Spring 1991: “Dear Elder Burton, You are hereby called to serve as a missionary…” This was a letter I’d been waiting for my whole life: my mission call. I had prepared: In high school I had taken three years of German and two years of Spanish. I was also hoping use some of the scouting skills I’d acquired. “You are assigned to labor in …” My eyes darted across the page. Would I be tracting through Europe? Or hiking past llamas to the pueblos of South America? “… the Michigan Lansing Mission.”
I was dumbfounded. Could this be right? I didn't know what to think. I had always believed that every mission call was inspired. But this was so out of line with my expectations ... so totally random. And at that moment I realized that while some calls surely came by revelation, there were others that just had to be filled. And (unfortunately for me) I was one of the missionaries who just had to fill them. I don’t know if there was ever a more deflated prospective missionary than me as I finished reading the letter announcing my call. If my assessment was correct—if I was just filling a space as a missionary—where might I have gone, I wondered, if had submitted my papers a week earlier or later? I was filled with disappointment.
Still, I was determined to serve and was blessed with many assurances as I prepared to leave—right up to the Sunday before I entered the Missionary Training Center. That night my dad and I attended a fireside where we met Elder L. Tom Perry. I remember how proud my dad was as he introduced me to the apostle, telling him that on Wednesday I was going to the MTC. Elder Perry congratulated me, and I turned to follow my dad off the stand. But as I walked away, I felt I needed to ask Elder Perry a question.
“Elder Perry?” I asked as I faced him a second time.
“Yes, Elder,” he answered.
“You’re an apostle,” I stated.
“Yes.”
“Like Peter, James, and John,” I continued.
“Yes,” he said again.
“What’s it like?” I asked.
Elder Perry bent his tall frame close to me, wrapped his arms around me in a bear hug and whispered in my ear: “It’s just like being a missionary. Follow the Spirit! Follow the Spirit!”
The thrill that gave me could have carried me through my mission. But still I wondered: why Michigan?
April 2010: Nineteen years later I listened to President Rasband of the Seventy in the Priesthood Session of General Conference as he explained how each mission call comes by revelation. This was not new doctrine; I had been taught it from childhood. But I had never heard in as much detail how the calls were made, and was greatly moved by President Rasband’s words and the process of revelation as he explained it. I entirely believed what he taught, and yet I didn't connect his message to my own mission. I had witnessed and been part of many miracles on my mission. But still, I didn't see why I was supposed to be in Michigan as opposed to anywhere else. I justified this thought using the mission call of Stephen Burnett in D&C 80: “Wherefore, go ye and preach my gospel, whether to the north or to the south, to the east or to the west, it mattereth not…” That’s how I felt about my mission. If it didn't matter, did it really take revelation to call me there?
Fall 2012: Last fall, my neighbor invited me to take a DNA test offered by the family history company he works for. The idea was to discover my ancestral homelands using my DNA. I was adopted and had no idea of my biological ancestry or countries of origin. (As far as I knew, my children were the only blood relatives I had ever seen.) So the invitation appealed to me. When the results came back they showed I was entirely Scandinavian and Finnish/Russian—not too surprising considering my light skin and blue eyes. What was surprising was that the results also included possible DNA matches (that is, other people who had taken the test, with a prediction of how those matches were related to me). Typically, a test result might show relationships ranging from 3rd to 6th cousins, and allows users to send anonymous emails so they can collaborate in building their family trees. However, in my case the results showed a “Close Family” match and predicted with 99% confidence that this was a close family member or first cousin.
For years people had asked me if I wanted to find my birth parents and while I was definitely curious about my origins (enough to take this test), I was content with my life. I already had a family—they had raised me. So I wasn't sure I wanted to go searching for another. I had no idea of what I might find and didn't want to open a can of worms. And now here was this match.
I sent off an email: I was adopted, I wrote, and this person was listed as “close family.” Could they tell me anything about my “family”? Within minutes an email came back. When was I born? Where? I sent the answers. The next response came late the following night: The “Close Family” match was my half-brother. The person sending the emails was my birth mother. She gave me her number and asked me to call her.
I don't know that I've ever been so nervous about making a phone call. But the next morning I dialed her number, and then we talked for almost an hour as she told me my story: She told me how when she first found out she was pregnant, her mother assured her that a baby was a blessing. How her bishop agreed that the baby was a blessing, and then suggested that this baby (me) should have a mom and a dad, and she thought so too. How I was born, and how she held me for two and a half days before I was given for adoption. It was such a good feeling to talk to her.
At the end of the call, I asked about my biological father. She told me his name and said she thought he was from Lansing, Michigan. Lansing, Michigan? More than twenty years after I opened my mission call, a light switched on in my mind.
I immediately jumped online and within a few minutes of “Facebook sleuthing” and a few phone calls to some people I knew on my mission, I was confident I’d found my biological father. (His online pictures looked a whole lot like me and my family.) Before this moment, my "curiosity" about my biological family was mostly about my birth mother. I'd never felt much about finding my father. But seeing the similarities in likeness, and with the dawning realization that as a missionary I had been sent to a place where I had such close (if at the time unknown) family relationships, I had a great desire to reach out. I sent an email. His response the next morning confirmed that he was my biological father. We talked later on the phone and I think he was as nervous about that call as I had been calling my mom. We had a good talk, and then he said that his sister and her husband were coming to Utah and asked if they could visit me while they were here. They lived in an area where I had served, so I was very excited to meet them and to see if I might possibly remember them from my mission.
A few weeks later my aunt and uncle walked through my door. Seeing them I felt an instant familiarity, but couldn't quite place where it came from. Then in an instant the light turned on again. His hair had gone from black to silver and I hadn't known his first name (he had always been “Brother”) so I didn't recognized him at first, but standing in front of me was my ward mission leader from the Grand Rapids Ward with whom I had worked for a six months of my mission. For half a year I had been at his home weekly. I had played with his children—my cousins, throwing them on my shoulders, rolling them on the floor. I had been with my biological family and hadn't even known it.
