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.
May
5
Spanish Flu vs. Swine Flu. Are we prepared this time round?
Filed Under Health Insurance, Healthcare, Medical Insurance, Swine Flu | 1 Comment
In the modern day and age we as a human race have not experienced a major pandemic outbreak since the days of the Spanish flu, where it is estimated that 50 million people of the worlds population was wiped out. Prompting the question, are we prepared this time round? Do we have adequate methods in place now to deal with an outbreak of such scale? Can we prevent a pandemic with the possible power to kill a substantial percentage of the world’s population?
After less than a week of the worlds attention been drawn on the outbreak of the suspected next major pandemic, swine flu, the World Health Organization (WHO) has raised the global health alert from 3 to 4 to 5. Level 5 being a pandemic is imminent and level 6 being there is a pandemic and all humanity is at risk of catching the virus. This alertness shown today is in stark contrast to that shown during the Spanish Flu. Because of strange symptoms and lack of early dialogue between health officials of different countries, the Spanish flu initially was misdiagnosed as dengue, cholera or typhoid. This lack of early diagnosis and of Spanish flu was only exacerbated by the fact there was no global coordinated effort or central health body, thus allowing for no uniformed coordinated resistance against the pandemic, like those in place today in the form of the World Health Organization. Another significant factor contributing to the lack of early awareness during the Spanish Flu was the ignorance towards the matter shown by politicians during the pandemics infancy. This however is quite different from today where governments and politicians alike acknowledge the high risk of Swine Flu becoming a global pandemic and have begun planning for the worst case scenario. Such as in Hong Kong where a whole hotel guest list has been quarantined by the
Current antiviral stockpiles suggest that if there was a major outbreak of swine flu in the world, even the most powerful affluent nations such as U.S.A, the
With the widespread economic downturn facing the world it may seem that we are financially unstable and unprepared for a pandemic outbreak. However this may be the case but we are structurally and financially more prepared than in 1918 during the Spanish flu outbreak.1918, post war depression and war weariness rocked
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.
Apr
3
Tuberculosis: The Disease That Keeps On Giving
Filed Under China insurance, Health Insurance, Healthcare, International Healthcare, Medical Insurance | 1 Comment
World Tuberculosis Day was marked on March 24th with a forum in Rio de Janeiro this year and despite this disease having a history dating back to antiquity may be becoming more of a problem today than ever.
Tuberculosis is caused by the bacteria Mycobacterium tuberculosis and is the most deadly bacterial disease in the world. The World Health Organization alongside other partners is on a drive to bring mortality and prevalence rates of tuberculosis down to half the levels they were in 1990 by 2015.
The WHO currently estimates that one third of the world’s population is infected with the tuberculosis bacteria. Out of everyone infected with the Mycobacterium tuberculosis bacteria only 5-10% of those people will develop active tuberculosis of the lungs, which is the only way to become infectious and transmit the disease. While this may seem like a statistically low number, it is estimated that every second someone new is infected with tuberculosis bacteria.
In spite of the fact that tuberculosis is not only millennia old but also treatable, the goals that the World Health Organization set out to achieve are becoming increasingly hard to attain. While the agency has said that the percentage of the global population becoming ill with tuberculosis has continued the decline first noticed in 2004, they have also said that both Europe and Africa will not meet the intended reductions in either mortality or prevalence rates. So if the percentage of people suffering from tuberculosis is, as a percentage of the world’s population, going down, why is there increased concern over the issue?
There are two major reasons that are making tuberculosis an even larger health issue than it has ever been before. The first is that there is an incredible increase in the number of people with active tuberculosis that are also HIV positive, leading to increased complications in treatment and prevention. The second reason is that the disease has evolved into both multidrug-resistant tuberculosis (MRD-TB) and extensively drug-resistant tuberculosis (XDR-TB), which has made some standard treatments ineffective in combating the disease.
