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January 08, 2007

Unbelievable

From Lisa Girion's story on insurance underwriting (which I say more about at Tapped), here's a list of jobs which will lead major insurers in California to simply refuse to offer you coverage -- at any price:

Air traffic control

Building, moving

Chemical/rubber manufacturing

Circus or carnival work

Concrete or asphalt work

Crop dusting

Firefighting

Furniture and fixtures manufacturing

Lumber work, including wood chopping, timber cutting and working in a sawmill

Migrant labor

Oil well or refinery work

Police work

Roofing

Sandblasting

Sports, semi-pro or professional

Stockyard work, with or without butchering

Stables, all employees

Stunt work

Telecom installation

Transportation and aviation

Tree climbing

Tunnel work

War reporting

Window work at heights exceeding three stories

One wonders if making a living doing telecom installation, or roofing, or window cleaning, or lumber work, or construction is really so sinful that we think it acceptable for our health system to deny such workers health coverage.

January 8, 2007 in Insurance | Permalink

Comments

This is the basic flaw in the pure "market-based insurance system" theory of health care. Competition in insurance has little innovative power. Advances in actuarial practice do occur, but they tend to be mostly connected to advances in statistical analysis generally and thus don't provide much competitive advantage.

Hence, the competitive advantage of insurers boils down to only a few things:

a) Generalised administration efficiency (lower overheads)

b) Branding (which allows you to charge more)

c) Ability to avoid paying for treatments insured for. (More profit, but a tricky balance with customer satisfaction.)

d) Avoiding high risk groups or "cream skimming."

This is cream skimming in action. The killer is the "at any price" bit. The reason for it is that healthcare is not "just another commodity," it has strange elasticity curves (and a lack of substitutes) which disrupt the usual tools of market analysis.

There's more to say, but I think you address the consequences well in your TAPPED post.

Posted by: Meh | Jan 8, 2007 12:59:46 PM

Well, some of those jobs can get insurance through their employer/union, right? Like, I imagine anyone in a construction trade, or any public servant (police/fire) is insured through their union. Heck, even the stunt men might be. Though obviously not all construction workers are unionized.

So, the real travesties are the farm work, windows, and of course war reporting.

Posted by: Nicholas Beaudrot | Jan 8, 2007 1:16:34 PM

The insurers are only making intelligent use of actuarial tables.

The crime is that it's legal.

Posted by: Petey | Jan 8, 2007 1:21:42 PM

Air traffic control? What the heck is dangerous about that? The sleep patterns? It's not like planes crash into and burn down control towers.

Posted by: Cryptic Ned | Jan 8, 2007 1:28:47 PM

"Well, some of those jobs can get insurance through their employer/union, right?"

If so, then if the NFL etc won't insure you, I can somewhat understand orivate insurers refusing to. That might be part of the mechanism at work here, that group plans are available to some of these people. But probably not most.

"The crime is that it's legal."

I really don't think you should or can force a private business to operate at a loss by law.

Stoller calls it "murder by spreadsheet" I happen to like that level of rhetoric, because we need UHC NOW; because the biggest obstacle are the private insurers;because we can't fit them in to any reasonable system without simply subsidizing them and increasing overall costs. (although they might fit outside and around the margins, but without governmental connections.)

Private insurance has to go. We threaten them with extinction...and then, maybe, negotiate.

Posted by: bob mcmanus | Jan 8, 2007 1:32:36 PM

Health insurance is really for those who don't need it, as viewed by the insurance companies.

I think Bob McManus is correct. But we will have to do more than threaten extinction.

We can also prepare to make their life miserable if they don't go along:

- Mandatory Fed laws that require all policies be statewide-community rated - or even better nationwide-community rated (national risk pool).

- Jail terms for insurance executives that deny coverage to their insured if the disease/treatment is on a Federal list of things which must be covered.

- A federal entity that would compete with the insurance companies (like Fanny Mae) and use nationwide risk pooling, and that must be offered in each state as an alternative for consumers.

- Make it illegal for companies to write off expenses of lobbying/contributions from trade associations (like Pharma).

