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Five Plus Investor is a business owner, stock market junkie and manager of a (9) different investment accounts of various flavors (brokerage, HSA, Coverdell ESA, 529 College Savings, Traditional and Roth IRAs). As a contributor, Five Plus Investor has three main goals: 1) Assist new investors... More
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  • The Growing Bubble of Health Insurance Premiums 41 comments
    Oct 25, 2011 1:01 AM
    It happens every year.
     
    I get a notice that it’s time to start the process all over again. I drag out the year’s receipts and scrutinize where I can find any scrap of cost savings. I research available options for potential reductions. I curse that every year the bill gets higher and higher, all the while I get less and less. I wonder why Congress can’t get their act together enough to enact real change, yet rue to the high heavens the changes they have already made. 
     
    Sounds like tax time, doesn’t it. It’s not. It’s health insurance renewal time. For my family, that time is now.
     
    Merry-Go-Round? Or a Bubble About to Burst?
     
    Health insurance renewal goes round-and-round, the same old way, year after  year. We barely run any expenses through our insurance, yet every year our insurance premium is raised an average of 12%. The choice then becomes: pay the higher premium, or lower our coverage to maintain the rate. We can’t stand paying more and getting less, so we usually opt for paying the same, and getting less…
     
    What is the reward at next year’s renewal for us taking on more of our own health care costs, and the insurance company taking on less? The insurance company slaps us with yet again another premium increase of 12% or more.
     
    The only way off the merry-go-round with your current company is to change insurance carriers every few years. But it really accomplished nothing long-term. The next insurance company will raise your rates just like the last one. 
    Switching carriers year after year is like jumping off one merry-go-round and hopping on to another. You’re on the same ride, but you never really get anywhere. 
     
    I was commiserating about the process with an insurance agent who does not sell health insurance. He was in complete agreement. He then said something about the health insurance industry that, as an active investor, stopped me in my tracks:
     
    “Health insurance is a bubble that is about to burst.”
     
    When you use an investment term to describe a potential future event, you have my attention.
     
    Is Health Insurance a Growing Bubble?
     
    There is no dispute that health insurance premiums are in inflation mode. A study released by the Kaiser Family Foundation shows that premiums for families on employer (group) health insurance was 9% higher in 2011 than in 2010. Insurance rates have doubled since 2001. These rate increases are minor compared to the rapid rate of increase of personal health insurance policies. Regence BlueCross BlueShield, which operates in Oregon, is asking for a 22% raise in premiums for policies sold to individuals. Policies sold to individuals (personal health insurance) are strikingly different than group policies in accounting for pre-existing conditions, and on raising policies after a health event. Unlike group health insurance, they can screen out on and not cover individuals with pre-existing conditions. After a health event, the insurance company may raise your premiums substantially, as there exist loopholes which allow insurance to raise rates without review by the state. 
     
    What is interesting, and infuriating, is these rates do not correlate with the inflation rate of health care costs. One study places the year rate of increase of health costs at 7%, with health care costs doubling 48% in the last 10 years. This, while insurance premium rates doubled, and according to insurance companies themselves, the usage of insurance by the policy holders has decreased
     
    Insurance company proponents maintain that profit margins are low, opponents say profit margins don’t matter, look at insurance companies return on equity, which is currently averaging 16.1%. 
     
    Regardless of how you look at it, we cannot escape the following facts:
    ·         The cost of health care is rising;
    ·         Insurance premiums rise in tandem, or above, the rate of health care inflation; and,
    ·         Insurance premiums are rising higher than wages
     
    Health Insurance Is It’s Own Economic Bubble
     
    An economic  “bubble” can be defined as “a trade in products or assets with inflated values”, or “a rise over that fundamental value, which must eventually return to that fundamental value”. In investment terms, it is where the value of the trade is grossly overinflated over the asset’s the instrinsic value. The “bubble bursting” is the painful process wherein the trading value of the asset deflates down to a more true intrinsic value of the asset.
     
    When addressing health insurance we can apply the following correlations:
    • The “trade value” is the price of the insurance premium
    • The “intrinsic value” is, to the policy holder, the ability of the insurer to cover incurred health expenses.
    • The “trade value” of premiums is inflating 9% or more per year
    • The “intrinsic value” of insurance, for the policy holder, is decreasing, as policy holders as asked to take on more “risk” (higher premiums and/or lower coverage)
    • The ability of policy holders to pay on the “trade value” of insurance is decreasing, as wages have not increased in step with policy increases, and health insurance inflation exceeds economic inflation.
     
