Saturday, December 19, 2009

The feeling is mutual...

Well, it's snowing outside and I feel a little lazy today so it's time for baking Christmas (or is it Holiday) cookies and finding my soapbox. Yes, it's healthcare again that is on my mind. I guess that since I am not dating anyone right now, I spend too much time watching MSNBC and C-SPAN and I get caught up in public policy debate. The more and more I think about it, the public policy thoughts are probably the reason why I am not dating right now (I know, healthcare mandates and Medicare expansion are so alluring, right?). Anyway, here we go...

If we look to insurance as a sustainable model, premiums that are paid in should, over the long run, equal claims paid out. The cost of operations is covered by investment earnings on accumulated premiums. Thus, by including lower risk participants to the insurance pool, accumulated premiums are higher and investment earnings are sufficient to cover administrative costs and even expansion of the business. I am therefore puzzled, confused, some might even say be-fuddled why health insurance companies need to be in the public equity markets. The dual masters of insurance company management (policy holders and shareholders) lead to inefficient delivery and care decisions first driven by quarterly earnings results and quality care second. Healthcare is so vital to quality of life that the customers should not and cannot be separated from interests of ownership of the insurance company itself. Therefore, the insurance model for healthcare needs to follow some of its compatriots in the life insurance field. Health insurance companies need to be owned in a policy holder mutual company format.

Mutual companies align the interests of policy holders and ownership by allowing the policy holders to OWN the insurance company. Any excess profits can be returned to policy holders or held in reserves for future claims. Policy holders also have a say in management of the insurance company on an equal footing with all other policy holders. Overall, the company is capitalized of the policy holders, by the policy holders and for the policy holders (sorry Mr. Lincoln). This gives patients an ACTUAL VOICE in their care.

"Nice Adam, how do we do this?" you may ask. Well, we can vote with our feet. By flocking to providers who are mutuals, we can develop policy holder investor pools to align interests between patients and carriers. Legislation will, of course be necessary, but we can create a force that can be heard.

I realize this is short on details, but the concept of aligning interests is essential to long term sustainability. I will add more details over time, but for now, that is all I have to say about that.

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