How I Would Fix Healthcare – Step 2

This is a continuing series addressing the healthcare crisis in America and a possible alternative to President Obama’s healthcare solution.

Step 2: Maximum Non-Medical Costs Per Policy

By Federal mandate, insurance companies may retain no more than $40 per enrollee's health care insurance policy for administrative costs and profits.

Covering the extra costs of healthcare

Walk into an insurance company to buy health insurance. Where does the money that you pay for premiums go?

When you buy health insurance, you are buying more than just healthcare. The individual who sells you the policy receives commission on the sale. The company who brokers the policy receives their cut. The insurance company hires administrators to decide how your healthcare is managed, approving this test and that procedure, this referral, and that prescription. These administrators are overseen by highly paid executives. Staff is hired to assist. Buildings are built and maintained. Advertisements are bought in newspapers, magazines, TV and other venues. Events are sponsored to further advertise services as well as improve community relations. Indemnity insurance is purchased to cover malpractice lawsuits. Lobbyists are hired to go to Washington. After everything it paid for, anything left over is profit to investors and stockholders if the company is a for-profit insurance company.

According to a November 2008 study by the California Department of Managed Health Care (DMHC) and the Center for Medicare and Medicaid Services (CMS), health insurance companies on average retain anywhere from 14 to 18 percent of insurance premiums to cover administrative costs and profits. The average California enrollee in 2006 paid $3,565 per year for their policy, which averages out to only about $300 per policy holder per month. On average, insurance agencies gleaned anywhere from $42 per month to $53 per month to cover administrative costs and profits, or $500 to $641 per year.

Nationally, policy holders paid an average of $3919 per year, about $326 per month, and insurance companies retained 11 percent, or about $36 per policy per month, or $431 per year to cover administrative costs and profit.

The state of California is considering regulating the health insurance industry in their state so that insurance companies may not charge more than 15 percent per enrollee for administrative costs and profits.

This appears to be a fair number. However, where it falls apart is in the percentages.

Flat fees vs. percentages

If you are diagnosed with a serious disease, your insurance company can raise your premium. How high? As high as they want. The higher the better, in their minds, since higher premiums not only bring in more money for medical care, they also equal more money for profits and administrative costs.

In a system where commissions and profits are based on a percentage, prices are bound to go up. Why would I want to sell you an affordable $300 health plan and get $45 a month, when I can tack on risk factors, raising your premium to $2000 and getting $300 a month? I wouldn’t. I’d sell you the $2000 plan – every time.

By taking percentages in profit, rather than a flat fee, insurance brokers are motivated to sell higher priced policies.

However, convert this figure to a flat fee per “enrollee” and you suddenly have no incentive to artificially raise premiums. If an insurance agent understood that no matter how much your policy cost, he would still walk away with only $40 in his coffers, he has no incentive to pad the policy with unnecessary costs. Quite the contrary, he will offer you the absolute lowest priced policy he can which will suit your needs so that you don’t go to “Brand B” to buy your insurance instead of from him. In addition, he might even be inspired to shave off some of his commission so that he is more competitive. He will do better selling 100 policies at $300 per month per policy, than he will do selling 80 policies at $1000 per month per policy. He will be motivated to give you good service and keep his customers happy so that he can get referrals and win over even more customers.

Win-win for insurance companies

Since insurance companies nationwide currently glean about 11 percent on average from insurance policies, or $36 per month per average $3919 policy, limiting their potential profit to $40 per month per policy will essentially feel like a raise.

Only companies who are garnering significantly more for profits and administrative costs will feel the pinch. This regulation will inspire them to cut corners, pare down unnecessary administrative costs, and perhaps even slash a few salaries to highly paid executives.

Although this regulation will not solve the problem of increases in premiums for high risk policy holders, it will reduce one motivation for these increases – the one of profit. Healthcare costs will continue to rise as always, but will be based on actual medical costs, and not on the cost of operating the insurance company.

Reporting and regulation

Insurance companies will be required to submit monthly reports to an overseeing agency within the Federal government, listing the numbers of policies they have sold, the revenue they made, and how much was paid in non-medical vs. actual medical costs. Government accountants will audit each insurance company's books once a year.

