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The scandalous behavior of our major insurance businesses has become an accepted outrage. When we pay our premiums, we are no longer given the value we were sold with the policy. However, present legislation is being proposed to require that we buy insurance for the good of society. This is another instance of the public interest being stolen, for the profiteering that our business community has turned to.
When Massachusetts passed into law a requirement that everyone have insurance, the corruption of the industry was ignored. Reality-based health insurance legislation must require the actual activity of the insurer be regulated to require that a large proportion of that activity actually result in health care that the policy supposedly entails. In my opinion, that should be at least 80% of the amount received in premiums being devoted to actual health care.
The concept of insurance is that by pooling their funds, the insureds guarantee that they can manage those few outrageous costs that some of the insureds will encounter, usually through catastrophic health needs. As it is operated presently, that concept is the selling point for policies, but it is not the operating principle of the companies executing the policies.
The events chronicled in Sicko were revelatory to many in the audience, and included incidents of sick policy holders having their just claims refused by insurance moguls to promote profiteering. Hearings have recently established multitudes of instances that occurred when the medical needs of the insured were rejected by insurers because they reduced profits.
We have standards for charitable organizations that require them to give a certain amount of their funds to actual charitable work. All the more so, if the public is required to have insurance, should the work they contract for be a large proportion of what is actually financed.
In the case of charities, many oversight groups have formed because of outrages discovered in appeals to the public which represented fraudulent claims. There is obvious need to apply that same outrage reaction to companies that take in money on the pretense of a future commitment, then violate that commitment when a need for it actually arises.
This recent post about fraudulent fundraising strikes me as very relevant to the insurance debacle.
I get so angry when a nonprofit gets money that does not deserve it. For example, the Cancer Fund of America solicits donations across the U.S., including locally, through telemarketers, direct mail and online. The BBB found that more than 99 percent of all cash donations to the organization pay professional fundraising costs, salaries for charity officials, consultant fees and other expenses related to the charity’s operations. And they raised more than $8 million in 2007. Just how much of that came out of our community is unknown, but that is money that a good local charity did not see.
The BBB offers the following tips to persons receiving charitable solicitations:
•Before giving, ask for written information about a charity’s program, finances and tax status – especially if you are unfamiliar with the organization.
•Don’t bend to pressure to give money immediately, especially over the phone. A charity that wants your money today also will welcome it later.
When we use an insurance company, it would be much preferable if we could count on an oversight agency, like one operated by our government, to provide information about the amount of funds that actually are returned in satisfaction of the contract we make with that company.
From Charity Navigator, which gives recommendations about the amount of funds collected as charitable donations that actually goes to charitable work: Program Expenses less than 33.3% (Emphasis added.):
Our data shows that 7 out of 10 charities we’ve evaluated spend at least 75% of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65%. We believe that those spending less than a third of their budget on program expenses are simply not living up to their missions.
Even more so should businesses that promise a service deliver that service. So when we pay out a required amount of a premium for insurance, it should return 80% of the basis for our premiums to the activity we pay for.
For public safety our government has required that in order to use a name like "organic" the company meet specifications it has established to assure us that the product meets standards of organic production and content. to be able to call itself an "Insurance Company," that company should be required to use a reasonable amount of its charges, for the insurance policies it sells, as actual insurance to policyholders.
There really is no reason except for fraudulent obtaining of funds for a company that is advertising its services to get paid without providing those services.
It is past time to stop accepting theft as everyday business operation.
(This post also at http://cabdrollery.blogspot.com/ )
10 Comments
Thanks for this post. I would start by throwing out current health insurance contracts or achieve the same end by making many of their exclusions void. I think it’s also important to emphasize that achieving credible reform will involve multiple bills over several Congresses. One piece of legislation will only start the ball rolling.
Health insurance abuses have created the need for extreme reforms, just as the frauds perpetrated on the arms buying government in the Civil War created the need for more elaborate government contracts. The government was forced to define the material, warp and weave of army blankets or they were sent gauze instead. It had to dictate that boots be made from specific grade leather, in a specific quantity, and that it be cut and sewn to minimum standards. Otherwise, it took delivery of and paid for boots made from glued cardboard, which melted in rain or on the march. The same also with newfangled tinned meats, especially in the Great War, because rotted carcases fit the poorly defined terms in some contracts. Etc., etc., etc.