Some industries have to die when progress is made. Horse-buggy makers and horse-whip makers were not protected from change. As long as we make the insurance companies think we aren't serious about major change (including eliminating their business), they will think they are protected.


Posted by: JimPortlandOR | Jan 8, 2007 1:53:42 PM

so sinful

What kind of underwriting are we talking about here? Indulgences?

Posted by: Sanpete | Jan 8, 2007 2:21:55 PM

Attempting to issue insurance coverage at an individual level is just completely borked regardless of the insurance companies' motivations. The money to pay for sick peoples' claims has to come from somewhere, usually from the premiums of healthy people - but there aren't enough healthy people buying individual insurance for that to cover it. A large part of the reason these healthy people aren't buying individual insurance (i.e. go uninsured) is because the premiums are so high, compounding the original problem. This is the infamous adverse selection death spiral, and individual health insurance is a textook example of it in action.

As for threatening the companies with extinction - most of these companies already contract with the government to administer existing healthcare programs like Tricare and Medicare. If the government does the intelligent thing and becomes the primary insurer in the country, it'll have a helluva lot of new administration to be handled - which will most likely be farmed out to companies that already have a lot of experience in handling healthcare eligibility and claims. The insurance companies are being threatened with a massive refocusing of their business, not outright extinction.

Posted by: Kylroy | Jan 8, 2007 2:28:10 PM

"What kind of underwriting are we talking about here? Indulgences?"

Many people pooh-pooh universal coverage as a government subsidy to smokers and fatties. Why, if you live a virtuous, low-fat and excersize rich life, you won't get sick. Just ask Jim Fixx.

What this list illustrates is that the focus of underwriting is not virtue, but profits. And people in many occupations necessary to society (we could live without semi-pro sports and stuntmen, but construction and logging are definitely needed) are shut out of the current system. While some or even many of them may get group coverage, the glimpse into the id of the insurance industry this list provides us is a reminder that, if they could, insurers would drop anyone who ever claimed anything.

Posted by: Kylroy | Jan 8, 2007 2:36:03 PM

> Air traffic control? What the heck is
> dangerous about that? The sleep patterns?
> It's not like planes crash into and burn
> down control towers.

Very high ulcer, heart disease, and PSTD-like-syndrome rates. Similar to other high-stress, rotating-schedule jobs (e.g. power plant operator).

Cranky

Posted by: Cranky Observer | Jan 8, 2007 2:55:36 PM

This si why the very nature of health insurance is evil. Please, spare me the "they're a business and need to make money" argument. It is the very desire to better yourself at the expense of others that defines evil. The people who run health insurance are evil men, and I wouldn't mourn a day if theydied or their loved ones did. The wicked should suffer, for they make sure the good do.

Posted by: Soullite | Jan 8, 2007 3:23:38 PM

Kylroy, universal coverage and underwriting are independent issues.

It is the very desire to better yourself at the expense of others that defines evil.

So competition = evil, Soullite?

The people who run health insurance are evil men, and I wouldn't mourn a day if theydied or their loved ones did. The wicked should suffer, for they make sure the good do.

This attitude seems evil to me. The insurance people I've known have more humanity than you seem to, just judging from your post, though I'm guessing this isn't representative of your whole soul.

Posted by: Sanpete | Jan 8, 2007 3:34:46 PM

But... but... but... supply and demand curves! Market pressure! Econ 101!!!

Posted by: NBarnes | Jan 8, 2007 3:45:07 PM

Hemmm Cranky,

Seems you must be guessing. Ulcers are caused by H. Pilori, a bacteria, not having large aluminium tubes flying at high speed towards each other.

Since most of the Air Traffic people are government employees they have little need for outside insurance. I would suggest that none of this makes any sense and the data that Air Traffic Controllers are high risk is nonsense. I think they are on the list in error.

For what is it worth I know a lot about ATC and even more what it is worth, my son is one.

DrJohn

Posted by: DrJohn | Jan 8, 2007 3:52:41 PM

Not sure what kind of doctor you are, DrJohn, but ulcers have more causes than H. pilori. And they are associated with high stress, which air traffic control is famous for. High stress is also associated with high blood pressure and other problems. But there's no need to guess the general reason air traffic controllers are on the list. It's because studies, including ones internal to the insurance companies, show them to be at high risk for expensive claims. Doesn't surprise me at all. Best wishes for your son, regardless.

