Warren Buffet said invest in companies where the company can control what it charges the customer and the customer has little or no alternative, but to accept the charge. Insurance companies fit that characteristic.
For example, I just received a letter from my insurance company that advised us our insurance rates have been increased by 7%. I can not cancel, so I just have to pay it. This insurance company has increased premiums by 100% in the last 5 years, even though we have had only minor health care claims. Insurance companies have no fundamental incentive to become more efficient. Oh sure they can give lip service to the notion, but practically speaking when the have you they have you. Letting your money talk, by going to another insurance company, is a shout for help in a vacuum.
“Mr. Sherwood, were you covered by another insurance company?”
“Yes, I was.”
“And what was your reason for dropping that coverage?”
“So Mr. Sherwood then you have no insurance at the present time.”
“That is correct.”
“Well in that case you will have to wait at least 6 months to get coverage. You should have called us before you dropped your old insurance.”
And so on it goes.
For those of you who do not understand the health insurance business. Let me summarize it for you. The insurance companies sign up thousands of customers that they can arbitrarily increase the premiums on when their costs go up. Then the same companies send letters to the hospitals and doctors and say, “if you want our customers to be treated at your facility, this is how much we will pay you for treatment.” In essence they can increase the premiums to consumers and drive down payments to Doctors and hospitals. Now we know why Buffet is in the insurance business. It is a cash goose that keeps on laying golden eggs in good times and bad.
Yes. I understand. If a member of your family incurred a several hundred thousand dollar medical bill, then insurance is the angel of mercy. It kept your family from bankruptcy. However, the insurance company simply passes on these expenses to its other customers through an increase in premiums. They are not motivated to become more efficient.
The Obama health care bill simply misses the whole point. Putting the government in the health care business is a bad idea. A better idea is simply let the insurance companies compete across State lines. I do not know anyone who criticizes the benefits that accrue from solid competition. It is missing from the insurance industry.
I agree...something definitely needs to change. I am amazed that they can arbitrarily decide who gets coverage and who doesn't, based on their internal risk factors. Even people who have paid insurance for years can be cancelled or their claims denied, and the fight then is ridiculous. Food for thought!
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