For the last two months I have been hammering away at what I call the “actuarial insanity” of the health insurance reform measures put forward in both houses of Congress. Now that the House version of health insurance reform has passed, the insanity is on full display.

The House measure throws actuarial reality out the window by evening out the cost of premiums paid by younger workers and those approaching retirement (those at retirement age are already covered by Medicare). The legislation passed by the House mandates that people over 50 cannot pay more than twice as much for health care insurance as those under 50 do—this despite the fact that the over-50 crowd utilizes the health care system far more than their children and grandchildren do.

For example, people aged 60 to 64 consume 4 to 5 times as much health care as people in their 20s and 30s do. Under the current, actuarially based pricing of private health insurance, those in their 60s pay health insurance premiums that are 4 to 5 times higher than those of paid by people under 40. The House plan bans this practice, creating a massive shortfall in premiums. To recoup those lost funds, the new law increases the premiums of the younger people by as much as $1,100 a year until retirement. That might not seem so bad if you are 39, but if you just entering the workforce at age 18, it amounts to more than $50,000 over the course of your working life.

To put it another way, the natural benefit of health and vitality that younger adults enjoy will not translate into substantially lower health insurance premiums, as they do with private insurance.

The leaders of the nation’s largest membership organization, AARP (American Association of Retired People) see no problem with balancing the budget of health insurance reform on the backs of their children and grandchildren. The 40-million member organization supports shifting the costs of health care to the young—a strange stance for an organization that has as its motto, “To serve, not to be served.”

Nor is this the only government program that forces the young to pay for the old. Medicare—the federal government’s health insurance program for Americans aged 65 and above—and Social Security are funded through a 7.65% (15.3% if self-employed) Federal Insurance Contributions Act (FICA) payroll taxes paid by those in the workforce.

Both of these programs were presented to the public as forms of insurance, that is, paid for by the insured themselves over the course of their careers. This is not the case. By increasing benefits without correcting for actuarial reality, both Medicare and Social Security pay out far more than they take in from each individual. Younger and middle-aged workers underwrite the retirement of their elders.

Even so, within a decade both Social Security and Medicare will stop taking in as much money as they pay out, creating deficits.

The actuarial insanity of the House of Representatives’ health insurance mandates would not be quite as threatening to the young if they could opt out of the program. Supporters of health insurance “reform” know their scheme will never work without the financial contributions of younger workers, so the new law calls for stiff fines and even imprisonment for those who fail to obtain health insurance. It all strikes me as a strange way of bringing “fairness” to health insurance.

Health insurance reform legislation has moved to the floor of the U.S. Senate for debate. Passage of the bill could mean that 30 million people without health insurance will be required to purchase health insurance—or risk fines or imprisonment.

As an independent insurance agent who strongly believes in the importance of health care insurance, I suppose I should be thrilled that ten percent of the population will be required by law to buy what I am selling. I am not. Here’s why:

I respect the choices people make. If they choose not to do business with me or not to buy health insurance at all, I assume they have a good reason. They might not disclose what that reason is, but I’m sure it is there. People usually act in their own best interests.

Some people would rather pay for their medical expenses out of pocket, rather than locking into paying a set premium. They are betting that they will be healthy enough and safe enough from injury that their outlays for medical attention will be minimal. I wouldn’t make that bet, but others would. They believe that their lifestyle, family health history, and current health make it reasonable to run that risk. It is their choice. I would at the very least recommend that they use pre-tax dollars to pay their medical expenses by running the money through a tax-sheltered Flexible Spending Account (FSA).

Forcing these and other people onto the health insurance rolls is not going to have the effect that proponents of the health insurance bill say it will. The huge influx of the newly insured will not offset the high cost of covering those with serious pre-existing conditions. The reason is simple: If you force people to buy something, they will use it. Their resentment at the government coercion will manifest itself as a determination to get their money’s worth out of the program. Rather than minimizing their visits to the doctor, as they would if they were paying out of pocket, they will schedule appointments for anything and everything. Paying for these visits, the insurance provider—private companies or the government—will not have enough money left over to pay the high cost of the gravely ill (see my previous post regarding “actuarial insanity”).

