'Insurance' Archive
The most recent carrier to leave the Sunshine State is State Farm, with Allstate not far behind. Both insurers have said they will no longer write homeowners policies, citing steep losses. State Farm estimated that it was paying $1.21 in claims per $1 in premiums, and said it couldn’t take the $20 million monthly loss any longer. The company had asked for a 47% rate increase but was turned down.
It’s not just State Farm and Allstate, two of the biggest carriers in the US. Prudential and USAA have also said farewell to the idyllic beaches, the Keys, the Everglades, and the devastating hurricanes that plague the state.
So what now? Florida homeowners will be insured largely by a patchwork of local insurers. As a condition of State Farm pulling out, it is not allowed to dump its customers onto the state’s Citizens Property Insurance Corp, which was established in 2002 as a way to insure homeowners when they could not be insured by the private sector. As can be imagined, the agency is overburdened and is seen as the insurer of last resort.
But in the larger scheme, what does it mean for all homeowners, not just Floridians? Texans already pay some of the highest insurance premiums in the US and the coastal region of the state is similar to that of Florida’s — vulnerable to hurricanes. Since the insurance industry is regulated state by state, will insurers pull back from all coastal states, or Tornado Alley for that matter, leaving homeowners to be insured by state pools a la Citizens Property Group?
There have been calls for federal regulation of insurance companies. Interestingly enough, carriers are cautiously supportive of the concept. Agencies however, are not, with the Independent Insurance Agents & Brokers of America coming down firmly on the side of state regulation, saying it benefits the consumer.
Insurance companies have a legitimate need to make money, otherwise they won’t be able to pay claims. However, the dance that occurs between carrier, state commission, and customer is less a graceful waltz than a dancehall brawl at times. The customer often gets the worst of it, with limited coverage and higher rates.
Without insurance, the economy can’t be healthy. Insurance spreads the risk, with everyone paying some to make sure business, homeownership, commerce, is all a little bit safer. State Farm and Allstate’s decision is just business, nothing personal. But it leaves things a little more risky for the Florida homeowner — and down the road, for all the rest of us.
As details come to light, several aspects of the recently passed economic stimulus bill reveal themselves as giving a needed boost to health care consumers and providers alike.
First off, state Medicaid offices will receive increased funding for low-income and disability programs, including the recently revamped State Children’s Health Insurance Plan, which allows higher numbers of uninsured kids to qualify for state-subsidized health care coverage.
In addition, the plan includes stimulation of Cobra coverage for consumers who have lost their jobs and face paying the high cost of extending plans under the Cobra law, paying for expensive new individual policies, or becoming uninsured. Through the stimulus package, a subsidy will be provided for nine months to cover 65% of Cobra premiums for folks who have recently lost their jobs.
Funding for electronic medical records, one of President Barack Obama’s pet projects, is also included in the bill. The idea is that making information technology improvements in the health care system will lower costs by reducing unnecessary paperwork and improving the coordination of patient care and safety.
Hospitals and drugmakers will surely benefit from technology improvements and the anticipated increase in insured Americans. In addition, the administration has thrown a few bones to the medical research industry, which is suffering from a dip in financial resources, by increasing Health and Human Services research funding and by launching a comparative effectiveness research program on drugs and medical devices.
While these measures do not come without opposition, I personally am pleased to see that so many health care related issues made it through to the final agenda, as our ailing health care system cannot be allowed to drown in the sea of uncertain financial times.
Sure, everybody likes to feel needed, but the folks at the Fed could probably do with fewer cries for help these days. In one crazy, nightmarish Monday for US financial markets, the Fed not only refused help to flailing Lehman Brothers (which subsequently filed for Chapter 11 protection) and watched as Merrill Lynch agreed to be bought by Bank of America – it also had to field requests from insurance giant AIG for a $40 billion bridge loan that would help it stave off a potentially fatal ratings downgrade.
The insurer –- the US’s largest –- has been brought to the financial brink by its exposure to risky credit-default swaps and subprime mortgage-backed securities holdings. It has posted more than $18 billion in losses in the past nine months. As AIG’s stock price has plummeted (and its access to capital has contracted), ratings agencies have gotten nervous and threatened to cut the company’s credit rating –- a move that The New York Times reported could kill AIG within a few days.
After failing to seal a deal for a capital infusion from private equity firms, the company turned to the Federal Reserve for help.
The Fed didn’t seem all that interested in directly lending AIG money. Though the institution does have the power to broaden access to its funds, its primary dealer credit facility is technically accessible only to investment banks. And after refusing help to Lehman, it was loath to bail out AIG.
