How to Protect Yourself From Obamacare

[Conan71]

I've seen offhand remarks that the total is around a billion a year across all health insurers, but no hard figures.

In any case the average health insurance commissions are 20% of the first year and 5% of the second year.  This the retail commission so to speak as the larger brokers like East Coast Health Insurance have a volume contract with these health insurance companies and have been building our agency for a long time.    So the volume contracts typically average 25% though I have heard they can run as high as 30% for companies like United Health One.  I believe we are at 28% with them.

You can tell quite a bit about a health insurance carrier by its commissions as Blue Cross Blue Shield typically pays out 24% but only to Blue Cross only agencies in Florida.  We only get 18% but it is by far our most popular product.  Blue Cross of Georgia pays its brokers 10% on most of their work and have very few General Agents and this is reflected in their pricing and thus their market share.  I think that is the best health insurance company in the US by the way.

Aetna, Coventry, and Humana all pay 25% to their top agents and 20 to their normal agents.  On the other hand the companies owned by Health Markets, including Mega, Midwest, and United American (these people will certainly not ever see heaven by the way) have some sort of stock plan which they never pay out anyways from what I have heard.

http://echealthinsurance.com/health101/commissions/

FMC has an appointment with BCBS, I'll ask her what the commission structure is on that.  If it's 20 to 25% that's going to make paying 80% of revenues on claims pretty difficult.  Considering that so many companies are shopping new insurance every year to mitigate rising costs, looks like there could be an industry average of 15% or so.

[nathanm]

If 25% of our health insurance premiums are going to brokers, I think we've found a large part of the problem.

However, Aetna's Q3 financials state that selling expenses were a hair under 4% of collected premiums for Q3, so I don't think that's actually happening. I can look up others if you like.

UnitedHealth reported 2.6% for Q3, FWIW.

[Conan71]

If 25% of our health insurance premiums are going to brokers, I think we've found a large part of the problem.

However, Aetna's Q3 financials state that selling expenses were a hair under 4% of collected premiums for Q3, so I don't think that's actually happening. I can look up others if you like.

UnitedHealth reported 2.6% for Q3, FWIW.

So let's say it's 4% of revenues, that leaves 16% for profit, claims processing (unless that's considered part of the 80%) administrative, taxes, etc.  Still seems like that leaves a very narrow precarious margin for profit and makes skeptics like me think of it as a back door approach to single payer once the private insurers figure out there's no money in healthcare insurance any more.

[nathanm]

UnitedHealth didn't publish an MLR, but Aetna claims they were at about 82% last year and about 78% this year. I presume they're using the NAIC-recommended HHS formula. Aetna's after-tax profit margin on operations for Q3 was about 5.8% (I excluded investment income, since it's not really germane). Not a money factory, but not bad, either. And that's with a CEO pay package that's 6.8% of total net income, or about 12% if you exclude investment income from the net income figure.

And TBH, I have no sympathy for the insurance companies on claims processing. They refuse to standardize, so they bring a lot of that expense on themselves (and export a bunch of expense to doctors).

[Conan71]

UnitedHealth didn't publish an MLR, but Aetna claims they were at about 82% last year and about 78% this year. I presume they're using the NAIC-recommended HHS formula. Aetna's after-tax profit margin on operations for Q3 was about 5.8% (I excluded investment income, since it's not really germane). Not a money factory, but not bad, either. And that's with a CEO pay package that's 6.8% of total net income, or about 12% if you exclude investment income from the net income figure.

And TBH, I have no sympathy for the insurance companies on claims processing. They refuse to standardize, so they bring a lot of that expense on themselves (and export a bunch of expense to doctors).

Why do you suppose there's a reluctance to standardize?  It makes good sense to people like you and I.  It not only would be a cost-saving move, it would certainly stanch a lot of the criticisms commonly hurled at health insurers.

[nathanm]

Why do you suppose there's a reluctance to standardize?

It's probably the usual BS that has (almost) always prevailed in the absence of governments requiring it. Nobody wants to buy into somebody else's standard. Sometimes they think theirs is better. Sometimes they just don't want to give a competitor that sort of perceived control. In IT, we call it "not invented here" syndrome.

Beyond that, I'm sure there would be significant expense involved in reprogramming systems to deal with the new input formats. Given the present business situation where the top brass is always focused on next quarter's results, nobody is interested in making an investment that won't bear fruit for several years.

[Conan71]

It's probably the usual BS that has (almost) always prevailed in the absence of governments requiring it. Nobody wants to buy into somebody else's standard. Sometimes they think theirs is better. Sometimes they just don't want to give a competitor that sort of perceived control. In IT, we call it "not invented here" syndrome.

Beyond that, I'm sure there would be significant expense involved in reprogramming systems to deal with the new input formats. Given the present business situation where the top brass is always focused on next quarter's results, nobody is interested in making an investment that won't bear fruit for several years.

Think about how many other things have standardized without government intervention, VHS, compact DVD's, MP3, etc. ad nauseum.

I guess I don't know enough about medical coding and billing and probably think it should be over-simplified, but seems like there should be one coding standard nomenclature for procedures and diagnoses and really only one format needed for the patient info.  Seems like it would be easy enough to simply adopt Medicare or Medicaid coding and forms.  If it meant a better bottom line for carriers, you'd think they would jump all over it.

