posted
You might very well be part of an insurance group that would be getting a better deal by being merged with other groups Posts: 15770 | Registered: Dec 2001
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I just find that really hard to believe. For any sufficiently large company, as long as it's not an inherently hazardous profession such as the aforementioned coal workers, there are going to be people at varying levels of risk. Older people have more health problems, and so are probably more personally expensive. Younger people have more dependents, and so add costs that way. Most people work until their early 60s, and most people don't suddenly quit one job at 40 and find one at a different company that only hires people with 20 years of experience, so most offices are pretty well mixed.
My previous job was at an internet start up in the 90s, and yes, there were a lot of 20 year old kids doing the coding. There were also two retired professors doing editing, and several mid-50s people in HR and management who'd been brought in by the investors to make sure the company actually ran. I paid a lot more for insurance there, adjusted for inflation. It was also an office of about 60 people. In fact, my current insurance is the cheapest I've ever had. I can't speak for the entire company, but in my department we've got alcoholics, (we pay for treatment) battered wives, (we pay for counseling and therapy) people who are in and out of the hospital with chronic conditions, and people who are perfectly healthy. Just like anywhere else. There's no reason for it to be cheaper except for size.
To make a long story short, I think you're abstracting things too much. I'm sure that academically you're right, and for the hypothetical pools you're talking about everything works exactly as you say it does. I just think that applies to the actual demographics of the American workforce about as much as those guns v. butter graphs they draw on the first day of freshman economics apply to the national budget.
Posts: 7954 | Registered: Mar 2004
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posted
Its not a matter of not having varying levels of risk, its about the average levels of risk. Even if two companies have a wide variety of people with all sorts of different risks, they can have very different average risks, and very different average risks. It only takes a few high risk people (proportionally) to significantly distort average risk, particularly as high risk is often very high risk.
For instance, even a firm that hires remarkably similar people to another firm is going to be higher risk in a city with a large amount of air pollution and higher rates of automobile accidents compared to a city with healthy skies and good public transportation.
I think you're abstracting things too much by jumping from a lot of variation to similar averages
Also, you don't seem to have grasped what I said earlier about small groups not being what I'm talking about. Anything under at least a few thousand is too small to be possible to talk about in terms of average risk.
Posts: 15770 | Registered: Dec 2001
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posted
I'd also be surprised if whatever new system is envisioned doesn't take age into consideration when figuring the costs. I don't anticipate a flat-rate. One of the huge determiners of what individuals pay per month for health insurance is their age. At least I'm pretty sure I pay more than the 25 year olds in my own company.
If that's not the case, then fugu's example makes more sense to me, but basically, if we're all separated into demographic bands, then the 25 year olds in my company shouldn't be hit with a penalty for working in a company where the other employees are pushing (or looking back on) 50. And yet they are. And that's because the company has to make SURE they can profit on the policy they wrote to our pool.
fugu, I liked your explanation of why the insurers would have to charge more for each small pool policy they write -- to make sure that every policy is profitable.
You and ElJay both asserted that the bargaining power is what keeps rates lower for companies with larger insurance pools. I tell you have had had insurers flat deny this to be true -- that they set their rates purely on actuarial estimates and the larger pools don't really get a "break" through bargaining. They get it through being large so that the law of averages doesn't bite the insurer like it might with small pools. I never really understood what they were talking about until fugu's example -- they have to make every single policy profitable at the group level so that means a larger margin is built into the smaller pools because variance is high.
Thanks fugu! (NOTE: I also think they are lying to me, though, because they can't possibly hang onto business from the huge companies if they don't offer competitive rates. I'm with ElJay on this aspect of it -- the people at small companies are absolutely subsidizing the cheaper rates offered to large companies. I don't believe the insurers want us to know how it works, but that's exactly what the bottom line is.)
Anyway, back to what you'd said about variance in pools. This also explains why the insurers have been so resistant to change over the years. Their profits are built on the backs of small groups.
Given that, they probably have also resisted pooling across all locations of large companies, so I wonder what we're talking about in terms of the upper limit pool sizes in the current environment.
