34 | SEPTEMBER 2017 | Claims Magazine | PropertyCasualty360.com
It has been over 50 years since this writer attempted to make a living selling health and life insurance as a licensed
Florida agent. In the two months I held
that job I managed to sell one policy, but
the underwriters rejected it for “
pre-existing conditions.” At the time, I knew quite a
bit about health insurance, but little of it is
the same in the 21st century.
Instead of a private, regulated medical
insurance industry, we have state-by-state
regulated health insurers and the Patient
Protection and Affordable Care Act of
2010 (ACA), a federal program reviled as
“Obamacare.” Where someone is insured
under their employer’s policy, disputes are
subject to federal, not state, courts as such
policies fall under the Employers Retirement Income Securities Act (ERISA).
The ACA was supposed to be tied to
the federally mandated Medicaid pro-
gram, which would assist state pools
in providing insurance for those who
couldn’t buy health insurance in the
market. Many states refused federal
funds to accept this support, and the
whole concept fell apart. While nobody
is still talking about “death squads” that
would select who got life-saving care and
who didn’t, the complaints were about
high premiums and the “mandatory”
Will Congress do ‘something’?
It is doubtful that any new health insurance legislation will be produced by Congress this fall. What is the holdup? Basically, Congress can’t seem to understand
one of the basic tenets of insurance, that to
make a risk insurable, there must be a large
number of homogeneous exposure units.
For a national health insurance program to work, it must include the healthy
and wealthy as well as the sick and poor.
Most elderly (perhaps the most expensive exposure units) are already excluded
from the pool by Medicare, so that leaves
only the vast multitude under 65 as exposure units. As the original ACA allowed
young people up to age 26 to remain on
their parents’ policies (if they were residents in their parents’ home) that further
reduced the size of the eligible pool.
One of the biggest complaints against the
ACA is the mandatory coverage require-
ment; it imposes a fine on those who fail
to participate by either purchasing their
own health insurance, having their em-
ployer purchase it for them, or joining
the ACA program, selecting coverage
from a pool of insurers. Many, some sug-
gest primarily young adults who think
they’re too healthy to need insurance, opt
out and elect to pay the “fine.” But the fine
was so small it didn’t affect these persons’
wallets in any significant way.
What happens when one of these “un-
insured” optimists gets sick or is injured
in an accident? With no insurance, their
medical and surgical costs are passed on to
those who do have insurance in the form of
higher premiums; these same responsible
citizens who purchased insurance also pay
taxes to fund local hospitals and emergency
rooms. As medical costs rise, many hospi-
tals are going broke, leaving large areas of
the nation without any medical care. Is it
not these “uninsureds” who are just as likely
to be injured in an accident or need care for
child birth or other medical problems? It’s
not the elderly who are having babies!
Most auto insurers sell Uninsured Mo-
torist Coverage along with other coverages
because irresponsible drivers cause acci-
dents and have no insurance to pay the
damages. Insured drivers have to pay for
these irresponsible people, even in states
with “mandatory auto insurance” laws.
Rather than a small fine, whatever pro-
gram Congress designs needs to include
the mandatory coverage requirement, but
the fine should be set at a minimum of
twice the amount health insurance would
have cost these individuals had they fol-
lowed the law and purchased insurance.
If Congress thinks that’s too burdensome on their constituents, they can set
up a funding mechanism, in part paid by
the fines, to help the poor buy coverage
and make the program work. Unless all
the “homogeneous exposure units” participate, no healthcare plan will function,
and the current chaos will continue.
Ken Brownlee, CPCU, is a former
adjuster and risk manager based in
Atlanta, Ga. He now authors and edits
claims-adjusting textbooks. Opinions
expressed are the author’s own.
Is it Possible to