    Does all this fit neatly into the “bubble” model, with its inherent “boom” and “bust” cycle? You decide based on the definition of a bubble, and the description of the boom and bust:
    • Product or asset that trades with an inflated value
    • May ultimately be caused by price coordination
    • Prices are inflated and fragile
    • Bubbles tend to cause misallocation of resources into non-optimal uses
    • Bubbles appear even when market participants are well-capable of pricing assets correctly
    • Bubbles appear even when speculation is not possible or when over-confidence is absent.
    • The causes of inflation are also the causes of bubbles
    • Assets are irrationally valued based solely upon their returns in the recent past
     
    A final definition: “The one true constant with all bubbles is that they create excess demand and production. Once the bubble deflates, which it always does, a contraction or consolidation has to occur to alleviate the excess”.
     
    Health insurance does not neatly fit into the academic definition of a “bubble” like a well-worn puzzle piece. For one, the pricing aspect of insurance is based directly on the rising costs of health care. This article does attempt to address rising health care costs, which in and of itself is akin to a huge 1000-piece puzzle. Health insurance pricing, does, however, fit every anecdotal and real-life definition of a bubble: 
     
    The price of the asset keeps rising, while our ability to
    pay the market price for the asset is shrinking. 
     
    At some point in the future, whether in years or generations, the lines will converge. The market price of the insurance will exceed the market’s ability to pay the market price, and the bubble-burst will begin. It may be a slow leak, or it may be a catastrophic blow-up. Either way, the bottom line is this:  policy holders cannot keep paying out, ad infinitum, at the rate in increase expected by health insurers.
     
    I for one will not be waiting with sweated brow and wringing hands for this inevitability. This year, at renewal time, I have made some decisions to get off the insurance merry-go-round. I believe these discoveries and decisions will help my readers. Therefore, a second installment will address some practical ways you can reduce your premiums (which include investment and retirement options) and for some, get off the merry-go-round of health insurance altogether.
     
     
     
     
     
     


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Evelyn, this article may be just as appropriate in other sections of SA, so please feel free to share with other editors as you think best.
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Comments (41)
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  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    Denise, you might want to have Evelyn fix the title at the top of the article. :-)

     

    I eagerly anticipate part 2, so I can see your ideas on how to pay less for health insurance.

     

    Robert
    26 Oct 2011, 08:55 AM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » @Robert - thanks! I originally submitted this as a premium article...and it was rejected :-(. I think if health care reform were front-burner news, it would have been published.

     

    Regardless, health insurance is a "hot topic" with me, and is with most persons who deal with personal health insurance. So as I have time, I will certainly post an Instablog on ways to save on personal health insurance.

     

    Thanks for the encouragement!
    26 Oct 2011, 09:28 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "I think if health care reform were front-burner news, it would have been published."

     

    If the SA editors don't think health care reform is front page news, then they haven't been reading the front page. :-(

     

    My wife and I are both self-employed. We live in Massachusetts, which disabled its individual insurance policies in the 1990's. We were "forced" to join an aggregator (the Small Business Service Bureau) in order to "qualify" for group rates. Our rates have gone up much more quickly than inflation, and our monthly health insurance bill is second only to our mortgage. :-(

     

    Anything you can do to help me will be gratefully appreciated.

     

    Robert
    26 Oct 2011, 10:17 AM Reply Like
  • sneaker1404
    , contributor
    Comments (396) | Send Message
     
    5+,

     

    I also await with interest as healthcare has been very frustrating for my family. I am a (Greencarded) Canadian living in Texas for the last 11 years and am self employed. My American wife is (thankfully) a stay at home Mom for our children, so that leaves us with no employer based heath care, high deductibles, and low benefits.

     

    We never reach our high per person deductible, but the premiums just keep going up. At this rate, in about 10 years, I doubt we'll be able to afford it at all.
    26 Oct 2011, 10:39 PM Reply Like
  • Smarty_Pants
    , contributor
    Comments (2846) | Send Message
     
    I carried a personal health insurance policy for nearly 5 years starting about 10 years ago when I went the self-employed route. Initially the policy coverage was much less expensive than the COBRA coverage from my prior job (less than half). But for each of the next five years, my premiums increased by more than a 20% compounded rate.

