Asset (ăs‘ĕt‘) n.
- A useful or valuable quality, person, or thing; an advantage or resource.
- A tangible or intangible item that can be applied to cover liabilities of a person or a business (cash, stock, inventory, rights, or goodwill).
I have previously made the argument that our personal health status should be considered a form of currency, or an asset, that we manage, protect, and work to improve over time. Our health is something that we often take for granted, until it does not exist in the form we want or are used to, and then its paucity gives us uncomfortable, and occasionally, painful pause.
The failure to consider health as an asset and apply the familiar concepts of “asset management” to its maintenance, creates an unpleasant and expensive downstream result. By not taking the long view, nor considering the implications of our health choices, we can mistakenly become so busy with the activities of daily living that we forget there won’t be much living to do unless we actively manage the enabling asset.
This is seen in multiple myriad ways, but perhaps none more clearly than the multiply perverted perspectives we have on health insurance. Since I am in the business of helping to reform health care by looking at the mechanisms in which we finance and manage our health “assets”, I wanted to consider the differing perspectives we seem to imply by how we insure our health and vehicle assets.
While it is an oversimplication to compare health with car insurance, I believe it is instructive to look at the implicit and explicit behaviors we see:
1. True Insurance. We typically view car insurance as truly “insurance” against catastrophic, unpredicted, and unexpected disaster. I don’t expect my car insurance to pay for routine checkups, oil changes, small dents/scratches, and even opt out of reporting moderate body work so as to avoid rate increases. I take responsibility for the preventive maintenance, incidental expenditures, and can choose whether or not to invoke my insurance depending on the need. I don’t rely on my car insurance carrier to advise me on cars, mechanics, or driving behavior. The onus is on me to manage this asset, but I know that I am protected in the event that I have a major accident.
2. Claims Processing. The claims processing is very simple. If I have an incident worthy of invoking insurance, I can make a call to register a claim. Depending on the situation, the call center can either help answer my question or send someone out to help me figure out what to do. Based on that input, I am then responsible for finding a body shop that can repair my vehicle. After getting some bids, these are approved by the insurance company and I am reimbursed directly by EFT to my personal bank account.
3. Market Pricing within Choice. This places the onus on me to directly pay the provider of body shop services and typically drives value seeking behavior. I am incented to seek the best Body Shop that fits my value (outcome/price) system which may be unknown or unknowable by the insurance car carrier but are relevant and important to me. If my bids are excessive, and even if they are low, the carrier will often determine a set amount reimbursement and directly send the check to me personally. I can either pocket the costs savings or pay more for a specific trusted body shop to fix my car. It is my choice. Further more, the pricing is not set, dictated, or regulated by anything other than the invisible hand. Can you imaging your car insurance company trying to negotiate prices with all the body shops in town, including creating networks with special discounts that require contracting, administration overhead, and infinite frustrations as they are designed to cloak true pricing?
4. Customer Satisfaction. I also have high expectations that the car company will keep their promises and protect me in the case of minor / major accidents or related problems. All State has an online claims process, 24×7 call center, and has always kept its commitments to me and my family. In fact, All State even defended me in a bogus ambulance chaser lawsuit resulting from a low speed fender bender. They were there for me when I needed them, and I truly felt like I was in “good hands“. I have had no issues with other claims, with management of my account, or any issue.
5. Incentives for Good Behavior. What’s more, my car insurance company is willing to give me some of that hard earned premium money back in the form of a Safe Driving Bonus. The actuaries at All State have figure out if I demonstrate specific types of behavior that I am less likely to get in an accident and they not only keep my premiums low as a result, but they will also give me some money back. This translates into encouraging my kids to get good grades, slowing down when I am driving, and keeping our car in excellent condition so as to avoid problems.
Now, contrast this with your own Body Shop experience – contracted/networked providers, no price transparency as a result, minimal on-line interactivity, incredibly complex claims process, minimal incentives for care, and exceptional poor member satisfaction.
More to the point, see where your perspectives and expectations are also very different – many people think of health insurance as this never ending gravy train (they should totally cover my gym membership!) wherein they get $10-15K worth of benefits for $2-3K. That clearly is not sustainable. Also, people balk at the notion of paying for their own preventative stuff, but faithfully go get their oil changed, tires rotated, engine repaired, and actively (often lovingly) take care of the car better than the vehicle that transports them through life.
I guess my point is, why doesn’t health insurance operate more like car insurance, and is there a model wherein we can dramatically simplify the current insurance/risk model to adopt the principles of risk and asset management that have been so successful in other industries? I think there is . . . and we are working on it.
The convergence of health and wealth, and the increasing awareness of the need to actively manage our most precious asset, should lend new meaning to the CYA mantra.
5 comments on “Covering Your Asset: The Body Shop Insurance Company”
Interesting concept. I wonder how many of our politcos are even in the same book let alone on the same page. The idea that health is an asset would certainly make each person more responsible for their own health care as would personal health accounts. But doesn’t this directly offend the current political thinking where the responsibility for such care should be governmental with no individual responsibility? AND the cost factored across the population healthy and responsible or not?
That is the basis of the car insurance industry’s actuarial thinking, althought this is beginning to experience a sea change where the better drivers pay less than the riskier ones. Health insurance should follow that same path with riskier “health behaviors” paying more in premiums than responsible ones.
Liked your thoughts though.
Scott’s comments are spot on with the exception that some major auto insurers do have preferred networks of repair shops. Insured’s are not, however, forced to use these networks. Insureds are given the choice of using them based on convenience and other value that they provide. It is much different that the penalties that health insurance companies assess for going outside their network, even if you find a better price outside the network!
For two articles comparing auto and health insurance, see:
Health Insurance Lessons from the Auto Insurance Industry: http://hiu.nahu.org/article.asp?article=1342&paper=0&cat=1
Auto Insurance Principles should apply to Health Insurance: http://www.contingencies.org/janfeb07/commentary.pdf
Your use of analogies is very effective way to explain the state of healthcare and as a way to conceive of solutions. I especially liked the auto insurance comparison.
I’m not in the healthcare industry, but see myself as a consumer (patient) utilizing technology (i.e., Internet) in order to as assume a new and central role in managing more own health and wellness — another position that I find interesting in your blog entries.
I heard from a colleague that you made a very interesting presentation at SCALE — comparing the virtues of open source and medicine. Do you intend to provide a blog post or should I be looking elsewhere — e.g., conference site?
Very good post, thanks!
Insurance becomes very important in life, a very interesting concept of your article.