(Note: readers have pointed out that Stacy says that the standard industry arrangement has been a 65-45 percentage split on expenses, with 65 percent going to claims payments and 45 percent for administratoin and claims expense. But that adds up to 110 percent, an error that neither Stacy nor Limbaugh nor many others caught. I think we’re frazzled by everything that’s been happening. I assume that Stacy meant 65-35. And now that I’m looking through the interview again, I see that she and Limbaugh repeatedly refer to “65-45 percentage,” and, I admit, I didn’t notice it.)
Stacy, Our EIB Insurance Expert
Rush Limbaugh Show | EIB Network | March 23, 2010
RUSH: Stacy in hiding … is this our insurance babe? Stacy, welcome back. Great to have you here.
CALLER: Hey, Rush.
RUSH: Do you know you have gotten me into so much fun hot water?
CALLER: I know, I’ve heard!
RUSH: Do you know how you did that?
CALLER: I did by coming on about Costa Rica.
RUSH: You came on and you told me that your insurance company was setting up medical operations in Costa Rica, you’re going to take the doctors and everything down there and you’re going to sell insurance policies if this thing all happened to your customers, and included in the premium would be trips to Costa Rica for medical treatment and so forth. So after having heard you say that, another caller asked me, “What are you going to do if it passes?” “I’m going to go get treated in Costa Rica.”
And so now everybody thinks I said I’m leaving the country for Costa Rica. So I need to ask you, how soon are you going to get those clinics set up so I can go?
CALLER: Well, I’m afraid that even that’s not going to save us.
RUSH: Oh, no.
CALLER: I’ve gotta revise my estimate. We may last two to three years, tops, and let me tell you why. The 85-15 provision that has just been signed into law an hour ago –
CALLER:—by definition of every state and federal insurance regulator makes us financially unsound.
RUSH: All right, now, I have to take a break here and I want to ask you if you can hold on ‘til the top of the next hour where we will get your details on this without any time constraints. Can you hang on?
CALLER: I’ll skip a bit of a meeting, sure …
RUSH: Now, we welcome back from “in hiding” in Atlanta Stacy, who works for an insurance company who’s been keeping us updated throughout this past year on the fate of her industry should this thing pass. Now it has passed. Give us the lowdown, Stacy.
CALLER: Um, we’re going to make it two years, three tops.
RUSH: Explain why and start at the beginning.
CALLER: Okay. For time immemorial, both state and federal regulation—and also just the industry standard—has been a 65-45 percentage arrangement: 65 in claims payment and 45 for administration and claims expense. Withholding that you store for, you know, a major catastrophe or something.
RUSH: This is to pay your claims?
CALLER: No, 65% is to pay the claims. Forty-five percent is for everything else.
RUSH: That means 45% is salaries, administration costs, and the offices, all the paperwork, that kind of thing?
CALLER: It’s that as well as, you know, we are required to keep a certain amount of cash on hand as a percentage of our claims exposure to pay claims.
RUSH: I got you.
CALLER: So, for example, if you have a disaster and you suddenly had 400,000 claims come in, you’ve gotta have the money to be able to pay those claims immediately.
RUSH: Now, I just want to make sure I understand here. State and federal regulations set those percentages?
CALLER: State and federal regulations, yes.
RUSH: So if you wanted to have 85% set aside for claims, you couldn’t. You had to go at 65%?
RUSH: If you wanted 30% set aside for claims and the rest were administration, you couldn’t do it. It had to be 65%.
CALLER: That’s illegal, yes. It has to be 65-45, and there’s a couple of percentage either way, but generally when an insurance company falls outside of those guidelines, they are considered financially unstable.
RUSH: Well, who audits you all to make sure you are within the ratio?
CALLER: We’re audited by the state insurance departments, primarily. There are some plans that are audited both state and federally, and then you have your private auditors who will come in as part of the stock market and that kind of thing. So we’re audited often.
RUSH: How often do these audits take place?
CALLER: At least once a year, you’ll have one from the industry auditors, and every three to five perhaps for federal and state.
CALLER: More often if they think that you’re unstable, they’ll audit you more often. So what Obama just did an hour and a half ago is make every insurance company in the country financially unstable. Remember, the 15% that we are left has not only to pay salaries, maintenance, upkeep of buildings; it also has to pay the 40% increased taxes that we’ve got. I mean, there’s just no way. You can’t do it.
RUSH: Well, you’re getting a little bit ahead of me here. What did Obama sign that changes this 65-45 split? In what way did Obama now sign you into permanent instability?
CALLER: The provision in the Senate bill requires that all insurance companies pay 85% of premiums collected every year in claims.
RUSH: So the 65 is now 85?
CALLER: Exactly. It doesn’t matter how much we increase the premium, it won’t matter.
RUSH: And just to satisfy my own curiosity, with the mandates that are in this—such as you now being required to insure children on their parents’ policies to age 26 or 27; and now having to insure (or cover) preexisting conditions—what’s that going to do to your current premium structure starting today?
CALLER: That’s my other fear, Rush. I don’t know that November is as big a lock as we would hope and here’s why. Most group plans renew January 1st of every year. Most people won’t see the dramatic premium increases until January 1st. So what they’re going to do is all these people who voted for this—and who likely were swayed by this argument—are going to run around and say, “Well, look, nothing happened. You’re not paying any more. You know, everything’s fine. It was just a bunch of, quote, unquote, ‘fearmongering,’” and I’m afraid they’re going to be reelected.
