The Insurance Industry

Ingrid Naiman

This article has been gestating for many years, basically since the AIDS epidemic was first discussed publicly.

The idea that someone could pay a sum now so as not to be too financially inconvenienced by a misfortune is the future is more or less novel and perhaps even experimental.  The further fact that countless people agree to a plan whereby the risks are shared by numerous, literally numberless, other individuals is totally unique and idealistic.  It brings us to a point where we subscribe to becoming our brother's keeper, less for altruistic reasons than because we never know when we may be the one suffering from disaster or disease.

It is relatively easy to promote the concept of insurance if one is afraid enough to forfeit present use of one's income in favor of future security.  It is harder to sell the plan if one does not expect to benefit personally in some unforeseen time in the distance.  However, if we as a society agree to a social responsibility to care for all our members, insurance in all its forms becomes marketable.

We have many kinds of insurance:  property insurance, auto insurance, health insurance, life insurance, product liability insurance, malpractice insurance—you name it—not because we like paying premiums but because we have bought into at least two propositions:  (1) deferred use of income for future security, and (2) shared risk, by which is meant that even if I personally never get back a penny I have spent on insurance, I am spending this money to feel safer, to protect myself and my family in case of adversity, and/or to take on part of the risk faced by others.

In the early days of insurance, participation in a plan was no doubt voluntary and some companies were probably sincerely interested in the welfare of their customers.

How does insurance actually work?  Let's say I earn $1000 a month.  I spend $60 of that on car insurance and perhaps another $100 on health insurance.  If my employer provides the health insurance instead of me, he is still taking away some of my worth because he is paying me less so as to make the premium payment.  He is also taking away a considerable amount of my free choice because he chooses the plan, regardless of my health requirements and medical beliefs.

The insurance company invests the money so that if and when a claim is filed, the customer's needs are met.  The insurance company has to manage its funds very responsibly or the coffers will be empty when legitimate claims are met.  So, traditionally, insurance companies invested very conservatively but with a growing economy, it was actually hard to lose too badly.  The sanity of investments shows when times are tougher.

To calculate future needs, actuaries estimate life expectancies, medical requirements, and so on and so forth.  If someone has a life insurance policy for one million dollars, the actuarial department figures how long that person is likely to live and how many premium payments for how much he needs to make if the company is going to have to cough up one million dollars when the customer is 72.5 years old.

Along comes the AIDS epidemic and people who are largely between the ages of 25-35 are dying by the thousands, this after having made relatively few premium payments.  This should be a nightmare for insurance companies, but when I was consulting for one of them, I was eventually told to "get lost" because the insurance industry was so well invested that it would weather the storm.

I doubted it.  I said to colleagues, "Now we have a virus bigger than the bomb . . . and it's spread by sexual contact . . . so why would the epidemiology be different from herpes or chlamydia?"  At that time, the average cost of medical treatment, unsuccessful treatment, was $250,000 per patient.  As the drug companies see a market, they will, of course, come up with more "treatments" and try to raise that closer to whatever the limit is on pay outs.  For instance, cancer treatments were averaging about half a million at that time.  From the perspective of the insurance company, once cancer was diagnosed, the patient remained on the dockets until he or she died because "treatment" never stopped, unless, of course, the ceiling on payments was reached.  This ceiling was usually 1-2 million.  Hospitals knew all this and frequently their pundits could overheard making unconscionable statements such as, "we can let him go home now because we have reached the limit covered by insurance."  For some patients, this was the golden handshake, for others the ultimate betrayal both by the insurance industry and medical system.

The insurance companies are, of course, invested in the very treatments they cover:  hospitalization and prescription drugs.  It ought to be considered a conflict of interest that they profit on both ends:  from premium payments and treatments, especially if their investments influence which treatments they will and will not cover.

There is a department in every insurance company devoted to limiting losses.  This is actually a very polite euphemism for the place where people are trained to say "no".  The insurance company can say "no" for ever so many reasons, the main one being that the policy does not cover whatever your problem is, and they have teams of lawyers supporting their contentions.  The cost of these lawyers is an expense, not loss, so the budget is not nearly so tight on lawyers as it is on claims.