Because HIV attacks the body’s immune system, it is leading not only to increased rates of infection but also increased mortality rates in people infected with both HIV and tuberculosis. The co-infection of HIV/TB is a seriously threat as the diseases piggy back on each other, each speeding the progress of the other. The WHO’s 2009 global TB control report indicates that about one out of four TB deaths are HIV related, which is more than twice as many as was previously indicated. Regions with high levels of HIV infections like Africa are being hit the hardest, with some places like South Africa where numbers of tuberculosis infections almost tripled. In 2007 alone it is estimated that there were 1.37 million new cases of tuberculosis in people infected with HIV as well as 456,000 deaths.
There is, however, somewhat good news arising from the intense scrutiny of data over the years. Having realized the increased threat that HIV/TB co-infection poses, there has been a raised effort to test for HIV in people who are receiving treatment for TB. The WHO report shows that in Africa in 2004, only 4% of patients being treated for tuberculosis were tested for HIV. By 2007 the number of TB patients in the African region getting HIV tests has risen to 37%, with some individual countries testing as many as 75% of their TB patients for the immunodeficiency disease.
The other issue of drug-resistant tuberculosis is beginning to attract increased attention because of concerns about the possibility of a virtually untreatable tuberculosis epidemic. The driving force behind the rise in drug-resistant strains of tuberculosis is that in the places with the highest rates of TB infections, such as Africa, Eastern Europe and Asia often have poor healthcare systems.
One of the gravest problems is that the systems will lose track of tuberculosis patients who do not finish their course of treatment for TB, allowing the disease to morph into a drug-resistant form of the disease. Some places such as India or Russia have poor healthcare where there is either a shortage of doctors and appropriate medication, or little control over the sale and usage of TB drugs.
As health ministers from some of the most direly affected countries, along with the leader of the WHO and Bill Gates gathered in Beijing on April 1st to formulate plans to prevent the spread of drug-resistant tuberculosis, one story has illustrated the need for quality medical insurance networks. A migrant worker named Wang Chong was in the Beijing Chest Hospital for his tuberculosis treatment which has been continuing for over five months. But because he has no insurance of his own and no national healthcare safety net to support him, he must decide whether to continue the treatment which has already cost him more than $5000 dollars, no small amount of money for a migrant worker in China, or to stop treatment and risk his disease evolving into a drug-resistant variety which could kill him.
There are estimated to be more than half a million people in the world with drug-resistant tuberculosis across the globe, with more than a quarter of them in China. Some health advocacy groups say that less than five percent of the people carrying drug-resistant strains of the disease are being treated properly, meaning that they are often out and about spreading the increasingly resilient disease to others.
At the moment, treatment of regular tuberculosis requires taking four different antibiotics and lasts for up to six months. Treatment for extensively drug-resistant tuberculosis is toxic to the patient and may last up to two years, often leading to the confinement of the patient. There are ongoing efforts to find a two drug combination that will work in combating both regular tuberculosis and extensively drug-resistant tuberculosis, with one phase of clinical trials scheduled to be completed by the end of 2009 in South Korea. The recent forums and meetings of the worlds’ healthcare leaders in highlights the need for awareness on the topic and the need to make sure you are protected, so that you can be assured a full treatment without having to make the same decisions that Wang Chong is having to make this very moment.
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
6
A Change of Perception?
Filed Under Health Insurance, Healthcare, Medical Insurance | 4 Comments
Imagine this; one morning while walking down the street, minding your own business, on the way to meeting your friends in the park, when all of a sudden a motorcyclist on the road looses control of his bike and crashes into you. This type of incident, while not pleasant, happens on a daily basis all around the world. We would like to think that help is given to the victims of such accidents in a prompt and efficient manner, especially in first world countries. However, the truth of what happens in the aftermath of a serious road accident is often scary enough to make a person drastically reconsider their views on the modern healthcare industry.
