9 ms·

Lies, Maths, And Health Insurance

80 points by winanga 17y ago

daeken 17y ago
It constantly amazes me as to how even the simplest and most shallow of figures ("It affects less than one-half of one percent of people we cover.") can lie in a spectacular way. I tend to think of myself as a fairly well-educated person, but I wouldn't have looked twice at this statement unless I was given good reason to. How many people are being manipulated by 'simple' and seemingly pure figures every day?
- gleb 17y ago
  Then the article "lies" in the same way: "If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population)." Let's assume his numbers are correct. Is 10% high or low? Who knows. What is the probability of the applicant having lied, given that they have filed that type of claim, and what is the probability for the rest of their customers? The whole "evil insurance companies" thing is ridiculous. Companies are amoral and profit seeking. Insurance companies just take groups (as regulated by government), provide them level of coverage (as regulated by government), figure out the actuarial risks (based on factors regulated by government), spread those risks around members of the group (with a low-risk members subsidizing the high risk at the level regulated by government) and sell insurance product designed to maximize their profit within a competitive marketplace. A similar product to what he is suggesting, that covers pre-existing conditions already exists in CA as a shall-issue product, it's called a small group coverage. It's also many times more expensive than individual insurance. Should an individual insurance product with transparent pre-existing condition coverage exist? Absolutely. It's going to be more expensive than today's individual coverage, and that's why an insurance company could not successfully sell it against existing competing products in the current individual marketplace, even if regulators allowed it to. It's up to the government to set up or to allow insurance companies to setup such a group/coverage/underwriting-criteria combination. It's also up to the government to get rid of perverse tax incentives that subsidize group policies and drive people away from individual policies. Of course, grilling insurance company executives on TV is so much more fun than actually doing work.
  - thras 17y ago
    The whole "evil insurance companies" thing is ridiculous. Companies are amoral and profit seeking. Wrong. Industries have distinct cultures, usually formed through self-selection due to the sort of people who choose careers in them. Compare police officers and firemen, for example. Similar sorts of work, but wildly different cultures due to self-selection effects. Now, what sort of culture do insurance companies have? I think that there's good evidence that it's a sick and cancerous one. Otherwise, good point about the necessity of government intervention in this market.
    - mnemonicsloth 17y ago
      Now, what sort of culture do insurance companies have? I think that there's good evidence that it's a sick and cancerous one. If you have evidence to support this claim, provide it. It might be interesting. If you don't, you're just resorting to name-calling so you can win a boring argument about politics. We don't like that sort of thing here. http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html
      - davidw 17y ago
        > If you don't, you're just resorting to name-calling so you can win a boring argument about politics. We don't like that sort of thing here. Which is why "we" flag all of these articles:-)
      - timr 17y ago
        "If you have evidence to support this claim, provide it. It might be interesting. If you don't, you're just resorting to name-calling so you can win a boring argument about politics. We don't like that sort of thing here." I think the opinion of the parent falls under the heading of "arguments that do not require citation, because any educated citizen should be familiar with their content". Here's what I found in two seconds of Googling: http://articles.latimes.com/2006/sep/17/business/fi-revoke17 http://articles.latimes.com/2006/sep/17/business/fi-revoke17 http://select.nytimes.com/2006/09/22/opinion/22krugman.html?