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  #1  
Old Apr 25, '12, 8:49 pm
The GreyPilgrim The GreyPilgrim is offline
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Default How insurance works...

When you decide to buy insurance for whatever you need insurance for you sign an agreement from an insurance company(IC) to provide coverage based on the terms agreed to in the policy. Payments regularly made are called premiums and those premiums under the policy(depending also on the IC but most operate the same) are placed in the IC funding pool.

For this example I will used car insurance.

When you file an insurance claim-say for instance you have a car accident-per the policy you pay a small deductable(out of pocket cost) and the IC covers the rest. Normally the loger you go without a claim the more your premiums go down; I say "normally" but if there is for any reason an increased number of claims for the IC they have the right per the policy to increase your premiums to cover their costs for an indeterminate time to maintain their business. Each one of these claims has to be billed, mailed, received, verified, investigated, adjusted, paid, and filed.

The point of all this is that, and this cannot be overstated, insurance if any type is set up for rare or dire cases involving a catestrophic loss. There are extensive paperwork and man-hours involved in processing claims of any kind, and everything involved in processing these claims must be considered when any IC determines their costs.

The problem with health insurance(hi) is that this system has been misrepresented, first by Unions and then by the IC's themselves as a promise to "cheap" health care. Sadly too many people have bought into the lie.

The IC's grouped insurance packages for employers with the promise that large group packages with basic coverage would always keep costs down. For a while that was true. But people became enamored with it and desired more be covered in their basic coverage. IC's must have known that this would necessarily increase claims and therefore increase costs. But it also provided a lucrative opportunity for expansion. Eventually you had IC's merging with hospitals who were undergoing a crisis of their own in trying to remain technologically on par with medical advancements while at the same time treating those who were underprivledged and who got free care. They found that these IC's could subsidize their technology and balance their budgets. The trade-off was that the merger meant that the IC's-which later became known as HMO's-set price for care, not the doctors, not the hospitals, but IC bureaucrats. And those same bureaucrats began denying care to those who-guess what-weren't buying insurance-the poor and underprivledged.

Now, as I said before, each claim you file has extensive costs that go with it. Transfer this principle to health insurance. Say you're a healthy person with insurance and as part of your policy you decide to take advantage of the physical benefit covered under the plan. After a year you have had two physicals. You have then filed two claims. Over five years you file 10 claims. By comparison with your car insurance, even if you've had a really terrible string of luck(say one accident per year), you've still filed twice as many claims for hc than for your car. Multiply that by the thousands of other healthy individuals who may have taken the same advantage.

Now let's look further. Take the example of an elderly person who has declining health, of course. Say they were lifetime smokers. And now they're in retirement and on a fixed income. Their kids are busy and don't come to visit as often as he/she would like. So they decide to visit their doctor once or twice a week for a check-up and some nice company or conversation. They've paid their premiums and they're entitled to it. That's 26 claims in a year, maybe even more depending on other things. Multiply this by the thousands of elderly who do the same thing.

On top of these instances you have thousands of claims being filed for families. Even minor things like bruises and the common cold. They go to their primary care physician(pcp), pay their co-pay, and the claim is filed.

Tens, and I bet, even hundreds-of-thousands of claims are processed by health insurance providers each year. Not only do they have to pay hospital employees, doctors, administrative staff and other hospital staff but their own staff as well. They have to pay first responders salaries and supplies and maintenance for their vehicles. Pay for hospital eqiupment, materials and supplies, travel expenses for investgators and adjusters and VIP's; all of the necessary costs of running a business. Just the costs for red tape alone has to be astronomical.
(If you think I'm lying next time your at the hospital ask your doctor how much an MRI scan costs? Most likely he/she will have no idea because they never see the price, its all set by the IC's cost managers).


And everyone complains and wonders why their premiums go up year, after year, after year? You all wonder why you get less while continually paying more?