The influx of the resentfully insured will place a tremendous strain on the healthcare delivery system. The healthcare industry already faces a shortage of nurses. In four years, when the new health insurance programs will take effect, the shortage will be worst, in part because many nurses are part of the aging Baby Boomer generation has reached retirement age. Healthcare rationing will follow, but nothing will save the private health insurance system. The government will become the sole health insurer. But it won’t be “insurance” at all, because it will not have an actuarial foundation. It will be an entitlement funded by the payroll taxes of a shrinking workforce—the same dynamic that is causing Social Security and Medicare to go broke in the next decades.

My advice: If you don’t have private health insurance, get it now. See your doctor. Make sure you get the tests and screenings you need. If you need further care, get it done. And start a savings account for future medical needs.

I realize that television journalists are required by the constraints of time to compress complex issues into one-sentence sound bites, but these oversimplifications can prove more than a little misleading. A prime example keeps coming up in the discussion of the health care insurance reforms being considered by Congress. I have heard more than one television reporter comment on “the health insurance companies’ practice of denying coverage to people with pre-existing conditions.”

The average listener cannot help but interpret that statement to mean that health insurance providers routinely deny coverage to all people with pre-existing conditions. This, however, is not the case.

On the contrary, the vast majority of people with pre-existing conditions are fully covered. This is because they obtain their health insurance through group plans provided by their employers. It is illegal to deny or delay coverage to a person with pre-existing conditions who enrolls in a group health insurance plan.

If the insurance companies can be said to have a general “practice,” it is to cover people with pre-existing conditions, not to exclude them.

Pre-existing conditions only come into play when a person seeks individual health insurance—often due to job loss, relocation, divorce, or death of a spouse. Even then, health insurance companies cannot deny coverage to people who have had “continuous coverage” as defined by the Health insurance Portability and Accountability Act (HIPPA). In addition, Medicaid and Medicare do not deny coverage to people with pre-existing conditions. That means the very young, the very old, and the very poor also are exempt from the threat of exclusion due to pre-existing conditions.

The only people who can be excluded from coverage for pre-existing conditions are those seeking individual health insurance who have not had continuous coverage. Yet the vast majority of these health insurance consumers are not denied health coverage, either. Rather, the coverage of the pre-existing condition is merely delayed for a waiting period. However, all other conditions are covered. For example, if a person has heart disease, he or she might have to pay out of pocket for heart medications and treatment for 12 to 18 months. Yet if that person becomes ill with the H1N1 flu, breaks a leg, or comes down with pneumonia, he or she is covered for those conditions.

So who, really, is denied coverage? Adults between the ages of 18 and 65 who make too much money to be covered by Medicaid, who are not eligible for group insurance, and who have a life-threatening diseases. Is this a shame? Yes. Is it common? No. Should it be addressed by Congress? Perhaps, but not by mandating coverage by private health insurance.

The foundation of all insurance—property insurance, life insurance, health insurance, etc.—is the concept of shared risk: a large number of people pay a relatively small amount of money to protect themselves against the unlikely but financially devastating cost of some kind of disaster—a home burning down, an untimely death, or a catastrophic illness. For private insurance to work, the amount of money the policyholders pay, the premium, cannot be an arbitrary number. Rather, the premium is calculated using actuarial science, which balances expected losses against expected earnings.

Requiring private health insurance companies to cover people with pre-existing conditions is an act of actuarial insanity. It forces to the health insurance providers to assume all the risk with no way of adequately sharing it. It would be like forcing car insurance companies to insure a motorist who just had an accident, and to pay for the accident. It would be like insuring a house after it has burned to the ground, or insuring a ship after it has sunk.

A better solution would be to leave actuarial integrity of private health insurance intact and have the government assume direct responsibility for the small number of people who actually are denied coverage because of serious pre-existing conditions. This will save private health insurance for the millions who benefit from it while extending help to the unfortunate few who cannot obtain coverage due to serious illnesses.

Blanket Health Insurance Agency Helps San Diego Resident Seniors!

Hi everyone! I’m Cyril Honz and I’m the owner of Blanket Health Insurance. I specialize in helping Seniors find Medicare Health Insurance that’s right for them.

