“Figures don’t lie but liars figure” is an old saying.” As the problems of our economy continue to unfold we have found that business after business has manipulated their practices for their own gain. We find that businesses have been manipulating their practices for a long time. It is funny but sad and true that manipulation isn’t always illegal. I can attest to that.
Perhaps you are wondering why the government is in a position to manage health care services. The reason is that private insurance companies have failed. However, I would like to share with you an insurance practice that went on for years when I was in the field and still may be going on today. It was and is a sad state of affairs.
The company I was familiar with on a business basis had a line of insurance products. Its key product was a major medical product.
The company would develop a very competitive rate and file it with the states it did business in. Then the product would be introduced to the “field” for the agents to begin to sell it.
After one year the “loss ratio” on the book of business would be calculated. A loss ratio is the percentage of premium used to pay claims.
Based on this loss ratio the insurance company would ask for a rate increase from the states so they could cover their losses. It would be granted.
However, the company would also develop another health product series.
An example would be the initial policy might be called Series MM-2008 and then the second series might be called MM-2009.
The newer policy would be introduced with much lower rates.
People who had the initial policy and were in good health (in other words didn’t have many claims) could apply for the new plan and get the new rates.
Unfortunately those with a poor claim history couldn’t move and had to stay and pay the higher premium in the old plan.
However, that wasn’t the end of the bad news for those stuck in the “old plan.” When the healthy people left the plan, it took more and more money to pay for the plan cost because the plan didn’t attract new members due to its prohibitive costs. Therefore the sick people would have more and more claims driving the premiums higher and higher. The best way to describe it is that a group of sickly people became more and more responsible for their own medicine and hospitalization.
Ultimately the cost became prohibitive and people had to drop their coverage.
This procedure was utilized over and over.
The company failed in its mission to the, public but it sure made a lot of money, doubling its profit in two years.
Again was the company doing anything illegal? No, they were just massaging their business practices within the law.
However, because of business practices of many companies like this, the United States is paying a major price.
Personal Experience, Best’s, 1985