[nathanm]

In all of those cases, standardization was slow in coming. When it's not a consumer product, the split market can last a lot longer; sometimes even indefinitely. There are still people other than railroads using 25Hz AC power. You and I can't pass on the extra cost of having both HD-DVD and Blu-Ray to someone else.

It's worst when there's no clear advantage to one "standard" or another. The advantage comes with everybody just picking one and moving on, and nobody is willing to be the one to spend the money to change their systems, policies, and procedures to move to somebody else's. It doesn't help that the overall cost isn't even entirely clear, even as the benefits to society as a whole are obvious.

This is why Congress was empowered to set standards of weight and measure by the Constitution. My pound might be different than your pound and there's not really any advantage to either of us individually to change. Thus, society suffers under the increased expense of dealing with two or more disparate systems until Congress steps in and defines the system of weights.

[Conan71]

In all of those cases, standardization was slow in coming. When it's not a consumer product, the split market can last a lot longer; sometimes even indefinitely. There are still people other than railroads using 25Hz AC power. You and I can't pass on the extra cost of having both HD-DVD and Blu-Ray to someone else.

It's worst when there's no clear advantage to one "standard" or another. The advantage comes with everybody just picking one and moving on, and nobody is willing to be the one to spend the money to change their systems, policies, and procedures to move to somebody else's. It doesn't help that the overall cost isn't even entirely clear, even as the benefits to society as a whole are obvious.

This is why Congress was empowered to set standards of weight and measure by the Constitution. My pound might be different than your pound and there's not really any advantage to either of us individually to change. Thus, society suffers under the increased expense of dealing with two or more disparate systems until Congress steps in and defines the system of weights.

That's where it starts to get ridiculous, the government has an existing standard for the health care they pay for.  Unless the Medicare system is incredibly arcane, I'd think the government would even be willing to help subsidize any change to a common format based on that, as that is one common issue cited for higher health care costs.  You'd think that would be a great common ground with private insurers and the government.  Again, it's an area I have virtually no personal knowledge of, I'm just relying on common sense, something government nor big business seems to have much use for.

[Teatownclown]

That's where it starts to get ridiculous, the government has an existing standard for the health care they pay for.  Unless the Medicare system is incredibly arcane, I'd think the government would even be willing to help subsidize any change to a common format based on that, as that is one common issue cited for higher health care costs.  You'd think that would be a great common ground with private insurers and the government.  Again, it's an area I have virtually no personal knowledge of, I'm just relying on common sense, something government Insurers nor big business Pharma seems to have much use for.

You really like to fool yourself. Single payer is the only answer. You're getting there....

[nathanm]

That's where it starts to get ridiculous, the government has an existing standard for the health care they pay for.  Unless the Medicare system is incredibly arcane, I'd think the government would even be willing to help subsidize any change to a common format based on that, as that is one common issue cited for higher health care costs.  You'd think that would be a great common ground with private insurers and the government.

I see where you're coming from, but at the same time I wonder why it is we should give private insurance companies even more public funds to do something that they should have done a decade or more ago. It seems that route will just perpetuate the government dependence you rail against in other threads. I don't mind government money going to a good cause, but I don't really want it used to perpetuate an obviously broken system and I'm quite against it being used to reward corporate stupidity writ large.

Yes, this is somewhat inconsistent with my view on the bank bailouts, but those were loans to illiquid but solvent institutions. The insurance companies are neither illiquid nor insolvent. They're also not integral to the provision of health care services.

[guido911]

Well this is terrific news:

NEW YORK (CNNMoney) -- Doctors in America are harboring an embarrassing secret: Many of them are going broke.

This quiet reality, which is spreading nationwide, is claiming a wide range of casualties, including family physicians, cardiologists and oncologists.

Industry watchers say the trend is worrisome. Half of all doctors in the nation operate a private practice. So if a cash crunch forces the death of an independent practice, it robs a community of a vital health care resource.

http://money.cnn.com/2012/01/05/smallbusiness/doctors_broke/index.htm?hpt=hp_t3&hpt=hp_c1

[Teatownclown]

Well this is terrific news:  Many of them are going broke.

http://money.cnn.com/2012/01/05/smallbusiness/doctors_broke/index.htm?hpt=hp_t3&hpt=hp_c1

Not the one next door who just bought two new expensive cars. Perhaps his large living hasn't caught up to his family yet or maybe he just has done well with his other investments.

When I was growing up, the doctors around town did not make money off their practice like the docs do today....

[guido911]

Not the one next door who just bought two new expensive cars. Perhaps his large living hasn't caught up to his family yet or maybe he just has done well with his other investments.

When I was growing up, the doctors around town did not make money off their practice like the docs do today....

@ssclowns doctor in his day:



I wonder how many malpractice lawsuits this guy had against him which forced him to practice defensive medicine and pay expensive med mal coverage?

[nathanm]

When I was growing up, the doctors around town did not make money off their practice like the docs do today....

They also weren't being squeezed from all sides with ridiculously high student loan balances, ridiculously high insurance costs, ridiculously high costs in accepting insurance, ridiculously high costs for medical equipment, and ridiculously low payments from insurance companies.

The way I see it, doctors both make too much and too little. They, in aggregate, make more than is sustainable for our society, yet they often make less than they need.