A recent accident in Tokyo, mirroring the example illustrated above, left a 69 year old pedestrian dead after a biker lost control of his vehicle. His death, however, has been blamed on massive failures in the Japanese healthcare service, rather than on the operator of the motorbike. Paramedics arrived on the scene minutes after the incident, but then spent the next 90 minutes trying to convince hospitals to admit the injured senior. The total number of hospitals that they tried was a shockingly high 14. That is, 14 hospitals turned away a seriously injured elderly man, and by the time he was admitted into hospital number 15 his condition has deteriorated so much that there was nothing that healthcare workers could do to prevent his imminent demise.
The biker? He was admitted for treatment at the third hospital paramedics tried and is now recovering from his injuries.
This is not the first time that this type of situation has occurred in
The reason for this state of affairs is cited as being due to the growing strain on the Japanese public health system from an aging population, dwindling manpower, and massive overcrowding. The situation is getting so bad that in the past 2 years more than 14,000 emergency patients have been refused entry and treatment due to overcrowding at various medical facilities. To make matters worse the Japanese government cannot legally punish hospitals that turn away patients while claiming that they are full.
The Japanese healthcare system is based on a form of universal coverage backed by a state run insurance scheme (rather than contribute your tax dollars, you pay for a universal “insurance policy” out of your salary). Under this type of healthcare service individuals are “guaranteed” equality of access and fees; certainly an admirable goal and one mirrored by a number of national health systems around the world. In reality however, these types of universal services are falling drastically short of their intended targets, especially when one considers the examples provided by
The question here is; if a first world nation known for its technological prowess, strong social services, and high quality of living is failing at providing adequate healthcare protection and services for its population, then what is happening in third world nations? Even leaving aside the third world, you need only look at the United Kingdom and the USA to see that the current healthcare objectives all over the globe are in serious need of a major facelift, and even then, the risk is high that patients will continue to be left out in the cold (quite literally) without the care and treatment that they need.
The proponents of national healthcare coverage will cite equality of care and cost cutting as the primary reasons for installing such systems, and with the financial meltdown over the last 8 months, private healthcare and insurance are looking like very unattractive options for a majority of individuals around the world. The problems associated with the Japanese healthcare service may just be regulatory in nature. In the
While private health insurance has received a bad rap, especially in the domestic
The simple truth of the issue is this, it doesn’t matter if you are covered by a private health insurance plan, or a national universal one, because healthcare systems all over the world are in dire need of an overhaul, and have been for quite some time. Perpetually rising costs and massive overcrowding are increasingly becoming the norm, no matter where you may be located.
For the average individual there is not much that can be done at this point in time other than to wait and see what action is taken by various governments, especially the USA.
Jan
9
The Recession and Insurance
Filed Under Expat Insurance, Health Insurance, Healthcare, International Healthcare, Medical Insurance, UAE Insurance, United Kingdom | 1 Comment
With news outlets broadcasting dire predictions about the financial downturn like a frothy-mouthed preacher on the apocalypse, we feel it’s time to take a look at how people think the recession will affect insurance. With this in mind, we’ll take a look at projections about how insurers may fare, how your premium could shape up, and other worries and notable points to keep in your head moving forward.
Views on how the insurance industry will deal with the financial climate are a decidedly mixed bag. Larger, more established insurance companies are expected to do well, such as more diversified health insurers. Their size, balance sheets, and diversity of both product and geography are believed to allow a degree of protection from the need to boost operating earnings during the down times. Considering that the international private medical insurance market posted growth rates of around 20% or more for 2008 it’s hard to imagine some of the larger companies needing to start penny-pinching policies which would drive away customers. Combining their growth rates with their long-running operational stability and ratings agencies’ inclination to keep decently performing insurance companies at a favorable rating, and we will hopefully see some benefits for policyholders, not just shareholders. After all, the acceptable balance sheets and relative operating stability mean that your insurer stays in business and keeps offering your plan, plus there’s always the hope that with less of a need to increase earnings and squeeze margins, there may be less pressure to increase your premiums. However, given that insurance premiums have gone up 119% in the last 9 years, don’t hold your breath.
