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Non-Profit Insurers: A Cheaper Alternative?

31 Dec

When I discovered the existence of non-profit* insurance companies, I was hopeful. I thought “surely a company that isn’t hell-bent on making a profit will provide more affordable policies and handle claims with fairness and decency.” Unfortunately, I was wrong.

Due to the nature of the insurance markets, non-profit insurers have been forced to mirror the activities of their for-profit cousins, which had the effect of either 1) putting them out of business because you can’t do both at once or 2) turning them into for-profit companies that find legal loopholes that allow them to still be labeled as “non-profit.”

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The Starving Goddess Livilla – Wasting Away, Just Like Non-Profit Insurers (credit:  Wikipedia)

Some That are Labelled as Non-Profit are Gaming the System

Blue Shield of California lost its California tax exempt status in 2015 because although it was classified as non-profit, it was not adhering to the charitable nature we all expect of a true non-profit organization. Instead, it was holding all $2 billion of its profit in a large fund that was intended to be used to expand the company further. There are numerous non-profit insurance companies like Blue Shield that are just not subject to the same level of scrutiny as they would be in the California pro-consumer environment.

The True Non-Profit Insurance Companies Have Gone Out of Business**

When Obamacare failed to offer the public option, i.e. government provided medical care, they did manage to keep a non-profit or “CO-OP” option available. For these co-ops to succeed against the massive, already well-established insurance companies, they needed a great deal of government support and funding right from the start. The co-ops started out very well and even had premium rates that were 6-9% cheaper than the for-profits. However, as the years went by, the U.S. government did not follow through on its promise to provide a certain level of funding, and the non-profits simply were not able to survive.

*Insurance companies that run as a non-profit institution.

** At least most of them have – I don’t have data on ALL of the companies that were created under Obamacare.

When Insurance Companies Merge

29 Jul

 

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Giant Insurance Company Logo Collage (courtesy of Hartford Courant)

Depending on who you ask, insurance company mergers will either help or hurt consumers. Whether a merger in general is a good or a bad thing is debatable. The problem today is that there have already been so many mergers of insurance companies that we are heading directly toward an oligopoly or monopoly, which is a well-established BAD thing for consumers. Healthy competition is a building block to a free market economy.

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Competition is a Spectator Sport (photo courtesy of Wikipedia)

As a general rule in the insurance world, any time the federal government is actually motivated to step in and do something, it’s probably because an issue of vital and imminent importance has entered their radar screen. And so, the Justice Department has stepped in to investigate the proposed mergers between Humana and Aetna, and Cigna and Anthem.

The Hartford Courant (based in the U.S. headquarters of the insurance industry, Hartford, CT) has written a very nice article about how different sectors of the population will be affected in the event of the proposed merger of these giant insurance companies – seniors, low income families, employers, and physicians and health care providers.

Is the United States Too Corporation-Centric? A Humble Observation of an Insurance Expert

17 Jul

I’ve been researching some complex medical regulations in the past weeks, and I uncovered what to me, is a disturbing fact. Deeply embedded in ERISA (Employee Retirement Income Security Act) I found that our federal government addressed the serious (and sometimes deadly) failings of corporate insurance coverage a full FOURTEEN years before it got around to making those same fixes for the “rest” of the American population.

McDonald's, One of the Largest Recognizable Corporations in the World (credit Wikipedia)

McDonald’s, One of the Largest Recognizable Corporations in the World (credit Wikipedia)

Parallels Between ERISA/HIPAA of 1996 and ACA of 2010

For example, you are probably aware that the ACA (Affordable Care Act, or Obamacare) prohibits the denial of health insurance based on pre-existing conditions. Well, in 1996, the HIPAA amendment to ERISA imposed this prohibition on all corporate-provided insurance (group policies). Basically, if you were lucky enough to work for a corporation between 1996 and 2010 (the year ACA was enacted), you could not be denied medical coverage (even if you changed coporate jobs, as long as you went from one corporation to another). But if you were unlucky enough to be an independent contractor, work for a small business, or be self-employed, you would not be able to secure affordable medical insurance if you had a pre-existing condition. You were out of luck.

There were many other examples of provisions that were part of the corporate regulations of HIPAA that would be enacted as part of the ACA, almost verbatim.

What Took the Government So Long?

Now, given that a full 72% of Americans do work for a corporation (or similar entity), the 1996 regulation was helpful to the majority of the workforce. But what about the other 28%? That is not a number to sneeze at. Recent (pre-ACA) estimations put the uninsured American population at appx. 45million, and that didn’t count those who had insurance that was basically useless, with huge deductibles and co-pays. Probably around 65 MILLION* Americans were at risk for ill health and early death because their government was quick to address corporate interests but slow to address the failing American medical system as a whole.

What to Consider

The point to ponder here is this – is our society so corporate-driven that the government, which is meant to represent ALL Americans, is addressing corporate needs/interests decades before addressing the American population as a whole?

*my estimate, using 2013 U.S. Census data

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