Monday, September 17, 2007

The Compassion Business

by Tom Bozzo

The Cap Times has a story of another area business that got socked with a 30 percent health insurance premium hike — we'd been there last year. Here's what an executive for the insurer has to say:

Kathryne McGowan, vice president of sales and marketing Physicians Plus, declined to speak specifically about the Park Printing situation, citing client confidentiality rules. But she said companies getting hit with "above market" premium increases are either offering too much in employee benefits or have failed to embrace a wellness culture in the workplace.

"When employees think an office visit only costs them $10 they have no incentive to ask the right kind of questions about their own situation," said McGowan, who counts over 25 years in the health insurance arena.

Well f**k you too, lady.

Maybe it would help if the answer at least made sense. Normally, you'd expect better coverage to be reflected in higher premium levels, but not so much higher growth rates. Among the factors that would lead you to expect otherwise is something that should warm the hearts of (some) hedonic pricing skeptics. If the quality of the typical policy in the market is declining, as by shifting costs and risks from insurers and employers to the insured, then the "market" premium increases represent implicit discounts for the quality degradations. [*] However, "why of course you've been paying more for less" may not be the slogan that private health insurance marketers will want on the tips of their tongues when the revolution comes.

I'd like to see their "wellness culture" metrics. It sure sounds like a buzzword justifying premium increases after the fact of payout events. "Insurance" is a lot less insurance-like when the insurer operates on a heads-I-win, tails-you-lose model.

The glibertarian appeal to incentives and customer involvement in care is just icing on the cake. Medicine is yet another complicated area where there are gains from trade with specialists. At the risk of paternalism, should people who, say, need paid tax preparers to fill out the 1040EZ be encouraged to rely less on experts?

[*] As far as I'm aware, this is not corrected in measured inflation.


"glibertarian"! I love it!
I only wish I could take credit for the coinage, as it is so perfect for some circumstances.
Speaking as a known hedonic pricing skeptic (long post coming RSN--which probably means January at the current rate), and who has seen the copy of the same office visit go up from $10 to $30 while the doctor's office is paid just about the same amount (certainly not $20 more), I'm not understanding what the "pricing" aspect is.

Wait until the insurance companies who bought all that "radioactive waste" find out their ROA is even worse than it was in the past few years.

(Yes, your premia will increase because of those defaulting Midwestern and OC mortgages. Taking odds on that getting reported?)
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