There are also those who believe that the world’s financial nose dive will be a boon to insurers in the international health insurance markets, and their reason is that during recessions, people are more open to traveling to other countries in order to find job openings. With more and more businesses extending their operations into new geographic areas, not only are people more willing to travel to foreign countries for jobs, but companies embracing globalization are increasingly opening branch offices and sending out local staff to manage new operations. This is seen as a potential spike in demand for expatriate insurance products both for individuals and companies. If this is indeed the case, then there are a number of ways this could affect your current policy or your plan to get one. One worry is that the increased demand for international health insurance will lead to increased premiums due to a burgeoning number of clients and the need to cover the increase in claims. I find this assertion extremely dubious, but resisted the temptation to file it under wild conjecture and speculation.
Most international health insurance products are community-rated, which means that their premiums are based on your age and area of cover, and the factors calculated for your premium such as medical inflation, claims ratios from the previous year’s age group are not linked to the number of policyholders in the plan. Simply put, an increase in people paying premiums does not alter the cost of care, or your likelihood of making a claim, and therefore is a highly unlikely reason for an increase in your premiums, so you can rest easy on that count.
Another issue that was raised by some spectators, such as those at the web publication for expatriates, Shelter Offshore, also think that with increased demand for insurance products geared towards expatriates, insurers may become a little choosier about who they will accept for coverage. In contrast with the other claim, this may actually be possible, but then again with tighter budgets all around it would be hard to imagine insurers becoming overly-picky and denying coverage to reasonable applicants who can always look for another policy.
So if the insurance companies seem to at least be lurching by in these troubled days, what about the prospects for your ever increasing premiums? One piece of good news is that with the recession in full swing, it has effectively put a damper on the inflating cost of care. With costs for medical treatments, tests and drugs falling in line with the downward turn in the economy, it should mean that these items won’t be consuming an increasingly large chunk out of insurers’ margins, alleviating some of the need to push up the cost of premiums. Although one problem in at least some sectors has been that during the financial debacle some private insurers’ more risky investments have taken a hit in the market downturn, effectively reducing the amount of cash and assets they have on hand to help pay out claims.
For example, Australia’s private medical insurers have put in a request to the government to allow them to raise their premiums on private health policies. Some of the investments made by the private health funds took a large hit, and the funds now say they will need to find $600 million Australian dollars to make up for the losses, and the plan is to do it through premiums. One firm, HBF is said to have lost approximately $56 million Australian dollars, while another company, MBF, lost about half of that. While this just highlights one geographic sector’s issues, it is seen to be fairly widespread given that at least some private insurers from every walk of life around the globe have taken a hit on their investments with AIG probably being hit the hardest. All in all it’s hard to say for sure whether or not the recession will have a direct and immediate effect on premium rates. While investments were hit, it’s difficult to see how much the decreased rate of medical inflation will contribute to staying the rise of premiums. Add into the equation the fact that many countries are deciding to invest large amounts of money in their public health systems and infrastructure could have interesting effects on premium rates as well.
One thing that has been made clear from reading recent news and stories is that healthcare systems and rules around the world are in a state of change. Highlighting the cases of Bahrain and the UAE, there is a growing trend in some countries to consider enacting rules that make health insurance for expatriates compulsory, meaning that if you are traveling into the country, you must have health insurance. If you do not, you must buy an insurance policy on the spot or possibly be refused entrance into the country, and standing in an airport is not the optimal place to shop for insurance. Additionally, in some countries like Germany, if you do not have health insurance, you may not be able to receive treatment. With this in mind, it is important that even in the tough times it is, at best, inadvisable to neglect paying your health insurance premiums. While the payments may be hard to part with if money is tight, should your cover lapse and there is an accident or an illness, depending on where you are, the best case scenario may end up being financial bankruptcy from medical bills. As for the worst case, it really is no fun having your health disintegrate and possibly die because your lack of insurance precluded you from receiving treatment.