I thought of the Big 4 accounting firms as one possible example of a large pool of mostly young healthy people (save stress of those jobs). I really couldn't come up with many other large pools of young, healthy people, though. Maybe brokerage houses? But are they in large enough pools? Perhaps engineering firms, but most of them are mid-sized companies. Software houses, I suppose.
But still...I'm thinking that not a large number of people are part of a really big pool composed of mostly young people.
But see...here's where the age example falls apart for me as an explanation of why a national pool would be "bad" for very many people. The year-to-year variance of that pool's health care performance would be about as small as we could get. So, that removes the penalty of small pools entirely.
Now, within that pool, since they adjust everyone for age and gender related risk, they really, truly should be giving each person the best possible rate for a person in their demographic.
The only thing that should make a 25 year-olds rate be worse under this scheme than the current employer-based system would be if there's a huge number of sick 25 year olds who will be added to the pool. I don't think that's the case.
Of course, if we aren't charged differently based on age and gender characteristics, my objection is moot. But I'm pretty sure I'm right on this one.
I don't pay the same rate as the 25 year olds in my company. I'm also not paying the same rate as my boss (who is older). At least I'm fairly sure I'm not.
If I'm wrong on that, then maybe we need to consider age/gender-band pools when we make up the national system.
Also, aren't the 70+ year-olds influence on the pool is sort of off the table if medicare/medicaid are still in operation. Hmm...not sure on that one.
Posts: 300 | Registered: Dec 2002
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posted
fugu, I know small groups aren't what you're talking about. Merging the current small groups into large groups is what I'm talking about. Because I think the business model of having to make every pool profitable instead of having to make the entire company profitable over all the pools they insure is basically an excuse to rip off smaller companies. My optimistic side wants to think that they're just doing it for larger profits, and not in fact to make the smaller companies subsidize the larger ones. But the only way I agree with you that some people's insurance costs will go up under the plan Bob outlined is if large companies are subsidized by small ones currently. Or if a company is currently paying more than 4% of a given person's wages for their health benefit and decides to only cover the required 4% after the change.
Posts: 7954 | Registered: Mar 2004
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quote:One of the huge determiners of what individuals pay per month for health insurance is their age. At least I'm pretty sure I pay more than the 25 year olds in my own company.
I'm very skeptical of this (speaking only to employer-provided group coverage). I think, at least for companies greater than 50 people, the ADEA prevents this. Not sure, but I've never seen an age-specific premium chart, both when i was selecting plans for my own company (which was 30 at most) or selecting plans as an employee.
I'm almost positive it's illegal to adjust premiums for gender.
Posts: 26071 | Registered: Oct 2003
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posted
I meant I was skeptical of it being a huge determiner - even if people with less than 50 can discriminate like that, they're a small percentage of the number of insured people.
Posts: 26071 | Registered: Oct 2003
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posted
Many of the small groups would be benefitted, yes. However, there are significant numbers of employees in large groups as well.
Bob's quite right in that insurance estimates are fundamentally based on actuarial science, and expected cost is the most basic part of actuarial science, not some theoretical abstraction.
While I have no doubt bargaining goes into eventual insurance deals with companies, there can't be that much variation around the actuarial estimate. If the insurance company tried to charge too much, another insurance company would step in. If the insurance company didn't charge enough, they'd lose money.
Whether or not age ends up being a determiner, there are always groups of high risk people in any age group who can be easily grouped together. Part of my assertion is that, so long as good insurance that leads to good healthcare remains affordable, it is better if people with higher risk tend to be members of groups that pay more. It provides people with incentives to mitigate their risks, and also allows for more tailoring of the basic insurance policies if there are qualitative tendencies among the groups. I want insurance to be affordable for everyone, but I don't think everyone should be paying the same price for basic insurance.
Posts: 15770 | Registered: Dec 2001
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posted
I won't be offended if you don't have much to say - although I'd love to hear your thoughts. I've gone far afield into political theory, and a fairly esoteric portion of it at that.
Posts: 26071 | Registered: Oct 2003
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posted
I have just been so swamped, and this is one of the areas I don't do by halves, you know? It requires and is worth so much more than an offhand comment, although not so much for voting on war movies. *grin
Thanks for understanding. Life will slow down for a brief bit today, thank goodness.
Posts: 14017 | Registered: May 2000
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