RUSH: Well, we’ll deal with that when the time comes. I think there’s a lot more in this than just those two provisions that have people outraged and upset, and I know that your fear is that the people that supported this are going to show up in droves and vote for Democrats on the theory that none of the scare stories that were told had happened because this delayed until January, but there are other things that we can work with on this. The Democrat Party’s damaged itself in the sense. They just inflicted great harm on the country. Whenever it shows up, it will be realized. Now, I want to take you back to the first thing you said: You originally thought that your industry would survive. You’re speaking industry or just your particular company?
CALLER: I would say 99% of all insurance companies, health insurance companies in the country.
RUSH: Okay. So you originated thought you might have three to five years to stay in business under Obama. Now you said it’s two to three. Why?
CALLER: Because of the 85-15. Plus the additional expenses we’re gonna incur. Additionally, the mandates, what people don’t understand when CMS (which is the Centers for Medicaid and Medicare) push a mandate down on insurance companies, we have to pay to complement those mandates. We don’t know how many of those are in this monstrosity. So we can have our mandate budget doubled, our taxes already up 40% or whatever it is, and our cash flow immediately cut.
RUSH: Well, how can you know in advance of paying any claims? Because they’ve now shifted to 65% that you have to set aside for claims to 85%. How in the world can anybody know in advance of paying claims that it’s going to amount to 85%?
CALLER: Well –
RUSH: Of course 65%? It seems to be like this is a ridiculous dictate made by people that have no clue how your business works.
CALLER: Well, they don’t have a clue. But the way that amount of money is calculated is you look at the past year, past five years, past ten years, and you see what your claims expense have been those years. Then based on your enrollment and your demographics you project forward into what you expect to be paying in the future, in the next year and the next five years. So you can do that. It’s not precise to a dollar, but you usually get pretty close. What he’s done is by saying, for example, the preventative services now –
RUSH: Those are free. Those are, quote, unquote, “free.”
CALLER: Yeah, exactly.
RUSH: What the hell is a preventative service covered by an insurance company, anyway?
CALLER: Well, that would be your colonoscopies, your mammograms, your yearly physicals, your lab work.
RUSH: Oh, so those are free now! So if I want to go get a colonoscopy today and I have an insurance policy, I’m not going to pay for it?
RUSH: But you will.
CALLER: Well, we will. We’ll pay out the nose for it.
RUSH: (laughing) Well …
CALLER: I know, bad analogy. I’m sorry.
RUSH: It is Christmas!
CALLER: (giggling) But, Rush –
RUSH: Well, no, I don’t look at a colonoscopy as Christmas. Don’t misunderstand.
RUSH: But it is Christmas in the sense that I’m not paying for it. I don’t know how you can stay in business even two to three years with this kind of thing happening to you this year alone.
CALLER: I don’t think we will and that’s why I am seriously considering leaving this industry. I’m updating my resume. You know, people who I work with—even people who voted for Obama and thought he was the greatest thing since sliced bread—are shell-shocked.
RUSH: That just frustrates the hell out of me. Anybody with a brain has no reason to be shell-shocked about who this guy is, but it is what it is.
CALLER: Rush, it’s not him. I didn’t think Congress would sell us down the river like this, especially given the public opinion. When have you ever seen a politician just say, “I don’t care that the public doesn’t like it and I don’t care if I’m reelected”? This is something I have never experienced. I have never seen this, and people that I work with who don’t follow politics, who don’t know what’s going on necessarily, they had no clue this was coming. At least I had an inkling! They had no idea.
RUSH: Well, it’s proof positive is that people who don’t pay attention to politics are now outraged, upset, and don’t quite understand. It’s time to make ‘em understand. This is who Democrats are. This is who liberals are. You realize, too, I’m sure, that the whole purpose of all these new requirements on you is to put you out of business.
CALLER: Oh, absolutely.
RUSH: The whole purpose is to make it unable for you to stay in business financially, and so the government can come in and say, “Okay, well, you know, these damn insurance companies! We never could depend on them. They’re nothing but a bunch of frauds and nothing but a bunch of cheats. They’re still cheating people. They’re still raping people. We’re going to have to do this ourselves.”
CALLER: And you know how many people are going to die in the interim, Rush? I say that in all sincerity, because come January 1st you’re going to see 200, 300% increases in premiums and people are going to drop their coverage. So you’ve got the woman who isn’t going to go get the mammogram or the man who’s not going to get the prostate exam.
RUSH: Wait a minute!
CALLER: People are going to die.
RUSH: I thought the mammogram was free.
CALLER: Not when you drop the coverage because you can’t afford three times the premium. Remember, the premiums are going up because of the government, and jobs are being lost because of the government. If you can’t pay it, you can’t pay it. So people are going to drop it. They’re going to drop their insurance before they drop their mortgage.
RUSH: They’re going to be clamoring to the government to fix the mean-spirited insurance companies for raising the prices so high and that’s where Obama’s going to step in and say, “You know what? We have no choice here but than to do it ourselves,” and then you get dumped on again first and foremost with Obama portraying the government as the savior …
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