Should you be looking for insurance, I cannot possibly stress the importance of shopping around for the best comparison in quotes. With the shifting sands of business and finance, there are subtle changes in the major insurers which will affect how they will be pricing their insurance products, so it is in your best interests to either canvas the major insurers to find competitive quotes and coverage details or contact a broker who deals with a wide variety of insurers’ products.
Sep
24
AIG – What is happening, and how it affects you.
Filed Under China insurance, Expat Insurance, Health Insurance, Healthcare, International Healthcare, Life Insurance, Medical Insurance, USA Health Insurance | 2 Comments
AIG: The letters on Manchester United’s football shirts, on buildings dominating skylines in major cities worldwide, and in the past week, on the front covers of the business pages, if not the entire paper.
A company with a long and storied history, AIG had posted total losses of $18.5 billion over the last three quarters, before being bailed out last Tuesday (Sep. 17th) with a loan of up to $85 billion dollars from the Federal Reserve. This was designed to effectively secure the company’s important economic position worldwide, and in exchange the Fed would get around an 80% stake in the company as a kind of security, and 12% interest on the loan.
What happened? Why did AIG suddenly need so much cash to avoid going under? Should they have been lent it?
This was not the start of the story, and it is far from being the end of it. It began, like so many of today’s economic worries, with the sub-prime mortgage crisis. To enable them to continue making yet more bad loans, banks in the US and Europe insured some of the loans with insurers such as AIG. As the largest insurance company in the US, AIG also insured many other deals made by banks or large companies, so as the economy went into recession, it lost a great deal of money, resulting in a situation where the company was very illiquid and could therefore fail. This would have had a huge knock-on effect on banks and companies not just in the US but worldwide, meaning that the Fed felt justified in bailing out AIG (whereas it left Lehman Brothers Holdings Inc., who announced last week that they would file for chapter 11 bankruptcy protection, to their own devices).
The government was fresh from shoring up Freddie Mac and Fannie Mae, (the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association) with guarantees and the prospect of a ‘conservatorship’, and back in March, the Fed backed the purchase of the stricken Bear Stearns by JP Morgan. The Federal Reserve has as a result been rather seriously depleted.
The US is not the only country that is having to take action of this kind. The UK government ‘nationalized’ the Northern Rock bank, another victim of the sub-prime crisis in the US, back in February. Some slack is taken up by companies taking over other companies, e.g. Bank of America buying Merrill Lynch, Lloyds TSB merging with HBOS, or Barclays buying up some of Lehman Brothers’ core assets- which many would argue is how the market should work. At present, however, the US looks likely to spend yet more money to try and solve a problem that, although originating in the country, affects the world’s economy as a whole. It is unlikely that other countries will be able to continue to sit back and watch the US deal with the problem alone for very long.
The AIG bail-out looks to be only the start of an almost unprecedented level of government spending to assist private business. Lawmakers are still hashing out the details of a plan to use taxpayers’ money to buy the bad debts of financial institutions with significant operations in the US. The plan would put about $700 billion dollars spending money into the hands of Treasury Secretary Henry M. Paulson Jr. who would theoretically decide how to spend it in a way that balances the interests of the taxpayer - minimizing immediate costs but ensuring liquidity in the financial markets in the long term. This is a very controversial plan, and has even been called a kind of undemocratic socialism. Paulson in fact used to be head of Goldman Sachs, which along with Morgan Stanley just announced a change of legal status to enable it to take advantage of the proposal. Many politicians, including McCain and Obama, have expressed concern and are demanding greater oversight, but as it is hard even for financial experts to put a value on bad loans of the type that caused the crisis, it is unclear how this would work.
