Feb
24
American International Group May be on the Road to Recovery
Filed Under AIG, Income Protection, Insurance Company, Life Insurance | 3 Comments
American International Group may be on the road to recovery 17 months after the company received a US$ 182.3 Billion bailout from the American government at the peak of the global financial crisis of 2008/2009.
AIG, whose failure threatened to collapse the USA’s economy, has improved its means to repay the bailout which it received through increased sales in the company’s property-casualty business. Property-Casualty contributed to a third of AIG’s revenue in the three quarters following the opening shots of the great recession. In conjunction with rising Life and Retirement product sales, the mainstay of AIG’s offerings, in the third quarter of 2009 the company looks well placed to pull out of what many industry analysts are referring to as a “death spiral”.
Managing Director of Nomura Securities International, David Havens, said “There are clear signs that AIG has pulled out of what could have been a death spiral.” Nomura Securities was a key player during the Global Financial Crisis, taking over the European and Asian business of defunct banking giant Lehman Brothers.
Industry observers are forecasting a positive outlook for AIG, and point to recently released third quarter results that see the company moving more in line with industry averages, rather than continuing poor performance. During the fourth quarter of 2008, the first full reporting period after they received their bailout, AIG posted Property-Casualty premiums sales of US$ 7.1 billion. This figure has risen during 2009 with the property-casualty arm posting sales of US$ 7.7 billion in the first quarter, US$ 7.9 billion in the second quarter, and US$ 8.1 billion in the third.
Life insurance however, may be slower to recover. During the fourth quarter of 2008, AIG posted Life insurance revenues of US$ 15.2 billion. The first quarter of 2009 saw British clients abandon the firm due to a perceived lack of confidence, and consequently saw Life insurance sales drop to US$ 14.5 billion. The life insurance arm of AIG continued to struggle in the second quarter of 2009 with sales down to US$ 13 billion, but a recent reversal of the downward trend, and an increase in Life insurance sales, up to US$13.7 billion in the third quarter, means that stability may be returning to this beleaguered company.
In other AIG news, AIG Star Life Insurance Co. Ltd, a life insurance subsidiary located in Japan, has formed a partnership with Orix Corp. to sell annuity products. Aiming to enhance AIG Star’s customer base, the two companies will pursue a venture which will see them jointly marketing annuity products to Orix Corp’s existing clients.
Companies Mentioned
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally
A wholly owned subsidiary of Nomura Holdings, Nomura Securities is a finanical services company in addition to being a global investment bank. Based in Tokyo, Nomura Securities has approximately 26,000 staff worldwide.
Jun
29
Market Competition: American and International insurance
Filed Under Health Insurance, Healthcare, Income Protection, International Healthcare, Medical Insurance, USA Health Insurance | Leave a Comment
Despite the fact that recent polls show approximately 72% of the American populace are in favor of a government-sponsored health insurance plan and the common sense idea that sooner would be better than later, the legislative leaders of the country seem to have instead let the discussion drift into politics.
Various Democrats have proposed plans either involving a public plan, an individual mandate to force people to buy insurance (probably with some form of government subsidy), or some kind of reform with a “trigger”, whereby if the market for health insurance does not rectify itself within a period of time then a public plan would be introduced. On the flipside, Republicans leaders have put forward a plan for health insurance reform which, to be fair, is somewhat less than substantive as it does not include any numbers or data.
While most of Washington has been consumed by the bickering, not all have been sitting on their hands. After an investigation by the New York attorney general’s office as well as a congressional investigation, it came to light that American insurance companies have been using a database run by Ingenix, a subsidiary of managed health care company UnitedHealth Group, that allowed many American insurers to routinely underpay U.S. doctors and hospitals for out-of-network care administered to American patients, ultimately saddling average Americans with the remainder of the costs. A separate congressional hearing has landed some insurers in hot water over the practice known as recission, where they have revoked some individuals’ coverage based on medical history after the individuals’ had already paid their premiums.
The Ingenix database worked by taking claims data submitted by its customers, the insurers, and developing payment rates for out-of-network medical services. Here’s the rub, the insurers were found to have been cleaning up their claims data before sending it to the database by removing many high costing data points. Ingenix itself would then use highly suspect statistical analysis to arrive at rate estimates for how much insurers should pay for medical services provided by medical facilities not in their insurance networks. The end result being that the reduced cost of the initial data, along with statistical tweaking, forcibly and falsely pushes down the amount they have to pay on a claim and also increasing the amount the patient has to pay out of pocket.
