I find that once a state makes a move (such as doubling down on a 12 in blackjack - anyone who knows blackjack knows you don't do that - unless it is me at O'Sheas in Vegas, on a Thursday afternoon, well drinks flowing and $1 chips flying - with my friend Scott), other states will also start to drop chips and attempt the same bet.
Insurance carriers are regulated by their state department of insurance. Each state regulates and requires an insurance company to set up a reserve. A reserve is basically an account where money is held to use in time of a disaster. For example, if there were a natural disaster or a huge flu outbreak that affected a large population of members enrolled into a carrier, you want your insurance carrier to be able to have that cash flow to continue to pay claims.
It is a safety net provided to members who get their insurance from the individual market, the employer sponsored market or Medicaid. It also protects doctors, hospitals and members, should an insurance carrier cease to do business and there are claims for services rendered that have to be paid. (unfortunately, this doesn't always work out as planned, as evidenced in recent state co-op failures around the country - more on that in a future post).
How much an insurance carrier is required to put into reserves depends on the state, the size of the carrier, total membership and other factors. The reserve money comes from premiums paid by customers after claim payment.
So back to New Jersey. . . for those who don't know, Chris Christie (R), is the Governor of NJ, the state I grew up in. In his recent budget address on February 28 - Governor Christie , asked Horizon Blue Cross Blue Shield (Horizon BCBS) to use some of their reserves to fund NJ state programs that assist residents of NJ in need, such as social programs for the needy and financially vulnerable.
In essence, he categorized the reserves a surplus for Horizon BCBS, when in fact, this is NOT a surplus but a safety net should a catastrophic situation occur that Horizon needs the funds to pay additional or excess claims. Horizon BCBS pushed back and told Governor Christie no and outlined the ways they contribute to the State of NJ - i.e. paying $1B a year in taxes; providing over $50M in grants and having over 700 employees who logged over 35,000 in volunteer hours to communities statewide.
Discussing this issue with a colleague at the office, he mentioned this sounded like what was starting to occur in the banking industry - something called a Bail-In. While somewhat different, it carries a theme that we should be very concerned about.
We cannot allow state governments to "demand" any insurance carrier (for profit or not for profit) to release these reserves to them to fund programs that the state cannot fund themselves through state budgetary means. We are in an era of uncertainty with the repeal and replace the ACA. Undermining the financial stability of the insurance carriers who already juggle financial regulations that change on a daily basis, is a threat to the system itself. Horizon BCBS is one of the few carriers in NJ that chose to stay in the individual marketplace and offer individual plans - they cover over a quarter of a million NJ residents in the individual market.
I don't normally take the stance to defend the industry we are in, but fiscally - we have to be thoughtful in what we are doing and take a stand - and this demand from a sitting Governor to spend reserves paid in by the Horizon BCBS customers enrolled into their programs is putting the system at risk for ALL residents in NJ - regardless of how they get their coverage, or from whom. This is a 2017 version of Robin Hood and we will all lose the bet, along with everything else, whether we double down or not.
Oh and by the way, Scott and I cleaned up at O'Sheas that day - the pit boss was not too happy with us, having the dealer call out "doubling down on 12" every 2 minutes and checking our cards. I have not doubled down on a 12 since.
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