How does this affect my insurance?
Essentially, it shouldn’t. AIG has been more or less guaranteed by the US government. In any case, most private policies are with subsidiaries of AIG that are separately regulated and financially sound. Also, in the US, policies are usually guaranteed to some extent by state run associations should an insurer fail.
However, as anyone who has seen Mary Poppins should know, customers are not necessarily rational beings, as has been demonstrated in the past week, particularly in Asia. The offices of AIG subsidiaries in Singapore, Taiwan and Hong Kong have been mobbed by people wanting to either enquire about the safety of their policies or cancel them altogether. In Hong Kong some 1,700 people surrendered their policies with AIA on Tuesday. This was despite assurances, including from the monetary authority of Singapore, that the subsidiaries of AIG are still sound. AIA in Singapore has announced a policy conservation program to enable those who surrendered their policies in panic last week to reinstate them. While some unscrupous agents might be tempted to advise people to switch insurers to get a new commission, the best course of action is probably to wait and see.
Effects on the presidential election race, and the candidates’ healthcare proposals:
Both candidates are going to have to make significant changes to their policy proposals in the face of the economic realities which will likely face the next administration. They also both have to come up with a stance on this new proposal. So far their responses have been fairly similar, with both calling for more oversight. Both McCain and Joe Biden were supporters of the deregulation in the late 90s that arguably made the sub-prime crisis possible, which may mean Obama has the edge in not having to backtrack too much. What is certain is that there is going to be a lot less money available for expensive programs such as Medicare or Medicaid, and any candidate promising tax-cuts will have serious credibility issues. The future of health insurance and healthcare financing in America is now very unclear.
Aug
29
The Health Insurance Market In China, And The Challenges It Faces.
Filed Under China insurance, Expat Insurance, Health Insurance, Healthcare, International Healthcare, Medical Insurance | 2 Comments
“Since the country’s embrace of the reform and opening-up policy, the development of China’s insurance industry has held the attention of the world,” said the China Insurance Regulatory Commission in 2006. China is indeed a huge and promising market for health insurance. But how does health insurance in China actually work?
The vast majority of Chinese people don’t have health insurance, or for that matter, access to affordable good quality healthcare. If this seems somewhat odd in a nominally socialist state, it is because it was not always the case. Mao Zedong set up a countryside healthcare system after taking power, based around agricultural communes, which brought life-long government subsidized health care to 90% of China’s population, raising life expectancy and reducing infant mortality. However, with the gradual dismantlement of commune-based agriculture under the auspices of Deng Xiaoping, the rural healthcare system which was linked to the communes fell apart, subsidies stopped flowing, and hospitals were privatised. By 1985, only 9.5% of the rural population was still covered by the medical cooperative system. The rapid economic growth of China’s cities has resulted in a situation where, while around 900 million of the population live there, only a third of health professionals work in the countryside. The government’s healthcare spending has risen overall, but has been falling as a percentage of the budget for more than a decade, and in any case, 80% of the healthcare budget is spent on government officials.
This worrying situation looks like it may be set to change, as Premier Wen Jiabao recently announced a new national health-insurance program, to be piloted in cities to start with and scheduled to be extended to the rest of the country by 2010. The government already tried to introduce cooperative medical insurance for people in the countryside in 2003, without huge success. While the situation in cities is naturally better than in the countryside, the World Bank estimated in 2005 that fewer than 60% of China’s urban residents had health insurance (still a lot more than in the countryside). Employed urban residents are the only ones allowed to participate in the national health insurance program, which excludes migrant workers (though there are some schemes theoretically supposed to help this group of people, of whom there are more than 110 million), and the unemployed.
However, of the 400 million people living in Chinese cities, and the 900 million or so in the countryside, the small proportion for whom private medical insurance is even remotely feasible still amounts to a huge number of people, and a huge potential market, and until some sort of comprehensive state health coverage is introduced, private medical insurance is set to become more and more popular with the rising numbers of middle and upper class Chinese.