_r=1 http://select.nytimes.com/2006/09/22/opinion/22krugman.html?... http://www.sickofbluecross.com/consumer_stories/ http://www.sickofbluecross.com/consumer_stories/ and here's a great podcst from last weekend on insurance companies and their rescission practices that I just happened to hear while making dinner (third story in; right around the 30 minute mark): http://thislife.org/Radio_Episode.aspx?episode=386 http://thislife.org/Radio_Episode.aspx?episode=386 ...and that's just a taste of the information that's out there, available to anyone with even a passing inclination to look for it. Maybe the decisions documented in these articles don't constitute "evil", but I wouldn't characterize the them as "amoral", either. At the least, there's a strong argument to be made that the profit-seeking motive of American health insurance companies has gotten out of balance with its duty to protect the insured, and requires further regulation.
- bitdiddle 17y ago
  innumeracy is a far worse problem than you think. Here's an example that explains why most doctors are loathe to quote numbers to patients http://yudkowsky.net/rational/bayes http://yudkowsky.net/rational/bayes
- orc 17y ago
  The real question here is, of those .5% who had their policy cancelled, how many of them actually lied about a preexisting condition that they then filed a claim for? Because if there's even ONE person who had their policy cancelled unjustly, then that is one person too many.
jdminhbg 17y ago
The Monty Hall problem has nothing to do with his statistics, which in any case are completely dependent on his unsupported assertions, cf.: "If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%..." "But let’s not forget that the very nature of the forms is designed to create inaccuracies" Not to mention: "I tend to think of traditional banking and traditional insurance as mirror images: when you take out a mortgage, you get a lump sum and make a series of payments; when you get life insurance, you make a series of payments and get a lump sum." Which pretty much sums up the problem with the current health care debate -- almost nobody involved knows the difference between insurance and care. There's no reason middlish class people need to have things like physicians' visits and normal prescription drugs filtered through an insurance company or the government, they're completely affordable and expectable on their own. You insure unexpected, unaffordable events, like crashing your car, not oil changes.
- kgrin 17y ago
  That's true, though if you're on the hook for a person's catastrophic care, you may very well want to give them economic incentives (i.e. cheap/free doctor's checkups) to invest in preventative care. Now, this doesn't mean that we ought to necessarily have a big, bad program (government or private) control everything. But it does mean that the "insurance is for catastrophes, everything else should be out-of-pocket" model isn't necessarily as simple and wonderful as it sounds.
  - jdminhbg 17y ago
    That's true if the assumptions behind it are true -- that cheap/free doctor's checkups result in lower catastrophic care costs. I'm not aware of any study that shows that they are.
    - kgrin 17y ago
      I don't have the studies in front of me, but it generally depends. In the case of diabetes, for instance, a lifetime of diet monitoring and counseling by a doctor or nurse is still way cheaper than insulin or amputation.
zader 17y ago
The article assumes that any cancellations must be unjust, and then uses math to show that there are more cancellations than one might suspect. But if the cancellations aren't unjust in the first place, then the article is all smoke and no fire. News flash - If you include fraudulent information on your insurance application, your insurance company may cancel your coverage when you need it most. Of course, if you filled out your application in good faith and they try to cancel it for frivolous reasons, you can sue them in court. What exactly is the problem here? Most of the urgency in his article comes from comparing fraudulent insurance applications to game show contestants and underage gamblers. Using these kinds of analogies obscures the more fundamental fact that insurance companies can only legally cancel your policy when you have supplied demonstrably fraudulent information. That hardly seems like a scandal, or anything that warrants additional government regulation in what is already an incredibly heavily regulated industry.