Each year, the overseeing government agency will also re-evaluate the maximum $40 per policy per month maximum and adjust it for inflation or deflation, as the case may be.

How I Would Fix Healthcare

Step 1 – Employers must provide a minimum $300 health insurance policy allowance for each and every worker.

Step 2 – Insurance agencies may not take more than $40 per policy for profit and administrative costs.

Step 3 – Protect Health Insurance Surplus Coffers

Step 4 – Preventative Healthcare Maintenance Schedule

Step 5 – Improve Healthcare Access

A. Institute a “public option”;
B. Regulate rates with blind menu pricing; and/or
C. Provide free clinics and access to community health centers

Stay tuned for steps 6 and 7

How I Would Fix Healthcare – Step 1

Although I did vote for him, I am not a fan of President Obama’s healthcare solution. I agree that we are in crisis in this country due to rising healthcare related costs. However, I feel that Obama’s plan is far too complex and misdirected so that it unfairly burdens the very people it's intended to help. In the next few blogs, I’ll try to suggest an alternative.

Step 1: Employee Healthcare Plan Allowance

By Federal mandate, each employer should provide a healthcare plan allowance of a minimum of $300 per month, per employee of all classifications.

Choices in coverage

The employee will then be able to shop on their own for a plan from an independent insurance agency or managed healthcare company. They will make their own choices to spend this money on a plan that fits their needs the best.

Several years ago, when I needed to provide health insurance for my employees, I devised this system. It worked well for me as an employer because it was affordable, I could easily budget for it, and I wasn’t sucked into a contract with an insurance agency for an expensive company-wide-plan which really didn’t cover what everyone needed. I based the amount of the allowance on the entire cost for one sample employee of the oldest age to cover themselves from head to toe at a local HMO, including dental and vision care, and a co-pay of $10 per visit. At the time, this was $240. For a small additional fee of $80, employees could add up to three dependents on their plan, or pick a more expensive plan and pay the difference from their paycheck.

My employees loved feeling empowered to pick their own plan. Insurance agents visited our office and dropped off brochures and set up meetings to discuss options. Everyone was happy.

Most employees opted for a Blue Cross plan which had a percentage co-pay and deductible, but allowed them to go to whatever doctor they chose. However, one ad salesman, whose husband had lost his job and his benefits, instead chose a plan from another company that covered her entire family of four for catastrophic insurance only. Unfortunately, one employee smoked and was not able to get as much coverage with his allowance because his health was at a higher risk, so he went with Group Health, the local HMO. What was not an option was getting the money added to their paychecks, however I did offer to pay an actual medical bill for an employee who forgot to sign up for a plan. In all my years as an employer, I never heard one single complaint that the plan wasn’t working. Everyone loved it.

No Employee Left Behind

Every employee, no matter their status: full time, part time, permanent, temporary, seasonal, or contract should be given this benefit during the months they are employed. A Department of Labor survey in 2004 showed that only 60% of employers offer healthcare of any sort, and only 69% of all employees had access to participating in an employer plan.

While large companies are usually required by varying state laws to provide health insurance of some sort for their full time employees, they are usually not required to provide health insurance for their part-time, temporary, or contract help. In most states, companies with small numbers of employees are not required to provide any health insurance at all. Unfortunately, this mandate leads to less jobs and fewer paid hours as employers purposely cut hours, making employees work 34 hours instead of 35 to 40, just so that they can classify them as part time; or hiring temporary or on-site contract employees instead of permanent ones, all so that they are not required to pay for their health insurance. By requiring all employers to cover every worker, they will be inspired to promote some part time or temporary workers to full time permanent, which will also help to increase employment.

Employers will not be required to pay healthcare for workers they hire who are technically self-employed specialists, even if that worker does not have a business license. For instance, the man who comes and waters your plants once a week would not be considered your employee since he theoretically can hire himself out to water plants for several companies.

Duplication of coverage

Due to legislation and insurance agency contracts, there is a great deal of duplication of coverage, causing prices to be much higher than necessary.