As a society, we have to understand the industry and agree on our relationship to it.  There might have been a time when you got what you paid for, but I doubt this is the case now.  I will cite a few "for instances" and then you decide.

Social security is also a type of insurance, ostensibly managed by the federal government rather than private industry.  It is bankrupt so the income you deferred may or may not repay you for your sacrifices.

Every "incident" is a lobbying opportunity for the insurance industry.  Hurricanes and floods are justifications for limiting coverage.  Moreover, as the news reports now and then, scores of lawyers are employed to redefine "causes".  To make this really clear, think of a pregnancy or even multiple sclerosis as a "preexisting condition."  Let's say a man changes job while his wife is expecting.   The insurance provided by his former employer covers maternity and childbirth but if he changes to a new job while his wife is with child, her condition is preexisting.  There is hardly any limit to how this catchall can be used.  If one could prove that exposure to toxic metals or a virus caused MS, it would also be considered preexisting, just as smoking might be considered such a risk for lung cancer that the cancer, once discovered, is attributed to a cause existing prior to when the active insurance went into effect  In theory, the previous insurer would then be accountable, but we know this is not the case.

I have seen alarming developments in recent years.  For instance, earthquakes are definite risks and insurers may choose not to cover them, but then the purpose for carrying insurance may be greatly diminished, especially in the event that the greatest risk may be earthquakes.  This must be true for many properties affected by the San Andreas Fault.  So, exclusions are issues and redefinitions are also concerns.  This has been ongoing with victims of Katrina.

Medical malpractice can be so expensive that some doctors cannot afford it, but hospitals cannot remain open without it.  Recent lobbying would exempt some kinds of malpractice and put an absurd ceiling on other forms.  This operates to the benefit of insurance companies, few of whom can be expected to reduce premiums to correspond with their own reduced risks.  It certainly fails to protect patients and their families.

Now, insurance companies are cashing in on two more bonuses.  Thanks to their generous support of political candidates, they want the favors returned, roughly 100-fold.  They want less liability as well as mandatory health insurance.  These are freebies for an industry that has become reprehensible.

Massachusetts already has mandatory health insurance.  Even if one is unemployed and living below the poverty line, one has to have health insurance.  It will cost at least $325 per month per person.  Multiply that by the number of members in your family.  Then, just to keep your senses about you, remember that department that says no.  Expect the quality of your health care to decrease and the muscle on your wallet to be increased.

I have watched socialized medicine for many years now, since it was first introduced in the United Kingdom and Sweden.  It is now mandatory in all Western European countries, at least so far as I know.  If a government takes responsibility for all its citizens, it is one matter.  Odds are they could not do this unless, (1) they had very high taxes and very low expenses for other budgetary items such as bullets and bombs, and (2) very high employment rates so that unemployment compensation was not draining the coffers.  To protect the intent of such programs, it is vitally important that politicians are not in bed with the medical industry and profiting invisibly by deals cut behind the scenes.  We know this is not the case in the U.S., a country with the transparent shame of a Secretary of Defense who was formerly CEO of a drug company.

Obviously, I could go on and on, but my purpose in writing this is two-pronged.  First, I would like people to be very cautious before jumping on board some scheme that would inevitably if not immediately lead to loss of discretion over how you spend your health dollars.  If I were obliged to have insurance, but I could choose to be insured by a company that provided full-service natural health care, that would be one thing, but to take my money and then foist a flawed system of medicine on me is an entirely different matter.

Second, to demonstrate that consumers are not asleep, I am going to ask everyone to think about ways to cut the costs of their insurance without jeopardizing what they feel they need to have covered.  This is very difficult.  There are online sites specializing in advice on how to trim the costs of auto insurance.  I am sure comparable sites exist for health and life insurance.  I will try to find them and link to them.

Lastly, as a personal favor, I would like everyone who is presently insured by Mutual of Enumclaw to look seriously at changing your insurer.  As I said, this is a personal matter and I would not be suggesting this without very good reason.  I can, however, practically assure you that if you ever have any reason to deal with them that your life will be made considerably more miserable as a result.  In saying this, I have no doubt that equally evil insurance companies exist, but this one, I can say from personal experience, is really, really bad.