In the late 1990s, the price of term life insurance dropped dramatically. The prices of other insurances, health , automobile, and homeowners coverage for example, remained the same
For a period of time, the sudden drop in price was shocking. What change could incite such a sudden drop in prices?
That change was the internet, specifically alongside the creation of sites like quotesmith.com that allowed customers to compare, within seconds, the cost, quality and terms of life insurance.
Suddenly finding the cheapest policy that met your needs, which was previously difficult and time consuming if not impossible, was made simple. This forced more expensive companies to drop their rates.
Suddenly, customers were paying $1 billion less a year for term life insurance (Duber & Leavitt, 2005, Freakonomics, p.66).
Whoa, $1 billion! That’s a whole lot of apples.
Here is a lesson in business 101. It may confirm some very raw fears and lurking suspicions of some readers.
Businesses, as a way of profiting, use the benefit of “information asymmetry.” Information asymmetry exists in areas where “expert” advice is needed.”
This existed in finance and investment banking. Information asymmetry significantly contributed to our current economic chaos. It’s, in my opinion, the primary reason for the burst of the housing bubble and the consequences of subprime loans.
How do I know this? From personal experience, of course.
We were looking to secure a mortgage during the prime sale time of these subprime loans. We were even approached by salesman. One was a family member. The sales pitch was good. . . .
if you were financially ill prepared and uneducated in the language of banking.
I was lucky to have been raised by the Director of a Bank. I knew that if I accepted an interest only loan, at some point I would have to pay principal plus additional fees and the cost would be unaffordable.
Not everyone was so lucky. You all know what I’m talking about. If you don’t, you’ve been living in a bubble far more secure than mine.
Among the businesses that use information asymmetry as a tool to create profits are health insurance companies.
If life insurance companies do it, why wouldn’t they?
Health insurance companies are a for-profit business. They ascribe to basic rules of economics, such as “supply and demand” which states the more people that want an item and the less available a product becomes the more the price will rise.
I still don’t understand how not-for-profit hospitals can pay for the profits of insurance companies, but that’s a whole other subject.
What salesmen and insurance companies do is leverage your ignorance of options (or not giving you options at all if you are buying into an employee plan) and manipulating your emotions, which include fear for the financial future of your family if you become ill and put a price tag on those emotions.
Sales pitches may create a false or hyper-inflated trust whereby a person believes that the insurance company has the persons best interests at heart, when, inactuality, they are calculating their return on investment for a healthy 23 year old in their heads.
True story. When speaking to a doctor friend, he told me about a lecture he had recently given at a health insurance company on Irritable Bowel Diseases, which included interventions and surgeries.
He spoke from a health care provider perspective.
During the period of questioning, the insurance companies’ employees were referring to their “ROIs” (return on investments), among other business terms, referring to how they could recoup their costs.
Yes, groups of people trying to profit off your life misfortunes do exist.
They navigate due to the assumption that you are ignorant of their deeds or in denial.
If you are neither of these things, you are probably too sick or disabled to fight. Have you ever tried to contest the ruling of an insurance company?
Good luck.
If you are savvy enough to navigate the system and have the time and energy despite your sickness, the company will continue to place barriers to receiving payment in your way.
These practices discriminate against the ill by placing unachievable restrictions and limitations to receive payment. Fighting for payment of costs included within my health care policy takes my representative over 6 hours weekly.
I am not physically capable of working this many hours. Even as a registered nurse with a bachelors degree in science, I do not understand the codes and policies needed to receive payment.
Even doctors do not word their notes “properly” to ensure payment.
Billing must constantly call and ask Doctors to “fix” their notes so the hospital can be reimbursed.
No professional should be forced into altering their verbage to ensure payment.
If I am, as a nurse with four years collegiate preparation, incapable of navigating the insurance system for payment.
If American Doctors are forced to “rephrase” their opinions on behalf of patients to ensure payment and thereby maintain access to care, it is safe to say no person, no patient, no professional is capable of navigating the system.
