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Generic Confusion

When you leave, my blog just fades to grey
Nu ma nu ma iei, nu ma nu ma nu ma iei

News? Check. Politics? Check. Music? Check. Random thoughts about life? Check. Readership? Ummm.... let me get back to you on that. Updated when I feel like I have something to say, and remember to post it.

Wednesday, January 24, 2007

Bush's Health Care Proposal

Now, I recognize the plan is not likely to pass a Congress that didn't even want to remove government responsibility for a portion of retirement savings, but I like the plan. President Bush's plan, as outlined in his state of the union address, proposes treating employer-provided health insurance as taxable income, but then giving a tax credit for health insurance, up to $7500 for individuals or $15,000 for families. If your company spends that amount or less on insurance, your tax bill is unchanged. Only if your employer offers a luxury health care plan would you have extra taxable income.

Example: If I have an inexpensive health insurance package that costs $300 a month, with $250 per month paid by my employer, I'd have an added taxable income of $3000, but would deduct $3600 from my taxable income. If a university professor has a no-deductible, no-copay, no-drug cost, no-network, full mental health, full chiropractic, etc. plan that costs $1000 a month, he'd have $12,000 more taxable income, and a deduction of $7500.

I understand that the proposal applies the tax credit to both income taxes and payroll taxes, providing additional benefit for lower-middle and middle-class families.

Under the current system, health insurance is tax-deductible for businesses, but not for individuals. A CPA with Price-Waterhouse enjoys a subsidy that an independent CPA doesn't get. Under the proposed system, everyone will receive the same tax treatment for identical insurance. At the very least, it's a fairer system than what we have now. President Bush's proposal still doesn't require people to have insurance, though.

An additional benefit of Bush's proposal? It might make people look more at buying INSURANCE, not buying a mechanism to transfer the payments for medical costs.

Take two health plans:
  • $A deductible, B% copay, $C drug copay, $D annual out-of-pocket maximum for necessary medical expenses
  • $A deductible, B% copay, $C drug copay, $D annual out-of-pocket maximum for necessary medical expenses, PLUS semiannual checkups.
The latter plan will be more expensive, obviously. If a checkup runs $100, then the latter plan with its two checkups will cost... wait for it... MORE than $200 more. Here's the issue: In the first case, the insured gets a bill from the doctor and pays it. In the second case, the insured gets a bill from the doctor and sends it to the insurance company, who processes the envelope to the mail department, who processes the claim, who issues a check, who mails a check, and who pays overhead for all of the above.

There's a reason to encourage insureds to go to checkups; they help identify problems earlier, when they're cheaper to fix. (Warning: that's also one of the reasons hated HMOs are supposed to save money over indemnity insurance.) However, there's really no reason to bill the insurance company for a service that is known in advance. It's not insurance to pay for a sure thing. (An insurance company that executes a financial transaction, calling it insurance, but not exchanging any risk, will get in trouble.)

The plan is a start, but here are some issues the plan does not address.
  1. The plan does not help people buy insurance. Plenty of families above the Medicaid threshold are honestly unable to pay for inexpensive health insurance, and plenty more would rather spend the money on something else. Some manner of sliding scale to provide payment assistance would help, but would be expensive.
  2. The plan does not make individual insurance cheaper. Until insurance is mandatory, the people who buy individual insurance are the kind who expect to use it. People generally don't elect or unelect group insurance provided by an employer based on their health status.
  3. Insurance for people with chronic problems will continue to be expensive. Let's be honest, if you have chronic conditions that require $1000 of covered drugs and a battery of tests each month, you're not going to find individual insurance for $7500 per year. A risk pool will continue to be necessary (insurers contributing funds to cover the medical expenses of the uninsurable). The same thing happens with the inevitable higher health care costs of older people. Again, group insurance is cheaper; as long as you meet what is effectively a minimum level of underwriting (you're healthy enough to work), your expenses get spread with healthy individuals.
  4. The plan does not allow people to buy cheaper insurance built around fewer mandates. New York requires insurance to cover mental health and chiropractic. If you don't want it? Tough. Individuals should be able to buy insurance issued under other states' regulations.
Above all, Bush's plan keeps the important aspect of CHOICE in the system. Do you not like something about your in-network treatment? You can go out of network. Heck, you could even pay for some health care by yourself. That's in contrast to goverment health care that forces you to wait for desired treatment, or HillaryCare (a plan created by lawyers, not doctors), which made it a crime to pay a doctor for your own care.

One warning for the future: Bush's plan would make it easier for healthy individuals to elect individual insurance, electing out of group insurance. It won't have much of an impact now, but if there's ever a realistic market for younger insureds, it could increase the age and average cost of group insurance.

Others' comments:
Ruth Marcus, Washington Post
Arnold Kling, Cato Unbound

Sunday, January 21, 2007

Another hit for Such Great Heights

In the course of watching the Colts-Patriots playoff game, I happened across several of the Whiteboard commercials for UPS. By the second commercial in the series, I noticed the background music was very familiar. Confirming by popping in the CD, I learned it was another commercial to use the song Such Great Heights. Unlike the M&Ms commercial discussed previously, this is the original version by the Postal Service.

Friday, January 19, 2007

Duke Penitentiary

The Duke lacrosse false rape case has been covered extensively, such as by the indispensable KC Johnson. Suffice to say I hope the accused players receive sincere apologies, the university is punished monetarily, and the false accuser serves a stiff prison sentence.

