Daniel Gross continues the insurance claim denial myth

Daniel Gross, writing over at Slate, continues the myth that insurance companies routinely deny legitimate claims. This came to a head most clearly in the aftermath of Hurricane Katrina, when many individuals who had chosen not to buy flood insurance were surprised that they had no insurance to cover their loss when a flood destroyed their homes.

Insurance is a contract and it's a clearly legally enforceable contract. Whatever Mr. Gross might thing, all the lawmakers in the world won't let you get out of having to make a payment when it's legally required. Also, most lawyers who do insurance claims work do not charge hourly rates; they receive a percentage of the end settlement which usually is about triple what the company originally would have to pay out.

This, then, brings about a balance to what Mr. Gross describes as an insurance company's "powerful motivations not to pay legitimate claims" - the court system. Failing to pay a legitimate claim is a very easy case to bring to court and is a very easy case to win. An insurance company stands to lose, on average, about triple what they would normally pay out - not including their own legal fees - when a claim is incorrectly denied. As powerful as Mr. Gross's "powerful motivation" may be for insurance companies to act unethically and immorally, the compulsion of the government is much stronger still.

Besides, a huge number of health insurance companies - particularly in Michigan - are non-profits. If someone is really concerned about the profit motive and they're in Michigan, just go to Blue Cross or M-Care as both are non-profit companies.

I Can Get It for You Retail
Rudy Giuliani's health-care plan is great for insurance companies
Slate

Last week, Rudy Giuliani tried to add some domestic policy substance to his campaign by unveiling a health-care reform plan. His proposal, as Harvard economist Greg Mankiw noted, "sounds remarkable similar to the Bush health plan." In this year's State of the Union, President George W. Bush proposed a $15,000 standard deduction for health insurance, claiming a family of four making $60,000 would receive a $4,500 tax break to buy health insurance on its own. Giuliani would similarly offer a deduction of up to $15,000, which can be claimed by families that buy their own insurance. And, the New York Times credulously noted, "the money left over, he said, could be put into a 'health savings account' to be used to pay for deductibles or other uncovered medical expenses."

The time has long passed to be shocked by the ignorance that the press, many professional economists, and politicians show about the market for health insurance. After all, virtually all of them have their insurance paid for by a university, the government, or a Fortune 500 company. It never seems to have crossed the mind of President Bush, or Rudy Giuliani, or the Times reporters who uncritically noted his comments, how much insurance actually costs. (Or, in Giuliani's case, precisely which insurance companies are salivating over the prospect of insuring a 63-year-old, thrice-married cancer survivor.) The Kaiser Foundation found that in 2006, the average family premium was $11,480. (I've been buying my own - and my family's - health insurance for most of the last 14 years and claiming the tax deduction already available to self-employed people for the premiums. The policy I gave up when I joined Newsweek last month costs about $8,300 a year.)

Blogger Ezra Klein and my Slate colleague Timothy Noah have already weighed in on the various deficiencies of the Giuliani plan, and, by analogy, of the Bush plan. But I'd like to focus on another angle. For these proposals, which are championed by many who claim to have a natural sympathy for business, involve an understanding of business customer-supplier relationships doesn't seem realistic.