For a contract to be deemed a health insurance contract that can be sold to the public, it should meet minimum criteria. It should be cancellable only in exceptional circumstances, not because the insurer lost its bet and the patient actually uses it. And not because the patient failed to disclose adolescent antibiotic treatment for acne, when the insurance company’s problem is that it doesn’t want to pay for an unrelated heart valve replacement.
Preventive care, vaccinations, periodic physicals, etc., should be paid for. (Changing the oil is always cheaper than changing the engine.) Pre-existing conditions should be banned as exceptions to coverage.
The number of abusive practices that should be banned is extensive. Many are arcane, but offer serious financial rewards for the insurer. Insured claims should date, for example, from the date services are provided, not when claims are made. That simple device pushes many costs onto later contract years, which is good for a company’s financial performance, but not patients. It can lead to no coverage at all if a covered employee changes jobs or loses one and the new insurer claims that it is liable only for procedures performed after the start of its contract and which it approved.
Thanks, and I like the comparison with war profiteering, it has the same aspect of bait and switch that the ‘insured’ suffers.
Rewriting of the basic contract reminds me of any other major purchase, where government has dictated a basic contract. That’s escaped the process in the case of insurance, and it’s writing contracts with clauses that make them unenforceable.
It should be cancellable only in exceptional circumstances, not because the insurer lost its bet and the patient actually uses it.
Absolutely. I will keep working on this.
Great post, thank you.
It’s above my paygrade, to comment on “messaging,” but I really prefer your approach. Instead of appearing to be “asking” for health care, let’s “hammer” the goddamn health insurance oligopoly for fraud and theft.
You know a lot more about this than I, but I thought I would pass this on.
It’s possible that this statement is overly cautious.
This is from Kip Sullivan, M.D. back in 2004:
AFL-CIO’s Timid Approach Makes It Irrelevant in Health Care Debate
Someone has to do oversight/quality control and that takes money. I would agree that Medicare’s 3% is too low.
ICYMI, Scarecrow’s
How Would Enron Design Health Care Reform? is really good too.
Thanks. The insurance industry has escaped the controls of simple contract law, and partly I think that’s because it has managed to carve a niche out as a semi-charitable activity. As you say, I may be too gentle with that 80%.
Medical school expenses though, would give that same hydra an inside position with the medical profession. I think here we really need the buffer of an oversight agency, instead.
Still working on this.
I will get back to you commenting with development later as I work on this.
Another audit of the health insurance oligopoly should be reqarding the percentage of their workforce that is “off-shore.” I’ve read comments here at FDL that CIGNA in particular off-shores a lot of their operation.
AFAIK, the single largest burden of medical school education falls on Medicare. Why not shift that onto the health insurance oligopoly?
Really good blog and replies. Thanks for them. I think we really need to have a sense of justice about the insurance companies, and to use it in reform. They’ve committed fraud for many years now. It may not be legal fraud, because of the contracts people sign without understanding them; but they’ve promised protection and have been delivering failures of service, death, and bankruptcies. We ought to claw back the insurance company profits through higher taxes, and use the money to pay for reform. And, if we don’t convert to single payer, we ought immediately to limit insurance company profits to a fixed amount and also regulate the salaries of executives in those companies so that maximum compensation in insurance administration, including CEO salaries doesn’t exceed the compensation of the President of the United States.
Those contracts shouldn’t be voided when the insured gets sick; there isn’t any contract that should be legal when it performs like that.
‘if we don’t convert to single payer, we ought immediately to limit insurance company profits to a fixed amount’
Agreed. I’m working on the percentage, what about that 80%?
80% is too low. it used to be more like 85%:
theft it is.
To presume a “contract” at all between two so unequal parties – an eternally mindless all-devouring godzilla profit juggernaut and a single ordinary individual susceptible to illness and accident – the first party possessing maximum resources, life-and-death power, and fiduciary duty of impoverishment to death if necessary, over the second party – i think makes a sick mockery of the entire notion of contracts.
All law, not to mention honor, has long left the station. Translation of any and all niceties on paper: we can f*ck you and we will.
These monsters are pushing, incessantly, to see how far they can get before something gives. Just like Cheney.
Btw thanks for such a great thought-provoking post.