This is the case, and it is this way because it was purposefully constructed this way.
Health insurance companies have purposefully constructed their businesses so no amount of education could prepare a person to easily obtain payment.
The current health care system and the use of for-profit health insurance companies exploit information asymmetry as a method of maintaining profits causing health care to be inaccessible and unaffordable.
To solve this America needs to even out the knowledge barrier, as happened in the 1990s with life insurance companies.
During this period, online comparison was made simple. Options people needed were clearly stated and organized.
Sudenly a very complicated process of comparison shopping was easy. It turned a process that was misunderstood among the masses into something easily understood.
It translated legalize, which serves as a barrier to adequate understanding among many, into plain English.
Sales people, CEOs, CFOs, Board of Directors, etc., no longer had the upper hand of knowledge. They could no longer instigate fear of what a loved one might “need” in absence due to health or death. Suddenly, a person could adequately assess their families’ needs themselves.
What gives companies the upper hand, specifically in health related businesses, is their ability to leverage the fear of the unknown, the fear of your own mortality, the innate guilt for the possibility that you may not be able to provide and the ones you love will suffer due to something out of your control coupled with the buyer’s ignorance.
If a person overcomes the aforementioned, then the process becomes increasingly difficult.
Jon and I were recently “audited” by our health insurance provider. We were asked to provide evidence that we were actually married, and married at the time we stated we had been.
The health insurance company had “bought” us when J’s company had been bought. We were a bad investment. The company was looking for a way to deny me coverage.
I’m a bad health investment.
In the workplace, trying to fire me due to my health status would clearly labeled as disability discrimination.
I fail to see how creating obstacles in an attempt to have me fail to provide “needed” or “necessary” private information to excuse “letting me go” as a patient because I am a bad investment is any different.
For a period of time, the sudden drop in price was shocking. What change could incite such a sudden drop in prices?
That change was the internet, specifically alongside the creation of sites like quotesmith.com that allowed customers to compare, within seconds, the cost, quality and terms of life insurance.
Suddenly finding the cheapest policy that met your needs, which was previously difficult and time consuming if not impossible, was made simple. This forced more expensive companies to drop their rates.
Suddenly, customers were paying $1 billion less a year for term life insurance (Duber & Leavitt, 2005, Freakonomics, p.66).
Whoa, $1 billion! That’s a whole lot of apples.
Here is a lesson in business 101. It may confirm some very raw fears and lurking suspicions of some readers.
Businesses, as a way of profiting, use the benefit of “information asymmetry.” Information asymmetry exists in areas where “expert” advice is needed.”
This existed in finance and investment banking. Information asymmetry significantly contributed to our current economic chaos. It’s, in my opinion, the primary reason for the burst of the housing bubble and the consequences of subprime loans.
How do I know this? From personal experience, of course.
We were looking to secure a mortgage during the prime sale time of these subprime loans. We were even approached by salesman. One was a family member. The sales pitch was good. . . .
if you were financially ill prepared and uneducated in the language of banking.
I was lucky to have been raised by the Director of a Bank. I knew that if I accepted an interest only loan, at some point I would have to pay principal plus additional fees and the cost would be unaffordable.
Not everyone was so lucky. You all know what I’m talking about. If you don’t, you’ve been living in a bubble far more secure than mine.
Among the businesses that use information asymmetry as a tool to create profits are health insurance companies.
If life insurance companies do it, why wouldn’t they?
Health insurance companies are a for-profit business. They ascribe to basic rules of economics, such as “supply and demand” which states the more people that want an item and the less available a product becomes the more the price will rise.
I still don’t understand how not-for-profit hospitals can pay for the profits of insurance companies, but that’s a whole other subject.
What salesmen and insurance companies do is leverage your ignorance of options (or not giving you options at all if you are buying into an employee plan) and manipulating your emotions, which include fear for the financial future of your family if you become ill and put a price tag on those emotions.
