Author: riskandconsequences

After the Flood: The Limits of Homeowners Insurance

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Most of the homes currently underwater in the Houston area are probably not covered by flood insurance. Only around 15% of homes in Harris County (the county encompassing much of the metro Houston area) are in a designated flood zone. To get a mortgage on a property in a flood zone, homeowners have to purchase flood insurance from the National Flood Insurance Program.

FloodedHouse

Few who are not required to buy flood insurance do so. Many people wrongly assume their homeowners insurance policy covers flooding. It doesn’t. The standard homeowners insurance policy excludes flood damage. Wind damage is covered.

The standard homeowners policy most people purchase is the HO-3 or “Special form” policy, developed by the Insurance Services Office (ISO). It provides the minimal level of coverage required by mortgage providers. HO-3 is what is known as an “all risks” policy because it covers all perils not specifically excluded in the policy.

exclusions
From: ISO Sample Homeowners Special Form (HO-3)

water damage

You can download a sample of the entire form here.

 

 

Legislation to Repeal Health Insurers’ Antitrust Exemption Won’t Increase Competition or Lower Premiums

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This week, in addition to voting on the American Health Care Act, the House of Representatives will also be voting to repeal the insurance industry’s antitrust exemption. The Competitive Health Insurance Reform Act of 2017 seems to have bipartisan support, probably because eliminating collusion between insurance companies sounds like a good thing; or at least it does if you don’t understand the history and purpose of the anti-trust exemption.

What The Antitrust Exemption For Health Insurers Means from NPR and Kaiser Health News (dating back to 2010 when Congress tried to pass similar legislation) provides a primer on the anti-trust exemption and explains why repealing is unlikely to increase insurer competition or lower prices.

But many antitrust experts say that ending the exemption — by repealing the 1945 McCarran-Ferguson Act — wouldn’t significantly increase competition or reduce premiums.

“This is just barking up the wrong tree for health insurance,” said Scott Harrington, a professor of health care management at the Wharton School at the University of Pennsylvania. While many lawmakers are eager to pass some kind of health care bill, they “don’t have a clue how the antitrust exemption works. It might sound good, but I can think of very few things in the bill that would be less consequential for consumers of health insurance.”

Here is a short primer on the issue:

What is the antitrust exemption?

Insurers are among a handful of industries, including Major League Baseball, that have a special exemption from federal antitrust laws.

The McCarran-Ferguson Act gives states the power to regulate the “business of insurance,” granting insurers a limited exemption from federal antitrust scrutiny. Insurers, for example, under the federal antitrust exemption may be able to meet, share information and agree on pricing for premiums, but experts say that most states prohibit that practice.

Read the Full Story

The High Cost of Being Uninsured—Even if You’re Young and Healthy

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Uninsured_Flowchart

As we explained in a previous post, Visualizing the U.S. Healthcare Delivery System, Before, During, and After the Affordable Care Act, insurers are at the center of the healthcare delivery system in the United States. In this post we explain what that means for those outside this system—the uninsured.

U.S. Healthcare Delivery System Before ACA

If you’re young and/or healthy, going without insurance might seem like a reasonable gamble—after all, under current law (and proposed legislation) you can’t be turned down if you need insurance later. Under the ACA, you can’t even be charged more, and even the proposed AHCA only allows insurers to add a 30% surcharge for a coverage gap.

But if you’re not part of the managed care system, you lose out on its benefits. You pay more for medical care and expose yourself to unlimited economic loss in case of medical catastrophe.

Insurance provides the following benefits:

  •  Negotiated Discounts: Under managed care, insurers and managed care organizations negotiate prices with healthcare providers within their networks. When you see an in-network provider you are charged the lower negotiated price, even if you are paying out of pocket. That’s why even a high deductible plan still saves you money on healthcare.

  • Preventative Healthcare: The ACA requires insurers to cover certain preventative healthcare (like a yearly checkup or mammogram) at no cost to the insured. This care is provided for free even if you haven’t met your deductible. But to enjoy it, you need to have coverage.

  • Out-of-Pocket Annual Maximums: Insurance caps your annual out-of-pocket costs. In 2016, the out-of-pocket limits for plans on the ACA marketplace were $6,850 for an individual and $13,700 for a family. This means that once you’ve reached the maximum (through paying your deductible and co-insurance) insurance covers the rest. Without insurance, an illness or injury can have catastrophic financial consequences. A hospitalization can easily run into the $100,000s. Such medical bills may take years to pay off, and failure to pay can ruin your credit. Medical debt is a major cause of bankruptcy.

Whether or not you believe health insurance should be mandated, participating in the managed care system could be in your best interest. In addition to the personal benefits, Insurance has a myriad of societal benefits—from increased public health to less uncompensated care (which costs everyone through higher medical prices and/or taxes). Not to mention, a larger, more diverse insurance pool can bring down premiums for everyone.

Infographics Part II: ACA Medicaid Expansion vs. AHCA Per Capita Caps

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NYT CBO

Medicaid beneficiaries stand to lose the most under the American Health Care Act (AHCA). According to the new Congressional Budget Office Report, Medicaid recipients would make up a disproportionately large share of 24 million people expected to lose health insurance coverage by 2026 if the GOP legislation becomes law.

Under the Affordable Care Act (ACA) 32 states expanded Medicaid eligibility to low-income adults earning up to 138 percent of the poverty line (about $34,000 for a family of four). The AHCA, as currently written, continues expansion for three more years before cutting federal funding to state Medicare programs through a per capita cap, limiting coverage to those enrolled before 2020. Vox recently provided a good explanation of per capita caps as does the Kaiser Family Foundation.

current-status-of-the-medicaid-expansion-decisions-healthreform.png

Many of the best Medicaid infographics predate the release of the AHCA, but they still remain relevant to the current discussion. The KFF website includes a large collection of data on Medicaid expansion, including maps (like the image above) and detailed Medicaid State Fact Sheets.

The Center on Budget and Policy Priorities (CBPP) produced the following charts estimating the costs to states of the per capita cap.

Medicaid Cost Shift CBPP

MEdiciad Cuts Growth OVer Time CBPPCBPP also created a series of fact sheets illustrating the effects of Medicaid cuts in nine different states. Here is the fact sheet for Pennsylvania:

PA Fact Sheet CBPP.jpg

Images in the slideshow below appear in The New York Times article “Republicans’ Changes to Medicaid Could Have Larger Impact Than Their Changes to Obamacare”

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See Part I: Tax Credits vs. Premium Subsidies

Coming Soon:

Part III: Individual Mandate vs. Penalty for Break in Coverage

Part IV: Cost Comparisons