     

    And I never used the insurance for anything. Every medical bill I encountered was below the deductible amount, so all the costs of my few treatments came out of my pocket.

     

    Eventually I returned to the workforce and I currently have group coverage through my employer for about the same amount as my last individual policy (my share, I'm sure my employer is paying a good bit in addition to that).

     

    I suspect that the growing number of people who can't fully afford medical care and fall under the medicaid or medicare systems are forcing doctors and hospitals to provide care at a financial loss. In order to make up for that unrecoverable cost, the providers increase the charges on those with insurance, who WILL pay.

     

    I agree with your conclusion however. Such a system cannot last forever. Eventually the free lunch ends for somebody. With the Boomer bulge of the demographic distribution beginning to pile onto Medicare at the same time that the government needs to cut expenditures, the medical providers will be squeezed even harder and try to pass the costs off on to fewer and fewer paying customers.

     

    One day the bubble will pop and things will get "not pretty" awfully quick.
    27 Oct 2011, 12:38 AM Reply Like
  • Retracement
    , contributor
    Comments (433) | Send Message
     
    Good article 5+!

     

    I had an interesting discussion with Robert a few months back on the US healthcare system, its relative (in)efficiency and how for example the average monthly costs compared between the US model and Dutch model. I understand the Dutch and Canadian model have a lot of comparisons actually.

     

    The rising costs of healthcare will continue unfortunately. Most participants in the medical field work under the same rule: 'the higher the price, the higher the profit'. There need to be real incentives to control cost, otherwise they will continue to spiral out of control.

     

    There's a lot of inefficiency built into healthcare systems, like hospital operations for example. By formulating a proper legal framework, applying similar efficiency ideas and techniques as used in other industries, and by giving medical professionals more responsibility/room to come up with and implement ideas it is often times possible to improve efficiency, save money and hopefully even cut down on patient waiting time.

     

    And from an investing point of view it's best to just go with the flow and always have some global pharmaceutical companies in portfolio, because they should continue to do quite well, both in terms of earnings growth and their dividend policy towards investors.
    28 Oct 2011, 10:29 AM Reply Like
  • sneaker1404
    , contributor
    Comments (396) | Send Message
     
    My view of the Canadian model is that it is great when you break a bone. You get good care, it is fixed, it doesn't cost you an arm (or a leg!) and you move on with life.

     

    If you have a condition that takes a lot of diagnostics, it can be hard to find a doctor willing to put in the time, because (I believe) they get paid in relation to the number of patients they see.

     

    If you have a condition that has expensive care options, you will likely get the cheaper care.

     

    The environment is not conducive to medical breakthroughs unless it is cost justified. If a new pill cured cancer but was 2 million dollars, the treatment would never be used (except for NHL hockey players).

     

    ... and I still prefer that to the US model.
    31 Oct 2011, 01:21 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    Count up the number of Canadians who come to the US for medical care.
    Count up the number of Americans who come to Canada for medical care.
    Guess which is the bigger number?
    31 Oct 2011, 04:39 PM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » @RAS - here's another "count the number" to consider, and that is the flight of both Americans and Canadians to medical tourism destinations, which has exploded into a $20 billion business. Canadians go to circumvent the queue system; we go to circumvent the outrageous price of our health care. I'm part of that statistic, as my family gets dental in Mexico, and I have had surgery in Costa Rica. I haven't met many Canadians coming to the U.S. anymore for care, but I've talked to several Canadians in waiting rooms in both Mexico and Central America!
    31 Oct 2011, 05:17 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    Denise, I agree with you. I was in Costa Rica a few years ago, and learned that they have very good (and inexpensive) medical care, which drew many folks from the US. I didn't realize from Canada too.
    1 Nov 2011, 03:27 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3472) | Send Message
     
    Five Plus Investor,
    Thank you for sharing your ideas. I wait part 2 because health insurance is the main unknown for my family early retirement. Meantime I invest in healthcare sector stocks in US and Europe with good dividends, some of them (AZN GSK JNJ MDT TEVA VIVO) are "on sale" now.
    I'd probably agree that such articles are away from SA mainstream but Instablog gives authors more freedom, so I use this SA feature for my thoughts.