Not only had I gone to Michigan, I had interacted and worked with my family. My new found aunt told me the family story of how she and her brothers joined the church, but her mother (my grandmother) never did, nor her family before her. Spread all over Michigan, in the very places where I was called to serve, was my family. In light of what I now saw, could I continue to believe that my mission was simply a call to fill a space? Were my biological origins and my assigned field of labor merely coincidence? I knew now that this was truly a call by revelation and inspiration specifically for me. The only question that remained was this: Had I allowed blinding disappointment to keep me from accomplishing the fullness I might have otherwise enjoyed on my mission?
Thankfully for me, this is not the end of my story, and I wasn't shown this just to have a glimpse of what might have been. Rather, I believe that my Heavenly Father revealed all of this to me because there is still work to do—work I began as a full-time missionary and work I have been called to continue throughout my life. And next time I’m tempted to think that of life as bitter, random, or haphazard, I just hope it won’t take me twenty years to find the faith to see the purpose in it.
Monday, May 13, 2013
Thursday, October 07, 2010
Confessions of an Insurance Salesman
Insurance is a funny thing. I sell a product that I hope my clients will never use. Nobody wants to make an insurance claim. The exception is health insurance. People buy health insurance with every intention of using it. Many make plans to use it right away. A large portion of my income comes from selling health insurance, but I have a confession to make: our fundamental reliance on health insurance to pay every medical expense is what’s ruining our health care system.
Let me explain. Modern insurance is a method of risk management that began with merchants shipping goods over seas. An earlier technique used by merchants to minimize risk was to distribute their cargo on to more than one ship. Thus, if one ship sank, they didn’t lose their entire shipment. As risk management became more sophisticated, merchants and ship owners would enter into contracts with parties willing to guarantee, i.e., insure, the ships and their cargos. The idea was simple enough: in exchange for a relatively small premium payment, the insuring party agreed to compensate the merchant or ship owner in the event of a large, potentially devastating loss.
Following the development of these marine policies, other lines of insurance were established including, fire insurance for houses, and life insurance, and today there is an almost countless number of things we insure. But as varied and complex as modern insurance policies have become, there are a few basic conditions that must be met in order for insurance to be an effective means of minimizing risk:
• The potential loss being insured against must be large,
• It must be unexpected, and
• Its occurrence must be rare.
Insurance is too expensive when used as a means of financing small, inexpensive risks. Consider the following. Here in Provo, I can insure a $500,000 house for less than $500 per year. Think of that. For roughly $35-$40 a month, a half million dollar risk is covered. That’s a great exchange. On the other hand, I recently bought a $45 phone for which the vender tried to sell me insurance for $5 per month—$60 a year to cover a $45 risk. Bad exchange.
Neither is insurance an appropriate means of financing losses which we know are going to occur. For example, no insurer would allow me to purchase a new fire policy while a wild fire was burning through my neighborhood. Any loss to be insured against must be uncertain.
Nor can insurance be used to finance losses when they become too frequent. For example, if I am regularly involved in car accidents, insurance companies will decline to cover me or make the premiums prohibitively expensive.
The problem with health insurance today is that we have violated all three of those criteria. We have used insurance to cover planned, routine, and inexpensive care with the result being that the cost of insurance has skyrocketed and even regular office visits now feel unaffordable. Faced with the consequences of our misuse, Congress has enacted legislation to “solve” the problems of health care by actually expanding the role of insurance. Their argument is that when everyone is insured, the price for everybody will go down. Really?
Let’s look at that idea using the ridiculous example of toilet paper insurance. TP is something that I hope everybody uses. What would happen if we had TP insurance? Would it make TP more affordable? Of course not. The cost of financing our TP with insurance would have to include the cost of the TP plus the additional costs of the insurance clerks who process the payments. And that’s just the beginning. As useful as insurance can be, it presents a perverse incentive to waste and destroys any incentive to save. Think it through. If your TP is covered by insurance, do you limit the number of squares you use? Do you buy the discount brands, or only the ultra-soft kind? Do you waste your time coupon clipping?
And let’s not forget about the TP manufacturers. When people have TP insurance, manufacturers don’t have to compete on price anymore. What does that do to cost?
But what if everybody had it? Well then the price would probably just go up faster.
Believe it or not, the same economic principles that apply to TP apply to health care. The fact is health insurance increases the cost of each visit to your doctor by adding extra people, i.e., billing and insurance clerks, into the transaction. It promotes over utilization of health care because the patient doesn’t pay the cost directly. And when was the last time your doctor or hospital advertised their prices? Never. (Can you even name another industry that hides its prices like the medical industry?) But if you think they aren’t concerned with increasing their profits, then explain why the medical industry spends nearly $6 Billion a year in advertising.
So how did we get into this mess? Why did we ever start using insurance to finance planned, routine, and inexpensive care?—especially if, as I’ve claimed, it costs more? The answer requires a little more history. Modern group health insurance had its beginnings in 1929 but didn’t really take off until World War II when government-imposed wage freezes prompted employers to offer other benefits in lieu of increased pay. But by 1954 most people still didn’t have health insurance. That’s when Congress got involved again and made contributions to employer-based health plans tax-deductible. At that time the minimum Federal tax bracket was 20%; the highest was 91%. So getting that tax deduction was equivalent to taking between 20-91% off the price of a person’s health insurance. (It works the same way today.) With “discounts” like that, insurance became the least expensive way to finance all health care—from the catastrophic right down to minor colds and sniffles.
It seemed like a great deal, and it really took off. Except the “deal” didn’t last long. For reasons already discussed (over utilization of services, and inattention to prices), the cost of health care rose rapidly. That in turn increased the cost of insurance. Today the cost to insure a family rivals the cost of the family’s mortgage. If you think that’s no big deal because your employer pays it, think again. Remember, group health insurance became popular because it was a substitute for wages. It still is. If your employer has to pay more for insurance, that means less is available to pay you.
As a nation almost 20% of every dollar earned is spent on health care. And that number is growing. We can’t continue in that direction much longer. But what can we do? Congress’s solution was more insurance for everybody. Coupled with that, they had to cap reimbursement for doctors and hospitals. (Yes, our government passed legislation limiting how much doctors and hospitals get paid.) And they’ve discussed “death panels,” i.e., government panels to approve or disapprove life-saving treatment for the elderly, as a way to limit the expenses for end of life care. Is that really what we want for America?
