My friend and fellow activist Santiago Leon just wrote this story, and I asked him if I could share it:
BRER RABBIT AND HEALTH CARE REFORM
You may be familiar with the story of Brer Rabbit and the tar baby from the Uncle Remus books. Brer Rabbit repeatedly outsmarts Brer Fox, who is constantly chasing him. At one point, Brer Rabbit is finally caught:.
“I’ve got you this time, Brer Rabbit,” said Brer Fox, jumping up and shaking off the dust. “You’ve sassed me for the very last time. Now I wonder what I should do with you?”
Brer Rabbit’s eyes got very large. “Oh please Brer Fox, whatever you do, please don’t throw me into the briar patch.”
After some conversation, Brer Fox does indeed toss Brer Rabbit into the briar patch. He listens for whimpers of pain. Instead, a minute or two later, he hears a familiar voice calling him from the top of the nearest hill:
“I was bred and born in the briar patch, Brer Fox,” he called. “Born and bred in the briar patch.” And Brer Rabbit “skipped away as merry as a cricket while Brer Fox ground his teeth in rage and went home.”
Why does the current health care commotion remind me of this story? Consider: we are told that something must be done about the insurance companies- they turn people down, they exclude pre-existing conditions, they cap lifetime benefits, they charge older people more than younger people and charge sick people more than healthy people. So Congress comes up with a health plan that prohibits the insurance companies from doing all those bad things- Brer Fox has finally caught Brer Rabbit!
What is the practical significance to the insurance companies of being told not to do all those wicked things? Well, why do insurance companies do those things in the first place? They do them to limit their risk of having to pay claims. And of course, if any one insurance company stopped doing those things, that insurance company would get all the sick people, would therefore have to raise its premiums and would therefore become uncompetitive. However, if Congress tells ALL the insurance companies not to do those things, then ALL of them can stop without fear of a competitive disadvantage. In practical terms, this means that all the insurance companies can reduce the number of people involved in those claims-reducing activities, which on the face of it would allow them to keep a higher percentage of the premiums they collect- good news for the insurance companies. However, not so fast- Congress may require the insurers to pay out a minimum of 85% of premiums in claims, which is a little more than they do now, so it looks as if they would not benefit from the reduction in administrative costs after all. But guess what? Since the insurance companies’ administrative costs will be reduced, they will now be able to keep a bigger slice of that 15% for executive salaries and profits. Bingo!
Furthermore, since the insurance companies are going to be required to accept all applicants, they will have more higher-cost enrollees and they will have to do what? Raise premiums, of course. Ordinarily that would be bad for business, except that Congress proposes to require everyone to buy insurance from these same companies, and plans to appropriate money to help them pay the premiums. Thus, as things are going, the final result of the health care reform process will be that insurance companies will have millions more customers, whose premiums are subsidized by the federal government. They will charge those customers (and all their existing customers) higher premiums than they do now, and they will have lower administrative costs. Small wonder, then, that the stock prices of health insurance companies have been rising.
What about Brer Rabbit? The insurance companies are about to be thrown into their version of the briar patch- a new world with millions of additional customers, subsidized premiums and reduced operating expenses. Little wonder that the insurance companies, despite a little quiet griping, have not turned on their giant propaganda machine to defeat health care reform- the reform plans could not be better for the insurers if they had written them. Of course, when you look at the recent increase in health care lobbying expenses, you realize that the insurance companies probably DID write the bills.
My prediction: when all is said and done, despite the bad-mouthing of the insurance companies by some legislators and advocacy groups, the insurance companies will “skip away as merry as a cricket.”
Santiago Leon is an insurance broker in South Miami who is active in progressive causes and health care reform.