     

    Sincerely
    SDS
    29 Oct 2011, 01:00 AM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1051) | Send Message
     
    "At some point in the future, whether in years or generations, the lines will converge. The market price of the insurance will exceed the market’s ability to pay the market price, and the bubble-burst will begin."

     

    Let me tell you as a business owner, this process has begun. A few years ago I offered a Cadillac health insurance program for free to all my employees. Then, to keep costs the same, I began offering two levels of coverage to my employees, a 100% free catastophic coverage and the option to buy a Cadillac plan for a low monthly cost. Every one of my employees chose not to pay for the Cadillac plan. As the costs continued to rise, I looked at the monthly charge I was paying for my group plan compared to what my employees could buy the coverage on their own. I was paying four times as much for the group plan as they would for individual plans. I met with my employees, explained the situation and offered to assist them in completing the paperwork to purchase their individual plan. Not one of my employees chose to purchase an individual plan and now they have no health insurance.

     

    I believe the bubble is bursting and we have a serious problem. The problem is that the workers are going without healthcare so they can fund it for the non-workers. This is not sustainable. We need to get this economy moving forward again so that the businesses can afford to reinstate their insurance coverage to their employees. The businesses cannot afford to be forced into providing this coverage through Obamacare. If we could afford it, we would offer insurance coverage for our employees.
    29 Oct 2011, 08:30 AM Reply Like
  • sneaker1404
    , contributor
    Comments (396) | Send Message
     
    Is the right thing to do separate healthcare from employment? I tend to lean toward that. I'm for forcing everyone pay for healthcare. Enlarge the risk pool. Shouldn't that keep rates lower? Seems ok from where I sit, but I'm not sure of the unintended consequences (of which I admit there are always many :)
    30 Oct 2011, 09:43 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "Is the right thing to do separate healthcare from employment?"

     

    Yes.

     

    Why, when you lose your job, should you lose your insurance, precisely when you need it the most?

     

    Why, as an employee, should you be limited to only what your (current) employer offers you?

     

    I've read about far too many people who say they cannot leave their jobs because they don't want to lose their "benefits".

     

    If each person owned their own medical insurance policy, life insurance policy, etc. then there wouldn't be "golden handcuffs" tying you to a job that you don't want, and you could keep your benefits no matter where you worked.
    30 Oct 2011, 10:07 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3472) | Send Message
     
    Rodger Luebke,

     

    Health insurance in your company: I do not understand your staff behavior. Do they insure cars, houses, etc...?

     

    I'm happy that my wife and me have both health, vision, dental, etc... insurances at our jobs. I have now clue how much it will cost us if we retire tomorrow (we are both in middle 50th). I know we will not have Medicare for 10+ years and we not brave/stupid enough to live without insurance.
    Any idea how to estimate health insurance expenses?

     

    Sincerely
    SDS
    2 Nov 2011, 08:30 AM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1051) | Send Message
     
    You can easily get a free online quote for health insurance through Ehealthinsurance dot com. Problem is getting the coverage. I am paying $800 per month for my insurance through my wife's group plan because I can't get any insurance company to accept me. I am very healthy, only had one problem 3 years ago. That one hospital stay is getting me rejected from all carriers. I had to go get new procedures to verify no further problems, had my doctor write a clean bill of health and am trying again to get a carrier to accept me. Several of my employees are having the same problem.

     

    Also, my employees do not value health insurance. They are young and think they will live forever with no problems. They are well paid and can afford it. They choose not to buy it.
    2 Nov 2011, 09:06 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "You can easily get a free online quote for health insurance through Ehealthinsurance dot com."

     

    Except in Massachusetts, where I live. That web site does not offer policies in my state, apparently because there are so many mandated "benefits" (due to RomneyCare) that they cannot offer policies at competitive prices, so they simply do not offer policies.

     

    "my employees do not value health insurance. They are young and think they will live forever with no problems. They are well paid and can afford it. They choose not to buy it."

     

    I believe an individual has the right to decide not to buy health insurance. It might be a mistake, but individuals have the right to make mistakes.
    2 Nov 2011, 09:18 AM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » Robert - I agree in principal with your last paragraph. If we truly had a free market health care system, those without health insurance would incur the consequences of their behavior. That is, in an accident or life threatening illness, they would be left to die or rot away.