The beginnings of a better solution to our health care “crisis” are already visible in the free market. As insurance prices have skyrocketed, many insurance shoppers have opted for high-deductible, lower-premium plans. These plans may have $5,000 or even $10,000 deductibles, thereby placing the patient as the direct payer for his/her health care costs until the deductible is met. I have seen first-hand a shift toward these types of plans, and as more people are put in the position of paying their own health care costs, over utilization will decrease all on its own. Patients will become price shoppers, and doctors and hospitals will begin to compete on price and quality just as in every other industry.
A technique I used until recently to make insurance more affordable was to split coverage for a family. That is, I would give mom and dad a high-deductible, low-premium plan and put the kids on a more comprehensive plan. One of our local health plans offered comprehensive kids plans with low deductibles and co-pays with premiums as low as $40 per month. I used to offer a student plan for college students for as little as $30 per month. Unfortunately, the student plan and kids plans were discontinued following the passage of the health reform legislation last March.
One of the gems of that new law is that children under age 19 are now guaranteed coverage and pre-existing conditions cannot be excluded. At first that sounds pretty good. One of my best friends has a son who had open heart surgery shortly after birth and now has a pacemaker in his chest. Before the law passed, this boy was uninsurable on any individual/family plan. Faced with situations like his, most people don’t mind regulating insurance companies into offering coverage to children. The problem is, scoundrels like me exist to expertly exploit all your good intentions. My first thought when I heard about the guarantee for child coverage, was to remove my children from our insurance. Why, with guaranteed coverage available and no exclusions, would anyone cover their children before they got sick or injured? I reasoned that as soon as the cost for care exceeded the cost of insurance, I could add them. And I would have gotten away with it, too, if it weren’t for those meddling insurance companies anticipating my plan.
As just mentioned, kids plans were discontinued in September as the first wave of the reform legislation came into effect. Today there isn’t a plan in Utah that offers coverage to children under the age of 19 who aren’t applying on their parent(s)’s policy. Some plans went further declining even to cover partial families. The non-profit BlueCross BlueShield plan in Utah went as far as to discontinue offering their plans to any minors under the age of 19—even as part of a family plan. (You see, the law only said the child couldn’t be denied for health reasons. It didn’t say that children couldn’t be ruled ineligible to apply.) And rates took a sizable increase.
Oh, those big, bad insurance companies: limiting their offerings, and raising their prices. The trouble is that government has limited the ability of insurance companies to perform their primary function which is to assess risk. It would be like saying to a bank, “You can give loans, but you can’t qualify applicants based on income, employment, or credit history.” Such a policy would encourage what we call “adverse selection,” that is, bad credit risks would apply for loans, and as interest rates necessarily went up due to an increased risk of default, the better risks would drop out. That is exactly what this new regulation does to health insurance. Only the sick, i.e., those for whom the cost of insurance is less than the cost of treatment, have an incentive to buy coverage. And as premiums increase, only the sickest will remain, until ultimately the market collapses.
Yes, insurance companies make HUGE profits (net-income for those non-profit plans), and we should be glad they do. They wouldn’t exist, nor could they provide a service without it—just like any other business in America. The eighteenth century economist, Adam Smith, wrote: “It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest.” “I have never known much good done by those who affected to trade for the public good.” In other words, more people get better bread when bakers rake in the dough. Why should it be different for insurance companies?
Other nuggets of health reform include:
• Insurance companies are prohibited from imposing annual or lifetime coverage limits.
• Preventative care is covered 100% (with zero deductibles or co-pays).
• Children can remain on their parents policies until they are 27 years old (regardless of student status and even if they’re married with kids of their own!).
More coverage always feels good from the patient’s point of view. I always tell my clients: “You can never have too much insurance, BUT you can have too much premium.” Did we believe all this was coming for free? Ironically, the net effect of reform legislation, with its stated purpose of making insurance available to more people, may be that fewer people will be able to buy coverage. And those who can will pay more.
So what’s the solution? We’re facing big problems:
1. The cost of health care is going up at break-neck speed, and
2. There are many like my friend’s son who can’t get private insurance and can’t afford care without it.
Let’s look first at cost. We’re in the middle of a health care bubble, not unlike the housing bubble a few years ago or the tech bubble before that. The trend we’re seeing is definitely unsustainable, but if we could let the free market work, the bubble might “pop” softly. As I’ve said earlier, we’re here because of our reliance on insurance to cover any and every medical expense, and insurance lulls us from being smart shoppers. When we go to see the doctor, most of us only pay a co-pay and have no idea how much the visit actually costs, nor do we care. The obvious result is that health care costs have gone up dramatically, which in turn has led to increased insurance premiums. Many of us have even been shielded from any direct cost there because our employers have paid all or at least a good portion of our insurance. But as the increases have gotten higher, our employers have had to shift more of that burden back on us, and that’s actually good news for the market because it’s finally forced us to start shopping.
As mentioned earlier, I’ve begun to see many insurance shoppers choose high-deductible, low-premium plans. The insurance shoppers who buy these plans will also start to become health care shoppers who will compare the price and quality of health care providers just as they compare the produce between grocery stores. It’s time we start asking why MRIs, using 20 year-old technology and about 20 minutes of a technician’s time, cost $1,200. Interestingly, doctors whose services aren’t covered by insurance (or the government) already do compete on price and quality. Drive along I-15 and you’re sure to see a LASIK surgeon’s rates posted on a billboard. His higher-priced competitors use their own advertisements to tout their superior skill, but even their prices have come down in the last five years. At the same time, the technology these doctors use has gotten better and more advanced. It’s proof that in a free market, we can shop our way to a better health care solution.
Still, we have the problem of the uninsurable. Or do we? The fact is, anyone can buy insurance in Utah. If a group/employer-sponsored plan is available, coverage is guaranteed. And we have programs to help with premiums for those who can’t afford them on their own. For those without the option of a group plan, we have the Utah Comprehensive Health Insurance Pool where coverage is likewise guaranteed and premiums are based on income. If even those (reduced) premiums are too high, the individual is likely to qualify for Medicaid. But if the free market is given the opportunity to function, more and more people will be able to afford their own health care.