I work out of my No. County, CA office and can be reached by phone at
1-800-963-400.
I love working with seniors on finding the Medicare Supplement that’s right for them. While I enjoy helping my friends and neighbors here in The San Diego area, I’ve also had experience working with consumers from across our great state of California!
I’d like to concentrate this blog entry on the topic of maximizing the advantages that come with the Medicare Supplement open enrollment period.
The open enrollment period starts on the first day of the month in which you are 65 or older and enrolled in Medicare Part B. Your open enrollment period lasts for six months. During this period, the insurer cannot: Deny you any Medicare Supplement policy they sell (You can not be denied!); charge you more due to your health; make you wait for the coverage to start! That, my friends, is a great deal!

I realize that consumers – when faced with difficult or complex buying decisions – will delay, delay, and delay some more. While I applaud any consumer who wants to carefully review their options in order to make the right, long term decision, I do want to make certain that for those of you who are either in decision-making mode right now or soon will be, you are ever mindful of the expiration date of your open enrollment period. Please do not delay past that deadline and lose out on the important advantages that come along with the open enrollment period.

I promised that I would make the advantages of open enrollment the focus of this blog entry but (Sorry!) I can’t help myself: I just want to also briefly mention the vital importance of actually owning a Medicare Supplement policy! While Medicare does offer important healthcare coverage to the average Senior, this coverage by itself leaves lots of “gaps” in coverage: Deductibles and coinsurance that you are responsible for can and do add up and can negatively impact the fixed incomes of the retired. I don’t need to tell you that the last couple of years have been brutal to so many retiree portfolios, as well as the portfolios of the soon-to-be-retired. Unlike the stock market, securing the right Medicare Supplement policy – at the right time! – is something we Seniors can control! I’m available at your convenience: I’m confident you’ll find me to be a caring, concerned health insurance professional who can also relate to the many issues facing Seniors today. Don’t feel you have to do this alone, folks: I’m here to help you make the decisions that are right for you today and all your tomorrows!

Waiting for Health Insurance Reform May Be Bad For Your Wallet
October
Hello to all our friends and neighbors in San Diego We hope your summer was fantastic and filled with joy, spent in the company of family and friends.
Recently we were talking with two fellow residents of The San Diego area who told us that they were delaying a purchasing decision on health insurance for themselves and their family because they were waiting for the “results” of President Obama’s health care reform initiative.
Friends, we made a decision very early on when we launched our blog that it would act as a service to our Health Insurance shoppers and not act as any sort of platform for political commentary. Our feeling is that you, your family, and all Americans deserve access to Affordable Health Insurance. Our goal is to be present and accounted for when you shop for your family’s or business’s health insurance and help provide you with the benefit of our experience and professional expertise throughout that process.
Referring back to the folks who told us they were “waiting on Washington” before they committed themselves to a health care plan for their family, we left those conversations feeling worried and perplexed: We believe that health care reform will likely come later rather than sooner and that the President and Congress will need to work long and hard on this issue in order to deliver viable health care legislation that meets the President’s agenda for health care reform. In other words, we just don’t feel that each and every one of us can close our eyes to the very real need for viable Health Insurance,
Folks, we don’t need to tell you that an untimely accident or health issue for any uninsured member of your family can leave your family’s finances in absolute tatters. Creating a viable health insurance safety net for yourself and your family is both a necessary and responsible action on the part of you and your spouse in the same way that responsible financial planning is crucial for your retirement years and the future educational needs of your children.
This is where Blanket Health Insurance Agency can be of value and help you with Health Insurance Assistance: Please Contact our agency and let us provide you with free, unbiased consultation on the health care plan that works best for you, your family, or your business! In this day and age of spiraling health care costs, it pays to be proactive in your health insurance planning. We’re here to help and appreciative of the trust you place in us!

The health insurance reform legislation before Congress is like a computer virus: It appears innocuous on the outside, but once activated, it will destroy the private health care insurance system from within. The mechanism it will use is the actuarial unsustainability.

It doesn’t take a Nobel Prize in economics to see that the health insurance proposals working their way through Congress will bring about the end of private health insurance. It’s a matter of third-grade math.