80 points by winanga 17y ago

It constantly amazes me as to how even the simplest and most shallow of figures ("It affects less than one-half of one percent of people we cover.") can lie in a spectacular way. I tend to think of myself as a fairly well-educated person, but I wouldn't have looked twice at this statement unless I was given good reason to. How many people are being manipulated by 'simple' and seemingly pure figures every day?

gleb 17y ago
Then the article "lies" in the same way: "If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population)." Let's assume his numbers are correct. Is 10% high or low? Who knows. What is the probability of the applicant having lied, given that they have filed that type of claim, and what is the probability for the rest of their customers? The whole "evil insurance companies" thing is ridiculous. Companies are amoral and profit seeking. Insurance companies just take groups (as regulated by government), provide them level of coverage (as regulated by government), figure out the actuarial risks (based on factors regulated by government), spread those risks around members of the group (with a low-risk members subsidizing the high risk at the level regulated by government) and sell insurance product designed to maximize their profit within a competitive marketplace. A similar product to what he is suggesting, that covers pre-existing conditions already exists in CA as a shall-issue product, it's called a small group coverage. It's also many times more expensive than individual insurance. Should an individual insurance product with transparent pre-existing condition coverage exist? Absolutely. It's going to be more expensive than today's individual coverage, and that's why an insurance company could not successfully sell it against existing competing products in the current individual marketplace, even if regulators allowed it to. It's up to the government to set up or to allow insurance companies to setup such a group/coverage/underwriting-criteria combination. It's also up to the government to get rid of perverse tax incentives that subsidize group policies and drive people away from individual policies. Of course, grilling insurance company executives on TV is so much more fun than actually doing work.
- thras 17y ago
  The whole "evil insurance companies" thing is ridiculous. Companies are amoral and profit seeking. Wrong. Industries have distinct cultures, usually formed through self-selection due to the sort of people who choose careers in them. Compare police officers and firemen, for example. Similar sorts of work, but wildly different cultures due to self-selection effects. Now, what sort of culture do insurance companies have? I think that there's good evidence that it's a sick and cancerous one. Otherwise, good point about the necessity of government intervention in this market.
  - mnemonicsloth 17y ago
    Now, what sort of culture do insurance companies have? I think that there's good evidence that it's a sick and cancerous one. If you have evidence to support this claim, provide it. It might be interesting. If you don't, you're just resorting to name-calling so you can win a boring argument about politics. We don't like that sort of thing here. http://ycombinator.com/newsguidelines.html http://ycombinator.com/newsguidelines.html
    - davidw 17y ago
      > If you don't, you're just resorting to name-calling so you can win a boring argument about politics. We don't like that sort of thing here. Which is why "we" flag all of these articles:-)
    - timr 17y ago
      "If you have evidence to support this claim, provide it. It might be interesting. If you don't, you're just resorting to name-calling so you can win a boring argument about politics. We don't like that sort of thing here." I think the opinion of the parent falls under the heading of "arguments that do not require citation, because any educated citizen should be familiar with their content". Here's what I found in two seconds of Googling: http://articles.latimes.com/2006/sep/17/business/fi-revoke17 http://articles.latimes.com/2006/sep/17/business/fi-revoke17 http://select.nytimes.com/2006/09/22/opinion/22krugman.html?_r=1 http://select.nytimes.com/2006/09/22/opinion/22krugman.html?... http://www.sickofbluecross.com/consumer_stories/ http://www.sickofbluecross.com/consumer_stories/ and here's a great podcst from last weekend on insurance companies and their rescission practices that I just happened to hear while making dinner (third story in; right around the 30 minute mark): http://thislife.org/Radio_Episode.aspx?episode=386 http://thislife.org/Radio_Episode.aspx?episode=386 ...and that's just a taste of the information that's out there, available to anyone with even a passing inclination to look for it. Maybe the decisions documented in these articles don't constitute "evil", but I wouldn't characterize the them as "amoral", either. At the least, there's a strong argument to be made that the profit-seeking motive of American health insurance companies has gotten out of balance with its duty to protect the insured, and requires further regulation.
bitdiddle 17y ago
innumeracy is a far worse problem than you think. Here's an example that explains why most doctors are loathe to quote numbers to patients http://yudkowsky.net/rational/bayes http://yudkowsky.net/rational/bayes
orc 17y ago
The real question here is, of those .5% who had their policy cancelled, how many of them actually lied about a preexisting condition that they then filed a claim for? Because if there's even ONE person who had their policy cancelled unjustly, then that is one person too many.

jdminhbg 17y ago

The Monty Hall problem has nothing to do with his statistics, which in any case are completely dependent on his unsupported assertions, cf.: "If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%..." "But let’s not forget that the very nature of the forms is designed to create inaccuracies" Not to mention: "I tend to think of traditional banking and traditional insurance as mirror images: when you take out a mortgage, you get a lump sum and make a series of payments; when you get life insurance, you make a series of payments and get a lump sum." Which pretty much sums up the problem with the current health care debate -- almost nobody involved knows the difference between insurance and care. There's no reason middlish class people need to have things like physicians' visits and normal prescription drugs filtered through an insurance company or the government, they're completely affordable and expectable on their own. You insure unexpected, unaffordable events, like crashing your car, not oil changes.

kgrin 17y ago
That's true, though if you're on the hook for a person's catastrophic care, you may very well want to give them economic incentives (i.e. cheap/free doctor's checkups) to invest in preventative care. Now, this doesn't mean that we ought to necessarily have a big, bad program (government or private) control everything. But it does mean that the "insurance is for catastrophes, everything else should be out-of-pocket" model isn't necessarily as simple and wonderful as it sounds.
- jdminhbg 17y ago
  That's true if the assumptions behind it are true -- that cheap/free doctor's checkups result in lower catastrophic care costs. I'm not aware of any study that shows that they are.
  - kgrin 17y ago
    I don't have the studies in front of me, but it generally depends. In the case of diabetes, for instance, a lifetime of diet monitoring and counseling by a doctor or nurse is still way cheaper than insulin or amputation.

zader 17y ago

The article assumes that any cancellations must be unjust, and then uses math to show that there are more cancellations than one might suspect. But if the cancellations aren't unjust in the first place, then the article is all smoke and no fire. News flash - If you include fraudulent information on your insurance application, your insurance company may cancel your coverage when you need it most. Of course, if you filled out your application in good faith and they try to cancel it for frivolous reasons, you can sue them in court. What exactly is the problem here? Most of the urgency in his article comes from comparing fraudulent insurance applications to game show contestants and underage gamblers. Using these kinds of analogies obscures the more fundamental fact that insurance companies can only legally cancel your policy when you have supplied demonstrably fraudulent information. That hardly seems like a scandal, or anything that warrants additional government regulation in what is already an incredibly heavily regulated industry.