Not All Insurance is Alike

In about two weeks people will be eligible to sign up for health insurance through the state and federal insurance exchanges as required by the Affordable Care Act. States are preparing call centers to walk their citizens through the complexities of subsidies and how to qualify for the different programs.  Meanwhile, according to this article much confusion remains about the law itself.  “Slightly more than half of 1,500 people polled by the Kaiser Family Foundation in August said they didn't know enough about the law to understand how it will impact their families. And 44% of 1,000 people polled separately…said they weren't even sure the law is in effect…”

This got me thinking about how different health insurance is from other types:  life, auto, homeowner’s, etc.  You can’t just say that insurance is insurance.

The first difference is that most people buy other insurance hoping they will never need it.  I don’t buy insurance on my house thinking, “Next time it burns down, I won’t have to pay” or buy auto insurance thinking, “When I wreck the car the insurance will cover it.”  Typical thinking is that we buy insurance in case something bad happens, but hope it never will.  Happy auto insurance customers are those that go many years without a scrape or dent.  They also tend to get better rates.  Health (or dental) insurance, on the other hand, is insurance we expect to use.  We think, “Next time I go to the doctor I’m covered.”  We hope for good health, but we realistically expect every year to pay premiums and receive some benefit.  Some people see a doctor once a year, some less frequently and some many times a year, but the rates are now based more on income than on usage or experience.

The second difference comes in the choices of coverage.  If my insurance agent tells me that my auto insurance also covers my boat, I would say that I don’t have a boat and don’t want to pay for boat insurance.  It’s my choice, and I don’t want to help subsidize all the boat owners with my premium payments.  If a health insurance policy tells me that it covers chiropractic visits, and I have never seen nor do I ever expect to see a chiropractor, and I don’t want to subsidize those who do; too bad.  That’s the policy.  Sometimes the law tells them what they must cover.  As obesity is declared a disease, those who don’t need the coverage for treatment and counseling, must buy it anyway.

With other insurance you get estimates for your car repair or an appraisal on the house damage so you have an idea of what it will cost.  With health insurance you often get the service first and the insurance surprise later.  Perhaps that’s because the medical charges are also a surprise, sometimes trickling in over a period of months from providers you never recall having seen.

Finally, have you ever gone for a car repair and been told that the price will depend on whether it’s covered by insurance or not?  Would replacing a house roof cost less because it was insurance-covered wind damage or just old age?  That’s not been my experience.  It’s common, though for doctors and dentists to charge the uninsured a higher fee than the one negotiated by insurance companies.  A flyer in my mail recently told me that a certain Medicare Advantage plan saved members on average $3,364 last year on prescription drugs – then the footnote explains:  compared to “retail prices paid for drugs purchased by individuals without insurance.”  Isn’t that insane?

Health insurance just doesn't look or act like other insurance.  It’s no wonder people are confused.

Doing the Math

Often the people who give us information are counting on us not to think too hard about it.  They especially count on us not to do the math.  It’s a reasonable expectation on their part because many people are intimidated by anything mathematical and avoid it whenever they can.  But it doesn’t have to be that way and we will make better decisions when aided by some simple calculations.

What brought this to mind was an ad for a railroad saying that they move a ton of freight 450 miles on a single gallon of fuel.  True, railroads are very efficient, but most people hearing this would automatically compare it to auto gas mileage.  You can’t move a ton of freight in your car that gets 25 or 30 miles per gallon.  If you have a truck that can carry a ton of freight it might get only 18 mpg or less.  That’s less than 1/20 of the railroad efficiency.  But that is the comparison they want you to make.  Their real competition, an over-the-road tractor-trailer can carry a 40,000-pound load.  That’s 20 tons.  According to Popular Mechanics:  “New fuel-economy standards that take effect beginning in 2014 will require semi trucks with a sleeper cab to get 7.2 mpg on level roads.”  Using simple math, 7.2 times 20 = 144 or just about 1/3 of the railroad number.  Our new conclusion is that railroads are indeed more efficient, but not by the huge amount we were led to believe (and trucks are often easier to unload).

Another tricky area is percent calculations.  If the stock market goes down by 20%, then goes back up by 20% is does not end up where it started.  Think about it using 100 as the starting point.  If it goes down by 20%, it’s at 80.  Now 20% of 80 is only 16, so a 20% rise leaves it at 96 (not 100).  Likewise when a store runs a discount of an additional 20% off, here’s how it works.  If the original price was $100 and it was reduced by 30%, it now sells at $70.  An additional 20% off is $70 minus $14 (20% of 70 = 14).  The new sale price is now $56.  You can’t take the 20% plus 30% and expect to get it at half price, or $50.  It seems tricky and a little deceptive, but it’s fairly easy when you think it through.

