Probably stupid idea - non-profit, policy-holder-owned health insurance company?

[Muskrat Love]

It seems that a lot of problems in the American health care system are caused by insurance companies that seem to care more about increasing their profit margins than caring for the people who buy their policies - they are focused on making their shareholders happy instead of their customers.

What are some of the barriers to creating a health insurance company that is not publically traded and non-profit? When the company takes in more than it pays out in claims, the funds are used to build up their reserves of money, and if they are still making money and the folks in charge of it (elected by the policy holders) decide to, the money can be used as a credit towards the payments made - essentially, if your insurance company is running well, you get some of the money you spend on it back.

Now, I understand it takes a lot of money to create an insurance company and to have enough buffer funds to handle statistical anomalies, so I would propose that the government provide some seed money that is to be paid back once the fund is self-sufficient, and insure and regulate the company's investments. I think this would be a good medium between having a government controlled single-payer system and the current system.

I'm no economist or insurance expert, though, so I'm sure this is a pretty dumb idea as I haven't heard of it being done. So what's wrong with it?

[KidVermicious]

There are other insurance co-ops, why not health insurance?

[SoylentPopTart]

Like this?

http://www.carefirst.com/company/html/AboutUsHome.html

[Muskrat Love]

Like this?

http://www.carefirst.com/company/html/AboutUsHome.html

I guess it wasn't that dumb of an idea.

[EJsGirl]

My auto and homeowners insurance company is USAA, and they are like that. Any profits after claims payouts and other costs get returned to the members in the form of rebate checks. I get one most years- sometimes under $100, sometimes more.

[Mirhanda]

Somewhat recently I heard something about health care in America, I can't remember if I read it or saw it on the tube though.* But anyway, they said that up until 197? (4? 5?) that all health insurance was non-profit. It might have been the law or something. Dang my memory.


*Don't you hate that?

[Beadalin]

I work for such an organization, so I'd say it's a good idea.

[redtail]

I've been saying the same thing for a while now - except I figured you should tap Gates and Buffett for the start-up cash.

It is my understanding that most of the profits for insurance companies is not directly from policy payments, but from the interest made from investing those premium payments. Hence the inverse correlation between premiums and the stock market. (This is, at least, true of malpractice premiums. I haven't seen the same claims for other types of insurance, but weren't there several insurance companies that went under due to over-investment in junk bonds?)

So I do wonder if premium payments alone is enough to maintain your reserve fund, especially if you're not screwing everyone else (i.e., medical providers and patients) like the insurance companies do.

I have lots of ideas on how it needs to be run administratively. Overhead costs could be drastically reduced for docs, patients, and the coop if you were just taking care of people (and avoiding fraud) rather than trying to screw every last penny from every opportunity.

Beadalin, do you mind saying whom you work for?

[Lounsbury]

It is my understanding that most of the profits for insurance companies is not directly from policy payments, but from the interest made from investing those premium payments.

Investment of premiums allows the insurance industry to cover future claims. Pay-as-you-go (a la the US Social Security system) is for any private insurance scheme highly unstable.

As insurance liabilities are usually "long," insurers are good investors of long term capital.

So I do wonder if premium payments alone is enough to maintain your reserve fund, especially if you're not screwing everyone else (i.e., medical providers and patients) like the insurance companies do.

It almost never is. Of course merely keeping entitlement under control is oft perceived as "screwing" people.

I have lots of ideas on how it needs to be run administratively. Overhead costs could be drastically reduced for docs, patients, and the coop if you were just taking care of people (and avoiding fraud) rather than trying to screw every last penny from every opportunity.

One rather suspects that keeping cost under control and avoiding abuse and fraud actually rather looks like "trying to screw every last penny."

But of course the public always likes magical ponies.

[Muskrat Love]

So I do wonder if premium payments alone is enough to maintain your reserve fund, especially if you're not screwing everyone else (i.e., medical providers and patients) like the insurance companies do.

It was not my intention that this would run solely off of premiums - the company would invest just like for-profit insurance companies do, it's just that the profits would be going back to the policy holders, not to stockholders.

[redtail]

Investment of premiums allows the insurance industry to cover future claims. Pay-as-you-go (a la the US Social Security system) is for any private insurance scheme highly unstable.

As insurance liabilities are usually "long," insurers are good investors of long term capital. That's what I thought. So in addition to all the stuff you think you'd need, you'd also need investment people to keep enough money rolling.