     

    Unfortunately (or, more compassionately "fortunately") federal law dictates that you MUST receive health care when visiting an emergency room. You must be treated. But without insurance, who picks up the tab? Eventually, you and me.

     

    Hospitals make up the uncompensated costs from the uninsured by raising the prices of a hospital stay. This is how you end up paying $7.00 for a pitcher of water and $20.00 for bandages...things that normally are free and $1.00 in real life.

     

    For the insured, these costs are passed on to insurance companies. Which means our rates are raised. So the uninsured maintaining their "freedom" not to be insured - along with a host of other factors - plays into skyrocketing insurance premiums.

     

    We simply can't have it both ways - personal freedom to NOT be insured, and cheaper rates on insurance. The two simply and irrevocably contradict one another.
    2 Nov 2011, 09:35 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    Denise, I agree with everything you said.

     

    Rather than mandate that everyone pay for insurance, which destroys the right of individual choice, I would rather repeal the law that requires hospitals to treat patients who will not or can not pay for themselves. There is no other industry in the world where the government requires a provider of a service to give that service away for free to anyone who walks in the door. This does not make any economic sense at all.

     

    If everyone knew that they had to have insurance in order to be treated at a hospital, then it would remove the current "moral hazard" of people who say, "I don't have to buy insurance, because the hospital will be forced to treat me for free".
    2 Nov 2011, 10:25 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3472) | Send Message
     
    Robert Allan Schwartz
    ""Is the right thing to do separate healthcare from employment?" - Yes."

     

    I kind of agree although I always though that group insurance is cheaper than individual one so "separate healthcare from employment" doesn't sound economically correct but Read Rodger Luebke comment here. I guess I'll ask more $$$ if my employer does not provide insurance to buy one but RL's plumbers probably have different minds.

     

    Sincerely
    SDS
    2 Nov 2011, 08:40 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "I always though that group insurance is cheaper than individual one so "separate healthcare from employment" doesn't sound economically correct"

     

    It might be true that group is cheaper than individual, because of the concept of "adverse selection".

     

    However, I believe that in a free market for insurance (which this country does not have any more), many vendors of insurance would compete for my business, which would lower prices.
    2 Nov 2011, 09:20 AM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1051) | Send Message
     
    Group is definately not cheaper than individual if you pay the whole group charge yourself. It is only cheaper if your employer subsidizes it. Its more expensive because they have to take everyone and can't charge more for the higher risk individuals, so they charge more on on average.

     

    I can buy an individual plan for around $250 that matches my current $800 group plan. Problem is that I haven't been successful in obtaining an individual plan.
    2 Nov 2011, 09:28 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    Rodger, my wife and I were forced (because Massachusetts "repealed" individual insurance plans in 1996) to join an aggregator (in our case, the Small Business Service Bureau). We receive group rates because we belong to that group. This is a national organization, so perhaps they offer membership in your area.

     

    "Its more expensive because they have to take everyone and can't charge more for the higher risk individuals, so they charge more on on average."

     

    This is true, but there is a countering force - there is no "adverse selection" in a group, and that reduces an insurance companies costs.
    2 Nov 2011, 10:27 AM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1051) | Send Message
     
    Robert, I'll check it out. Thanks
    2 Nov 2011, 10:34 AM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » Keep in mind that "group rates" does not equate to group health. There is no group health for small businesses (less than 20 employees) wherein pre-existing is not factored in. If you have a mom-pop business like I do, you WILL be prescreened for pre-existing. "Group rates" also does not equate no pre-screening if the policy is individual.

     

    There are association health care organizations like this in Texas. I checked them out. Their rates were no cheaper than me pricing out my own policy, when you factored in the fact you had to PAY for the privilege of being part of the group.

     

    I'm not dismissing Robert's suggestion outright. I'm just saying kick the tires before you buy in.
    2 Nov 2011, 11:57 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "There is no group health for small businesses (less than 20 employees) wherein pre-existing is not factored in. If you have a mom-pop business like I do, you WILL be prescreened for pre-existing."

     

    Denise, my wife and I are both self-employed, so we are small businesses with 1 employee each. As far as I remember, there was no health screen when we joined the aggregator. Perhaps that is because there are hundreds of thousands of members in the aggregator; perhaps things are different in Massachusetts; I don't know.
    2 Nov 2011, 12:22 PM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » You may be right. There is probably a difference between the aggregator and an association. I know for us, with no aggregator, there have been health screens across the board, both for group and individual. Health screens also apply to association health care, which renders it pretty useless here.