However, while AIG may have started out the day with only two days to live, it ended in a slightly more hopeful (though still pretty bleak) place. First, New York state regulators gave the company permission to access capital from its subsidiaries, essentially allowing it to lend money to itself. And while the Fed hasn’t agreed to a direct loan, it is petitioning Goldman Sachs and JPMorgan Chase to round up $70 billion to $75 billion in private sector loans for the company. Those measures, along with AIG’s plans to sell some assets (such as its Variable Annuity Life Insurance unit), might bring the company back from the brink. What they don’t do is change the fact that, right now, AIG is living one day at a time.
UPDATE: Despite its emergency measures to raise capital, AIG couldn’t hold off a downgrade from ratings agencies after all. S&P’s and Moody’s both cut the company’s credit ratings late on Monday, a move that allows AIG’s trading partners to require the company to raise an additional $14.5 billion in capital. It’s not clear how long it will take for AIG to raise that money, or if it can do so in time to fend off bankruptcy.
A front-page article in the Wall Street Journal yesterday highlights the common practice among US hospitals of requiring up-front payments from uninsured or under-insured patients before they’ll provide treatment.
The story describes the plight of Lisa Kelly, a Lousiana woman diagnosed with leukemia and referred to cancer hospital M.D. Anderson for care. Though insured under a limited-benefit plan sold by AARP and underwritten by UnitedHealth, she wasn’t able to get treatment at Anderson unless she agreed to pay big sums of money ($45,000, $60,000) beforehand.
The practice isn’t new, nor is it limited to M.D. Anderson. (For-profit operators HCA and Tenet follow the practice, as do not-for-profits and state-supported providers.) Hospitals have for years been plagued by bad debt, or the unpaid medical bills left by uninsured or underinsured patients. And they have found a number of ways to deal with the problem — policies that have led in part to a financial rebound in the industry. Among those new methods are better case-management practices that identify patients who can be enrolled in Medicaid. Requiring prepayment is another tactic, since it’s much harder to collect on bills after a patient has left the hospital or finished treatment.
Prepayment requirements are reserved for people who theoretically can pay, since care for indigent patients can be written off as charity care. And though Mrs. Kelly was insured, she had an insurance policy that wasn’t up to the kind of catastrophic costs she was facing.
Called a limited-benefit or mini-medical plan, her policy was likely good for covering doctors’ visits and minor costs, but probably had a relatively low annual cap and may have excluded certain services altogether. Such plans are popular for individuals not covered by their employers and businesses who employ lots of part-timers, but they’ve also become increasingly common offerings for the full-time employees of smaller businesses. Unfortunately, individuals purchasing the policies don’t always understand that they’re not good for handling major medical emergencies. And some peddlers of the products, including a Texas company called HealthMarkets, have come under fire for not adequately explaining the risks to their customers.
At any rate, Anderson wouldn’t accept Mrs. Kelly’s plan; as a de facto uninsured patient responsible for paying her own medical bills, she was forced to make payments up front. And though the practice may be common, the Journal article still manages to shock because of the personal story attached to it, which throws into stark relief the indignities such practices force on patients already under great strain from dealing with critical illness. (In one reported episode, for example, the hospital sent a bill collector into Kelly’s exam room to discuss payment before proceeding.)
Like almost everything related to the American health care system, this one’s a thorny issue. Hospitals provide services and, of course, ought to be compensated. But surely, surely we can do better than this.
Bizmology fans who read my post on pharmaceutical contamination of water supplies last month may recall the suggestion that health care facilities and individuals take unused prescriptions to collection centers to help prevent the buildup of chemicals in drinking water.
A recent Associated Press article outlines the rise of state programs that recycle prescriptions with two additional benefits in mind — redistributing the medications to those who can’t afford it and, in turn, battling skyrocketing medical costs. With the number of uninsured patients (and drug prices) steadily rising, the idea is worth examining. While the recycling programs require the extra effort of sorting and verifying drug types and checking for safety (as opposed to collection centers simply destroying the meds), ultimately I think the programs could have a significant impact.
According to the article, more than 30 states are running or exploring drug recycling programs. The goal is to provide prescriptions to those who wouldn’t be able to get them otherwise, thus improving their health and avoiding future ER visits or hospital stays. This is an especially timely issue as many hospitals are facing the financial burden of treating uninsured patients who can’t afford primary care. (Some hospitals are also trying to cut costs by recycling medical devices.)
While the results are small to date, facilitators are optimistic that the programs could have a larger impact on medical costs and patient health over the long term. This will likely not happen, however, unless there is an increase in publicity of the programs and an expansion of programs into additional areas.
I doubt many of us know where to find a local pharmaceutical recycling center or if our doctor’s office participates in such a program. Some state programs are only open to facility donations, but the programs could excel if they were convenient for everyone to participate. While drug makers like Pfizer and Merck probably wouldn’t jump for joy at missing out on the possible sales, it would be difficult to argue with the need for alternatives to high health care costs.