I have two more suggestions. First, I would personally like to see group/employer-sponsored plans replaced with individual/family plans. We don’t buy auto or homeowners insurance from our employer. Why should we buy our health insurance at work? There are some who continue in jobs they don’t like for fear of losing their insurance coverage. Individual plans are the easy solution to insurance portability. Still, I would also vigorously oppose regulating group plans out of existence. (On the other hand, I could easily be persuaded to eliminate the artificial tax incentives discussed earlier that make group plans so attractive.) Let’s create a level playing field and let the market decide what’s best.
Second, I think there could also be a case made for “Open Enrollment” periods. Medicare enrollees have a seven month window around their 65th birthday within which they can enroll and be guaranteed for coverage in a Medicare Supplement plan. If they do not enroll during that open enrollment period they may never qualify for a Supplement plan again—ever. We could explore the idea of implementing similarly limited windows for otherwise uninsurable adults and children wherein they could apply for coverage on private plans.
In a few weeks from now we will go to the polls to elect representatives to various offices in government. Who are they and where do they stand on the issue of health reform? We need to find leaders like U.S. Senate candidate Mike Lee who says, "The real solution to our current health care challenge is found in less government involvement in the process—not more.” It’s not that government is evil or corrupt. Nor do I believe they are out to waste our money. But it is practically impossible to impose market discipline in government: you see, even if the government is inefficient, or (unintentionally) wasteful, or produces unpopular products/programs—even if the government loses money hand over fist, it will never go out of business because it has the ability to tax us to make up for its shortcomings. In other words, it doesn't have to please us as customers; it's going to take our money whether we like it or not.
A friend of mine argued that what we're facing is too complex to simply say that the free market will fix it. My question is, if it's so complex, why would anyone want a one-size fits all solution from the government? Wouldn't the thousands of ideas and solutions offered by private enterprise be the preferred option? Further, Congress unwittingly put in place the incentives which helped to create the problems we're facing. Why should we trust them now to fix it?
I believe our candidates for state office can have as great an effect on health care in Utah as those running for national office because insurance is largely regulated on the state level. Representative Dean Sanpei (Utah House District 63) has by profession been responsible for positioning a $6 billion healthcare organization to understand the implications of health reform and what its impacts will be, and has consulted on health reform initiatives nationally and in the state of Utah. He writes:
Representative Sanpei's opponent, Democratic candidate Don Jarvis, isn't stating his position on health care this year, but in 2008 he favored a “government single-payer system.” And the Utah County Democrats, which Jarvis chaired, state in their platform: “We believe everyone should have access to affordable, quality health care.... We call for efficient and effective public health programs for children, seniors, and the working poor leading to universal health care for all citizens.” Are those the real Utah values Jarvis says he represents?
Now, if you’ve read this far, I’m flattered and I thank you. But don’t stop here or I’ll have wasted my effort. Go now and research the candidates for yourself. I hope you will join me in voting on November 2nd for leaders like Mike Lee and Dean Sanpei who will fight to protect our freedoms in health care.
If you like what you’ve read, please pass it on. Or if you disagree, email me at Chris.Burton@BlueMountainInsurance.com.
Better yet, if you want help with your insurance, call me at
Let me explain. Modern insurance is a method of risk management that began with merchants shipping goods over seas. An earlier technique used by merchants to minimize risk was to distribute their cargo on to more than one ship. Thus, if one ship sank, they didn’t lose their entire shipment. As risk management became more sophisticated, merchants and ship owners would enter into contracts with parties willing to guarantee, i.e., insure, the ships and their cargos. The idea was simple enough: in exchange for a relatively small premium payment, the insuring party agreed to compensate the merchant or ship owner in the event of a large, potentially devastating loss.
Following the development of these marine policies, other lines of insurance were established including, fire insurance for houses, and life insurance, and today there is an almost countless number of things we insure. But as varied and complex as modern insurance policies have become, there are a few basic conditions that must be met in order for insurance to be an effective means of minimizing risk:
• The potential loss being insured against must be large,
• It must be unexpected, and
• Its occurrence must be rare.
Insurance is too expensive when used as a means of financing small, inexpensive risks. Consider the following. Here in Provo, I can insure a $500,000 house for less than $500 per year. Think of that. For roughly $35-$40 a month, a half million dollar risk is covered. That’s a great exchange. On the other hand, I recently bought a $45 phone for which the vender tried to sell me insurance for $5 per month—$60 a year to cover a $45 risk. Bad exchange.
Neither is insurance an appropriate means of financing losses which we know are going to occur. For example, no insurer would allow me to purchase a new fire policy while a wild fire was burning through my neighborhood. Any loss to be insured against must be uncertain.
Nor can insurance be used to finance losses when they become too frequent. For example, if I am regularly involved in car accidents, insurance companies will decline to cover me or make the premiums prohibitively expensive.
The problem with health insurance today is that we have violated all three of those criteria. We have used insurance to cover planned, routine, and inexpensive care with the result being that the cost of insurance has skyrocketed and even regular office visits now feel unaffordable. Faced with the consequences of our misuse, Congress has enacted legislation to “solve” the problems of health care by actually expanding the role of insurance. Their argument is that when everyone is insured, the price for everybody will go down. Really?
Let’s look at that idea using the ridiculous example of toilet paper insurance. TP is something that I hope everybody uses. What would happen if we had TP insurance? Would it make TP more affordable? Of course not. The cost of financing our TP with insurance would have to include the cost of the TP plus the additional costs of the insurance clerks who process the payments. And that’s just the beginning. As useful as insurance can be, it presents a perverse incentive to waste and destroys any incentive to save. Think it through. If your TP is covered by insurance, do you limit the number of squares you use? Do you buy the discount brands, or only the ultra-soft kind? Do you waste your time coupon clipping?
And let’s not forget about the TP manufacturers. When people have TP insurance, manufacturers don’t have to compete on price anymore. What does that do to cost?
But what if everybody had it? Well then the price would probably just go up faster.
