It's Your Turn To Pick Up The Check

Thursday, October 22, 2009
Forget free lunch. I want dinner.

I briefly touched upon rating differentials in my last blog. To recap, there were women complaining to Congress about paying higher individual health insurance premiums when they are young and, statistically, have more claims than young men. There was, of course, no mention that their rates would be less than their male counterparts when they get older. As Congress decides to invade my business, they will eventually scale back on the grandiose proclamations and actually have to start running their new insurance company.

Yes, insurance company. How will Uncle Sam Mutual operate? Will U.S.M. cover all of the services, tests, and procedures your current plan challenges? Every dread disease will have its teams of lobbyists and victims ready to testify at Congressional hearings. Congress will be the board of directors of Uncle Sam Mutual. Congress, the same group that a few years ago under Doctor Bill Frist's leadership attempted to diagnose Terri Schiavo, will be asked to make tough decisions. We're in trouble.

Let's take something easy - price. How will Uncle Sam Mutual price the product? Let's assume, to keep this simple, that there is only one policy.

The following determine premiums today:
1. Location
2. Age
3. Gender
4. Health
5. Habits

Residents of Cuyahoga County pay the highest health insurance premiums in Ohio. Our doctors and hospitals charge more, run more tests, and do more procedures. Forget New York or Los Angelas. If we just make all Ohioans pay the same premium, my son Phillip, who lives in Marietta, will have the opportunity to help lower my monthly cost. Theoretically, as my premiums go down, his will go up.

Speaking of Phil, he can really pitch in if age is no longer a factor. I turn 55 next February. Males 55-64 have high utilization. Age 55-59 is expensive. Premiums for men 60-64 can be down right unpleasant. Thirty-one year old males have premiums that reflect their few claims. Remove age as a pricing factor and my premium should plummet. Poor Phillip.

Before we go any further, let's do a numbers check. Remember, so far we are only talking about location and age IN OHIO. We aren't stacking the deck with national extremes, smokers with suspended driver's licenses, or the chronically ill.

We'll use a "Chevy". Anthem Blue Cross. $1000 deductible 80/20 policy with office visits and Rx Card.

Marietta - Male age 22 - $101.08 per month
Lakewood - Male age 62 - $506.08 per month


In the interest of fairness, we'll split the difference. Again, we are only looking at location and age. Gender, habits, and health have yet to be factored into these numbers. The average of these two rates is $303.58. Our mythical 62 year old is thrilled. Our 22 year old is not. Forced to pay way too much, he abandons the system. At 22, he can. What does that do to our price?

As thousands of young men in their early 20's abandon Uncle Sam Mutual's policy, the average age of the participants increases. The price, assuming any semblance of rational accounting, increases. Every time the price increases, it forces more young, healthy people off the policy. Our 22 year old's biggest problem is the high percentage of older people who vote.

According to President Obama, we need the public option "to keep the insurance companies honest". How? Will the government really begin to pay medical providers the higher insurance rates? Will the policy be as self-sufficient as the Post Office? Will all the promises to the pharmaceutical companies, the seniors, the sick, etc... be kept? Or is this just one more campaign to pass a piece of legislation?

We have only touched upon two of the rating factors. Gender, habits, and health can actually be bigger contributors to the cost to pay for someone's health care. That is what we are discussing, Morbidity. What does it cost to pay for YOUR care?

I'm looking forward to a great dinner. And by the way, it's your turn to pick up the check.

DAVE

www.bogartcunix.com