The Simple Health Insurance Solution
Ninety-nine and forty-four one hundreds percent pure love
Former CIGNA insurance executive Wendell Potter was on Bill Moyers Journal a few weeks ago and cited a stunning statistic. When the Clintons were debating health care in the early 1990’s, 95 cents of every insurance premium dollar went to pay claims. Now it is slightly above 80 cents per dollar.
The technical term for what Potter cited is the “medical loss ratio.” When it is at 80%, it means one out of every five dollars that you are paying for insurance premiums is going towards insurance company profits.
I don’t have a dog in the health insurance fight. I voted for President Obama and I want to see all Americans have health insurance coverage. I’ve been around the insurance business all my adult life, but I stopped selling health insurance 20 years ago. I buy my own health insurance from another agent.
I really follow the nuances of how health care is priced and I don’t claim to understand it.
This puts me in the same boat as most other Americans.
I don’t think President Obama is connecting with the American people on this health care issue. It is complicated and complex. People who have health insurance are afraid of paying more for it. People without health insurance don’t have money for high-powered lobbyists and non-stop television commercials. People who are intellectually in favor of the idea of universal coverage don’t want to pay higher taxes to have it.
It’s a complicated problem. But I am offering a simple solution:
Floor the medical loss ratio at 95%.
Make insurance companies cover everyone, no matter what their pre-existing conditions might be.
Help poor and middle-income people buy coverage with a subsidy or tax credit.
My simple solution achieves several goals. It gives everyone an opportunity to be covered. Poor people have Medicaid. By subsidizing the middle class and working class, we will come close to getting everyone insured.
If health insurance carriers are forced to pay out at least 95% of what they take in, it seems they would likely compete with each other by offering better service and coverage for more treatments.
The idea behind a public option is for the government to compete with the big health insurance carriers and, thus, drive down costs.
I am seeing a campaign by President Obama and Speaker Pelosi to demonize the health insurance companies but I am not sure it is going to work. I know most people don’t like insurance companies. But getting people to march against them is an entirely different matter.
Right now, people are worried about losing their homes and their jobs. It’s hard to get people focused on anything else during a time of economic chaos and high unemployment.
I’ve had my own angry, screaming battles with my health insurance carrier. It seems like everyone I’ve talked to has had a similar experience.
I just don’t see them marching on Washington about it.
My plan (you can call it the McNay plan if it happens to catch on) is a compromise that everyone will like and everyone will hate.
The health insurance carriers will scream that they can’t make a profit on a 95% medical loss ratio. However, property and casualty insurance carriers (the people who insure your car, home etc.) have a loss ratio close to 100%. They make their profits investing the premiums. Health insurance carriers operate the same way.
Under my plan, they won’t have a profit incentive to deny claims. Being required to pay at least 95% of their premium income will mean the only way they can increase their profits is to increase their premium income. And the only ways to increase premium income is either to raise prices or to get more business. Competition will take care of both options, all to the consumers’ benefit.
Insurance companies will scream about covering everyone with no exceptions for people with pre-existing conditions, but since they have an extra 15% to 20% in claims money to work with, they ought to be able to make it happen.
The government subsidies will make sure everyone can afford coverage. The health insurance companies can’t complain about subsidies because, ultimately, the government subsidies are going to go back to them.
Insurance companies are only going to get 5% of the premiums for overhead and profit, but if we insure 41 million now-uninsured Americans, the insurance companies are going to get 5% more of a much, much larger pie.
That ought to make their stockholders happy. It also will inspire other insurance companies to get into the health insurance business and capture premium for themselves.
That is the kind of competition they were looking for.
Implementing my idea makes it harder for President Obama’s critics to attack it politically. Opponents can’t argue that “government bureaucrats will be making your medical decisions” because it won’t be government bureaucrats calling the shots.
It will be the same private health insurance company bureaucrats who are making the decisions now.
I don’t think that is necessarily better but it sure knocks a hole in the opposition’s argument.
I want to see President Obama get some kind of health insurance program passed. I suspect the Republican senator who thinks defeat of the health care program could cost Obama’s re-election has a valid point.
Obama is spending a lot of political capital on this. I’m not sure it is catching on and seems to be getting away from him.
The president keeps wanting to lecture us – all while we would rather talk about the Harvard professor and the policeman having a beer.
My idea is so simple that I am sure there are many holes in it. I’m not an expert, just a guy with a lot of insurance industry designations behind his name. None of those designations makes me a specialist in the health care debate, but it’s a different idea.
I’m open to hearing from those who don’t agree and finding out why.
My idea works and is politically viable. It gets uninsured people covered and it will get better coverage for the rest of us. It will take away the incentive for insurance companies to gouge us on claims in order to make their stockholders happy.
It’s not a perfect solution but it’s a ninety nine and forty-four one hundreds percent pure idea that we can at least talk about.
Don McNay, CLU, ChFC, MSFS, CSSC is one of the world’s leading authorities in helping injured people and lottery winners deal with complex financial issues.
McNay is also an award winning syndicated financial columnist and Huffington Post contributor.
McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983. The company’s primary office is in Richmond, Kentucky.
McNay has Master's Degrees from Vanderbilt and the American College and is in the Eastern Kentucky University Hall of Distinguished Alumni.
McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You When The Lottery.
You can write to Don at firstname.lastname@example.org or read his column at www.donmcnay.com.
You can reach him on Facebook at www.facebook.com/donmcnay and on Twitter at twitter.com/Donmcnay
McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.