The opportunities for Chinese and foreign insurance companies in the country have recently been greatly opened up. Insurance in China is still a young industry, only re-emerging, after a long hiatus, in 1984. AIG, founded in Shanghai in 1919, was the first foreign insurer to operate in China after it reopened, returning to Shanghai in 1992. Foreign insurance companies were encouraged to bring money and expertise to China, but were greatly restricted in how they could operate, resulting in mostly joint-ventures, and were not allowed to sell health insurance. Companies usually had to have a representative office in the country for many years before they were actually allowed to do business in their own right, and this is still the first step for a foreign firm setting up in China. It is still technically illegal for companies without a license to operate in China to sell insurance to Chinese clients, and until 2005 companies with a licence were limited to operating only in certain Chinese cities such as Beijing, Shanghai, Guangzhou and Tianjin.
Not until 2005 were geographical restrictions lifted, and companies were allowed to sell health insurance, group insurance, and pensions/annuities, as part of changes to put China in accordance with the conditions of its accession to the WTO. This and other reforms have made the market much more open to foreign insurers, who had a 6.9% share of the overall insurance market in 2005. On the other hand, there are still restrictions in place on entering the market, such as having to have 20 years continuous experience in the insurance business.
Experience is however usually what sets foreign insurers apart from the Chinese companies. Most health insurance policies in China are naturally provided by Chinese companies, but these have also been subject to a great many restrictions, for example on their investment options, though these are gradually being eased, for example allowing them to invest in real estate, and abroad. As many of the big Chinese insurers are still government run or owned, they have some way to go in terms of efficient management, and though companies like Ping An appointed executives experienced with global firms, helping them to take the second largest share of the market, Chinese insurers face a risk that global firms moving to China will headhunt their best people for their understanding of the Chinese market and regulations. Also, foreign insurers, with their greater insurance experience, professional standards, freedom from association with government bureacracy, and usually sounder investment strategies, may appear safer and more reliable to Chinese customers. This has resulted in a significant practice of Chinese people buying (or being sold) life insurance or health insurance policies illegally from foreign companies offering products considered better than those available within China.
The ball is rolling, and the requirements of WTO membership and the opening up of the Chinese insurance market, both legally and illegally, are causing the government to have to constantly reevaluate its regulations about insurance; the need to allow Chinese insurers to be as competitive as possible, both in the home market, where they have a head-start, and abroad, means that they are likely to be given more leeway in terms of how they invest, how they are run, and what kind of products they can offer, but in the meantime global insurance companies have a window of opportunity, which they are seizing. Hopefully, amid all this excitement, the government will remember to do something for the many millions of people that cannot afford health insurance in China.
Aug
27
A few reasons for the cost of healthcare in the US- and will they be addressed?
Filed Under Health Insurance, Healthcare, Medical Insurance, USA Health Insurance | Leave a Comment
With the US presidential election around the corner, one of the issues getting the most media attention is the candidates’ differing stances on healthcare. Everyone agrees that something needs to be done about the rising costs of healthcare in the US to the federal and state government and to private individuals; the question is: ‘what?’. But to answer this question, we need to know why costs are rising in the first place.
Part of the reason is the large numbers of different groups trying to make money out of the system. Pharmaceutical companies, hospitals, insurers; unfortunately, altruism is not always the primary motivation, and as with any detective investigation, the question we should ask ourselves is ‘cui bono?’- or ‘show me the money!’.