For instance, spouses who both work full-time are usually required to both carry full coverage, usually partially deducted from their pay, even when they work at the same company. This is completely unnecessary and I blame insurance agency company contracts, which require employers to cover everyone, with no exceptions, for this gross overcharging.

The two employers should be able to work with each other to reduce their costs, perhaps splitting the cost of the family coverage between the two, or even allowing the couple to get a better plan for their household by pooling their allowances.

Likewise, if an employee works at more than one part time job where they will receive coverage at each of their jobs, the two or three or so employers should be allowed to split the costs.

Currently, employers must provide on-the-job injury and accident insurance for all employees of all statuses, no matter if they are full time permanent or just working for the day. In some ways, this is a duplication of coverage. The money that is allocated for this type of insurance could be reallocated to basic health insurance.

Is $300 enough?

The more people who are covered, the lower the prices are for everyone.

Most of us are fortunately healthy, and $300 x 12 months is $3600 per year, far more than what is needed to cover the basics.

Clinics can afford to offer low cost healthcare at phenomenally low rates by employing nurse practitioners instead of doctors. I was self-employed for many years and went to two different affordable clinics for basic care. I checked online for the current prices: yearly physical exam with GYN exam ($75 at a clinic), blood and urine test ($20), flu immunization ($12 at a drugstore), and medications (mine are $120 a year for generics). The most expensive cost was teeth cleanings ($160). Eye exams are $40 at a retail store, but I found basic prescription eyeglasses online ($28 with shipping). Other appropriate medical exams and tests would cost more. However, most people could get by with less than $500 in total costs per year. After deducting the $10 per visit co-pay, and having the patient pay for their own medications and eyeglasses (such as with my current plan), the insurance company would only have to pay around $300 for me per year, far less than the $3600 they would collect in premiums. (I should mention, that my current plan costs me nearly $500 per month, which is $6000 per year).

While it is true that pregnancy, catastrophic injuries, and serious illnesses can cost a great deal more to treat, few of us are frequently in need of these extras, so we never spend all of the money we contributed to the plan over the years. The extra money (and there is a lot of it) is supposed to be pooled so that those who need it can receive more coverage, and not supposed to be taken as extra profits by insurance agencies, as is currently done... which will be Part 2.

How I Would Fix Healthcare

Step 1 – Employers must provide a minimum $300 health insurance policy allowance for each and every worker.

Step 2 – Insurance agencies may not take more than $40 per policy for profit and administrative costs.

Step 3 – Protect Health Insurance Surplus Coffers

Step 4 – Preventative Healthcare Maintenance Schedule

Step 5 – Improve Healthcare Access

A. Institute a “public option”;
B. Regulate rates with blind menu pricing; and/or
C. Provide free clinics and access to community health centers

Stay tuned for steps 6 and 7

Janet Should Get the Kids

While I try not to comment on pointless celebrity gossip and scandal, this time, I feel I can make a positive impact on several innocent lives, so I’m throwing in my own two cents.

While Grandmother Katherine Jackson and birthmother Deborah Rowe are trying to hash out their differences regarding the newly fatherless Jackson children: Prince, age 12; Paris, age 11; and Prince II (Blanket) age 7; I wonder if anyone has considered Michael’s younger sister, Janet Jackson, as an ideal legal guardian.

During the very public Michael Jackson memorial, Michael’s daughter, Paris, after breaking down in a torrent of emotional tears, turned not to Latoya, Katherine, or any of her uncles who tried to pull her to them, but instead went straight for Janet. It’s no wonder. Janet appears quite caring, loving, and nurturing. Despite never having children of her own – perhaps due to choice, her first two husbands’ choices, or medical difficulties – Janet seems to be a natural born mother. At the young age of 43, after a very successful music career, perhaps this is her time to settle down to raise her brother’s three very beautiful children. Her third husband, Jermaine Dupri, who she is rumored to have married in October 2007, and has dated since 2002, would offer the children a stable and loving, two-parent home.

