The Truth About Insurance Companies

[CuteOldGuy]

I can't believe it. Now this board puts me in the awkward position of defending insurance companies. Insurance companies are not evil. Government is evil, it's just that insurance companies have done a great job of passing the evil they receive from the government on to their policyholders. The fact is, insurance companies are over-regulated. They are required to cover things that don't need to be covered, and have to comply with regulations that are simply nonsense. Here's how they are supposed to work.

1. Insurance is a contract. You pay the insurance company a premium, and they in turn agree to pay for claims submitted within agreed upon guidelines. If you suffer an injury or illness you didn't agree to have covered, you don't get coverage. It's really pretty simple. If an insurance company denies a covered claim, they can be subject to treble (3x) damages in court. That's a good incentive to pay covered claims, which have been previously agreed on by the company and the insured.

2. Insurance companies are in business to make money. If they don't make money, no claims get paid. They do this by hiring actuaries who are very good at determining the risk involved in paying claims, how much the insurance company can expect to pay, and thereby spread the risk of coverage over all the policyholders. Some policyholders never need a claim paid, others need many claims paid. Insurance premiums are the policyholders way of limiting their risk. Some will use all of it, others nothing. We just never know how or why things happen, but the actuaries are very good at coming up with accurate figures. I don't know how they do it, but they are very good.

If an insurance company is a mutual company, the profits are returned to the policyholders either by dividend or by rate reductions. The policyholders are the owners of the company.

3. Insurance companies can't be expected to cover pre-existing conditions, although many do when part of a group policy. The actuaries are able to determine the cost of granting that coverage so the company can know how much in premiums they will need. Otherwise, it is ridiculous to ask them to cover a pre-existing condition. What company would enter into a contract that at the beginning is going to require them to spend much more than they can charge? If a proposed insured tells the insurance company something like "I have cancer" who knows how much that will cost to cover? There is no way to spread the risk, because there is no risk, since it is a certainty.

What would you do if you were told you had to provide a service or product that was worth $10,000 to someone but could only charge them $100? How long would you stay in business?

We need less government in health care, not more. Insurance companies need to be free to contract across state lines, and tailor their policies to their policyholders. People should not be required to pay for coverage they don't want or need.

We also need some serious tort reform. Frivolous cases use up a LOT of health care dollars. I was just a small time lawyer and I had a frivolous malpractice suit filed against me. I won. In fact, in each court where it was presented, the judge told the other side to knock it off, this wasn't a valid claim. It was appealed several times, each time the other side was told they didn't have a case. I never had to go to trial, it was that frivolous. But when it was over, I was vindicated, but it cost my insurance company over $250k to defend me. My rates skyrocketed. And I didn't do anything wrong. And I was a small time attorney. Multiply this by 1000, and we start looking at what doctors and insurance companies have to face. It can cost a fortune to defend a capable, competent doctor. This kind of crap has to stop.

If we deregulated the insurance industry, except for some limited oversight, probably from the SEC (god help us), and adopted some serious tort reform, Obamacare would be laughed off the table. We would have much better health care at a much lower cost. And no government involvement.

And now you know, the rest of the story.

[Sidewinder]

I have a simple question, which you can pass along to your malpractice insurance company.

Why did they/you not file for sanctions against the opposing attorney(s)?

When every judge at every level tells opposing counsel he doesn't have a case, and opposing counsel keeps it up, it seems to me that, at SOME point, opposing counsel's Bar card(s) should be shredded.

[CuteOldGuy]

My attorneys didn't want to pursue that.

[CuteOldGuy]

That's not quite right, my attorneys were discussing it, but I wasn't included in later transpired. I don't know what happened after the S Ct threw it out.

[TexTushHog]

When you say that your premiums skyrocketed, from what, to what? I've found that my malpractice premiums are quite reasonable. Around $15,000/year for two lawyers, $2M/$5M limits, $25k retention.

[CuteOldGuy]

That isn't the point of this thread.