Look closely at news stories reporting percent changes in defects.  One might feature scary headlines saying that the percentage of school buses failing inspection jumped by 50%.  Buried in the article are the numbers.  Did it jump from 4 to 6, or from 50 to 75?  Both are a 50% increase.  What you may never see in the article is the total population.  Are they talking about 10 or 100 or 10,000 buses?  This makes a big difference, but the headline is designed to catch your eye and elicit concern.

Finally, consider how the government, advertisers and advocacy groups describe savings, spending and crises by manipulating time frames.  Instead of $200 billion per year, we hear $2 trillion over the next 10 years.  Auto loan companies lower payments by increasing the term of the loan (but you will ultimately pay more interest).  We hear about certain diseases killing or affecting one person every 6 minutes instead of a total of 87,600 people (less than .03 percent of the population).  The time frame is manipulated to manipulate your reaction to it.

Sometimes doing the math and paying attention to details can make a big difference in your reactions to numbers.  It may even tell you how realistic the numbers are in the first place.  It pays to be careful.

Teen Birth Rates Down

It began with a print article about a report from the Centers for Disease Control and Prevention (CDC) about birth rates in the US.  A portion of the report showed a decline in teen birth rates, which seems like a positive example of responsible behavior.  Then it got a little weird.

I started reading articles on the Internet looking for good ones to use as links in a discussion of responsibility and found many differing approaches to the same CDC report.  Some emphasized overall birthrates, whereas others featured headlines like this:  “Teenage Birth Rate Reached Record Low in 2012.” 

This is understandable.  Different news agencies might take slightly different slants.  However, the stories looked quite different in what they told and the expert quotes they chose.  I knew I was reading about the same CDC report, but the approaches, opinions and information presented were surprisingly different.  Here are some examples (with differences highlighted).

The expert in the US News report stated:  “the decline in the teen birth rate could be a sign that teenagers are having less sex, that they are using contraception more often, or a combination of the two.”  The same expert was cited by MSNBC as saying that improvement “is attributed to less sex and more contraception” and “positive peer influence.”  Whereas the NBC article used another source to say:  “Percentage of high school kids reporting ever having sexual intercourse…held steady at about 47 percent [from 2002] through 2011.”  Less sex could be, is, or may not be a factor.  CBS played it safe with:  “Experts attribute the decline to a range of factors, including less sex and more use of contraception.”

Going back to the "peer influence" comment on MSNBC, the ABC article tells us that the same expert told them: “teens themselves say parents, not peers or pop culture, most influence their decisions about sex.”

Not to give parents too much credit, MSNBC says: “The Obama administration has invested in approaches to prevent teen pregnancy… The Affordable Care Act includes funding for states to support programs promoting abstinence…”  But the ABC story tells it differently:  “The administration has funded teen pregnancy prevention initiatives, and opposed the abstinence-only refrain.” 

It is interesting that only the USA Today and the Parent Herald mentioned the teen rate by race even though it was a full-page graph in the original report.  USA Today wrote:  “Teen birthrates varied by race and origin with 46.3 births per 1,000 Hispanic teens, 15 to 19; 43.9 per 1,000 for black teens; 34.9 for American Indian or Alaska Native; 20.5 for whites; 9.7, for Asian or Pacific Islanders.”  Perhaps the others feared being labeled as racists (for stating facts?).  Huffington Post, Washington Post, CNN Money, and CBS gave only the rate of improvements for each group and not the base statistics.  MSNBC, US News, New York Daily News, and NBC made no mention of this portion of the report.  ABC made only general statements about the decline among Hispanics. 

This breakdown might be particularly important since, according to ABC:  “Kids born to teens are also more likely to become teen parents themselves and since there’s been a steady decline over the last few decades, we may be seeing a decrease in that cycle.”  Given that teen birth rates have a strong connections with the cycle of poverty and that a few articles (but not all) mentioned it is still far worse than that in other industrialized nations, this could be important data for focusing resources.

Not mentioned anywhere but in USA Today was the following quote from that same expert, which could be considered quite controversial or at least raises questions:  “We still have almost three-quarters of a million teen pregnancies per year in the United States with over 300,000 births.”  (This paragraph was even omitted from the print version I originally read which cited the USA Today as the source.)

The good news is that the teen birthrate is down.  Whatever the precise reason, this trend can be attributed to positive behavior in the dimension of responsibility on the part of the teens and probably their parents as well.  The slightly troubling news is that when various agencies read the same report and interview the same experts, they come away with different ideas about what’s important enough to pass along as facts and how to present it.  This applies not only to those that some people consider the extremes of political bias, but to all of them, even on seemingly non-political subjects.  That's why I must be careful when choosing my sources.