     

    There is a reason why Texas is the most uninsured state in the union. Way to go Rick Perry (I'm a Republican and I am NO FAN of Mr. Crony Capitalist himself).
    2 Nov 2011, 01:11 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3472) | Send Message
     
    "Canada, Costa Rica, ...."
    I used to live in countries there medicine was NOT a business (all hospitals, medical offices did not run for profit) and I did trust doctors there more than doctors in USA. The quality of medicine wasn't so good in terms of equipment. Most doctors there recommended preventive and fix-treatment medicine and did not wait for surgery. I guess /because my health is good and I don't have experience/ that USA doctors prefer Tylenol, more Tylenol and then expensive surgery instead of cheap fixes. In the result cost of insurance is too high in USA. The cost will be even higher (or quality and accessibility drops) with Obamacare if a working person pays for 100% healthy adults who live due to social benefits and whose grandparents and parents had never work, for illegal emigrants who work for cash in black market, for many layers of bureaucrat between me doctor and insurer.
    2 Nov 2011, 08:57 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3472) | Send Message
     
    How much "aggregator" charge?

     

    "I can buy an individual plan for around $250 .... Problem is that I haven't been successful in obtaining an individual plan."
    Is $250 just an advertising number???
    2 Nov 2011, 11:26 AM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1051) | Send Message
     
    No, I've switched between individual and group plans several times over the past 10 years. The problem is that I was hospitalized while on the last group plan and now I can't get back on an individual plan. The rates are set like utiilty rates. Same rate no matter which insurance broker you use. Its just the underwriting department doesn't like me now.

     

    If I didn't have access to my wife's group plans, I'd be one of those uninsured people that shows up at an ER. Not by choice, but because I can not buy health insurance at any price right now. I don't understand why that is, but it just is?
    2 Nov 2011, 11:38 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    Warren Buffett owns Geico, so he is in the insurance business. He once said, "There are no bad policies, only bad rates". I'm sad that there aren't any insurance providers out there who will offer you a policy, even at a higher price than you'd like to pay. :-(
    2 Nov 2011, 12:24 PM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    Its an INSURANCE bubble, not a healthcare bubble per se. That's an important distinction. The question then becomes, can the two be separated from each other realistically? The answer is not completely.

     

    But, I think if we could separate them more than they are now we would see lower costs. One on hand you pay for care in the form of checkups, mild non-life threatening trauma, pneumonia(which can be life threatening), etc. And then there's the black swan coverage, a life event broadsides you(an Allstate commercial).

     

    So you need life insurance, but you also need healthcare. The two don't necessarily need to be cobbled together even if there are some intersections. They are two different ideas.

     

    And what is currently happening is that hospitals are doing the same thing that the banks did with crappy mortgages by hedging them with the good ones in the form of CDS. Then selling them. They are hedging risk by forcing the people with good health and low to moderate use of their plan to subsidize people in bad health with high monthly prescription expenditures, etc.

     

    This is the problem. It is a giant Credit Default Swap.

     

    We had this two years ago when my comany's RAF was bumped to a 1.00 from a .90 after one worker out of 122 had cancer. Everyone now was paying higher premiums for his cancer. Does this make sense? Are all these workers now higher risks? No. But the provider can do what they want apparently. Its socialism covering for the costs of the one spread out over the group.

     

    The other problem is medicare and medicaid which force hospitals to cover patients they don't want to cover. Many hospitals and doctors refuse these after a certain limit, but are forced to take them on up to a point. What does this do? It is a forced subsidy which then FORCES the hospital to turn around and raise premiums on everyone else. Government is directly, through their meddling, inflating health premiums through the ancient, rotting legacy of LBJ's bright idea.

     

    And Zerocare did nothing to address any of these real issues, only set them further into concrete. Perhaps he wanted that??? To create more dependency?

     

    What needs to happen is something disruptive from a structural side where customers can shop their premiums around nationally. Congress has forbid it and thereby propped up the ponzi by making state monopolies. Why? The lobbyists are paying the congress critters to do so.

     

    And this is where we are. A combination of corruption and a bad system.
    7 Nov 2011, 10:22 AM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » @Wyatt - you hit the nail on the head.