Believe it or not, the same economic principles that apply to TP apply to health care. The fact is health insurance increases the cost of each visit to your doctor by adding extra people, i.e., billing and insurance clerks, into the transaction. It promotes over utilization of health care because the patient doesn’t pay the cost directly. And when was the last time your doctor or hospital advertised their prices? Never. (Can you even name another industry that hides its prices like the medical industry?) But if you think they aren’t concerned with increasing their profits, then explain why the medical industry spends nearly $6 Billion a year in advertising.
So how did we get into this mess? Why did we ever start using insurance to finance planned, routine, and inexpensive care?—especially if, as I’ve claimed, it costs more? The answer requires a little more history. Modern group health insurance had its beginnings in 1929 but didn’t really take off until World War II when government-imposed wage freezes prompted employers to offer other benefits in lieu of increased pay. But by 1954 most people still didn’t have health insurance. That’s when Congress got involved again and made contributions to employer-based health plans tax-deductible. At that time the minimum Federal tax bracket was 20%; the highest was 91%. So getting that tax deduction was equivalent to taking between 20-91% off the price of a person’s health insurance. (It works the same way today.) With “discounts” like that, insurance became the least expensive way to finance all health care—from the catastrophic right down to minor colds and sniffles.
It seemed like a great deal, and it really took off. Except the “deal” didn’t last long. For reasons already discussed (over utilization of services, and inattention to prices), the cost of health care rose rapidly. That in turn increased the cost of insurance. Today the cost to insure a family rivals the cost of the family’s mortgage. If you think that’s no big deal because your employer pays it, think again. Remember, group health insurance became popular because it was a substitute for wages. It still is. If your employer has to pay more for insurance, that means less is available to pay you.
As a nation almost 20% of every dollar earned is spent on health care. And that number is growing. We can’t continue in that direction much longer. But what can we do? Congress’s solution was more insurance for everybody. Coupled with that, they had to cap reimbursement for doctors and hospitals. (Yes, our government passed legislation limiting how much doctors and hospitals get paid.) And they’ve discussed “death panels,” i.e., government panels to approve or disapprove life-saving treatment for the elderly, as a way to limit the expenses for end of life care. Is that really what we want for America?
The beginnings of a better solution to our health care “crisis” are already visible in the free market. As insurance prices have skyrocketed, many insurance shoppers have opted for high-deductible, lower-premium plans. These plans may have $5,000 or even $10,000 deductibles, thereby placing the patient as the direct payer for his/her health care costs until the deductible is met. I have seen first-hand a shift toward these types of plans, and as more people are put in the position of paying their own health care costs, over utilization will decrease all on its own. Patients will become price shoppers, and doctors and hospitals will begin to compete on price and quality just as in every other industry.
A technique I used until recently to make insurance more affordable was to split coverage for a family. That is, I would give mom and dad a high-deductible, low-premium plan and put the kids on a more comprehensive plan. One of our local health plans offered comprehensive kids plans with low deductibles and co-pays with premiums as low as $40 per month. I used to offer a student plan for college students for as little as $30 per month. Unfortunately, the student plan and kids plans were discontinued following the passage of the health reform legislation last March.
One of the gems of that new law is that children under age 19 are now guaranteed coverage and pre-existing conditions cannot be excluded. At first that sounds pretty good. One of my best friends has a son who had open heart surgery shortly after birth and now has a pacemaker in his chest. Before the law passed, this boy was uninsurable on any individual/family plan. Faced with situations like his, most people don’t mind regulating insurance companies into offering coverage to children. The problem is, scoundrels like me exist to expertly exploit all your good intentions. My first thought when I heard about the guarantee for child coverage, was to remove my children from our insurance. Why, with guaranteed coverage available and no exclusions, would anyone cover their children before they got sick or injured? I reasoned that as soon as the cost for care exceeded the cost of insurance, I could add them. And I would have gotten away with it, too, if it weren’t for those meddling insurance companies anticipating my plan.
As just mentioned, kids plans were discontinued in September as the first wave of the reform legislation came into effect. Today there isn’t a plan in Utah that offers coverage to children under the age of 19 who aren’t applying on their parent(s)’s policy. Some plans went further declining even to cover partial families. The non-profit BlueCross BlueShield plan in Utah went as far as to discontinue offering their plans to any minors under the age of 19—even as part of a family plan. (You see, the law only said the child couldn’t be denied for health reasons. It didn’t say that children couldn’t be ruled ineligible to apply.) And rates took a sizable increase.
Oh, those big, bad insurance companies: limiting their offerings, and raising their prices. The trouble is that government has limited the ability of insurance companies to perform their primary function which is to assess risk. It would be like saying to a bank, “You can give loans, but you can’t qualify applicants based on income, employment, or credit history.” Such a policy would encourage what we call “adverse selection,” that is, bad credit risks would apply for loans, and as interest rates necessarily went up due to an increased risk of default, the better risks would drop out. That is exactly what this new regulation does to health insurance. Only the sick, i.e., those for whom the cost of insurance is less than the cost of treatment, have an incentive to buy coverage. And as premiums increase, only the sickest will remain, until ultimately the market collapses.
Yes, insurance companies make HUGE profits (net-income for those non-profit plans), and we should be glad they do. They wouldn’t exist, nor could they provide a service without it—just like any other business in America. The eighteenth century economist, Adam Smith, wrote: “It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest.” “I have never known much good done by those who affected to trade for the public good.” In other words, more people get better bread when bakers rake in the dough. Why should it be different for insurance companies?
Other nuggets of health reform include:
• Insurance companies are prohibited from imposing annual or lifetime coverage limits.
• Preventative care is covered 100% (with zero deductibles or co-pays).
• Children can remain on their parents policies until they are 27 years old (regardless of student status and even if they’re married with kids of their own!).
More coverage always feels good from the patient’s point of view. I always tell my clients: “You can never have too much insurance, BUT you can have too much premium.” Did we believe all this was coming for free? Ironically, the net effect of reform legislation, with its stated purpose of making insurance available to more people, may be that fewer people will be able to buy coverage. And those who can will pay more.