Hospitals in the States and elsewhere, especially with the rise of medical tourism, will often try and sell themselves to prospective patients by advertising their latest equipment or more advanced surgical techniques. Sometimes a hospital will buy a machine, such as a CT scanner, for this very reason, but in any case, once it is bought, the hospital will want to make sure it is used, even if it is expensive, unnecessary for a particular patient, or even dangerous (for example, CT scanners subject patients to radiation equivalent to that of hundreds of x-rays) - not least because of the amounts they can bill. A CT scan often leads to additional precautionary treatment- increasing costs even more. Insured patients will often want the peace of mind that new technology can bring- it may have attracted them to the hospital in the first place- and insurers may end up footing the bill, much as they try to avoid paying for unnecessary treatment. Insurers may sometimes try to avoid such costs, but only at the risk of legal challenges and their reputation in a competitive market, especially when they get it wrong.
State and federal medical programs such as Medicare and Medicaid have more difficulty when they want to exclude certain procedures from their coverage on utilitarian grounds, and are often under pressure to include more procedures. Unlike in many countries, cost-benefit analysis is not so rigorously applied in the US- for example, the The Food & Drug Administration is forbidden by law from taking cost into account when considering the approval of a new device or drug.
Drugs are another reason for the high cost of US healthcare. Other governments which run universal state healthcare systems put limits on how much they will pay for drugs, and some say that this actually pushes up the price of drugs in the States.
On the other hand, Professor Sir Michael Rawlins says that other countries are having to pay for the marketing cost of drugs in the US, which he estimates at about twice the amount spent on actual research and development- the pharmaceutical representatives who make sure their companies’ products are used in hospitals and by doctors, a privilege companies will pay for - and advertising directed at potential patients, which is forbidden in many other countries. If this is the case, it is unlikely that marketing costs will go down any time soon, as big pharmaceuticals see the patents on their money-making drugs expire and face competition from ‘generics’.
Pushing unnecessary, inappropriate and expensive drugs might not happen if cost-benefit analysis was more carefully applied to new products and techniques. As it is, physicians face pressure from drug managers who try and keep costs down for hospitals and on behalf of insurance companies. These competing forces mean a doctor might be under pressure both to promote expensive drugs and procedures and at the same time not to approve these for insurance purposes.
The questions that all this has created about the validity of being able to trust your doctor to make an unbiased prescription of the most appropriate drug, and the direct marketing of many alternative brands of drugs to patients, has created a feeling that for determined individuals the right drug is out there if they are willing to put in independent efforts to find it, and the idea that the cost will primarily devolve upon the individual may create a sense of entitlement to the newest treatments, even if they are untested and have a slim chance of success. There is even debate about whether this atmosphere may prejudice clinical trials.
It is very likely that this all inclusive approach to drugs and medical techniques has pushed up the cost of healthcare in the US without proportional benefits to life expectancy and child mortality
How can this be changed? The pharmaceutical lobby is likely to use the threat of a drop in profits due to generics taking over many of their markets to try and influence any new health-care system, and it will be hard for any government to limit drug costs unless they are simply brought down by market competition, in which case there is still the possibility that they will have to include newer and more expensive treatments in healthcare cover. The existing systems federal and state medical provision such as Medicare have been leaking money recently, because of the involvement of subsidized private intermediary plans, and well publicized incidences of paying for fraudulent and improper claims. Congress recently overrode a presidential veto which would have reduced Medicare payments for doctors; the president had justified his veto partly on the grounds that bill would “perpetuate wasteful overpayments to medical equipment suppliers.” The existing state provision appears to be wasteful and inefficient, so while everyone agrees it needs to be changed it may be harder to appear to advocate more state spending, even if it would save money. While it would seem that socialized medicine would reduce overall individual insurance costs by virtue of healthy young people’s payments subsidizing risk prone older individuals, there is a good deal of disagreement on the subject, not least because of the element of ‘Socialism’ involved.
There are many myths about the reasons for the cost of American health care- Mark Gimein in Slate points out that too much blame cannot be put on private insurers, whose profits only make up a small percentage of total healthcare costs. The popularity and promotion of expensive medical techniques and drugs must surely play a large role, and will have to be taken into account and checked more aggressively if any more universal system of health care is to be introduced in the US.