     

    You realize how truly corrupt the system has become when you visit a country like Costa Rica, which neither allows health insurance, nor malpractice suits. The care is dramatically cheaper. What's even harder to explain to folks, since we believe so strongly in the U.S. that our health care system is the best, is that patient care is FAR SUPERIOR in a country that is not controlled by the dictates of insurance. I know this from personal experience.

     

    For me, given a choice between a surgery performed in the U.S., and a surgery performed in Costa Rica, I would choose Costa Rica again in a heartbeat.
    7 Nov 2011, 10:40 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "You realize how truly corrupt the system has become when you visit a country like Costa Rica, which neither allows health insurance, nor malpractice suits."

     

    Denise, does Costa Rica actually outlaw insurance? Or is it simply unnecessary because all health care is "free" (i.e. at no charge to the consumer)?

     

    I'd worry a bit about disallowing malpractice suits. Doctors who are negligent should be made to pay for their mistakes. But the unreasonably high awards in the USA might want to be capped.
    7 Nov 2011, 10:43 AM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » @Robert - health insurance companies are not allowed to sell policies in Costa Rica. No, the care is NOT free. It is, however, about 30% of what you would pay in the U.S.

     

    Costa Rica is a small country. Doctors who are negligent are easily found out, and they end up simply "going out of business". The free market (instead of the court system) takes care of them.

     

    The best doctors are able to charge higher prices and develop the best client base (thus you stick with doctors in Escazu where the rich people live in San Jose). The free market also takes care of them.

     

    Since medical tourism is a big business in Costa Rica, it is fairly easy to find information on the best doctors on medical tourism boards.

     

    How easy it to find out about a negligent doctor here in the U.S.? The system is very opaque. Also, how many malpractice cases in the U.S. are really, truly *malpractice*? Our system is completely hosed up with ridiculous cases, most of which the insurance company insists upon settling, which raises the premiums the doctors have to pay.

     

    And who pays for the doctors insurance premiums? We do!

     

    I agree that the trade-off in all this is, you have no recourse should something go wrong. So common sense says, don't go to a country like Costa Rica for a heart transplant. But if you need bunion surgery, or a lap band procedure, where the risk for most patients is minimal, the trade-off may be worth it.
    7 Nov 2011, 10:59 AM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    Side note to Plus 5.

     

    I got in on more MHR when it went sub $3.00 a few weeks back.

     

    Also check out PER. I think you'll like it ... a lot!

     

    Added more PER today. Its going ex-div in just a few days. Better catch it! A current 15% yield with an inflation hedge(oil).
    7 Nov 2011, 11:34 AM Reply Like
  • Five Plus Investor
    , contributor
    Comments (2559) | Send Message
     
    Author’s reply » @Wyatt - I'll check it out, thanks!
    7 Nov 2011, 11:38 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (14056) | Send Message
     
    "health insurance companies are not allowed to sell policies in Costa Rica. No, the care is NOT free. It is, however, about 30% of what you would pay in the U.S."

     

    I did not know that. Thanks for the information, Denise.

     

    "Doctors who are negligent are easily found out, and they end up simply "going out of business". The free market (instead of the court system) takes care of them."

     

    I am completely in favor of free market solutions like this one.
    7 Nov 2011, 11:47 AM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    Read this.

     

    http://seekingalpha.co...
    7 Nov 2011, 11:41 AM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4503) | Send Message
     
    And this.

     

    http://seekingalpha.co...
    7 Nov 2011, 11:42 AM Reply Like
  • extremebanker
    , contributor
    Comments (1698) | Send Message
     
    5+:

     

    A very good article that should have been published so it could have received many more comments and input.

     

    Health care is your typical government created bubble. All of the excess spending on Medicare and Medicaid of recent years has driven healthcare costs through the roof. Just like fannie mae and freddie mac drove up housing prices for everyone. (and the GSe's are really trying to drive up prices now) Demographics of an aging population and less people with employer coverage will continue driving prices higher as more people enter Medicare and Medicaid. It is similar to the bubble created in college degrees from government sponsored student loans. College expenses have gone through the roof and the value of a college degree is much less today than it was twenty years ago. These bubbles will eventually burst leaving us all in much worse shape.

     

    Once again, a nice article!
    6 Apr 2012, 01:12 PM Reply Like
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