Sales pitches may create a false or hyper-inflated trust whereby a person believes that the insurance company has the persons best interests at heart, when, inactuality, they are calculating their return on investment for a healthy 23 year old in their heads.
True story. When speaking to a doctor friend, he told me about a lecture he had recently given at a health insurance company on Irritable Bowel Diseases, which included interventions and surgeries.
He spoke from a health care provider perspective.
During the period of questioning, the insurance companies’ employees were referring to their “ROIs” (return on investments), among other business terms, referring to how they could recoup their costs.
Yes, groups of people trying to profit off your life misfortunes do exist.
They navigate due to the assumption that you are ignorant of their deeds or in denial.
If you are neither of these things, you are probably too sick or disabled to fight. Have you ever tried to contest the ruling of an insurance company?
Good luck.
If you are savvy enough to navigate the system and have the time and energy despite your sickness, the company will continue to place barriers to receiving payment in your way.
These practices discriminate against the ill by placing unachievable restrictions and limitations to receive payment. Fighting for payment of costs included within my health care policy takes my representative over 6 hours weekly.
I am not physically capable of working this many hours. Even as a registered nurse with a bachelors degree in science, I do not understand the codes and policies needed to receive payment.
Even doctors do not word their notes “properly” to ensure payment.
Billing must constantly call and ask Doctors to “fix” their notes so the hospital can be reimbursed.
No professional should be forced into altering their verbage to ensure payment.
If I am, as a nurse with four years collegiate preparation, incapable of navigating the insurance system for payment.
If American Doctors are forced to “rephrase” their opinions on behalf of patients to ensure payment and thereby maintain access to care, it is safe to say no person, no patient, no professional is capable of navigating the system.
This is the case, and it is this way because it was purposefully constructed this way.
Health insurance companies have purposefully constructed their businesses so no amount of education could prepare a person to easily obtain payment.
The current health care system and the use of for-profit health insurance companies exploit information asymmetry as a method of maintaining profits causing health care to be inaccessible and unaffordable.
To solve this America needs to even out the knowledge barrier, as happened in the 1990s with life insurance companies.
During this period, online comparison was made simple. Options people needed were clearly stated and organized.
Sudenly a very complicated process of comparison shopping was easy. It turned a process that was misunderstood among the masses into something easily understood.
It translated legalize, which serves as a barrier to adequate understanding among many, into plain English.
Sales people, CEOs, CFOs, Board of Directors, etc., no longer had the upper hand of knowledge. They could no longer instigate fear of what a loved one might “need” in absence due to health or death. Suddenly, a person could adequately assess their families’ needs themselves.
What gives companies the upper hand, specifically in health related businesses, is their ability to leverage the fear of the unknown, the fear of your own mortality, the innate guilt for the possibility that you may not be able to provide and the ones you love will suffer due to something out of your control coupled with the buyer’s ignorance.
If a person overcomes the aforementioned, then the process becomes increasingly difficult.
Jon and I were recently “audited” by our health insurance provider. We were asked to provide evidence that we were actually married, and married at the time we stated we had been.
The health insurance company had “bought” us when J’s company had been bought. We were a bad investment. The company was looking for a way to deny me coverage.
I’m a bad health investment.
In the workplace, trying to fire me due to my health status would clearly labeled as disability discrimination.
I fail to see how creating obstacles in an attempt to have me fail to provide “needed” or “necessary” private information to excuse “letting me go” as a patient because I am a bad investment is any different.
1 comment:
true! true! true! all of it.
i was once a utilization review nurse at a hospital. and YES dr's are asked to correct their verbage. all the time.
then i became an insured cancer patient with over 50K in denials. you'd think my experience above would help. after several denials i was just too tired. so i gave up.
if only people really knew how it was, if only...
p.s. am currently finishing up the added parts to freakonomics. interesting read.
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