Cost of Insurance Hits Close to Home

After writing about insurance for nearly half my life, I have a pretty good understanding of underwriting and risk-management practices, as well as the supreme importance of income protection.

I believe in the power of most insurance products, particularly in the area of disability, which is wildly underestimated, but view others as unnecessary. Banks and credit card companies, for example, are now expected to deal with identity theft, despite the birth of a cottage industry to manage this fast-growing, white-collar crime wave, while cancer insurance pales in comparison to critical-illness products that cast a much wider safety net in the event of a serious illness.

But as a consumer of these services, I have encountered the same flaws and frustrations as people who know nothing about the industry’s inner-workings or angry Americans who describe insurance as legal extortion. And despite having some insurance companies as clients through the years, I sometimes wonder whether the industry gets too much of a free pass, especially since health insurance premiums are the equivalent of a mortgage payment for so many families trying to make ends meet in a sluggish economy.

Consider a few recent eye-opening incidents:

* When applying for life insurance following the birth of my 18-month-old son, I underwent the requisite medical exam to rule out any uninsurable risks. As part of that process, I was asked whether I was on any medication. I answered no, but had forgotten about a prescription for valium that one of my wife’s relatives wrote as a favor. The pills were an afterthought – popped every now and then to help take the edge off the extreme sleep deprivation I faced as a first-time parent. But not to the insurance company, which fired off a curt form letter that suggested I purposely hid this information when a certain ingredient associated with the medication was found in my bloodstream and abruptly cancelled the application. I had no recourse other than to seek coverage elsewhere, according to my very embarrassed insurance agent, who said she never encountered anything like that before and recommended that I write a letter of complaint to California’s insurance department about this mid-level industry player. I have since obtained excellent coverage from another source with a better balance sheet.

* It has taken more than two months – and still counting, as I type this blog – to get my son onto our family’s newest health insurance plan because of an underwriting department whose cautiousness in my estimation is either grounded in irrationality, tangled in bureaucratic red tape or both. The brief back story: An ointment for eczema failed to include on the insurance application the date it was prescribed as well as a diagnosis. Small potatoes, right? Not so fast. I tried in vain to obtain this information for an entire month from his doctor, whose office was so acutely mismanaged and offered subpar care that my wife and I decided to pull the plug on the dirt-cheap coverage he had qualified for under a state-run plan and move him to a fabulous pediatrician with rock-star qualities. The old adage is true: You do get what you pay for, and in this case, it wasn’t worth the much lower price tag. But now we’ve fallen through the cracks, and I’m still trying to straighten out the situation with a supervisor for the more costly health insurance plan from a once proud nonprofit entity that years ago splintered into for-profit plans in hopes of cashing in on a market where the balance of power shifted from kindly doctors to number-crunching insurance company executives with fat paychecks. The first supervisor I spoke to agreed with my first-blush assessment, which was that a toddler with itchy skin isn’t a red flag to underwriters. It’s not like he was diagnosed with any serious pre-existing conditions or a life-threatening condition.

* My Peruvian in-laws are faced with a heart-breaking dilemma. Because of the escalating cost associated with treating my mother in-law’s early stage Alzheimer’s disease, they will eventually outlive their savings or need to move from the house they called home in Los Angeles for almost 40 years back to Peru, where care is much cheaper. This issue is the most macro-economic of these vignettes, with a larger implication about the most cost-efficient and dignified way we as a society must manage the care of our senior citizens. Long-term care insurance, which is designed to protect one’s assets in the event that something like this happens, is unaffordable for most working Americans, while a key provision in the new landmark health care reform legislation that was signed into law offers people a low-cost alternative to mitigate this risk, but the benefits are so paltry they’re laughable. So is the answer socialized medicine? Critics charge that such a solution would be worse than the problem it seeks to fix.

Which brings me to a few parting thoughts. Regardless of  your politics on the contentious issue of health care for all Americans, we can  no longer operate under the status quo. 

On the one hand, I’m horrified that President Obama and the once-Democratic majority in the House and Senate passed such an important law that had been attempted for nearly a century with no bipartisan support. Shame on them! This issue is too important to kick around as a political football. 

On the other hand, I’m equally horrified that the Republican leadership has devoted too many of its resources to repealing this bill rather than passing alternative reforms that would extend access to care without bloating the cost of such coverage. 

That, my friends, is the chief dilemma. How in the world do we add about 30 million uninsured people to the nation’s health insurance rolls without insurance companies passing on any additional costs to the consumer? It’s a complex question with no easy answers, but hopefully the powers that be will figure out this equation before the public becomes even more restless and our insurance premiums keep rising.