It almost never is. Of course merely keeping entitlement under control is oft perceived as "screwing" people.

One rather suspects that keeping cost under control and avoiding abuse and fraud actually rather looks like "trying to screw every last penny."

But of course the public always likes magical ponies.Ah, no. I'm talking about things like insurance companies changing the definition of "previously existing condition" without warning in order to refuse a claim, refusing to admit that a patient has already tried all the cheaper meds because it was under a previous insurance company and making them start the entire, lengthy process over again, and a few other experiences from my personal life.

I'm talking about my years of experience in medical billing and the things I've personally seen insurance companies do, plus the things that insurance company employees have admitted that they do. Things like tossing a certain number of claims and pretending they were never received - to the point that we were mailing claims with a return receipt required (pre-electronic filing, obviously). Things like the half-million dollar system we purchased to track what insurance companies pay and compare it to what they are contractually obligated to pay so that we could refile those claims - it came with a *guaranteed* ROI within two years. (That's on top of the multi-million dollar system we have to try and keep up with the various rules that insurance companies promulgate and constantly change about how their claims have to be filed.)

How about how the insurance industry has fought tooth and nail to legislate tort reform, capping payouts to victims of negligence and malpractice, claiming that it would reduce malpractice insurance costs? They lied. No state that has implemented tort reform has seen any improvement in malpractice premiums, because that's not what was affecting them. Studies have shown that they're directly correlated to how much insurance companies are making on the market, though. So now insurance companies still charge as much, but pay out less.

In point of fact, I have very few complaints about the Medicare reimbursement system, other than extremely low payments. They are very efficient and effective in their claims system. It's my understanding that their fraud units are as well. Unfortunately, most physicians can't survive on Medicare payments, as they're frequently less than actual costs of providing care (which is, of course, another method of keeping the insurance company's costs down, but one not really available to a private insurer).

I've been working in the biz for almost two decades - if you want to bullshit me about how the "public" abuses the poor little insurance companies, you'll have to do better than that. Maybe if you start talking about how the "MSM" lies about everything...

[redtail]

It was not my intention that this would run solely off of premiums - the company would invest just like for-profit insurance companies do, it's just that the profits would be going back to the policy holders, not to stockholders.OK, just checking. Like I said, I think it's a very feasible idea, if you can get the startup money and know-how to make it work.

[SoylentPopTart]

It was not my intention that this would run solely off of premiums - the company would invest just like for-profit insurance companies do, it's just that the profits would be going back to the policy holders, not to stockholders.

Even for-profit insurers are going to return money back to the policy holders, it's just typically in the form of reduced premiums. They have to do this to stay competitive with the other insurers doing the same thing.

[Muskrat Love]

Even for-profit insurers are going to return money back to the policy holders, it's just typically in the form of reduced premiums. They have to do this to stay competitive with the other insurers doing the same thing.

How many for-profit insurers have lowered their premiums over the last 5 years? I've been under the impression that premiums have been going up.

[Lounsbury]

I'm talking about my years of experience in medical billing and the things I've personally seen insurance companies do, plus the things that insurance company employees have admitted that they do. ...

I do not particularly find anecdotes about poor management compelling as an argument. A cost analysis might be compelling, but rubbish services from mutuals is hardly something unknown. Indeed my own provides such rubbish service, and it is theoretically a non profit. Anecdote for anecdote. And yet we are without data.

How about how the insurance industry has fought tooth and nail to legislate tort reform, capping payouts to victims of negligence and malpractice, claiming that it would reduce malpractice insurance costs? They lied. No state that has implemented tort reform has seen any improvement in malpractice premiums, because that's not what was affecting them. Studies have shown that they're directly correlated to how much insurance companies are making on the market, though. So now insurance companies still charge as much, but pay out less.

I am not familiar with US tort law nor the insane federal system, however that hardly seems a relevant issue for health insurance, given your ludicrously litigious society.

In point of fact, I have very few complaints about the Medicare reimbursement system, other than extremely low payments. They are very efficient and effective in their claims system. It's my understanding that their fraud units are as well. Unfortunately, most physicians can't survive on Medicare payments, as they're frequently less than actual costs of providing care (which is, of course, another method of keeping the insurance company's costs down, but one not really available to a private insurer).

Eh? EMphasis added. This rather confused paragraph seems to be an argument against your own point; an unsustainable system is not a solution.

I've been working in the biz for almost two decades - if you want to bullshit me about how the "public" abuses the poor little insurance companies, you'll have to do better than that. Maybe if you start talking about how the "MSM" lies about everything...

