Comments on: Higher Lifetime Maximums On Health Insurance

By: Jay

Jay — Wed, 29 Oct 2008 00:36:16 +0000

ParatrooperJJ:
When you say “why make the rest of us pay for it?”

…who is the “us” you speak of?

By: ParatrooperJJ

ParatrooperJJ — Tue, 28 Oct 2008 20:59:55 +0000

Most companies rebid their insurance every year and get a new insurer. When down the road you go back to the same insurer, the caps start over. Maxing out a lifetime cap is something that will happen to very few people, why make the rest of us pay for it?

By: Jay

Jay — Tue, 05 Aug 2008 21:03:28 +0000

Don:
You haven’t been reading anything I’ve written if you think I’m too concerned with the higher claimants. What I’ve said is that from an actuaries point of view (based on my discussions with them), a lifetime maximum over $2 million affects the premium by a negligible amount. That means there will (currently) be little or no difference in the premium of a policy with a $2 million, $10 million, or unlimited lifetime maximum – everything else the same. So a lifetime max over $2 million doesn’t affect the lower claimants in the pool. That is why the overall lifetime max is something I rarely discuss. This just happens to be one article out of several hundred on this blog and lifetime maximum is the topic. But my stance has been that an overall lifetime maximum over $2 million is a moot point.

Where the point is not moot is when you discuss policies through companies like Assurant that have embedded annual maximums and annual outpatient maximums. Or any policy from companies like MEGA and Midwest National for example that have “gotcha” limits on things all over the place. Some people know their situation and can accept those risks. But most people buying those policies don’t know what they’re getting and don’t know about those maximums until they have a big claim.

In a free market scams like that will always exist. When you’re getting your car worked on or your house remodeled, not understanding the full terms of an agreement or dealing with a shady company can cost you. But when you run across these companies or policies in the health insurance industry, that agent who either forgot to mention some stuff or purposely didn’t mention some of those things can be disaster.

By: Don Levit

Don Levit — Tue, 05 Aug 2008 19:45:42 +0000

Jay:
It is a bit ironic that you are proposing $10million, or more, of benefits when we have 47 million people who are uninsured.
I asume you define a catastrophic event that could bankrupt the insured as whatever it takes to make one whole less his net worth.
If so, that is a very bold recommendation, seeing that many people are unable to afford even the premiums on the “lower benefit” policies today.
We do need to be concerned about the lower claimants, for it is the lower claimants that make the insurance arrangement viable.
I believe you are too concerned about the higher claimants, forcing them too prematurely into bankruptcy.
If we don’t find a way to keep the lower claimants in the pool, even a $1million benefit may not be affordable.
How about we discuss keeping the pool financially viable, and finding a way to equitably and reasonably treat the higher claimants?
Don Levit

By: Jay

Jay — Tue, 05 Aug 2008 19:15:05 +0000

Don:
Moral or not, the purpose of health insurance is to protect against catastrophic events that would bankrupt the insured.

But the point of my comment was that it doesn’t matter. The actuaries are like the odds makers in Vegas. If they saw the increase in potential benefits as a possible drain on the pool of resources, they would need to reflect that in the price. Nobody knows who will end up being the lower claimants or the higher claimants.

In health insurance, it’s moot to say who is subsidizing whom. One might say the people that have never had a claim are subsidizing those that do file claims. If those people that have never filed a claim could know for sure that they never would, they would probably stop paying their premiums into the pool and quit subsidizing the people filing claims. But the reason they have the health insurance policy is because there is the possibility that they could need those $X million of potential benefits tomorrow, next week, next year, etc.

By: Don Levit

Don Levit — Tue, 05 Aug 2008 16:33:44 +0000

Jay:
I agree with you.
And, to supply catastrophic coverage is the function of insurance.
The problem with having one policy of, say, $10million of benefits, is that the lower claimants are having to inequitably subsidize the higher claimants.
Even though the policy may provide for $10million of benefits, you may have participants who feel that, morally, it is improper to lean on the other participants to that great of an extent, even if the chances of that happening are minor.
In a world of finite resources, $10million of potential benefits, or worse, unlimited benefits, can be a morally objectionable use of the community’s limited resources.
It is only because of the community, that an individual claimant can secure catastrophic benefits.
It is up to the community, in my opinion, to place reasonable limits on those benefits, even in a life and death situation.
Don Levit

By: Jay

Jay — Tue, 05 Aug 2008 01:09:21 +0000

I sometimes speak with the actuaries at various insurance companies about plan design. And they will regularly say that a lifetime maximum above $2 million does little to raise the premium. So they don’t see much of a risk of people going beyond that number right now.

By: Don Levit

Don Levit — Mon, 04 Aug 2008 17:16:27 +0000

Louise:
Do you think that by simply increasing the lifetime maximums for a slightly higher premium that the insurers will not try to creatively use even more ploys to not pay the higher benefits?
Just because the contract is worded in a certain way, does not mean that insurers will abide by the spirit of the contract.
Couldn’t these higher maximums be merely a way to attract business in which the insurer intends to work out the details at a later date?
Don Levit