And now you think that the government will make the system better? A system that was fundamentally flawed to begin with?
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  #2  
Old Apr 25, '12, 8:49 pm
The GreyPilgrim The GreyPilgrim is offline
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Default Re: How insurance works...

cont'd
The more people you add to any health insurance system, and the more benefits you guarantee to them by that system, you guarantee the ever-rising cost of that system until it becomes untenable. That is why every universal hc system in the world suffers from rising costs-even Switzerland's. The only reason they appeared tenable at first is because the population hadn't fully participated, and that population was relatively small(as countries like Switerland, the Netherlands, Cuba, Canada, etc are). And why the costs will never sustain itself here in the U.S.(350 million and growing). It will bury our economy under its weight.

There is only two ways you can effectively cut costs from this system, either you releave your rolls-get rid of policies-or you slash benefits thereby making it so that people file less claims.

The ineffective way to cut costs that will ultimately send IC's out of business is for the government to set and cap prices. Which will lead to rationing and waiting lines. Which we already see in countries that have universal hc systems.

The only other option is to get rid of health insurance entirely and hand the power to set prices back to the hospitals and to the doctors-as well as the descretion as to who to charge and not charge- who provide care.

But, hey, I could be wrong.
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  #3  
Old Apr 26, '12, 12:57 am
Viki63 Viki63 is offline
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Default Re: How insurance works...

Agree with you, we should get rid of health insurance entirely.
Also, if we quit listening to TV ads and ate as healthily as our forefathers, and walked everywhere instead of driving, we'd need far fewer doctor visits.
I would be willing to bet that if everyone in the country lost 20 lbs, we could reduce healthcare costs by a third. Previous generations didn't think it was normal to be taking blood pressure pills, cholesterol pills, diabetes pills, pain meds and antidepressants constantly.
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  #4  
Old Apr 26, '12, 8:43 am
BobCatholic BobCatholic is offline
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Default Re: How insurance works...

Health insurance is not insurance, it is prepaid health care. Anything else is just a lie.
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  #5  
Old Apr 30, '12, 10:10 pm
einfopedia einfopedia is offline
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Default Re: How insurance works...

i think that there are the lot of issues of the insurance so that you must have to read the policy of the insurance company then you have to join the policy because every insurance company has its own policy for the insurance.similarly life insurance pet insurance everything is different from each other.
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  #6  
Old May 1, '12, 3:02 am
St Francis St Francis is offline
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Default Re: How insurance works...

Quote:
Originally Posted by einfopedia View Post
i think that there are the lot of issues of the insurance so that you must have to read the policy of the insurance company then you have to join the policy because every insurance company has its own policy for the insurance.similarly life insurance pet insurance everything is different from each other.
Except for when you have to pay for the insurance to find out what's in it.... Oh, so that's where she got that idea!


(Seriously, when we called about insurance a few years ago, the lady told us she wouldn't be able to tell us if it would cover our children's medicine (running over $500/month) until after we got on the policy )
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  #7  
Old May 1, '12, 9:26 am
BillP BillP is online now
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Default Re: How insurance works...

Pilgrim,

I am afraid you fundamentally mis-understand health insurance.

Insurance is simply a way to make unpredictable expenses predictable, by using a pool to equalize the payments.

Statistically, we have no absolutely no idea what dollar value of healthcare any particular person will require in any particular period of time. Could be nothing, could be millions.

However, we have a very, very good idea of the aggregate dollar value of healthcare required by a large group of people. And the larger the group, the more accurate an idea we will have. With great certainty we can predict that 10,000 people, will require require, say, $57 million worth of Healthcare in a year's time.

You have two choices, you can go on your own and be liable for whatever amount you incur individually (from zero up to 1,000,000 or more) or you can "buy in" to the pool by paying $5700.

The main problem with our current system is that if you don't buy in and guess wrong, you still get healthcare whether or not you pay for it by simply turning up at the emergency room. Those costs are spread out among those of who do buy into the pool.

As far as:

Quote:
Now, as I said before, each claim you file has extensive costs that go with it. Transfer this principle to health insurance. Say you're a healthy person with insurance and as part of your policy you decide to take advantage of the physical benefit covered under the plan. After a year you have had two physicals. You have then filed two claims. Over five years you file 10 claims. By comparison with your car insurance, even if you've had a really terrible string of luck(say one accident per year), you've still filed twice as many claims for hc than for your car. Multiply that by the thousands of other healthy individuals who may have taken the same advantage.

