Health Reform

[twig93]

Originally Posted by Not Mike

None of these are comparable.
Life insurance - there's an insurable event, and it's over.
Auto insurance - there's an insurable event, and it's over. If the car is repaired, you switch insurers and then have another insurable event related to the first event, who pays the claim? The new insurer.
Disability - there's an insurable event, and as long as that person remains disabled, there is not another event. IF that person ends their disability coverage, returns to work, switches jobs, has a new GLTD plan and has a re-currence, who pays the claim? Not the first disability carrier, the new insurer (even it's even covered).
Workers' Comp is over when you return to work.

Health care is different. TECHNICALLY, going back to your original example, if HC worked the way you wanted, the first company should have continued to cover you. Any illness or injury you had is directly related to the orginal event (the birth).

Let's say I have knee surgery, ACL reconstruction and my employer covers it, then I switch jobs. Who should pay for my physical therapy? Six months later I want a knee brace, who pays for that? Four months later, the surgery fails. Who should cover my second surgery? I need clean up on my meniscus due to complications, who covers it?

It's just not as clean as life insurance, auto insurance, or disability. Apples and oranges.

Well, a birth is different from most other medical care for obvious reasons. But I was never covered on my father's policy at his old job. It seems obvious to me that it would be the new insurer that paid for my care.

In the example you gave, it's all pretty obvious that in the proposed system the old insurer would pay for the knee brace, the second surgery, the physical therapy. Anything that is related to the problem with your knee that caused the need for the first surgery would be the first insurer's responsibility.

Just like anything related to a disability that incurred while insured by the old insurer would be covered by the old insurer.

I am saying that becoming disabled is analogous to injuring your knee. When you become disabled, any and all covered costs associated with the disability are covered by the disability insurer on the date you become disabled. This includes cutting disability checks to the disabled member, paying for reasonable accomodations at their workplace, paying for a doctor's opinion on their disability (if the insurer disputes the doctor's statements that the insured submits), making pension contributions (if the policy provides for that) and any other valid expenses that arise that are covered by the policy.

When you injure your knee, the health insurer on the date your knee gets injured pays for anything relating to your knee.

If you subsequently develop pneumonia after switching to a different insurer, then your knee-injury claims are covered by the old insurer and your pneumonia claims are covered by the new insurer.

Yes, there can be complications. What if you developed pneumonia because you fell into a frozen lake walking on your injured knee and wouldn't have fallen if your knee had been OK? (yes, that's somewhat far-fetched) I'd say in that case, too bad, new insurer pays anyway.

There might be some other example where the old insurer pays. There would be some initial friction (probably a lot of initial friction) as insurers figure out what makes sense and where to draw the lines. That doesn't mean that they can't be drawn. (And surely health insurers are the right ones to figure out where the lines should be drawn... not politicians or judges or juries.)

Will there be some imperfections? You bet. In auto insurance, if a person is rear-ended, it is ALWAYS the fault of the driver in the back car. Even if the person in the front car slammed on their brakes for absolutely no reason at all. 99.9% of the time it's the person in the back car's fault, but there is that 0.1% of the time when it's not and their insurance company has to pay anyway. It's an imperfect system, but it works pretty well for the most part.

There will be imperfections with this in health insurance as there is a lot more gray with medical care than there is with car insurance. That doesn't mean it can't work. It means it will be complicated to set it up. Health insurers should rise to the challenge. It's better than any other method I've seen for dealing with pre-ex issues.

[twig93]

Originally Posted by Rex Ryan

The premiums are more because you are saying you are financing them differently.

Lets say you work for a year at a company and develop diabetes. And then you go to another company and work there 30 years until you retire. You really think it is fair for the company where you worked for 1 year to pay for your medical care for the next 30 years?

And no, I really do not see your way as fixing anything.

In fact, you would create new problems with your scheme. Many employers self insure, so what happens if they go out of business? What happens to your insurance them?

As erosewater brilliantly pointed out (first time for everything), the problem is not who pays, the problem is the cost.

What does a doctor make in the US, what does a doctor make in Europe? Are people in Europe as fat and diabetic as they are in the US? Does Eurpoe have a huge class of people who don't work and sit around collecting welfare? Do 50% of people in Europe not pay income taxes?

I was not trying to solve the problem of rising premiums (which is obviously related in large part to cost).