On top of all this, Americans are paying more than ever for health insurance and health care. A report from the U.S. Department of Health & Human Services shows that not only are rising premiums a concern, but deductibles, the amount of money you must pay for medical expenses before insurance covers the rest, and copayments, the amount of money you pay each time you see a doctor, have also risen steeply over the years. Average deductibles for families have risen in price by 30% over two years and the number of people with employer-based insurance and copayments over US$25 rose from 1 in 5 to 1 in 3 between 2004 and 2008. So what exactly is wrong with local American insurance policies that are causing such problems?
One reason is because of the way the U.S. health insurance market is set up to begin with. Because each state is entitled to a large amount of self-governance, there are, in effect, 50 different markets, each one is its own particular mishmash of state and federal rules, and each one quite distinct from the others. In and of itself this isn’t a problem, however, it does make it easier to gain a majority of market share. A recent report shows that there have been 400 mergers involving health insurance companies in the last thirteen years. The result of this has been that 94% of American statewide health insurance markets are now considered “Highly concentrated” by U.S. Department of Justice guidelines. By the aforementioned guidelines, a market can be considered as “highly concentrated” if more than 42% of the market’s share is controlled by one company. Experts have noted that healthy competition in the market place is a key way of keeping costs and premiums down.
Thankfully, this is not a problem for companies providing international insurance policies. As we saw earlier, local American policies, much like local health insurance policies everywhere, are restricted in their choice of medical facilities and doctors based upon the insurer they have and the network of medical facilities that will accept their coverage. Most international health insurance plans do have two areas of coverage, one being worldwide, and the other being worldwide excluding the U.S., due to the fact that the cost of health care in America is so high. Still, international health and medical insurance plans will generally afford you access to any hospital or doctor of your choice and pay your claim up to the limits of your policy. Even a policy excluding coverage in the U.S. will often provide emergency coverage if you are traveling through the country.
The fact that the vast majority of international health and medical insurance plans’ give you access to global network of participating medical facilities means that insurers have access to similar networks and must work for market share through offering products that compete through benefits and costs. This keeps down the price of premiums as well as out of pocket costs like deductibles and coinsurance.
The constant competition for customers in the international health insurance marketplace means that customers are as important to insurers as the insurance is to the customer. In order to provide products that are attractive to customers over the long term, international health and medical insurance plans are community rated and guaranteed renewable for life. Being community rated means that each age groups’ premium is based upon the average cost to insure the most average of people. Basically, should you develop a costly or chronic condition, you are guaranteed to be able to renew your insurance for the rest of your life if you wish, without having your premiums raised significantly every year due to your claims history.
While local health insurance plans in America and elsewhere may initially appear cheaper, often times they end up being cumulatively more expensive as people age or if they fall seriously ill causing their premiums and out of pocket costs to rise. Because of a more fluid, open market in the international health insurance industry, the inflation of insurance costs to consumers is kept down and plans have become more competitive over a longer period of time.
Apr
28
Towards the Edge: Recession Presses Need for Change
Filed Under Health Insurance, Healthcare, Income Protection, Medical Insurance, USA Health Insurance | Leave a Comment
America has been in need of healthcare reform for some time now with government health services slated to become an ever larger part of the budget in the future, while the increasing cost of private health insurance has outstripped growth in income by about 3 to 1 over the previous years. While the government debates reform, the recession is having an increasing impact on people and may be a driving force in the widest ranging healthcare reforms in the United States in years.
One fact about the American healthcare system that is fast becoming apparent is that it doesn’t function very smoothly. America has the highest medical costs in the world and the price tag does not always guarantee the highest quality care. Private insurance is prohibitively expensive unless purchased through an employer-based plan, while government run insurance manages to be under funded with an enormous budget at the same time. One thing is for certain, the current mix of public and private insurance have not excelled over time.
A recent survey carried out by David Cutler of Harvard University and Alexander Gelber of the Wharton School show that over the last two decades, a larger number of Americans are losing health insurance coverage at some point during the year. Using data from the US Census Bureau, the authors compared statistics from 1983-1986 and 2001-2004, finding that the percentage of the population that lost their insurance coverage during a 12 month period increased from 19.8% to 21.8% during the two decades or so in between the data sets. The percentage of people losing insurance as you look at the poor and those not in perfect health increases alarmingly.