By contract, health insurance companies must pay any and all qualified claims by the insured. To pay these claims, the company must raise enough revenue to cover these claims plus overhead and operations. To keep premiums competitive, the health insurance company must accurately forecast its probable claim costs. To do so, it uses actuarial models that factor in such things as the client’s age, weight, and general health.

As I pointed out in my last post, President Obama’s health insurance reform proposals ignore actuarial reality by mandating coverage of everyone regardless of their physical condition. In addition, the health insurance companies will not be able to cap annual or lifetime benefits. Forcing health insurance companies to cover everyone with pre-existing medical conditions without limits is like forcing a life insurance companies to write policies of any amount for people with terminal illnesses. Both are actuarial folly.

This is especially true since the government will limit how much the insurance companies can charge. Consequently, the premiums collected will never cover the costs of coverage.

This is the virus that will cause the private health insurance system to crash.

This week President Obama addressed a joint session of Congress and a primetime television audience on the topic of health insurance—a topic of great interest to me, as a health insurance agent, but also all Americans. As I wrote in a previous post, health care insurance legislation is unique because it affects every man, woman, and child in the United States.

Recent polls have shown that the vast majority of Americans are happy with their current health insurance. If the health insurance system is broken, as the president contends, then most people are not aware of it.

Polling also shows that the majority of Americans oppose the various health insurance reforms that have been drafted by Congress. The task for the president was to convince those who currently have health insurance that the new system will be better than what they have now, but all he seemed to do was reassure them that nothing would change. “If you are among the hundreds of millions of Americans who already have health insurance through your job, or Medicare, or Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have,” the president said. “Let me repeat this:  Nothing in our plan requires you to change what you have.”

This seemed like a rather weak argument for what is undeniably the most sweeping new legislation of our lifetimes.

The main benefit of the health insurance reforms for the insured, the president said, is that they would control the rising cost of health insurance. The engine behind these cost savings would be “a new insurance exchange—a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices.”

This proposal assumes that the insurance companies are not offering competitive plans now. As a health insurance agent who daily searches for the best deals from among several health insurance companies, I find it hard to believe that the insurance companies are holding out on the public now. Competition already is fierce. I doubt if there are better deals available for the asking.

It is especially difficult to imagine how insurance companies will be able to control costs at the same time they are being forced by law to offer more benefits. According to the president, “under this plan, it will be against the law for insurance companies to deny…coverage because of a preexisting condition” or “to place some arbitrary cap on the amount of coverage you can receive in a given year or in a lifetime.”  In addition, the president said, “insurance companies will be required to cover, with no extra charge, routine checkups and preventive care….”

These mandates will add billions of dollars in healthcare costs to the insurers. The president argues that these costs will be offset by a huge influx of new customers who are currently uninsured but under the new plan “will be required to carry basic health insurance.” This seems to comport with the basic premise of insurance: The cost of benefits is spread out over a large pool of insurance customers. The problem is that the new health insurance customers will be forced onto low-cost plans that will barely cover the cost of the benefits they will enjoy. There will not be enough money to pay for the expensive coverage of those with pre-existing conditions as well.

When insurance is based on government mandates rather than actuarial reality, the result is unsustainable. Someone will have to pick up the tab for a system that cannot pay for itself. We all know who that someone is: It is the American taxpayer.

September 10th, 2009
Hi everyone! Hope your Labor Day weekend was filled with fun and that everyone returned to work and school happy and most of all: Healthy! I spend a lot of time traveling around the Greater San Diego area which encompasses such beautiful communities as Oceanside, Carlsbad, Encinitas, Rancho Santa Fe, Del Mar, Solana Beach and that’s just the north side of “town”! Whew! When I think about it, I’m a pretty lucky guy to be able to travel throughout these wonderful communities filled with friendly fellow California residents and assist clients on an array of health insurance products such as individual health insurance, family health insurance, Medicare Supplement insurance or as it’s sometimes known: Medigap insurance.
So – if you see me driving through your community, give me a shout and especially give me a shout if I look lost and help me find my way back on track. Sometimes we all need a bit of help getting back on track and that’s where I come in for my friends and neighbors here in San Diego: For those of you contemplating the advantages or disadvantages of COBRA coverage after separation from your employer, please remember: We’re here to help! Allow us the opportunity to be a valued (and cost free!) consultant to you as you make important decisions that can have a long lasting impact on the health and financial well being of you and your family!

