealth Group Mikan, George $6,531,406 $1,374,150
UnitedHealth Group Munsell, William $5,267,845 $8,692,222
UnitedHealth Group Welters, Anthony $5,635,177 $10,676,463
UnitedHealth Group Wichmann, David $4,638,870 $81,561,764
TOTAL ANNUAL COMP MARKET VALUE of STOCK OPTIONS
$193,530,199 $1,474,082,167

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