There is good news though, in that for most of those losing their private insurance, many of them seek coverage under various government healthcare programs. The most recent Census Bureau figures for 2006-2007 show a minor dip in private insurance from 67.9% to 67.5% of the population, but the number of uninsured people in the country went down from 47 million to 45.7 million people. Government health insurance seems to have absorbed most of these people, growing from 80.3 million people covered to 83 million in the 2006-2007 period.
While it’s nice to see that government programs are stepping in to fill the gap, the problem is that its old news. It does not even begin to take into account the massive shifts brought on by the recent recession. The consequences are beginning to take a heavy toll on the health of the country in a myriad of ways. Since the start of the downturn in December 2007, employers have cut 5.1 million jobs. The number of people currently on continuing unemployment benefits is at 6.13 million, bringing the national unemployment rate to 8.5%. Because many people in the US receive their medical insurance through their employers, lost jobs means lost insurance. The Kaiser Family Foundation says that a 1% increase in the unemployment rate means an increase of 1 million enrollments in Medicaid and the Child Health Insurance Program (CHIP), and also a 1.1 million increase in uninsured people.
This high rate of lost jobs, estimated to be as high as 14,000 jobs per day, is pushing people out of their employer-based insurance and either into a government health insurance program or, if they are too young for Medicare or simply not poor enough to qualify for Medicaid, are forced to purchase private individual health insurance plans if they would like to have health insurance at all. An investigation by Consumer Reports has found this trend to carry problems of its own.
The investigation showed that personal health insurance is regularly more expensive than the equivalent cover would be through an employer-based plan. It is often extremely expensive or completely out of reach for people of meager income and less than stellar health. Consumer protection in this area is also an issue where, once again, America demonstrates the importance of appropriate regulation by not having it. Consumer Reports found that most state insurance regulators are not charged with evaluating the coverage these products offer and most disclosure requirements are decidedly limp-wristed at best. So, trying to compare plans, figure out prior to purchase what is and is not covered, or approximately calculating the out-of-pocket liability for any serious medical procedure is nigh impossible. While affordable, these low-end personal plans often come with extensive exclusions and loopholes which often leave people in serious medical debt if they suffer a medical catastrophe.
As everyday American consumers are continuing to feel financial pressure, recent polls have shown an increasing trend to put off medical care. A poll released by Thomson Reuters this month showed that over the past year, 20% of American households have either delayed or cancelled receiving medical care. Out of those who did cancel or delay care, 24.1 attributed it to the cost. The last time this poll was administered in 2006, the number of people delaying or canceling care was at 15.9% and the main reason for delays and cancellations was lack of time. Another chilling figure from the poll was that 21% of American adults were anticipating they would have difficulties paying for either health insurance or healthcare services within the next three months.
As the financial implications on healthcare snowball for the consumers, so too does it snowball for medical practitioners. One instance of this is in North Carolina, which has the fourth highest unemployment rate in the country at 10.7%. The increasing numbers of unemployed and uninsured people have led to a remarkable increase in traffic in free or discounted clinics and also emergency rooms, where hospitals are obliged to administer treatment to everyone, insurance or no. This often means hospitals are performing millions of dollars worth of healthcare services and not seeing any money from it. On top of this, people who do have insurance and actually pay the hospitals for their services are shying away from optional procedures and surgeries which would usually help generate income to keep the hospital running. At the moment, hospitals under financial pressure from both the shrinkage of revenue generating procedures and the amount of “uncompensated care” hospitals are offering to those in need, in some cases only staying functional through infusions of federal monies from the stimulus package.
The picture of American healthcare is looking increasingly bleak. Record numbers of Americans are losing their livelihoods and insurance, forcing the federal government to widen enrollment to more people and ratchet up spending on government programs which receive regular sniping from conservatives for being too expensive already. Not only that, but the health and finances of the people may suffer in the long run as they either cannot get the healthcare they need, or go into medical debt receiving it. One thing is for certain, the current hodge-podge of public and private in the healthcare system is a mess that is only getting worse with the limping economy. It can no longer be fixed by piecemeal measures and requires an alteration at the fundamental level of which the system operates.