But that's not to say you can't use the case for a laugh. The Center for Individual Freedom presents an article from six years in the future, showing the ultimate fate of the disgraced university.

In 2010, when Duke was forced to close its doors in the aftermath of a 2006 scandal involving false accusations of rape against three student lacrosse players, its property was sold at public auction to the state of North Carolina, which renamed it Duke Penitentiary, sometimes referred to as "Hoosegow of the South."

In keeping with its idyllic setting, Duke is a minimum-security prison primarily used to house white-collar criminals, former prosecutors, policemen, perjurers and approximately 88 former faculty members convicted in a series of riots that plagued the campus and the genteel streets of Durham throughout 2007.

It's worth an extra laugh if you're a graduate of UNC-CH.

Saturday, January 13, 2007

Snow in Southern California!

Check out the video clip from weather.com. That's a pretty decent snow cover for Southern California, in locations like Perris, Fontana, and Riverside. And the best part? There's no snow whatsoever in my part of Indiana.

Friday, January 12, 2007

Don't Fear the Werewolves of Wellpoint

Catherine Seipp at PajamasMedia is complaining about her Wellpoint individual health coverage. As you probably realize, individual health insurance is expensive, as people tend to get it when they think they'll need it. For example, I am not the kind of person who would buy it, because I rarely get sick and have no chronic conditions.

Let's go over her complaints.

1. Wellpoint is making sure they aren't the victims of fraud.

Health insurance is priced based on claim expectations. If this insurance is only sold to people with five times the claim expectations, because they get the insurance and hide their preexisting conditions, then the product is not priced correctly.

2. Wellpoint is profitable.

Most people don't realize that health insurance is typically priced to a loss ratio. A certain percentage of premium is supposed to go out as claims, based on actuarial assumptions, in a filing reviewed by the state insurance department. So complain all you want about profits and executive benefits. Even if those were lowered 50%, that wouldn't impact your premiums one cent.

Also note she only speaks in terms of total profit, not profit margin. In case you don't know, Wellpoint is HUGE.

3. Her out-of-pocket cap is being raised, because that's a benefit.

Actually, that surprises me. But if that's allowed by law, she should be complaining to the state legislature, not Wellpoint. Maybe she can lobby the National Association of Insurance Commissioners for a new model regulation.

4. Wellpoint doesn't want to pay for experimental treatment. (Avastin, for her cancer, at that point not approved by the FDA for that use.)

Now, I did find the statement from a Wellpoint medical director funny.

“If I keep garlic over my bed to keep away werewolves, and there aren’t werewolf attacks for five months… well, the logic is faulty there.”

That was a stupid thing to say. Here's what he should have said.

"Many people with cancer and other terminal illnesses travel to Mexico in pursuit of miracle cures. Should we pay for one of these miracle cancer cures, even if a CT scan shows the cancer shrinking? We say no. We need to establish a threshold for what treatment is properly considered medical treatment. We have chosen FDA approval of the treatment as that threshold."

Here's an example that someone who's not an actuary could understand. As part of your mobile phone package, you may elect to get your phone upgraded automatically once a year. That's a cost that can be planned for. If the new phone typically retails for $200 and costs the company $140, perhaps they'll charge $15 a month for this benefit. Now imagine the government tells the mobile service provider "You must provide a new phone twice a year." Now, that service is no longer priced appropriately.

It's pretty hard to price a product when at any point, the legislature or Department of Insurance can demand you cover a bunch of new $100,000 treatments without changing premiums.

Take a look at this column from Contingencies that pictures auto insurance designed as if it were health insurance. Then decide if maybe, just maybe, the expectations for health insurance need to change.

Tuesday, January 02, 2007

An old favorite topic returns!

Here I thought the topic had long disappeared, but Gary Brolsma is back, with a New Numa lip-synching video. It uses a newly created song called New Numa, by Variety Beats, performed in Russian.

Monday, January 01, 2007

The Great Designer Search

Continuing the trend of Magic-themed posts....

Over at Wizards of the Coast, the Magic: the Gathering design department decided to add an intern. And to fill this desirable position? Why not an open competition, in the vein of reality programming?

Over one thousand people responded to the first steps, to write ten essays and take a tricky quiz related to Magic design. Then, 136 people received a design challenge, and finally, the viewing public met fifteen candidates. They were slowly winnowed out with additional design challenges. One candidate, Alexis Jansen, distinguished herself and was perceived by many as an early front-runner, though there was nothing like agreement on the Wizards.com discussion forums. Fifteen participants became three, who went to Renton for interviews.

And it ended with a party, and all three finalists were offered different internships. Very cool.

If you followed the discussion carefully, you might have seen a plot twist that would make any reality television programmer swell with pride. (And I wasn't the first to make this point.)

While I would have loved to participate in the competition, and would love the job, participating would have meant lying on the very first question. Being in game design is like being in sports or movies. There are more people who fancy these jobs than there are jobs available, so salaries are pushed down. I simply would not be interested in giving up an actuary's salary (and job stability) for a game designer's salary. It wouldn't surprise me if the typical new FSA/FCAS earns more than vice presidents at WotC.

The secret of fruitcake... revealed!

Experiments intended to create the perfect holiday emissary resulted in a substance harder than darksteel and a fraction as merry.

A Wizards of the Coast holiday special for its employees, behold! The fruitcake elemental!