Not since the early 1990s has health insurance dominated the daily news. With a large majority in the House of Representatives, a filibuster-proof super majority in the Senate, and a president eager to sign health care insurance legislation, the Democrats are on the verge of realizing their nearly century-old dream of enacting some form of universal health insurance. The question many of my clients in Escondido, North County, and all of San Diedgo are asking me is: What will this mean for me?

The question is of particular importance to those who do not have health insurance right now due to loss of employment, divorce, spousal death, or relocation. They want to know if the government is going to give them health care insurance, and, if so, should they wait for it to come online.

I don’t know what Congress is going to do about health insurance, but I do know you should not wait to find out.

One thing often overlooked in the media is that health care insurance legislation is the first and only legislation in our lifetimes that will affect every person in the country. Changes to the federal tax code affect only those who earn income—about a quarter of the population. Going to war directly affects those in the military and their families. It indirectly affects the rest of us by securing our nation, but let’s face it, most of us never missed a meal or even a cup of coffee because of the wars in Afghanistan and Iraq. Social Security legislation affects only those of us 65 and older. One could argue that it ultimately affects everyone, because we all hope to attain that age, but the reality is that it does not affect us all at once.

Universal health care insurance, by definition, will affect everyone. If you look at countries like the U.K., Germany, and France, every person within their borders—citizen or not—is covered by national health insurance. Whether or not that is something the United States should emulate is being debated now in Congress and at town hall meetings across the country.

One thing is certain: Whatever we do about governmental health insurance, we need to get it right, because it will affect everyone, for generations. This is not something to rush into. It has to be thought through. Its costs and its consequences—intended and unintended—must be thoroughly considered. Everyone’s voice must be heard. Your health care insurance is not something you want your neighbor down the street deciding for you and your family.

The second question is easy to answer: No, do not wait for health care insurance legislation to be passed. If you lost your health insurance recently, you may be within the 63-day window that allows you to maintain continuous coverage by enrolling in a new health insurance plan. (See our explanations of HIPPA and the 63-day rule on our FAQ page.) Continuous coverage is vital because it means health insurance companies cannot delay or deny coverage for preexisting conditions. Even if universal health insurance is enacted, it could take months or even years to come online.

Even if you are outside the 63-day window, you should not wait for national health insurance. First, the outcome of the health insurance debate is uncertain. Second, you may or many not qualify for whatever health care insurance plan is passed. And third, you never know when an accident or serious illness might strike you or a loved one. You need insurance now, or you are putting every asset you have at risk.

Some drafts of health care insurance legislation are going to require families to buy some kind of health insurance, so you would be better off signing up now. If the health insurance companies are forced to extend policies to those with preexisting conditions, the new health insurance policies may be more expensive than ones you can get now. Also, the insurance companies may levy a surcharge to accommodate the deluge of new health insurance policies they will have to write. You would be better off protecting your family and getting into the system now. You can always make changes later. As your health insurance adviser, I will be on the alert to make sure you are always maximizing your health insurance dollar.

Blanket Health Insurance is constantly analyzing and assessing the every-changing health insurance marketplace in California and across the country. Change is happening fast, so to keep our clients up to date, we have launched this web log (blog) as a forum to discuss how changing health insurance proposals, legislation, and innovations will affect your and your health insurance needs.

We want the Blanket Blog to be a place where you share your thoughts as well. With your feedback, we will be better able to answer not only your health insurance questions, but also to address the concerns of all of our clients – individuals, families, and small businesses alike. Don’t be surprised if we dedicate an entire blog posting to answering one of your questions!

We will also use this space to give you real-time updates on the latest plans and benefits from major health insurance providers in San Diego County and all of California. We know that today’s consumers need a source of reliable information and analysis, not more marketing fluff. We are a voice you can trust on all things related to health insurance.