Now let's look further. Take the example of an elderly person who has declining health, of course. Say they were lifetime smokers. And now they're in retirement and on a fixed income. Their kids are busy and don't come to visit as often as he/she would like. So they decide to visit their doctor once or twice a week for a check-up and some nice company or conversation. They've paid their premiums and they're entitled to it. That's 26 claims in a year, maybe even more depending on other things. Multiply this by the thousands of elderly who do the same thing.
Have you ever had health insurance? No health policy I've ever heard of pays for two physicals a year (much less you absurd example of 26!!).

Furthermore, health insurance companies WANT people to undergo regular physical exams (that's why they provide them periodically with no out of pocket costs!) because such exams often uncover problems which can be dealt with cheaply and easily NOW, but will if left untreated result in huge expenditures later. FREX, a 40 year old man gets a physical which finds he has mildly elevated blood pressure. He cuts down on salt, get a bit more exercise and starts on blood pressure meds (costs a couple of hundred $$ all told) which means he won't have a devastating stroke or heart problems ten years down the road (either of which will cost the insurance company tens or hundreds of thousands).

You need to read up a bit more.
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  #8  
Old May 2, '12, 7:45 pm
CoralPalazzo CoralPalazzo is offline
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Default Re: How insurance works...

what is insurance?

Insurance fundamentally includes a bunch of individuals consenting to impart dangers like . It is a quite old thought which begun back when cruising dispatches inched toward getting destroyed or lost their cargoes. Traders found that by partitioning their cargoes right around numerous pontoons, they ensured themselves from sum monetary destroy. That method, depending on if one of the vessels was devastated, no shipper lost all items. Each stood to lose just a little divide.
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  #9  
Old May 5, '12, 9:14 am
GratefulFred GratefulFred is offline
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Default Re: How insurance works...

BillP's example of 10,000 people will generate $57 million in cost per year so each of the 10,000 has to pay $5,700 per year is a proper example.

Couple of additional points. Not all 10,000 will seek medical care in that year. Some will need minor service while a few will need major care. Most of us are happy to pay $5,700 to guard against a $100,000 medical event.

If all 10,000 were age 65 and older we would expect the total care cost to be much larger. If the 10,000 were all under 30, we'd expect the total care cost to be lower. So ICs try to be careful in who they accept and set rates accordingly.

There are two weaknesses in helath care insurance. No one talks about controlling the basic cost for care. How much should be charged for service? What is a proper profit margin? No one talks about the extremely high malpractice insurance that providers must pay because of fear of larger court settlements.

With no control on costs, the premiums are rising much faster than inflation and people opt out of ICs and hope they do not need it. And then our laws say they must get service when needed even if they chose to pre-pay their premiums.

Except for the very poor who we all should help willingly, is selfishness - I won't pre-pay but you can pay for me whenever - a proper way to run the system?
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  #10  
Old May 5, '12, 5:47 pm
PaulinVA PaulinVA is offline
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Default Re: How insurance works...

Quote:
Originally Posted by BillP View Post

Statistically, we have no absolutely no idea what dollar value of healthcare any particular person will require in any particular period of time. Could be nothing, could be millions.
Absolutely wrong.

Johns Hopkins (and others) have software that will group health claims for individuals and allow for risk-based underwriting based on disease conditions.

People with chronic conditions that are not well controlled spend the most money on health care. Not accidents, not cancer, not unexpected outcomes in births.

Chronic conditions and the co-morbid conditions associated with them cost the most. Smoking, obesity, diabetes, asthma, and lower back pain cost billions. Healthy people who take care of themselves are subsidizing the care of these people.
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  #11  
Old May 5, '12, 8:20 pm
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LeafByNiggle LeafByNiggle is online now
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Default Re: How insurance works...

Quote:
Originally Posted by PaulinVA View Post
Absolutely wrong.

Johns Hopkins (and others) have software that will group health claims for individuals and allow for risk-based underwriting based on disease conditions.
This does not contradict that BillP said. He was talking about knowledge of a single individual. You are talking about the probability based on what group that individual is in.
Quote:
People with chronic conditions that are not well controlled spend the most money on health care. Not accidents, not cancer, not unexpected outcomes in births.