So what’s the solution? We’re facing big problems:
1. The cost of health care is going up at break-neck speed, and
2. There are many like my friend’s son who can’t get private insurance and can’t afford care without it.
Let’s look first at cost. We’re in the middle of a health care bubble, not unlike the housing bubble a few years ago or the tech bubble before that. The trend we’re seeing is definitely unsustainable, but if we could let the free market work, the bubble might “pop” softly. As I’ve said earlier, we’re here because of our reliance on insurance to cover any and every medical expense, and insurance lulls us from being smart shoppers. When we go to see the doctor, most of us only pay a co-pay and have no idea how much the visit actually costs, nor do we care. The obvious result is that health care costs have gone up dramatically, which in turn has led to increased insurance premiums. Many of us have even been shielded from any direct cost there because our employers have paid all or at least a good portion of our insurance. But as the increases have gotten higher, our employers have had to shift more of that burden back on us, and that’s actually good news for the market because it’s finally forced us to start shopping.
As mentioned earlier, I’ve begun to see many insurance shoppers choose high-deductible, low-premium plans. The insurance shoppers who buy these plans will also start to become health care shoppers who will compare the price and quality of health care providers just as they compare the produce between grocery stores. It’s time we start asking why MRIs, using 20 year-old technology and about 20 minutes of a technician’s time, cost $1,200. Interestingly, doctors whose services aren’t covered by insurance (or the government) already do compete on price and quality. Drive along I-15 and you’re sure to see a LASIK surgeon’s rates posted on a billboard. His higher-priced competitors use their own advertisements to tout their superior skill, but even their prices have come down in the last five years. At the same time, the technology these doctors use has gotten better and more advanced. It’s proof that in a free market, we can shop our way to a better health care solution.
Still, we have the problem of the uninsurable. Or do we? The fact is, anyone can buy insurance in Utah. If a group/employer-sponsored plan is available, coverage is guaranteed. And we have programs to help with premiums for those who can’t afford them on their own. For those without the option of a group plan, we have the Utah Comprehensive Health Insurance Pool where coverage is likewise guaranteed and premiums are based on income. If even those (reduced) premiums are too high, the individual is likely to qualify for Medicaid. But if the free market is given the opportunity to function, more and more people will be able to afford their own health care.
I have two more suggestions. First, I would personally like to see group/employer-sponsored plans replaced with individual/family plans. We don’t buy auto or homeowners insurance from our employer. Why should we buy our health insurance at work? There are some who continue in jobs they don’t like for fear of losing their insurance coverage. Individual plans are the easy solution to insurance portability. Still, I would also vigorously oppose regulating group plans out of existence. (On the other hand, I could easily be persuaded to eliminate the artificial tax incentives discussed earlier that make group plans so attractive.) Let’s create a level playing field and let the market decide what’s best.
Second, I think there could also be a case made for “Open Enrollment” periods. Medicare enrollees have a seven month window around their 65th birthday within which they can enroll and be guaranteed for coverage in a Medicare Supplement plan. If they do not enroll during that open enrollment period they may never qualify for a Supplement plan again—ever. We could explore the idea of implementing similarly limited windows for otherwise uninsurable adults and children wherein they could apply for coverage on private plans.
In a few weeks from now we will go to the polls to elect representatives to various offices in government. Who are they and where do they stand on the issue of health reform? We need to find leaders like U.S. Senate candidate Mike Lee who says, "The real solution to our current health care challenge is found in less government involvement in the process—not more.” It’s not that government is evil or corrupt. Nor do I believe they are out to waste our money. But it is practically impossible to impose market discipline in government: you see, even if the government is inefficient, or (unintentionally) wasteful, or produces unpopular products/programs—even if the government loses money hand over fist, it will never go out of business because it has the ability to tax us to make up for its shortcomings. In other words, it doesn't have to please us as customers; it's going to take our money whether we like it or not.
A friend of mine argued that what we're facing is too complex to simply say that the free market will fix it. My question is, if it's so complex, why would anyone want a one-size fits all solution from the government? Wouldn't the thousands of ideas and solutions offered by private enterprise be the preferred option? Further, Congress unwittingly put in place the incentives which helped to create the problems we're facing. Why should we trust them now to fix it?
I believe our candidates for state office can have as great an effect on health care in Utah as those running for national office because insurance is largely regulated on the state level. Representative Dean Sanpei (Utah House District 63) has by profession been responsible for positioning a $6 billion healthcare organization to understand the implications of health reform and what its impacts will be, and has consulted on health reform initiatives nationally and in the state of Utah. He writes:
The cost escalation for healthcare expenses is unsustainable, however the solution lies in addressing cost incentives before increasing access to a broken system. Federal reform efforts are moving with the cart in front of the horse. They will increase access into a system where costs are already out of control thereby resulting in a debt explosion.
Rather we need to:
1. Change the incentives such that value is rewarded. Currently payment is received for care regardless of outcomes and quality.
2. Close the gap between who is paying and who is receiving the benefit. Individual accountability is lost when everything is paid for by a third party.
3. Recognize that the Federal Government has mandated a system to behave like healthcare is a right, but is not funding those mandates so that the private sector has been picking up the shortfall. We need to move our system away from the drivers of cost shifting.
Representative Sanpei's opponent, Democratic candidate Don Jarvis, isn't stating his position on health care this year, but in 2008 he favored a “government single-payer system.” And the Utah County Democrats, which Jarvis chaired, state in their platform: “We believe everyone should have access to affordable, quality health care.... We call for efficient and effective public health programs for children, seniors, and the working poor leading to universal health care for all citizens.” Are those the real Utah values Jarvis says he represents?
Now, if you’ve read this far, I’m flattered and I thank you. But don’t stop here or I’ll have wasted my effort. Go now and research the candidates for yourself. I hope you will join me in voting on November 2nd for leaders like Mike Lee and Dean Sanpei who will fight to protect our freedoms in health care.
If you like what you’ve read, please pass it on. Or if you disagree, email me at Chris.Burton@BlueMountainInsurance.com.
Better yet, if you want help with your insurance, call me at
801-373-SAVE!
Sunday, November 02, 2008
Conservative Quarterly Endorses Steve Clark
Having lived in Provo for many years, raising a family and operating a small business here, I wanted to join and involve others in the political conversation that shapes our community. Thus was born the Conservative Quarterly, a publication dedicated to conservative ideals and focused on local issues.