I was trying to solve the problem of not being able to switch insurance once you have a medical problem (pre-PPACA) or someone deliberately not buying insurance and waiting until they develop a serious health issue and then buying insurance that has no underwriting (post-PPACA).

The second issue drives up costs because it encourages people to not purchase insurance while they are healthy. If only the sick purchase insurance, the per-person cost is going to be way higher. It is clearly not the sole factor in rising costs, and almost certainly not the biggest factor either. But it is a factor.

And the first issue is a real problem that health insurers should have tried to fix before PPACA. If they had, there probably wouldn't be any PPACA.

[twig93]

Originally Posted by Rex Ryan

Lets say you work for a year at a company and develop diabetes. And then you go to another company and work there 30 years until you retire. You really think it is fair for the company where you worked for 1 year to pay for your medical care for the next 30 years?

If my working career is 31 years and I am equally likely to develop diabetes at any point during my working career (an imperfect assumption, but to keep it simple let's assume it's true) then there is a 1/31 chance that my first employer will have to pay for my diabetes and a 30/31 chance that my second employer will have to pay for my diabetes. Yes, that seems fair.

Or more specifically, the insurers for my employers.

Self-insuring would be extremely risky. It's risky with disability too - for the exact same reason - and it happens all the time.

When a self-insured company goes bankrupt and they have a bunch of existing claims on their hands, typically the premium to have an insurance company take over the liability (called a reserve buy out) will be a VERY senior claim on the company's finances. If they can't pay an insurer to take over the claims, I guess the claimants get screwed like any other creditor.

Probably if a company wanted to self-insure for medical, they'd have to pay premium to some guarantee organization, like with pensions. I don't think any such thing exists for disability, but I bet not too many claimants get screwed by it because I would imagine that this is right up there with employee payroll in terms of seniority. Medical costs will probably be higher, hence it makes sense for there to be more protection.

[twig93]

Originally Posted by OldGuy

While your purchase of risk idea does delete the long tail exposure, it doesn't do away with the cost to the initial insurer.

In the example the one year insurer would "sell" the risk to the 30 year insurer. The amount of risk transfer would still be proportional to the length and severity of risk.

How would the 30 year insurer know that it would have the risk for 30 years? If it did it would "buy" the risk for a very large amount of risk transfer back to the first insurer.

If it didn't it might underpay for the risk and then perhaps end up in financial trouble.

If you are going to have transfer of insurance from one carrier to the other, the risk covered has to be only for the coverage period.

Where is this idea that a liability is known in advance???

We're actuaries. What we do is deal with uncertainty. If someone could predict the future, we would all be out of a job.

When a pension actuary values a pension plan, how do they know whether employee A will live another 40 years or get hit by a bus tomorrow?

When a disability actuary buys out a disability insurance reserve from a self-insured group or a carrier that wishes to drop the line, how do they know whether a person will recover tomorrow or remain disabled for another 30 years?

They don't! They analyze the probabilities of different outcomes. Do you remember taking the life contingencies exam? That book called "Actuarial Mathematics"??? That's what it was all about.

[Mary Frances]

Originally Posted by Not Mike

None of these are comparable.

Workers' Comp is over when you return to work.

Health care is different. TECHNICALLY, going back to your original example, if HC worked the way you wanted, the first company should have continued to cover you. Any illness or injury you had is directly related to the orginal event (the birth).

Let's say I have knee surgery, ACL reconstruction and my employer covers it, then I switch jobs. Who should pay for my physical therapy? Six months later I want a knee brace, who pays for that? Four months later, the surgery fails. Who should cover my second surgery? I need clean up on my meniscus due to complications, who covers it?

Workers comp ends when your original injury is completely healed and you return to work - IF you return to work. There are really three kinds of WC claims: (1) very simple, no lost time, medical only claims. (2) More significant injuries that involve fairly extensive medical care and may include some lost time, but the worker does get better and get back to work with no permanent effects and (3) very significant injuries where the worker isn't ever going to be back to pre-injury status and may or may not ever return to work. Injuries in category (3) result in unlimited lifetime medical payments that are primary to Medicare.

I think those are comparable to: (a) a short-term illness or injury that involves one or more doctor visits and resolves within a few days or months (b) more serious injuries (the bad knee injury in the example) that are still ultimately resolved although it may take a year or more and (c) chronic illnesses that, once diagnosed, just aren't going to go away: diabetes, most cancers, heart disease.