What about the two oldest children’s birth mother, Deborah Rowe? I have no doubt that Rowe is indeed the natural mother of these two children. Paris is her spitting image. The natural father (who cannot be Michael because the children’s eyes would have to be brown) was a donor to a sperm bank and is long gone, not even slightly important. However, Rowe was not only their mother, but also Michael’s wife.

Rowe is currently earning her way as a horse and dog breeder in her home in Palmdale, CA. What better way for the kids to get to know her than to spend one afternoon a week horseback riding with their long lost mum? Janet Jackson herself once dreamed of becoming a race horse jockey and would probably also enjoy the outing. They could picnic when the weather’s nice, chat about going to school (which they have yet to do), their hobbies, and where they went on their last vacation.

Why Rowe was cut out of the children’s lives is as complicated as their marriage and she deserves an opportunity to reestablish a relationship with them. A Daily Mail article published in May 2009, just one month before Michael Jackson’s untimely death, suggests that it was not by Rowe’s choice, but that she believes that her husband, Michael, married her solely to bear children for him. She claims she first agreed to have a child for him because she wanted to help out a friend, and after she got pregnant, they got married. Although she says they never lived as husband and wife in the traditional sense, Michael turned out to be a very good parent.

After their second child, Paris, was born, Rowe was sadly unable to have more children, but Michael wanted more. Divorce would have been imminent and a financial settlement of some sort would have been necessary since the divorcee of a famous pop star would have extraordinary expenses in paying for security, rebuilding her life, buying a new place to live, and reestablishing the lucrative career she left behind. (The story of their divorce and Michael's failure to pay Rowe the agreed settlement is disclosed in a February 2008 interview with the Daily Mail.) I find it hard to believe that Deborah Rowe would have married Jackson and bore his children, just for the money, since such an arrangement would have been less legally complicated if she had simply hired out her services as a surrogate. However, if this was the case as some critics claim – that she only wanted the cash – then not offering her money with the child visitation arrangements, is the easiest way to test her character.

What about Grandmother Katherine Jackson? Other than the obvious – age – the only problem with Katherine is that she is still legally married to husband, Joseph: the father who Janet herself said asked her at the tender age of 8-years old that she stop calling him “dad” after entering the music business, but instead, call him, “Joseph.” Even Debbie Rowe herself has said that Jackson told her that his father bullied and beat him. Only Michael’s sister, Latoya Jackson, has been brave enough to reveal publicly more severe abuse suffered by their father, Joseph Jackson.

Although it would be wonderful for Grandmother Katherine to play a major role in the lives of Michael’s children, I would worry about Joseph getting his hands on them, either abusing them with extreme mental cruelty, exploiting them for fame and fortune, or worse…

Michael’s continued distance from his father, Joseph, and his overindulgent parenting method of his own children (a new toy everyday and no school) are indicative of the extreme mental cruelty he must have suffered as a child. Did his father lock him in the bathroom? Or did Michael escape into the bathroom when he was pushed too hard? I wonder. In his Neverland ranch, every bathroom has a backdoor, and those in his own bedroom escape up a flight of stairs to an attic playroom.

What about Michael’s money? Good question. The estate management should be a separate issue from the custody of the children. Ideally, the estate will be held in trust for his children to enjoy when they become of age. As to who should manage it, my thoughts turn back to Janet, once again, who has worked in the music industry, been extremely successful, knows her way around contracts, can work with managers and producers, can manage great wealth, and understands how much money should be received in royalties and song rights.

As for how Michael died? It was obvious that he had become dependent on Diprivan, also known as propofol, the hospital administered pre-surgery sedative and anesthesia drug. The drug is reported to give the subject a “very pleasant sleep,” complete with vivid erotic dreams. Diprivan must be administered by I.V. by an attendant, which would explain why Jackson employed Dr. Conrad Murray to sleep in the bedroom next to his, why the room was filled with oxygen tanks necessary for anesthesia, and why an I.V. drip was set up beside the bed where he was found unconscious. And, everyone knows you can’t go under on a full stomach, which explains why the autopsy showed that Michael Jackson had no food in his stomach. Dr. Murray probably should have checked Jackson’s blood sugar.