This edition examines the issues raised by the candidates in my home district, number 63: Growth and Transportation, Affordable Health Care, Education, and Ethics Reform. This edition also considers the recent economic crisis and looks for lessons from our past.
After reviewing the candidates and the issues, Representative Steve Clark is clearly the best candidate for Utah House District 63.
Remembering Ronald Reagan
"As we have seen many times in history, our country now stands at a crossroads."
This election comes as we enter the worst economic state our country has seen since the Carter Administration (with its double digit inflation, escalating mortgage payments, shrinking paychecks, and worries over foreign oil). What we needed then and need now more than ever are the conservative ideals that President Reagan reinstilled in our country: "Faith in the ideals of democracy, of free men and free markets, and of the extraordinary possibilities that lie within seemingly ordinary men and women." The promise that "America's best days are yet to come," and that "America remains what Emerson called her 150 years ago, 'the country of tomorrow.'"
Now as presidential candidates fight over "Joe the Plumber," we need a leader of principle like Reagan who, quoting Lincoln, stated, "'You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot help the poor by destroying the rich. You cannot help men permanently by doing for them what they could and should do for themselves.'…
"As we have seen many times in history, our country now stands at a crossroads. There is widespread doubt about our public institutions and profound concern, not merely about the economy but about the overall direction of this great country." Reagan spoke those words more than 16 years ago.
The issues we face today are not unlike those we've seen before; confronting the same challenges we meet at present, Reagan said, "Let us apply our ingenuity and remarkable spirit to revolutionize education in America so that everyone among us will have the mental tools to build a better life. And while we do so, let's remember that the most profound education begins in the home.
"And let us harness the competitive energy that built America,…so that real jobs can be created … and real
hope can rise out of despair.
"Let us strengthen our health care system so that Americans of all ages can be secure in their futures without the fear of financial ruin."
Reagan first won the White House in uncertain, dangerous times when liberals cautioned against standing up to the world's aggressors, and proposed bigger, more intrusive government as the solution for their failed policies. Under Reagan's leadership, however, America won the cold war and our economy flourished with limited government.
Now, facing like challenges, let us learn from the past: let us reject the failed policies of the left and vote our conservative ideals. Then "May [we] as Americans never forget [our] heroic origins, never fail to seek divine guidance, and never lose [our] natural, God-given optimism.
"And … may every dawn be a great new beginning for America and every evening bring us closer to that shining city upon a hill."
All quotes taken from Reagan's 1992 Republican National Convention speech, Houston, Texas.
The Economy
In the midst of the current economic crisis, Utah banks have remained strong. Utah, with a Triple A bond rating, was named the best managed state in the Nation, under Republican leadership.
The failure of Lehman Brothers and the resultant freezing of the credit markets sent shockwaves throughout Wall Street in September, intensifying the troubles of other giants like AIG, Morgan Stanley, and Goldman Sachs. These were the pillars thought to be fail-safe. How could they suddenly become so shaky? The short answer is too much debt—for individuals, corporations, banks, and now … the U.S. taxpayer.
A longer answer begins with U.S. government. Wanting to create an "Owership Society," the government encouraged banks to make reckless, high-risk mortgage loans to borrowers whose ability to repay was at best questionable. Able to sell these loans to government backed Freddie Mac and Fannie Mae, banks gladly made these loans to borrowers without proof of income, or even a job. Down payments were likewise unnecessary.
The failure of Lehman Brothers and the resultant freezing of the credit markets sent shockwaves throughout Wall Street in September, intensifying the troubles of other giants like AIG, Morgan Stanley, and Goldman Sachs. These were the pillars thought to be fail-safe. How could they suddenly become so shaky? The short answer is too much debt—for individuals, corporations, banks, and now … the U.S. taxpayer.
A longer answer begins with U.S. government. Wanting to create an "Owership Society," the government encouraged banks to make reckless, high-risk mortgage loans to borrowers whose ability to repay was at best questionable. Able to sell these loans to government backed Freddie Mac and Fannie Mae, banks gladly made these loans to borrowers without proof of income, or even a job. Down payments were likewise unnecessary.
Banks even loaned more than the value of the homes, reasoning that home values were rising. Of course they were. When money is cheap, the market compensates by charging more. In order to keep the rising
prices "affordable" some banks even offered a 50 year mortgage.
Packaging these loans into mortgage-backed securities, they were sold, and companies, like Lehman Brothers, gobbled them up. Betting heavily on these securities, they borrowed huge sums of money to buy even more. Unfortunately, they bet wrong. Home prices rose out of reach for most families. Adjusting interest rates and higher payments resulted in foreclosures and home prices plummeted. Companies, over-leveraged and invested in these mortgages, suddenly found themselves in trouble.
Hindsight, it's said, is 20/20, but was it really that hard to see what was coming? Yet, when warned four years ago by the Fed, Congress did nothing. Rather they encouraged Freddie and Fannie to do more to "make housing more widely available." And now in a panic, they've passed a $700 billion bailout package, "buying" those losses from the banks and corporations and passing them to taxpayers.
In other words, the gains made on Wall Street stayed private, but the losses became socialized. Financial institutions were incentivized to continue their risky behavior, while nothing was done to correct it. Instead of addressing the real problem of being over-leveraged and too far in debt as a nation, we further leveraged the taxpayer to the tune of $700 billion, and the markets as of yet are no more stable than before. In fact, one could easily argue that the bailout has created more uncertainty in the market as investors now wonder if banks are indeed stable, or if their current liquidity is nothing more than a short-term effect of the bailout.
Even worse, this bailout puts a major portion of our economy into the hands of the government. Looking back on the Great Depression of the early 1930s, economists today both liberal (Galbraith) and conservative (Friedman) consider the government's involvement in the economy misguided and counterproductive; taking what began as a relatively minor recession in to the worst economic crisis in our history. In regards to the present crisis, Fed Chairman Bernanke said, less than 18 months ago, that the total fallout from subprime mortgages would be contained to $50 billion—a fraction of estimates today. Likewise, as investment banks began to leverage themselves 20 and 30 times beyond their holdings, U.S. Treasury Secretary Paulson argued on Capitol Hill that they should be allowed to leverage themselves even further.
