Health and Insurance

For those of you who were wondering what new scam the financial geniuses on Wall Street would get up to next, I have the answer: life insurance. Financial institutions are buying people’s life insurance policies. They then bundle the policies and sell those bundles, very much as they did with mortgages.

Here’s how it works. When someone buys a life insurance policy, the insurance company takes into consideration a wide range of factors to determine how long they will be able to collect premiums from the insured person—basically, they calculate when that person will die. The insurance company invests the premiums in mostly financial assets that increase in value over time—they hope. The strategy is for that account to grow so that by the time the insured person dies, the insurance company will be able to pay the dead person’s beneficiaries the value of the policy and have a fat amount left over for profit. If the insured person dies before he or she is supposed to, the profit is smaller. The company might even lose money. If the insured person dies after he or she is supposed to, the profit is larger.

Under the new Wall Street scheme, nothing about the policy changes except the designated beneficiary: instead of a spouse or child or charity, it’s a financial corporation. The insured person gets the cash equivalent of their policy’s current value, which is less than the full value, which they’d only get if they were dead, which would kind of defeat the purpose of the deal. But the new beneficiary, the financial corporation, does have to wait for the insured person to die to get its money back. And the sooner the insured person dies, the better from their standpoint because their financial position is the opposite of the life insurance company’s.

It’s likely that many people will take advantage of deals like this to cover medical debts because of the sorry state of medical insurance. Like life insurance companies, medical insurance companies like to have policyholders who are healthy. This promotes long term, fat streams of premiums flowing in so they can be invested at a profit. The wrinkle for medical insurance companies, of course, is that they have to pay for medical services incurred by premium payers. To no one’s surprise, medical insurance companies do all they can to minimize payments by doing such things as denying claims, as recently revealed by the California Nurses Association, and by refusing to cover people who are likely to be a financial drain.

So why is everyone so excited about the so-called public option in pending legislation? Supposedly because it will compete with private insurance and keep them honest. Good luck with that.

As four leaders in the fight for single payer insurance argued in a recent issue of The Nation, the insurance industry will use the public option as a vat into which they can dump policyholders who are poor risks. Because that will make the public option a black hole of medical spending, it will serve as proof to single payer critics that any attempt by government to be involved with medical care is bound to be a disaster and will subsequently kill any hope of genuinely universal medical care. In my opinion, good riddance to the public option.

Although I believe that a government agency is capable of delivering high quality and cost effective medical insurance as well as high quality and cost effective medical care, current political institutions make such a thing virtually impossible.

There’s some talk about a public option that doesn’t compete with private insurance. Instead, it would offer insurance for catastrophic events, known in the insurance industry as acts of God. For people like me who don’t want to get on the overdiagnosis and overtreatment conveyor belt that is the trade of medical institutions, this is a great idea. It’s really what insurance is supposed to be about: protection from acts of God, not a bottomless money bucket for visits to the doctor, drugs, and endless treatments administered in the name of preventive medicine.

Insurance for real prevention isn’t found in the doctor’s office. Last month, Bruce McEwen and his colleagues published an article in the Journal of the American Medical Association of all places on how the care of children has the most significant effect on the long-term prevention of illness and injury. The abstract says this:

“A scientific consensus is emerging that the origins of adult disease are often found among developmental and biological disruptions occurring during the early years of life. These early experiences can affect adult health in 2 ways—either by cumulative damage over time or by the biological embedding of adversities during sensitive developmental periods. In both cases, there can be a lag of many years, even decades, before early adverse experiences are expressed in the form of disease. From both basic research and policy perspectives, confronting the origins of disparities in physical and mental health early in life may produce greater effects than attempting to modify health-related behaviors or improve access to health care in adulthood.”

Want real insurance? Take care of the kids.