Everybody Out of the Pool

This is a screed I cranked off on a thread on my personal Facebook profile.

I’m reposting it and sharing it here because I’m interested in what people have to say.

If we allow health insurance products to cross state lines without requiring the foreign product to match the host state’s standards there will be a race to the bottom on quality.

I’m fine with insurance products crossing state lines as long as the product meets the same standards as the state-regulated products.

Here’s why, and here’s why everyone should care:

Some but not all states require particular therapies for kids with special needs. I work a lot with kids who have Autism, and Florida is one of 35+ states that require behavior therapy to be covered.

My son (who is a person with Autism) gets about 1,000 hours of therapy a year at a cost of about $50,000. He’s going to need that for about 10 years all in. A half million bucks — and that’s just to treat his Autism. He also has epilepsy.

I’ve done okay in life financially, but if it were not for the insurance he gets through the ACA, I would either have to assume all that liability on my own, or, like many families, not treat his condition at all.

Autism rates are at 1 in 42 boys, 1 in 68 kids. We’re looking at about 1.5% of the population that’s going to need $500K over and above what any neurotypical kid will need.

There’s an old saying: “You think education is expensive? Try the alternative.”

Same thing is true in my son’s case, and that of the other 2,600 kids in Pinellas County who have Autism. If we do not share that risk and get kids treated, they go from being adults with jobs paying taxes and living lives independently to living with mom and dad and collecting SSI.

Half a million bucks spent over a childhood is an investment that yields a tax-paying consumer for a normal life span.

Since very few people can afford to pay the $500K, we have to share that risk. We all pay a little; so if a chronic condition shows up, we are not devastated financially. This same model underlies almost every insurance product we buy at the consumer level.

Now, if I’m an insurer and I can create a product in Kansas that does not require me to cover therapy, and I can sell that to the huge market of Florida, why not?

The outcome will be fewer insurers in the regulated market and it’s a race to the bottom.

I built and sold a successful company before I started the South Pinellas Autism Project (“Like” us and Donate. We run camps for kids with special needs. https://www.facebook.com/SouthPinellasAutism/).

I’ve run SPAP as a volunteer for the last year. I know business, and I’ve been blessed financially. It would likely take everything I have to pay for my son’s therapy if I did not have insurance. I doubt there are more than a few dozen families like mine in Pinellas. Most kids without insurance would not get therapy. The jails are full of people who have undiagnosed Autism. Many turn to drugs and become violent.

Without therapy you either live a life of quiet desperation on SSI, end up in jail or maybe die at your own hand. It’s a huge waste.

Let’s do the math: Say you get $75 from every person in Pinellas County every year. That’s $75 x 950,000 = $71,250,000 in a year.

Now let’s take 2,600 kids who need $500K each in therapy over 18 years. 2,600 * $500,000 / 18 = $72,222,2222.

See, my family of 5 puts up $375 a year in case my son has Autism and needs $50,000 a year in therapy for 10 years.

Insurance… Magic!

Now, my son’s therapy is only covered because people fought long and hard to force insurers to offer this coverage — at a profit, mind you. But if they can incorporate in the next state over and not have to pay claims for therapy and cut their costs to the consumer a bit, their margins grow.

This is why insurance markets need regulation on the product side in addition to regulation on the investment side.

I’m not asking for a hand out, I’m saying let’s all share the risk. If your kid gets pediatric cancer, let’s treat it. That’s why we are all in the risk pool.

Further, consider if there were no car insurance, and let’s be generous and say no one ever dies or gets injured in car accidents. Just consider the car. If you had to replace your car on your own in an accident (no risk pooling), what would be the effect on the larger economy?

Well, anyone who got in an accident, would not be able to buy as much other products, they might have to live in a smaller house, and they might have to eat Hamburger Helper instead of steak.

The magic of risk pooling is good for our economy. Products that take people out of the risk pool drain the economy. Insurers like smaller pools because the overall risk is easier to quantify and they can make more money on less revenue, which is good for their bottom line.

I know, you will say there is all this waste, fraud and abuse in the system; and you are right. We need to work on that. But let’s not sacrifice the benefit of pooled risk to save a few dollars today. It’s going to cost us a lot more tomorrow if we do.

You think the cost of my son’s therapy is expensive, you should look at the cost of him not getting it.

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