There’s an excellent article on Jackson's usage of Diprivan from July 1, 2009 on ABCnews.go.com

It’s extremely sad to see the life of a superstar pop icon end so prematurely. I’ll remember Michael Jackson in admiration of his talent, appreciation for creating so many incredibly brilliant songs, as well as for his charitable generosity which I had not been aware of until after his death.

I loved watching Michael Jackson perform in his Thriller videos. I sang along to ABC by The Jackson Five. I loved the powerful feminine message Janet Jackson relayed in her lyrics,“It’s Janet. But it’s Jackson if you’re nasty.”

However, the only Jackson family member album I own is Jermaine’s. Ironically, Jermaine Jackson's own music career may get a boost from his little brother’s death. Like a fallen California Redwood, the king of the forest, new life will sprout in a line along the fallen log.

How Un-American! Unequal Taxation Without Representation

(Why Florida Has No Money - Part 2)
My neighbor will pay only $400 in property tax for her house this year, while I will pay about ten times that for a nearly identical house.

Today is July 4, and I’m celebrating not only my country’s independence, but I’m also thanking God that I was born in the United States of America, where I can I vent my dislike of how the government is run without worrying about military troops coming to my home in the middle of the night to quietly take me away, never to be heard from again. If I feel like it, I can even go to the state capitol to protest by carrying a sign and walking up and down the sidewalk; and yet I am comforted to know that the government will do nothing to me in retaliation.

This great country of America was founded on July 4 in 1776 by intelligent citizens of England, Germany, France, Spain, Portugal, Africa, and other countries who were fed up with unequal taxation without representation. Bloody battles were fought over many years for the right to govern these United States. So, why is it that after all that fuss, we are back to square one?

Have you gotten your Florida property tax bill for next year? How do you feel about it?

I bought my house last year and despite the homestead deduction which I now qualify for, I’m still paying about ten times what the neighbor across the street is paying, who has a house nearly identical to mine in size, shape, number of rooms and bathrooms, year built, and type of construction. I will pay about $4000 in property taxes next year. She will pay about $400.

Last fall when I volunteered for the Democratic party to assist with the Barack Obama for President campaign, I complained to my fellow Democrats that the property tax system here in Florida is extremely unfair. I gave my own house as an example.

Their response: “People who bought their houses years ago have paid into the system for several years. You’re reaping the benefits of what they paid for in roads, schools, and libraries, but didn’t pay anything into it. You’re paying a higher rate because you’re making up for lost time.”

“But, I paid into the system in another state. It’s not like I wasn’t paying my share,” was my response.

“But, you live here, now,” they said.

I retreated, unprepared for that particular argument.

I was able to look up my neighbor’s property tax records online, thanks to the United States government’s public information act (only in America!); a well-oiled and organized property tax department, who keep good records; and the magic of the internet (otherwise, I’d be downtown scuffling through dusty file cabinets). The neighbor purchased her home in 1989 and is currently paying taxes on a valuation of about $18,000 (after exemptions), even though she could easily sell the home for about $200,000, even in today’s economy. While her taxes will rise by approximately 3 percent each year (as will mine), there will always be a huge disparity between our tax bills.

I did the math – just how much more in taxes will I pay over twenty years than my neighbor has paid, even including the ten years I didn’t own my home?

Two Nearly Identical Houses – Two Very Different Tax Bills

Both tax bills will increase by about 3% each year with today's current tax system.

Tax years	Taxes on House bought in 1989	Taxes on House bought in 2008
1989 – 2007	About $3000 total	(different owner) $0
2009	$391	$3700 with the homestead exemption
2010	$403	$3811
2011	$415	$3925
2012	$428	$4043
2013	$441	$4164
2014	$454	$4289
2015	$467	$4418
2016	$481	$4551
2017	$496	$4687
2018	$511	$4972
TOTAL paid over 20 years	$7867	$51,049

Within 20 years, my neighbor will have paid a total of about $8000 in property taxes, about what I'll pay every 2 years. Within 20 years, I'll have paid over six times more than my neighbor, even including the ten years I did not own my house. Hmmm. That’s enough to make me think about moving to another state.

See Part 1: Why Florida Has No Money - Florida's Unequal Tax System.