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I have been in the Life & Health Insurance business for 23 years in Florida. For the last ten years I have made a market selling to self-employed Realtors and have spent 95% of my time helping them, first and foremost, with health insurance. I also did a stint as member of the board of the Miami Life Underwriters Association — a local chapter of the National and Florida groups (MALU, FALU and NALU, now called FAIFA) and first chairman of its Political Involvement Committee. At the time we had over 1,000 members in the local, over 28,000 statewide and over 140,000 nationwide. I coordinated local chapter efforts primarily with the state Association in lobbying and legislative efforts on matters of interest to our group. We represent agents, not companies, and more often than not (don’t laugh) are more closely aligned with our client’s interests than perhaps any other group, especially some so-called “consumer interest groups.” After all, if something hurts our clients, it ultimately hurts us and our efforts were frequently at odds with those of insurance companies. I make no brief for the insurance companies for I know them far better than most and that they can certainly take care of themselves, and do, but there are some objective truths and reasonable people need to reexamine them.
I have watched and combated the “mandates” process for a long time. The last year I chaired the committee, 1991, there were over 120 proposed mandates in the legislative hopper in Tallahassee. This process has continued unabated. Maybe one or three will ever even make it out of committee each year, yet alone pass both houses and be signed into law, but the cumulative effect year and year out has been highly detrimental to the health insurance market as Mr. Catron points out. As in all government intervention it started out reasonably enough, mandated mammogram coverage, well child care, prostate exams, etc. but 20 years on it has metastasized into an ever expanding umbrella of “benefits” insurers are required to pay for. This in turn has ratcheted up the expectations of insureds to the point, speaking of interest groups, one of the more recent such calls for mandated benefits comes from an “autism activist” of Weston, FL, a very wealthy yuppie-burg in Broward County (Ft. Lauderdale area). Her demand would require all policies to pay for autism — an open ended, very subjective and potentially very expensive type of risk. I say, fine, if a carrier wants to offer such optional coverage at additional premium that’s the market at work. But why should I have to pay more on my family’s policy that includes my wife and six children for an autism mandate?
What the layman doesn’t understand is mandated coverage increases risk of loss across a carriers entire base of business that they have no say about. Too many citizens say, “tough, it’s only a few more dollars per policy.” Well, a mandate here and a mandate there and pretty soon we’re talking real premium.
Who is the worst “special” interest? In my experience, the most pernicious are state politicians who love to propose such mandates for the fawning headlines they garner back in their district; they don’t have to propose budgetary increases and the taxes that fund them and they get to posture as a compassionate David “fighting” for the little guy against the mean ol’ Goliaths of insurance. Bet you can’t guess which party loves playing that role? Mandates in a sense are just another redistribution scheme forcing some policyholders to subsidize others via insurance without the politicians having to get their hands dirty. Governor Crist recognizes this dynamic and his new plan will bring relief in the private market, but it doesn’t address the group market where far more people get their coverage.
Which is the other aspect to this problem I rarely see examined and that goes hand-in-glove with the mandate process. Florida is a case study. Prior to 1997 and the passage of the Health Insurance Portability Act (HIPPA) we had approximately 40 carriers offering group health insurance in Florida. For employer groups of less than 20 eligible employees, where the vast majority of employer-covered people work, the carriers had leeway in designing coverage and rates on a group due to the risk of the group (sick employees) or could decline to cover at all. Ditto for Associations, such as my agent’s association or Boards of Realtors, etc. where there is no “sponsoring employer” who pays a portion of the premium — a generally required distinction to increase broader participation of the young and old, healthy and sick, male and female in a group plan. The system worked, however imperfectly, far better than today’s situation. We could almost always find a reputable carrier to cover almost any group or association at reasonable market rates because they could design the plan and rates to match the risk and nature of the particular group. For individuals who were truly uninsurable there was a state guaranteed risk pool of participating insurers with a selection of guaranteed-issue plans they could purchase similar to many other states,’ no health questions asked, at higher premiums that properly reflected the greater risk of insuring them. A Democratic legislature and Governor decried this as “unfair” and so parallel to the federal HIPPA act passed legislation mandating that all group carriers issue guaranteed group plans with fixed rates on all businesses right on down to one “employee.”
That’s right, in Florida, it is possible for a self-employed individual or single shareholder/employee corporation to buy a “1-life group” plan that falls under full Federal protections regarding pre-existing conditions and portability just as if they had 1,000 employees and any group carrier doing business in Florida has to offer them. This oxymoron violates all cardinal principles of group underwriting. Meantime, the legislature, satisfied it had “solved” the insurability “crisis” and brought “fairness” with a wave of its magic wand, did away with the state run risk pool and crowed of its success. But what they really did was eliminate carriers’ ability to assess and decide which risks they are willing to take. The immediate and predictable results, indeed predicted by us, was the exodus of carriers offering group plans in our state and rapidly rising premiums.
Oh yeah, Association plans in Florida were the first to go as they, absent the sponsoring employer’s premium contribution, are generally higher risk than a typical group. Fast-forward to the present and we now have five shell-shocked and reeling carriers left standing in Florida and everybody pays through the nose. I guess that’s “fairness” of a sort. The typical group plan rate for a 35-year-old employee with family coverage in S. Florida today is on average $1,000-$1,200 monthly. For those unfortunates in the 61-65 bracket those are singles’ rates. Our rates are well above the national average, as is the annual percentage rate increases of 25-40%. It’s not hard to fathom what impact this is all having on smaller employers in today’s economy. Many are dropping their coverage because it represents hefty built-in increases in payroll every year. None of this is mysterious. If you have five companies offering plans to the same market 40 used to cover it’s going to be more expensive, way more expensive.
What have mandates and group plans got to do with one another? Risk, pure and simple. Insurers cover known, or reasonably knowable risks, for a premium and in the case of health insurance seek to spread it over a defined risk pool they can properly assess and adjust for. Mandating benefits increases risk by adding and expanding conditions to all policies they must pay for. Guaranteed issue group plans with mandated benefits for any and all comers restricts their ability to properly assess and adjust for risk and ultimately even to decide whether to take the risk. Their only remaining option is to quit the market. They are the two sides of the same coin and together have dramatically increased the risk to carriers to the point they’d simply rather leave than do business on the group side, again where most get their coverage, in one of the largest and most prosperous states. And less competition and innovation in any market of any kind always means higher prices. My clients or conversationalists will invariably compare insurers to bookies at which point I reply, that’s right, it’s very simple really, if a bookie or carrier cannot properly assess the odds or risk of losing, they won’t take it.p>The measures Mr. Catron outlines, such as Gov. Crist’s in Florida, along with the move to higher deductibles, health savings accounts and more all have this element of risk assessment and who gets to decide underlying them. We must allow carriers to get back to realistically assessing, charging and deciding which risks they will take. My fear though, knowing something about politicians, is the initiatives call for the thing all contemporary politicians most loathe — to be accused of “turning back the clock,” but that is what must be done for the health insurance market to work. br> — Mark Shepler br> Jupiter, Florida /p>
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online