How Much is Too Much?

The long-awaited second part of Professor Reinhardt's article on insurance costs and loss ratios was posted yesterday. In the first part, he explained that it's not just insurance company profits that drive the cost of insurance up: they have considerable overhead and costs, sometimes reaching, sometimes passing 15%.

That article, though, was about the group market. When you insure a large group, risk is distributed more widely and you can do things like look at historical data, rather than give individual physicals, and cut out a great deal of brokering and marketing. For the individual non-group market, which is especially important now that Fox News is reporting that 149 million Americans are unemployed, overhead is much, much higher. How high? I say I say, how high?

-- So high that insurance lobbies fought 2008 state laws that tried to restrict their 'loss ratio' (i.e. the percentage of income that they pay out in care) from going below 70%.

-- So high that they claim that 55 to 60% is average -- which means that for every dollar you give them, you have purchased the right to get two quarters and a dime's worth of health care.

-- So high that small firms, who buy insurance for fewer than 10 people at a time, pay up to 18% more in premiums than large firms.

-- So high that three fourths of all families who shop for individual health insurance policies end up buying nothing.

That's hiiiiigh. Forgetting your debit-card at the grocery store while you're buying a bag of Doritos and a 2-liter bottle of Squirt high.

A public option would allow the government to create one large group out of this terribly underserved part of the population. These people have money; they need and deserve insurance -- although opponents of reform like to blame the victim ("I don't want to pay for somebody else's..."), these people would be happy just to have a deal similar to those who are covered by large companies. Large companies, I would add, that almost all started as tiny businesses, or groups of freelancers -- if we continue to unfairly punish customers on the individual or small-group market, we may not even have the next generation of innovative large businesses -- the financial and health risk won't be worth striking out on one's own.

But a 55% loss ratio (let's call it a 55% care ratio) makes insurance industries big financial players with a lot of money to throw around, and this is why we have Blanche Lincoln channeling Ronald Reagan in the Senate Finance Committee. 45% of our premium dollars are more than enough to buy a little democracy.

EDIT: but not all the democracy: progressive stalwart Shakesville transcribes this exchange between White House spokesman Robert Gibbs and ultrajournalist Helen Thomas, who has been asking him whether Obama will veto a health care bill without a public option over and over again for over a week.