Posted by: Sanpete | Jan 8, 2007 4:16:39 PM

H. pylori, that should be.

Posted by: Sanpete | Jan 8, 2007 4:18:13 PM

"I would suggest that none of this makes any sense and the data that Air Traffic Controllers are high risk is nonsense."

We are not dealing in the realm of causatory logic. We are dealing in the realm of actuarial tables.

If the tables show ATC's to be a bad risk, no logical justification is necessary.

Again, the insurers are just doing their jobs. The crime is that it's legal.

Posted by: Petey | Jan 8, 2007 4:21:46 PM

"Kylroy, universal coverage and underwriting are independent issues."

Actually, they're very closely related. Absent universal coverage, you have underwriting to decide who does and does not get covered by a health insurance policy (or what the rates for that policy will be). And with healthy people opting out, you enter the adverse selection death spiral that got us where individual insurance is today. Forbidding certain types of underwriting exclusions won't eliminate the underlying problem - the money to pay sick people's claims has to come from somewhere. And if only sick people are signing up, it's going to come from insanely high premiums.

Group plans get healthy people to join by paying most of the cost for them and not offering them the alternative of a cash payout. National health care just drafts everyone into the same risk pool. I don't really see an objection to national health care that doesn't also apply to employer health care - if it's wrong to have your money support an overweight, hard-drinking fellow citizen, why is it OK to have that money support an overweight, hard-drinking coworker?

Posted by: Kylroy | Jan 8, 2007 4:31:18 PM

Kylroy, even with universal coverage you can have underwriting. Maybe you're thinking of community rating rather than universal coverage?

As I see it, universal coverage and community rating are both compatible with incentives for healthy behavior (beyond the ones that inhere in good health). Underwriting isn't the only way to provide incentives.

Posted by: Sanpete | Jan 8, 2007 4:54:00 PM

You got about 99 percent of the way to the cupie doll, Sanpete. Actually, in a perfect health insurance world, you need BOTH universal coverage and community rating. The beauty of it is, if you have both of those, you don't even need the government as single payor. You can have a multi-payor, private-sector-administered system as long as it is carefully regulated, much the way utilities are.

Posted by: Rick | Jan 8, 2007 5:14:37 PM

Kilroy said "The people who run health insurance are evil men, and I wouldn't mourn a day if theydied or their loved ones did. The wicked should suffer, for they make sure the good do."

Sanpete said "This attitude seems evil to me. The insurance people I've known have more humanity than you seem to, just judging from your post, though I'm guessing this isn't representative of your whole soul."

How bout this instead? The people who make a living by better determining who will be killed or maimed by disease or injury in the absence of health care, and then denying them access to that health care, regularly perform an immoral act. Their actions result in death and suffering. They undertake them because they enable them to make money.

Better said?

Posted by: RW | Jan 8, 2007 5:37:30 PM

Not the cupie doll I was trying for, Rick, but you may be right.

RW, it was Soullite who made your first quote. Your version is better, but it still depends on some controversial assumptions about morality and other things, some of which I'm not so sure of.

Posted by: Sanpete | Jan 8, 2007 6:05:38 PM

Drat! Can't seem to get my posters names right.

What controversial moral assumptions do you detect?

Posted by: RW | Jan 8, 2007 6:10:12 PM

What controversial moral assumptions do you detect?

There's the assumption that underwriters (and their insurance colleagues) determine who will be killed or maimed by disease in the absence of health care. The insurers decide whether they'll pay, but they don't directly decide who will get care. In a way, we all decide that, in that we could vote to pay. (And we often do pay, as it happens.)

There's also the assumption, it seems, that the insurers are morally responsible here. Usually in a free market we don't assign moral blame that way.

Posted by: Sanpete | Jan 8, 2007 7:29:02 PM

what does a free market have to do with the insurance industry? especialy since free markets can not exist in practice. Further why shouldn't we assign moral blame even if a free market were possible. The insurers make a moral choice whether they want to admit or not.

Posted by: BillCross | Jan 8, 2007 8:59:21 PM

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