So it seems to me that a diagnosis-based policy is not only possible, there are comparable policies written in the workers comp market every day. In a mature diagnosis-based system, premiums for younger people would be higher than they are today, but not much higher because most chronic illnesses get diagnosed at middle age. On the other hand, premiums for people over 55 might be lower than they are generally today because lots of chronic illnesses would already have been diagnosed and be on an existing policy. Transition, though, could be difficult, because your first year policy would need to cover everything.

As far as self-insurance goes, lots of large employers self-insure for workers comp, and every state has a guaranty fund to cover claims on bankrupt employers. At least if your employer goes bankrupt in WC, you're still covered by the guaranty fund, unlike if your employer goes bankrupt today and leaves you without any health coverage whatsoever.

Is it the answer to reducing costs? No, of course not. Would it get more people covered? Most likely yes. Help with the affordability spiral as people age? Probably yes.

[FormLetter]

Just curious - what happens in the WC world for one of your category (3) claims where, for example, it was a really bad knee injury 15 years ago. And now today a new laser surgery is invented that might treat that injury. Does the WC claim still cover that laser surgery that was just invented that can fix the injury?

In case my example isn't good enough, what I'm getting at is what happens in the tail when new drugs/procedures/treatments get developed many years after the initial accident occuring.

[twig93]

Originally Posted by FormLetter

Just curious - what happens in the WC world for one of your category (3) claims where, for example, it was a really bad knee injury 15 years ago. And now today a new laser surgery is invented that might treat that injury. Does the WC claim still cover that laser surgery that was just invented that can fix the injury?

In case my example isn't good enough, what I'm getting at is what happens in the tail when new drugs/procedures/treatments get developed many years after the initial accident occuring.

IANAWCA* but yes, the insurance should cover the treatment. Why do you think it shouldn't/wouldn't? What possible reason could there be?

If it's experimental, then it wouldn't. But if it's been tested and is now the standard medically accepted treatment for such an injury of course the insurance would cover it. Just because that treatment didn't exist when the policy was written doesn't make any difference. That's why it's important to make provisions for trend.

*IANAWCA = I Am Not A Workers Comp Actuary

If I've said anything that's wrong, WC Actuaries - please correct me. Having dealt with a WC claim from the claimant's perspective however, I'm pretty confident that this is how it works.

[twig93]

Originally Posted by Mary Frances

Transition, though, could be difficult, because your first year policy would need to cover everything.

This is a good point. Agree with everything else you wrote too.

[FormLetter]

Originally Posted by twig93

IANAWCA* but yes, the insurance should cover the treatment. Why do you think it shouldn't/wouldn't? What possible reason could there be?

If it's experimental, then it wouldn't. But if it's been tested and is now the standard medically accepted treatment for such an injury of course the insurance would cover it. Just because that treatment didn't exist when the policy was written doesn't make any difference. That's why it's important to make provisions for trend.

*IANAWCA = I Am Not A Workers Comp Actuary

If I've said anything that's wrong, WC Actuaries - please correct me. Having dealt with a WC claim from the claimant's perspective however, I'm pretty confident that this is how it works.

I didn't mean to imply that the procedure might not be covered. I merely wanted to know it it would be. You answered that. Thanks.

I could see how medical tech developers and drug companies would love to mine data for diagnoses under these diagnosis-made policies, and when they see that "Hey look 10 million people were diagnosed with Two Elbow Disease, let's make a drug for that since we know it will be covered forever!!!!", they target their development based on those diagnoses knowing there are a whole bunch of third-party payers out there that have no way to get away from whatever they want to charge for these new procedures/drugs/treatments.

[Chuck]

Originally Posted by FormLetter

I didn't mean to imply that the procedure might not be covered. I merely wanted to know it it would be. You answered that. Thanks.

I could see how medical tech developers and drug companies would love to mine data for diagnoses under these diagnosis-made policies, and when they see that "Hey look 10 million people were diagnosed with Two Elbow Disease, let's make a drug for that since we know it will be covered forever!!!!", they target their development based on those diagnoses knowing there are a whole bunch of third-party payers out there that have no way to get away from whatever they want to charge for these new procedures/drugs/treatments.

Your point is an important reason why healthcare costs increase so much in general. If somebody else pays the entire bill, expensive treatments are encouraged. I think a key to reversing the trend is to design policies that always require SOME out of pocket by the insured.