Tuesday, July 21, 2009

Concept of Insurance Violated in Practice

The scandalous behavior of our major insurance businesses has become an accepted outrage. When we pay our premiums, we are no longer given the value we were sold with the policy. However, present legislation is being proposed to require that we buy insurance for the good of society. This is another instance of the public interest being stolen, for the profiteering that our business community has turned to.

When Massachusetts passed into law a requirement that everyone have insurance, the corruption of the industry was ignored. Reality-based health insurance legislation must require the actual activity of the insurer be regulated to require that a large proportion of that activity actually result in health care that the policy supposedly entails. In my opinion, that should be at least 80% of the amount received in premiums being devoted to actual health care.

The concept of insurance is that by pooling their funds, the insureds guarantee that they can manage those few outrageous costs that some of the insureds will encounter, usually through catastrophic health needs. As it is operated presently, that concept is the selling point for policies, but it is not the operating principle of the companies executing the policies.

The events chronicled in Sicko were revelatory to many in the audience, and included incidents of sick policy holders having their just claims refused by insurance moguls to promote profiteering. Hearings have recently established multitudes of instances that occurred when the medical needs of the insured were rejected by insurers because they reduced profits.

We have standards for charitable organizations that require them to give a certain amount of their funds to actual charitable work. All the more so, if the public is required to have insurance, should the work they contract for be a large proportion of what is actually financed.

In the case of charities, many oversight groups have formed because of outrages discovered in appeals to the public which represented fraudulent claims. There is obvious need to apply that same outrage reaction to companies that take in money on the pretense of a future commitment, then violate that commitment when a need for it actually arises.

This recent post about fraudulent fundraising strikes me as very relevant to the insurance debacle.

I get so angry when a nonprofit gets money that does not deserve it. For example, the Cancer Fund of America solicits donations across the U.S., including locally, through telemarketers, direct mail and online. The BBB found that more than 99 percent of all cash donations to the organization pay professional fundraising costs, salaries for charity officials, consultant fees and other expenses related to the charity’s operations. And they raised more than $8 million in 2007. Just how much of that came out of our community is unknown, but that is money that a good local charity did not see.

The BBB offers the following tips to persons receiving charitable solicitations:

•Before giving, ask for written information about a charity’s program, finances and tax status – especially if you are unfamiliar with the organization.

•Don’t bend to pressure to give money immediately, especially over the phone. A charity that wants your money today also will welcome it later.

When we use an insurance company, it would be much preferable if we could count on an oversight agency, like one operated by our government, to provide information about the amount of funds that actually are returned in satisfaction of the contract we make with that company.

From Charity Navigator, which gives recommendations about the amount of funds collected as charitable donations that actually goes to charitable work: Program Expenses less than 33.3% (Emphasis added.):
Our data shows that 7 out of 10 charities we've evaluated spend at least 75% of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65%. We believe that those spending less than a third of their budget on program expenses are simply not living up to their missions.

Even more so should businesses that promise a service deliver that service. So when we pay out a required amount of a premium for insurance, it should return 80% of the basis for our premiums to the activity we pay for.

For public safety our government has required that in order to use a name like "organic" the company meet specifications it has established to assure us that the product meets standards of organic production and content. to be able to call itself an "Insurance Company", that company should be required to use a reasonable amount of its charges, for the insurance policies it sells, as actual insurance to policyholders.

There really is no reason except for fraudulent obtaining of funds for a company that is advertising its services to get paid without providing those services.

It is past time to stop accepting theft as everyday business operation.

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Blogger Cosa Nostradamus said...

Ever try to collect on a homeowner's policy? I did, after a fire destroyed my home. I got nothing. The bank foreclosed on the ashes.

When my father was killed, my Mom had to fight the life insurance company in court for YEARS to collect.

It's like I always say, they don't make money by giving it away. Insurance is simply a legal Ponzi scheme. It's legal because they don't pay off old investors with new investors' money. They don't pay anybody.

And you cannot buy a home, drive a car, raise a family, run a business or get healthcare without insurance. They're skimming a big percentage of all wages and profits in this country. And they use the money to bribe our politicians & bureaucrats, to keep the scam going.

The good news is, they're so freaking OBVIOUS about it now that everyone can see it. Let's hope everyone votes that way in 2010, 2012 & 2016.

SMASH corporatism.

9:40 AM  
Blogger Woody (Tokin Librul/Rogue Scholar/ Helluvafella!) said...

SMASH corporatism.

On a recent cross-country trip I heard a guy protesting that he paid out more than a quarter of his annual income in accumulated insurance premiums: home, auto, health, life, etc.

And asa you and ruth point out, recovering any significant pay-outs from the insurers is usually an exercise in futility and frustration.

12:10 PM  
Blogger Ruth said...

Thanks, you just talked me out of life insurance. And now that I'm beyond a mortgage, and the insurance co. paid me about half what it would take to replace my roof, I am concluding I would be better off putting those premiums straight into savings, too. Less and less is there any real justification for the pretense of insurance when it's theft by fraud.

1:00 PM  
Anonymous cgeye said...

The rogue members of the insurance industry that have pulled down the very concept of a rational risk pool could be taken down by three simple acts:

Nationalize regulation of insurance contracts. If the states have abrogated their responsibility, it's time to stop the state-based kickbacks that make contracts entirely in the favor of the companies. Yes, I know the feds would have their hands full, but they have one tool the states don't: RICO.

With sufficient prosecutorial zeal, the scams and real estate messes made by insurers' investment arms (y'know, the ones that buy junk bonds?) could be revealed, tried, and the remaining company assets disinfected, to be dedicated once more to responsible investments and payments to insureds.

Next, rescind the antitrust exemption insurance companies enjoy for actuarial synchronization. If they use that shared knowledge to stop insuring people, it's time to let them compete against each other like the cutthroats they really are.

And, finally, put back Glass-Steagall, so responsible insurers don't get bought up by speculators who loot premiums and give back nothing.

Oh, if we only had a president who started with such threats of strong regulations, to make the industry quake so hard they'd settle for a single-payer plan just to shut him up....

10:24 PM  

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