Chronic conditions and the co-morbid conditions associated with them cost the most. Smoking, obesity, diabetes, asthma, and lower back pain cost billions.
Of course people's cost for care is affected somewhat by willful choices they make. But a good many of the people with chronic conditions have those conditions through no fault of their own. Let's not paint them all with the same brush.
Quote:
Healthy people who take care of themselves are subsidizing the care of these people.
That is just another way of rephrasing the insurance contract. Of course those who are fortunate enough not to need benefits "subsidize" those who do need them. It wouldn't be insurance otherwise. Or are you making a little dig with that phrase "who take care of themselves" to imply that if people would just stop doing stupid things they would not need expensive health care?
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  #12  
Old May 6, '12, 7:56 am
PaulinVA PaulinVA is offline
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Default Re: How insurance works...

Quote:
Originally Posted by LeafByNiggle View Post
This does not contradict that BillP said. He was talking about knowledge of a single individual. You are talking about the probability based on what group that individual is in.
I can not predict whether you will be in a car accident or whether you will be diagnosed with cancer. I can predict your spending if you have hypertension, diabetes, etc.

{quote]Of course people's cost for care is affected somewhat by willful choices they make. But a good many of the people with chronic conditions have those conditions through no fault of their own. Let's not paint them all with the same brush.[/quote]
It's not the chronic condition - it's what you do with it. If you take care of yourself and follow the doctor's treatment plan you will cost less than if you don't.

Quote:
That is just another way of rephrasing the insurance contract. Of course those who are fortunate enough not to need benefits "subsidize" those who do need them. It wouldn't be insurance otherwise. Or are you making a little dig with that phrase "who take care of themselves" to imply that if people would just stop doing stupid things they would not need expensive health care?
I am making a big dig at people who refuse to take control of their health and drain resources from the health care ecosystem. Yes, absolutely! It is immoral (in my mind) to have a diagnosed chronic condition and not manage it. You have a lower life experience, but you also cost more of other people's money in care.
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  #13  
Old May 6, '12, 8:24 am
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Luna Lovecraft Luna Lovecraft is offline
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Default Re: How insurance works...

Quote:
Originally Posted by PaulinVA View Post
I am making a big dig at people who refuse to take control of their health and drain resources from the health care ecosystem. Yes, absolutely! It is immoral (in my mind) to have a diagnosed chronic condition and not manage it. You have a lower life experience, but you also cost more of other people's money in care.
Wow. Just wow.

So those chronic conditions that can't be managed are...? What? Immoral?

I apologise in advance for my stepdaughter's asthma, which hospitalized her twice last year. I am so sorry for the money her unmanagable condition caused you and people who think like you.

I'm also sorry for my father-in-law's bad back, which no one has been able to "cure" despite any number of interventions. I don't know how much he cost you, but I'm sure he would have avoided it if he could have.
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Old May 6, '12, 9:01 am
PaulinVA PaulinVA is offline
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Default Re: How insurance works...

Quote:
Originally Posted by Luna Lovecraft View Post
Wow. Just wow.

So those chronic conditions that can't be managed are...? What? Immoral?

I apologise in advance for my stepdaughter's asthma, which hospitalized her twice last year. I am so sorry for the money her unmanagable condition caused you and people who think like you.

I'm also sorry for my father-in-law's bad back, which no one has been able to "cure" despite any number of interventions. I don't know how much he cost you, but I'm sure he would have avoided it if he could have.
I have a family full of chronic conditions, and a daughter with asthma, so I am not unknowing of the trouble in managing chronic conditions. At one point, our treatment goal was to keep my daughter out of the ER for six months at a time, and keep her off of prednisone.

Note that I said "unmanaged" and "and follow the doctor's treatment plan" . If you are following your doctor's treatment plan for your stepdaughter, then my post did not apply to you.

This is a very personal subject, I know, but it is true - unmanaged chronic conditions reduce quality of life and are very expensive.
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Old May 8, '12, 9:06 pm
The GreyPilgrim The GreyPilgrim is offline
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Default Re: How insurance works...

