How Insurance Actually Works

Hidden inside this Wall Street Journal editorial there’s a neat explanation of how most “employer-provided” insurance plans are actually paid and administered, at least in the case of large companies:

In an aside in a Federal Register document filed this month, the Administration previewed its forthcoming regulation: “We also intend to propose in future rulemaking to exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 benefit years.”

Allow us to translate. “Self-insured” means that a business pays for the medical expenses of its workers directly and hires an insurer as a third-party administrator to process claims, manage care and the like. Most unions as well as big corporations use this arrangement.

But the kicker here is “self-administered.” That term refers to self-insured plans that don’t contract with the Aetnas and Blue Shields of the world and instead act as their own in-house benefits manager.

Almost no business in the real world still follows this old-fashioned practice as both medicine and medical billing have become more complex. The major exception is a certain type of collectively bargained insurance trust known as Taft-Hartley plans. Such insurance covers about 20 million union members, and four out of five Taft-Hartley trusts are self-administered.

There’s no conceivable rationale—other than politics—for releasing union-only plans from a tax that is defined as universal in the Affordable Care Act statute. Like so many other ObamaCare waivers, this labor dispensation will probably turn out to be illegal.

More than half of all employer-provided healthcare insurance is self-insurance and very, very few companies actually administer the claims themselves. However, unions do. If you add up all of the employers who self-insure plus unions and grandfather their plans, there isn’t a whole lot in employer-supported healthcare insurance left except for what’s been characterized as “substandard plans”, as circular a term as I’ve ever heard.

Right now we’re hearing about cancellations of plans in the individual insurance market but next year the big news will be the cancellation of small group plans.

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My Mom’s Birthday

Yesterday was my mom’s birthday. I’d intended to post on the occasion but was overwhelmed by events. In the past I’ve posted a number of pictures of her—as an infant, as a toddler, as a young wife, and as a mature woman. There are gaps in my catalog of pictures of her. I don’t believe I have any pictures of her between roughly the age of four and the age of 16, when she graduated from high school. I don’t have anything from 16 to her mid 20s. Once my dad started taking pictures of her she had hardly an unphotographed moment. Those ended when he died and she was at a relatively young age.

Rather than post a picture I thought I’d do something different. As you may recall my mom and her parents were in vaudeville. Theirs was an unsettled existence, moving from town to town, mostly in dusty western towns. Not hitting the high spots.

Above is an image of her first contract. As you can see, it’s with the owners of a theater in Houston, Texas when she was three years old. She might have been three but I suspect she was actually two. It’s hard to know for sure. I have three birth certificates for her, each with a different year of birth. Even she didn’t actually know when she was born.

Something else worth mentioning is the name. I don’t know that my mom went by the name “Coleen Neff” as anything but a stage name. Her mom at that point was known as “Babe Neff”. I’ve got some old clippings with those names I’ll show you some time.

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Litany

Yesterday when I was sitting in one my clients’ offices, an elderly woman hobbled up to me and engaged me in conversation.

“I’m a Survivor”, she said.

She rolled back her sleeve to show me the tattoo on her arm.

She then showered me with a litany of blessings.

“May the Lord bless you… May the Lord bless all your undertakings… May the Lord bless you…”

I hope they take. I can use all the help I can get.

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The Magic Fades

Fouad Ajami has an interesting op-ed in the Wall Street Journal on the fading of the Obama “magic” that I’m still trying to get my mind around. I never really “got” the president’s charisma. It may be that I’m tone-deaf but I think it was never the singer. It was always the song. The idea of Obama and the things he spoke about rather than Obama himself. A lot of Americans really liked the idea of a black president. They liked the idea of “post-partisanship”. They liked that he wasn’t George W. Bush.

I largely agree with this snippet:

A leader who set out to remake the health-care system in the country, a sixth of the national economy, on a razor-thin majority with no support whatsoever from the opposition party, misunderstood the nature of democratic politics. An election victory is the beginning of things, not the culmination. With Air Force One and the other prerogatives of office come the need for compromise, and for the disputations of democracy. A president who sought consensus would have never left his agenda on Capitol Hill in the hands of Harry Reid and Nancy Pelosi.

That is, after all, what I’ve been complaining about around here for the last five years.

I think this is overstated:

Valerie Jarrett, the president’s most trusted, probably most powerful, aide, once said in admiration that Mr. Obama has been bored his whole life. The implication was that he is above things, a man alone, and anointed. Perhaps this moment—a presidency coming apart, the incompetent social engineering of an entire health-care system—will now claim Mr. Obama’s attention.

I’m interested in hearing your opinions.

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How to Create a Perfect Storm

Step 1: Enact a hellaciously complicated healthcare insurance reform plan.
Step 2: Enact a plan with the “insider-outsider” problem noted in The Economist.
Step 3: Enact it strictly along partisan lines.
Step 4: Neglect the implementation of its entry portal until after a disastrous debut.
Step 5: Oversell it and give a mealy-mouthed apology for overselling it.