Feb
20
The Young Invincibles
Filed Under Health Insurance, Healthcare, Income Protection, Medical Insurance, Students, USA Health Insurance | 1 Comment
The New York Times is running an interesting story on young under-insured Americans during the current economic crisis. Regulars to this blog will be aware that this is a favorite topic of ours, and really only serves to illustrate that serious changes need to occur in the USA’s domestic healthcare and insurance industries.
From the article:
“My first reaction was to start laughing — I just kept saying, ‘No way, no way,’ ” Alanna Boyd, a 28-year-old receptionist, recalled of the $17,398 — including $13 for the use of a television — that she was charged after spending 46 hours in October at Beth Israel Medical Center in Manhattan with diverticulitis, a digestive illness. “I could have gone to a major university for a year. Instead, I went to the hospital for two days.”
“Most family insurance policies cut off dependents when they turn 19 or finish college, and many young adults start out in New York cobbling together part-time or freelance work with no benefits. To qualify for Medicaid, a single adult can earn no more than $706 a month — less than what a full-time minimum-wage earner makes. Yet the average insurance premium for a single adult is $900 a month, according to a spokesman for the State Insurance Department.”
Read more of the article, entitled For Uninsured Young Adults, Do-It-Yourself Healthcare, by visiting the New York Times website.
Its an interesting topic and one that bears further watching.
Feb
27
Hong Kong Healthcare Reform; a worldwide issue
Filed Under Expat Insurance, Health Insurance, Income Protection, International Healthcare, Medical Insurance | Leave a Comment
This is a serious issue for Hong Kong, and contributing to an already grim situation is the fact that the number of elderly persons in the city is expected to double by 2028, couple this with the elderly’s increased need for healthcare and general medical inflation around the world and it becomes fairly obvious that this is a situation that needs addressing. In fact, when examined closer it seems that the problems that Hong Kong is experiencing are running along the same lines as those associated with the American healthcare system, namely that large amounts of money are being spent for little or no return while the overall cost of medical services and treatment continues to rise at the fastest rate ever.
The solutions being proposed in the most recent public consultation on healthcare in
This option, as the name suggests, is fairly straight forward. An out-of-pocket healthcare scheme would force all but the poorest
- Social health insurance
A social, or national, health insurance scheme would force members of the work force to contribute a pre-determined percentage of their monthly salary towards the public healthcare system. This is an initiative that is already in place in a number of other countries and one that has experienced a large amount of success around the world. However the major complaint the
The major benefit with this proposal however, would be with regards to the fact that medical costs will continue to remain low, and people will not have to delve into their personal finances in order to receive quality treatment.
- Medical Savings Account
This option would work along the lines of a disaster relief fund. A specific portion of the
A medical savings account could potentially be an extremely effective solution. However individuals should be able to ‘opt out’ if they so choose. In order to do so they should have to prove that they have coverage through some other means, or in the case of many expatriates living in the city, that they will not remain in Hong Kong for long enough for this scheme to be of any practical use. Outside of this the medical savings account proposal would still create a higher ‘tax’ if you will as individuals must contribute.
- Voluntary Private Health Insurance
A voluntary insurance scheme, with incentives (such as tax breaks etc.), would ease the pressure on the government in terms of funding, ensure that a large portion of the Hong Kong population is able to receive coverage under their own health insurance, and create a safety net for an aging population. The other direction that could be taken with this idea is to force employers to provide their employees with some form of medical coverage, so in the event of a catastrophic situation the burden of provision would be taken off an already strained healthcare system
- Mandatory Private Health Insurance
This proposal would force every
One of the questions asked with the ‘mandatory’ health insurance scheme is with regards to regulation and what will be done to ensure that adequate coverage is provided. Not every individual will be able to afford the better quality plans, and this could potentially lead to a whole host of individuals who are ‘under insured’, a problem that the USA is experiencing at the moment, and this is something that will contribute to even more issues with the Hong Kong healthcare service.
- Personal Healthcare Reserve
The personal healthcare reserve proposal is a mixture of the Medical Savings Account idea and the mandatory health insurance initiative. This proposal would require a specific portion of the
So there you have it, the 6 ideas currently being floated in regards to reforming the
It is not only