Quote:
Originally Posted by BillP View Post
Pilgrim,

I am afraid you fundamentally mis-understand health insurance.

Insurance is simply a way to make unpredictable expenses predictable, by using a pool to equalize the payments.
Explain to me how that contradicts my explaination?

The issue with health insurance has to do with people's misunderstanding that by making it "comprehensive" and then forcing eveyone to be insured that it should automatically make it "cheap". That by forcing more people into the pool that you necessarily lower costs when the reality is the exact opposite.

Quote:
Originally Posted by BillP View Post
Statistically, we have no absolutely no idea what dollar value of healthcare any particular person will require in any particular period of time. Could be nothing, could be millions.
However, we have a very, very good idea of the aggregate dollar value of healthcare required by a large group of people. And the larger the group, the more accurate an idea we will have. With great certainty we can predict that 10,000 people, will require require, say, $57 million worth of Healthcare in a year's time.
You may have no idea, but the insurance companies do. If you don't think their cost analysts calculate how much an average family costs per year in claims and then further calculate their overhead into that cost, etc, etc, then, no offense, but I think that is a rather naive position.
Quote:
Originally Posted by BillP View Post
You have two choices, you can go on your own and be liable for whatever amount you incur individually (from zero up to 1,000,000 or more) or you can "buy in" to the pool by paying $5700.

The main problem with our current system is that if you don't buy in and guess wrong, you still get healthcare whether or not you pay for it by simply turning up at the emergency room. Those costs are spread out among those of who do buy into the pool.
Sadly that's not entirely true. Unless its life or death situation there are many people turned away from ER's everywhere-including my sister who is on medicaid.

And costs are not "spread out" because people necessarily are demanding that their policies be "comprehensive".


Quote:
Originally Posted by BillP View Post
Have you ever had health insurance? No health policy I've ever heard of pays for two physicals a year (much less you absurd example of 26!!).
Bill, its not an "absurd example".

The excessive costs of our current medical system can be classified into three major categories:

The first, and by far the largest excess cost, is due to the current overuse of medical resources by patients. Overuse is the rational response of consumers who do not have to pay the entire cost of the medical services they use. The causes of those excess costs are Medicaid, Medicare, and tax laws that provide incentives for individuals to have their employers purchase their medical care in the form of private health insurance.

The second category of excess cost consists of administrative and paperwork costs that are unnecessary for the provision of health care, but that have come into existence because of the current patchwork of third-party payers and their attempts to control their increasing costs by closely monitoring the behavior of doctors and patients. Even worse is the fact that those cost-containment activities do not seem to have contained costs very well.
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Quote:
Originally Posted by BillP View Post
Furthermore, health insurance companies WANT people to undergo regular physical exams (that's why they provide them periodically with no out of pocket costs!) because such exams often uncover problems which can be dealt with cheaply and easily NOW, but will if left untreated result in huge expenditures later.
Insurance companies WANT people to undergo regular physicals because they are also in cloousion with the government and the Rx companies to move their product. You prove this by your following remarks.
Quote:
Originally Posted by BillP View Post
FREX, a 40 year old man gets a physical which finds he has mildly elevated blood pressure. He cuts down on salt, get a bit more exercise and starts on blood pressure meds (costs a couple of hundred $$ all told) which means he won't have a devastating stroke or heart problems ten years down the road (either of which will cost the insurance company tens or hundreds of thousands).

You need to read up a bit more.
You seem to forget that the Health Insurance companies, like most other companies, are not in the business to lose money but to make money. Because of Bush's Rx bill the government subsidizes a lot of the Rx industry already. The Health Insurace companies already artificially inflate the prices on their statements. On one statement I received a few years back my IC told me that my MRI cost over $3,000. Later I saw a Stossel report where he uncovered that an MRI machine costs about $300/ hr to operate and I was in the machine for about 15 minutes.

So is there really any doubt that they also inflate the prices they put on their statements for pharmeceuticals?

They want you to have regular physicals because they make money, the Rx companies make money, and when they draw in enough claims they will continue to increase everyone's premiums.
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