Calling Dr. WalMart--Part II

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As discussed in Category 10, insurance is based on warring principles--the insurance company is betting that you will not have an accident and makes money by charging you premiums to protect you against that accident.  You are betting that you just might have that accident so are paying a little bit each year to avoid having to pay  all at once.  But insurance companies won't cover you unless you are a reasonable risk. 

Because insurance companies are not managed entirely by idiots, they will check you out.  If you had ten speeding tickets and three accidents in the last year, you are going to have a tough time getting auto insurance.  They also do acturial studies to determine risk.  (Accounting/Acturial Joke-"An acturial is an accountant that couldn't stand the excitement."  Get it?  Me neither but I saw it bring down the house at a controllers conference once.)  Eighteen years old males have more accidents than forty-eight year old females and thus are charged more, or more correctly, their parents are charged more.  At 17 my son railed against the insurance companies as a matter of pride since he was the best driver in all the world.  That was until he spun out on a icy road and put his Firebird nose first into a highway divider.  Case closed.   

The same goes for medical insurance, kind of.  There are two forms of medical insurance--group and individual.  If you join IBM or the Post Office or some other large institution that offers medical insurance you will pay x.  If you have a family and want them covered you pay x plus.  No medical exam, no questions, just sign up and pay your premium that will probably be less than private insurance because Big Brother, in the form of IBM or the Post Office, is subsidizing you and picking up part of the tab.  You can be in perfect health, run marathons, go vegan but don't bother because you are paying the same for coverage as the overweight, drinker, smoker moron in the next cubicle.  The insurance company does not check you out because you are only one individual in the IBM Army and their risk is spread over that army.  Not everyone is going to get sick but that moron in the next cubicle is going to for sure but you and he are paying the same for coverage.  Not fair.

That's right and groups like WalMart are catching on by offering individual coverage that is cheaper and, perhaps more important, portable.  Portable means you don't lose it if you change jobs.  If you have medical insurance now because you work at IBM or the Post Office, try quitting and see what happens.  No more insurance.  Yes, you can get COBRA (with some exceptions) but COBRA is really expensive because YOU are paying the whole premium.  (Note:  One of the saddest sights in life is having some miserable mid-level manager justify staying in a job they hate because of the "great benefits."  If you ever say that to yourself, just realize that your life and your priorities need a major overhaul.) 

If you have coverage outside a corporation, the insurer doesn't care where you work just as long as you can pay the premium.  That explains the portable part--you take it with you wherever you work.  It is also cheaper because the insurance is high deductible.  That means you pay more before the insurance kicks in.  This does two things.  One, it makes your premium lower because less is covered.  Two, it makes you think twice before going to the doctor.  Example--I have slightly high cholesterol.  So do two of my friends.  They are covered by the best medical plan ever.  I know because I used to work there and was covered by the same plan.  They take Lipitor and pay about $10 a month.  I have high deductible coverage and would pay about $200 a month for Lipitor.  Because I am one of the cheapest people on the planet I changed my diet and got my levels down but, boy, do I miss those pizzas.  Enough of self congratulation but cost changes behavior.  Another example.  Name two forms of surgery where the price has gone DOWN over the last five years.  Brain surgery?  No.  Heart surgery?  No.  Give up?  Laser eye surgery and plastic surgery.  Why?  Because they are not covered by insurance in most cases.   

In the competitive medical insurance arena, the market sets the price.  The market also sets the rules and that is where the political and moral dilemna rears its ugly head.  The debate tomorrow.

 

Comments

[DW]

Well, I may be that moron in the next cubicle it seems but anyway, fyi, if the company you leave closes down, so does your Cobra based insurance. Something some friends of mine just found out the hard way. And if you have a pre-existing condition and become uninsured.. good luck getting insurance ever again.