It was a Maxwell Smart moment.
Neal Spero politely told us that he had a plan. Dave Clark and I, with equal parts candor and respect, politely disagreed. Mr. Spero is the Senior VP of American Community Mutual, a mid-sized health insurer based in Livonia, Michigan. Dave and I have been two of American Community’s top agents for most of the last twenty years. That is quite an accomplishment since we both work with dozens of insurers. The date was September 6, 2007. We had asked to meet with Mr. Spero to share our concerns.
My perception was that American Community was digging itself into a hole. I saw a problem with their new distribution system (who sells it) and their underwriting (who gets covered and at what price). Mr. Spero saw nothing but blue skies and calm seas.
I stopped writing American Community’s individual policies last October. Their current renewals for their existing business, reflecting their staggering claims experience, came in at 33%. Mr. Spero had a plan. I can hear Steve Carell say “Missed it by that much”.
This past week Senator Ted Kennedy (D-MA) and Senator Christopher Dodd (D-CT) announced that they are now able to project a cost for their committee’s health care reform package – $611 billion dollars over the next ten years. The Health, Education, Labor and Pensions Committee (HELP, really, I can’t make this stuff up) was pleased to get the cost down to $611 billion dollars even though that number doesn’t include Medicaid expansions which put the price tag back over the $1 trillion mark.
I can hear Don Adams say “Missed it by that much”.
Not that Senators Kennedy and Dodd know where six hundred plus billion dollars are coming from, but what if the real price tag is a trillion or so? That is a question nobody wants to answer.
There are ways for American Community to save itself. They will raise their rates, tighten their underwriting, and reassess their marketing and distribution. Or they will fail. I am not being cavalier about this. I want A.C. to succeed, but American Community is a business, not a person, not a government. A company that consistently has higher expenses than income ceases to exist.
What will the U.S. government do? One idea was to tax employer provided health care benefits, a bipartisan compromise that might have brought in a couple hundred billion. Other trial balloons floated have included a tax increase on high earners and a “sin tax” on carbonated beverages and sugary drinks.
How much Coke do we have to drink to make up a $1 trillion shortfall?
What’s missing is a serious discussion of how we are paying for any of this. Discounts from hospitals? Shell games from big Pharma? Would you believe aliens with space ships full of cash? Sorry, it is just that I have been here before.
Let’s all say this together, Tax Increase. It’s OK. The world won’t end and most of Congress will still be reelected. If having the government run health care is a good idea, say so, tell us the real price tag, and tax us appropriately. We’re adults. We’re citizens. Trust us with the truth.
Quick note: Dave Clark just called. I told him that he was included in this post. His only issue is that the American Community insurance pool isn’t as polluted in Michigan where he lives as our’s is in Ohio. He still loves them and does a lot of business with them. He pointed out that they are still one of the easiest companies to work with, do a great job paying claims, and still have guys like Neal Spero who would meet with agents like us. Duly noted.
From Michael Saltzman who still hasn't figured out how to post a comment:
Dear David the Insurance Maven:
Your recent blog rminded me of the beloved Butch Davis who as the then coach of the Cleveland Browns said the following when Jamal Lewis (then a Baltimore Raven running back) gained 350 yards against the Browns is one game: "If it weren't for the four 75 yard touchdown runs, we pretty much kept him in check."
Did Yogi say "We have to fix the parts that aren't broken!"
My solution includes tying the entire cost of Doctoring and Drugs to a fixed percentage of GNP and let the Doctors, Hospitals and drug Companies fight it out as to how to divide that pie.
Michael the Lawyer
Insurance Maven? More likely idiot savant.