Our "experts" who think they understand and know seem to know less than they think they do. They may indeed have more knowledge and insight than the average taxpayer, but they cannot possibly know what the market collectively understands, and I fear this bailout will prove counterproductive as well.
Rather than letting interest rates rise, which would encourage less debt and more savings and liquidity, the Fed has continued to lower rates. Congress has also refused to cut capital-gains taxes which would further encourage savings and investment. The "infusion" of $700 billion into the economy will certainly create inflationary pressure, encouraging more spending and discouraging savings.
Meanwhile, Utah's largest banks, Wells Fargo and Zions Bank, have remained strong as they did not involve themselves in subprime loans. As well, Utah is one of only five states with a triple A (AAA) bond rating: our revenues are healthy even in declining economic times and the state's savings accounts are filled to the brim. In fact, Utah was named the Best Managed State in the Nation, under our Republican leadership.
From banks to governments to individuals, those who, in the words of Gordon B. Hinckley, chose "to live within our means,… to be free of debt, [and] to have a little money against a day of emergency," will make it through this "stormy weather."
Republican Steve Clark has done just that as he owned, operated and made payroll as a contractor for over 29 years. He has continued to do so as the Chairman of the Business/Labor Committee in our legislature.
Vote for Republican Steve Clark on Tuesday to continue to keep Utah's "house in order."
Growth and Transportation
Real leadership requires real solutions, like those put forward by Republican Steve Clark
Don Jarvis (Democrat) believes the solution to the growth and transportation problems in Utah County is to "fully support public transport, including a commuter rail system to alleviate congestion and pollution."
That and "more bicycle lanes."
Ground has already been broken and commuter rail will be up and running soon, thanks to a GOP legislature, but far more is needed. Public transit makes no statistical difference in commuter traffic in communities with fewer than 4,000 people per square mile.1 Provo, the largest city in Utah County, is well below that density, housing only approximately 2,830 people per square mile,2 while Utah County houses less than 200 people per square mile.3
Even in cities with much higher densities, the majority of people do not use public transit, and ridership across the country is declining.4 Even in Salt Lake, after initial enthusiasm for TRAX, ridership declined in 2007.5 Commuter rail (even with Jarvis' bike lanes) cannot solve our growth and transportation problems on its own.
Real leadership requires real solutions, like those put forward by Republican Steve Clark: "A major artery similar to the Legacy Highway in Davis County or the Centennial Highway in Salt Lake County needs to be constructed on the West Side of Utah Lake and will intersect with I-15 at Payson." As well, we need East/West traffic solutions.
If we are serious about alleviating traffic and congestion, then improving our roads and highways is a must. Having faster, more reliable access to Salt Lake City, the airport, and I-80 will have the added effect of attracting more industry to our valley as well. Cast your vote for growth. Vote for Steve Clark.
1. Thomas Sowell, Economic Facts and Fallacies, page 20.
2. U.S. Census Bureau, www.factfinder. census.gov.
3. Ibid.
4. Thomas Sowell, Economic Facts and Fallacies, page 19.
5. "New method of counting shows 'decline' in TRAX ridership," Deseret News, Jan. 27, 2008. See also "TRAX Ridership Appears to be on the Decline," ksl.com, July 22, 2007.
Affordable Health Care
Say no to socialized medicine and cast your vote for excellence in health care. Vote for Steve Clark.
Everyone wants a more affordable health care system, but are we ready for a "government single-payer system" (aka socialized medicine)? We all agree that the skyrocketing cost of health care is a problem, but socialism is not the answer. Consumerism is.
Anytime a third party (the biggest of which is the government) assumes payment for any good, concern for price deteriorates. Do you care how much the repair cost for your car is if your insurance is paying for it? This holds true for health care as well.
Patients become more cost conscious through participation in consumer driven health plans, and the cost of care comes down. Take, for example, plastic surgery and LASIK eye surgery: while health care costs have been increasing by more than double the rate of inflation for years, these procedures have actually come down in price, at the same time becoming better. They used to use knives on our eyes but now use computer guided lasers; recovery time is hours instead of weeks; and the results are superior. And it costs less! How can this be? Because most third party payers won't pay for these procedures. Rather, they are consumer
driven: consumers demand the best product at the best price, and vendors (even doctors) accommodate them.
Government involvement (i.e. Medicare/ Medicaid), on the other hand, almost always spurs higher spending in health care, then further inflates the cost of care for private payers who must subsidize the government's "allowable" fees. (For example, if the cost of care is $100, but the government's allowable fee is only $80, the market compensates by charging private payers $120.)
Massachusetts' experiment with health care isn't doing much better: almost three times over budget already,1 how long will it be before Massachusetts-care goes bankrupt?
The free market has proven it is a better solution than the government: While Congress was making deals with drug companies disallowing negotiations for lower prices on drugs for seniors on Medicare, Wal-Mart (driven by profits) began selling $4 generics!2 And remember the recent embarrassment of the rat and mold infested Walter Reed Army Medical Center; or Diane Sawyers' 2004 Primetime report on the sickening conditions in VA hospitals where patients wait eight hours to see a doctor.3
In contrast, Utah's locally (and privately) owned Intermountain Healthcare, a nationally recognized health care leader, operates hospitals ranking among the nation's best, with costs for care ranking among the lowest.4,5 A Dartmouth Medical School study suggested that following Intermountain Healthcare's model would save Medicare a third of its costs while maintaining treatment quality.6
Republican Steve Clark has had a seat on Intermountain Healthcare's board and knows their model of excellence. On November 4th, say no to socialized medicine and cast your vote for excellence in health care. Vote for Steve Clark.
1. Alice Dembner, "Subsidized care plan's cost to double," The Boston Globe, Feb. 3 2008.
2. Ralph Nadar, "If Sam's Club Can Negotiate for Lower Pharmaceutical Prices, Why Can't Uncle Sam?" CommonDreams.org, Nov. 28, 2003.
3. ABC, "Primetime," April 8, 2004.
4. Ty Bindrup, "How Intermountain Healthcare is Taking Mobility to the Next Level," eweek.com, May 28, 2008.
5. "Health Care," Life in the Valley Magazine (lifeinthevalley.com/ health_care.html).
6. Ibid.
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