Thursday, August 06, 2009

Mafia vs Private health insurance: who is more honest?

If you win a big jackpot at a casino, they pay out.

Heck, if you win a big jackpot in an illegal numbers game, they honor their commitment.

But if you pay health insurers for coverage and need expensive treatment, they try to weasel out of paying up, even if you live in a state where that is illegal.

Ask Jennifer Wittney Horton:

Or Peggy Raddatz:

Insurance company CEOs have confessed to Congress that if you get sick with a condition that is expensive to treat, such as cancer, their computer programs go through your records to see if there's any way they can cancel your coverage.

In contrast, if you don't submit a claim, they do not use their programs to see if they should rescind. They keep your money even though they would refuse to pay off if you got sick.

You're supposed to make the payments; you're not supposed apply for care!

Mike Konczal of the Atlantic magazine has done the math for us:

"It should be fairly clear that the people who do not file insurance claims do not face rescission. The insurance companies will happily deposit their checks. Indeed, even for someone in the 95th percentile, it doesn't make a lot of sense for the insurance company to take the nuclear option of blowing up the policy...

If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases - the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier - then the probability of having your policy torn up given a massively expensive condition is pushing 50%.

One in two...."

( How Health Care is Like Zombie Insurance, Jul 29 2009, Atlantic magazine)

Roughly half the time that health insurance would have to make a big payout, they find a way to avoid it.

Watch the video. There is no conclusion except that health insurers are less honest than organized crime.


UPDATED: check out

UPDATES AGAIN: actual Death Panel sighted:

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