The president and the Democrats better hope that Peggy Noonan’s assessment is wrong:

A great deal is possible because the people are coming around to the Republican point of view on the program: They do not like it, do not trust it, do not believe it will make things better. The president got caught—and it’s amazing he did it, because he must have known he’d be caught when the program debuted—dissembling, for three years, as he sold and attempted to popularize his program. In fact if your insurance isn’t provided by an employer or the government, chances are pretty good you will soon lose your policy, your doctor, your premium price.

[…]

The mainstream press is already beginning to peel off. Bill Clinton gave them permission for that. Big Dawg was right: The president has to honor his own word and protect those who trusted him and been thrown off their plans. The press, and congressional Democrats, are no longer disloyal if they say the same thing.

Democrats in the House seem near to snapping, and you never know what the House will do. They’re elected every two years. They’re always in an election cycle, and are thus more reactive to and sensitive to shifts in public thinking.

It would make history if congressional Democrats proved to be serious, equal to the moment, if they pushed back against the White House and came through for the American people by moving, in a real move, not a cosmetic gesture—too late for that, that’s what they should have been doing a month ago!—against ObamaCare.

It’s honestly not clear to me whether getting Healthcare.gov mostly working by the end of the month is important or not. Oh, it not mostly working would be important. If you think the flailing around for solutions is desperate now, wait until then. I’m not even sure mostly working will help.

The sad reality is that once any computer program has reached a certain levevl of complexity it will inevitably have bugs. There may be no fixes, just trade-offs. The president’s political opponents will be able to trot out a continuing stream of horror stories, a torrent of fear, uncertainty, and doubt.

What worries me is the dwindling elapsed time. How many end-to-end enrollments will the site support per hour? If your experts tell you there is no maximum number, get better experts. The closer we get to critical deadlines, e.g. the middle of December, the middle of February, the greater the demands that will be placed on the site and, inevitably, the more system failures.

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I Only Look at the Trend

What percentage of those who were crowing a week or so ago about the PPACA’s favorability going up will take the latest Gallup poll’s finding that its approval had gone down seriously? My guess is that it’s down the memory hole time.

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It Depends on What the Meaning of “Meaning” Is

I’ve been ruminating on the observation by an OTB commenter I mentioned the other day, that in the PPACA the Pelosi-Reid Congress enacted the “least disruptive meaningful change” to the system of healthcare insurance, trying to reconcile that observation with my own view of the law. Here’s what I’ve come up with.

I think it depends on how you define “meaningful”. I think that the Congressional Democrats defined meaning in terms of a list of buzz words, e.g. “guaranteed issue”, “community rating”, “market-based”, and so on, and their idea of meaningful resulted in the neoliberal mare’s nest of the PPACA. I don’t buy the apologist’s “60th senator” explanation. I think the PPACA is exactly what the Congressional leadership wanted.

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Which “Rule of Law”?

I’ve remarked on this before but I think it’s worth talking about again. There are several different ideas out there about what “the rule of law” means. Stating them in their most extreme versions one might be thought of as a rules-based regime and the other as a discretion-based regime.

In a discretion-based regime a law serves as a place marker, a statement of intent. The practical, day-to-day details are worked out by benign and capable administrators.

In a rules-based regime a law is a statement of actions that are required or forbidden and the penalties for violation. Any issue not addressed by the law is at the discretion of the individual.

To those who think of laws in terms of a discretion-based regime a rules-based regime is simultaneously too rigid and too chaotic. To those who think of laws in terms of a rules-based system a discretion-based regime is arbitrary and potentially tyrannical.

In practice our system has some of both. We have a common law system so most of our law has been created by judges, the “benign and capable administrators” above, presumably according to a set of principles, a system of meta-law. However, because we have a common law system there is no presumption that everything falls within the circle of the law.

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The “Pottery Barn Rule”

as applied to politics. Mickey Kaus proposes a campaign slogan for Democrats in 2014:

Only Democrats Can Fix the Mess They Made!

If Illinois is any gauge, Republicans will do their darnedest to convince people that’s exactly the case.

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Missed Deadlines

The editors of the Chicago Tribune bring up an interesting point. What happens if Healthcare.gov isn’t suitable to task by the November 30 deadline the Administration has established? It won’t be a confidence-builder, that’s for certain. But it would have real world implications as well:

Losing October and November to the computer meltdown means that millions of people will have, at best, days to cram through the insurance enrollment system by Dec. 15 if they want coverage that begins on Jan. 1, writes James Capretta of the American Enterprise Institute. If they can’t, “it will be nearly impossible to process the enrollments fast enough to prevent breaks in insurance coverage at the beginning of 2014.” Capretta’s prediction: “some very large number of Americans — probably in the millions — will experience a break in insurance coverage at the beginning of 2014.”

It will increase the peak load requirements for the site making it that much more difficult for it to achieve its purpose. And it will very likely mean a break in coverage for some number, possibly a very large number, of people.

It would also have psychological and, presumably, political implications.

BTW, why did President Obama make such a point of people who liked their insurance being able to keep it? Because of the way Bill Clinton bungled healthcare reform twenty years ago, the first step in that ill-fated operation being to put his wife, Hillary, in charge of it.

Now who is urging President Obama to find a way to make good on that promise? Bill Clinton.

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