Other than you are perhaps a slightly deluded billings clark, I am at a loss as to your point, other than perhaps your typical billings-clark petit bourgeois populism?

As for MSM: what are you on about either the Muscat Securities Market or Methylsulfonylmethane for?

[Lounsbury]

How many for-profit insurers have lowered their premiums over the last 5 years? I've been under the impression that premiums have been going up.

And?

Have costs to insure been declining? If not, then you have your answer. An insurer must have current premiums to invest at an assumed rate of return that will cover current and future payouts. If payouts are escalating in nominal terms and investment returns are steady, then premiums will have to rise.

[BJMoose]

That's what I thought. So in addition to all the stuff you think you'd need, you'd also need investment people to keep enough money rolling.

* * *

That would depend upon the company's investment strategy, wouldn't it? While a company persuing an "aggressive" investment strategy would need a rather large crew, a company that chose up front to follow a "conservative" or "safe" investment strategy - say, investing in nothing but T-Bills - would need just a couple of clerks to handle the paperwork.

[Lounsbury]

That would depend upon the company's investment strategy, wouldn't it? While a company persuing an "aggressive" investment strategy would need a rather large crew, a company that chose up front to follow a "conservative" or "safe" investment strategy - say, investing in nothing but T-Bills - would need just a couple of clerks to handle the paperwork.

Wrong, even conservative strategies require more than "clerks" managing paperwork. Balancing maturities between various Sovereigns (Treasuries) against ongoing cash needs, managing corporate cash balances / draws against market liquidity swings, etc. is much more than 'clerks' handling paperwork. Anyone asserting the same knows fuck all about asset management. Active management of liquidities and maturities is itself a demanding speciality, in particular for those 'rainy days' when markets behave queerly (such as the past six-nine months).

Never mind that no insurance firm can pursue a purely bond driven strategy given the global yield environment the difference between bond yields and inflation in health care. It will quickly be in significant deficit.

Any insurer will need a very actively managed mix of bonds (with a variety of risk profiles and maturities) and equity securities including publicly traded securities and private investment (ranging from Real Estate trusts with a view to income generation to venture funds with a view to significant long term capital gains).

This is demanding to get right.

[Measure for Measure]

It seems that a lot of problems in the American health care system are caused by insurance companies that seem to care more about increasing their profit margins than caring for the people who buy their policies - they are focused on making their shareholders happy instead of their customers. Well...

A lot of the inefficiency in the American health care system is driven by efforts to get somebody else to pay the bill. It's for this reason that administration and billing (whether by the payer, the doctor or the hospital) takes far more overhead in the US than in other countries. The other part is the incentive for private insurers to do what they can to attract... healthy clients. They're cheaper you know. I understand that other countries with private insurance companies don't permit them to turn down clients -- they must compete in other ways.

But a US nonprofit insurer would be under similar pressures under the status quo. So although USAA is indeed a terrific provider of auto and home insurance, I suspect that extending that model to healthcare wouldn't prove to be a silver bullet. It's not like Blue Cross had an especially rapacious beginning (http://en.wikipedia.org/wiki/Blue_Cross).
-----

Incidentally, there's a New Yorker article about US hospitals (http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande) that's generating a lot of buzz. Some hospitals generate a lot of billings but also average or mediocre medical outcomes. Other hospitals (eg the Mayo Clinic) have terrific outcomes and below-average costs. Knowledge pooling and the promotion of best managerial practices could do a lot to advance the nation's health and pocketbook.

[Muskrat Love]

Sorry I gave them that idea. I did really want a public option. :(

[sailor]

It seems that a lot of problems in the American health care system are caused by insurance companies that seem to care more about increasing their profit margins than caring for the people who buy their policies - they are focused on making their shareholders happy instead of their customers. I find this argument totally unconvincing and extremely simplistic as well as quite ignorant.

Most markets where there is a healthy competition provide the best products and services at the lowest possible cost as well as a profit for those who produce them. In a field where there is no profit and where pay is not good you are going to get crappy products and services.

The problem with the health industry in America has zero to do with anyone making a profit and all to do with a crazy structure and regulation which needs an overhaul which is impossible because it goes against the acquired interests of the sector. But it has nothing to do with not letting people and companies make a profit.

[Thin Mint]

It is a great idea and is being done in Seattle to a degree. Qliance (http://www.qliance.com/index.html)