Long-term care insurance is a racket. If you buy it, read the terms very carefully. Most policies are loaded with escape clauses and will end up paying only a small fraction of any eventual long term care costs.
Several years ago, I looked this up. The LTC payout ratio for men was ~.8 and for women was 1.05. The average was close to 1.0 since more women had LTC insurance. So, it’s possible that LTC provides too little coverage, but that’d mean it is also underpriced.
Not highly profitable without assuming too much risk, but yes, 1.0 is profitable.
But let’s say the LTC underwriters can pay out 10% more and stay in business. That would mean that in The OP’s “scam” scenario situation, instead of getting, say, $100,000 in benefits over two years, they could get $110,000. However, the inflamed wording suggests OP wants a lot more than his relative is getting, not a little bit more, like $300,000 over four years. That wouldn’t be possible to do in aggregate without charging a higher premium.
It came in very handy for a parent. I’m an insurance skeptic, but if they were too it could have bankrupted both of us. (Yes - one anecdote doesn’t translate into data)
Insurance works best for rare, randomly distributed events that have a high cost. Fundamentally, for insurance to work as a business, it has to cost more than the expected payout. The reason it's still worthwhile is that money has non-linear utility. To use a made-up example from the car insurance world (numbers are made-up but I hope it conveys the general idea): a guaranteed "loss" (cost of premium) of $100/month over the course of 30 years (total cost: $36,000) is far preferable to having a 1% chance of losing $500,000 over that same time period if you seriously injure yourself or someone else in an accident (expected value: -$5,000). So, the average person is paying $36,000 to avoid an expected loss of $5,000, which doesn't seem to make sense in a naive analysis. But the issue is that the average person can plan/budget for a $100/month expenditure, whereas a $500,000 loss could mean that they lose their house and life savings and more, which is far too high of a risk for most people.
Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?)
> Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?)
I agree with this, but I want to clarify your language: insurance works very well for common events - what it doesn't work well for are predictable events (which is why insurance is a terrible model to apply to routine medical care).
The entire value proposition of insurance is to reduce (but not eliminate) uncertainty. If an event is perfectly predictable on a regular cadence, there's no value to insuring it.
Events that are common but have high variance are potentially worth insuring, for the same reason that a person whose earnings are highly variable (contractor, or tip-based work) might choose to use a service that evens outs those payments, even though it lowers their total take-home earnings (by charging a fee).
> which is why insurance is a terrible model to apply to routine medical care
Yet, insurance is the only ethical model to apply to (routine) medical care. A society in which only the rich(est) can afford the medical care their specific situation requires and the rest is left to fend for themselves cannot be considered humane.
> Is universal healthcare funded with taxes unethical? The system in most developed countries has nothing to do with insurance.
Well, "universal healthcare funded with taxes" isn't strictly speaking the system in most developed countries either. Most countries have a mixture of private and public models.
The private part is optional and not widely used in many countries. And in some places it’s even illegal. The question stands: is the tax funded part unethical?
> The private part is optional and not widely used in many countries. And in some places it’s even illegal.
Going in descending order of population for EU countries:
* Germany: Mixture of private and public. Taxpayer funds cover about 75% of expenses. Private insurance can be used to cover the remainder.
* France: Mixture of private and public. Taxpayer funds only cover about 70% of expenses. Private insurance can be used to the remainder.
* UK: Arguably the most nationalized system, but still a heterogenous pool. NHS England ostensibly covers a little more than 90% of expenses, though it's complicated because the NHS sometimes subcontracts out to private management. NHS also has some of the worst ratings for specialized care (not routine care) among OECD countries, which is what other countries typically lean on private payments for.
* Italy: Mixture of private and public. The SSN doesn't cover 100% of expenses, and private insurance can be used to cover the remainder (or to pay for treatment in private practices). Similar to Medicare in the US, the SSN drives up reimbursements for private practices by setting minimum prices for private practices.
* Spain: Mixture of private and public. SNS doesn't cover all expenses, such as ambulances, dentists, pharmaceuticals, etc.
I could go on, but you get the idea. It's not really accurate to say that "the system in most developed countries has nothing to do with insurance", because most OECD countries require private payments for a non-trivial portion of care, and insurance is typically used to manage that portion of the costs.
Ok, let me be more precise. The universal healthcare system which pays for the large majority of healthcare costs in most developed countries does not work as an insurance (it’s paid by taxes or compulsory affiliation unrelated to actuarial risk). In some cases, one has the option to contract private insurance to pay for the parts not covered by the public system. It’s debatable to what extent this is comparable to actual healthcare insurance, because it’s not insuring the catastrophic events (that are already covered) but the relatively small and frequent out-of-pocket payments and some particular things like dental and vision care.
> Ok, let me be more precise. The universal healthcare system which pays for the large majority of healthcare costs in most developed countries does not work as an insurance (it’s paid by taxes or compulsory affiliation unrelated to actuarial risk)
As pointed out at the beginning of this thread, even in the US, health insurance is "insurance" in name only. Premiums are not set by actuarial risk (with the binary exception of smoking status).
That was the whole point of this subthread: there is no such thing as "actual healthcare insurance", because actual insurance is not a model that's applied to healthcare in any OECD country.
I don’t disagree. Healthcare insurance in the US is a fiction (especially now that catastrophic-only coverage is not an option). But other countries don’t even have this fiction of lives being saved by healthcare “insurance” because the one saving your life is the NHS, etc.
When mschuster91 said that insurance is the only ethical model it was not clear to me if he meant “insurance as in the US which is insurance in name only” or insurance as in “the model used in other countries which is not even called insurance”, hence me question.
It's a simple task to model a tax-funded healthcare system as an insured system (with monopsony), where the government is the insuror and the taxes that are directed to the are the premium. (And since the government is the sole payor in the system, it can unilaterally set the prices).
> It's a simple task to model a tax-funded healthcare system as an insured system (with monopsony), where the government is the insuror and the taxes that are directed to the are the premium
Unless you're proposing that taxes are based on risk levels, rather than realized income, then what. you are proposing is neither a simple task nor a true insurance model.
If that's what you're proposing, then it's an interesting thought experiment, but not one that applies to anything currently practiced anywhere in the world - and it's also something that would raise a lot of ethical objections.
Insurance skepticism is when the product seems more like gambling or an expensive savings plan, than it is about high cost risk management. The more inevitable some costly event is perceived, then why not just save for that event, rather than pay a premium for only partial coverage, etc.
This is my complaint with referring to health insurance, a huge amount of which is b.s. What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax.
You're right that health insurance isn't insurance at all. But to clarify:
> What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax
That would be the case if the following were true:
* If Medicare's operations were purely funded by tax money, and
* If the taxes people paid were proportional to their expected lifetime costs-of-care
However, neither of these are true. Medicare's reimbursement rates are indirectly subsidized by private insurers (who then pass those costs on to privately-insured patients in the form of higher monthly premiums and copays). And of course, the taxes are based on income, not risk profiles.
So I become skeptical, and (like many other things) believe I have to really dig in on the policies before buying one. Which means the sleaziness of the business has scared me enough that I'm probably underinsured now.
So insurance skepticism means you do your best to understand policies before buying them? What's the alternative to that? Before witnessing sketchy practices, did you just buy whatever the salesperson recommended?
I’m glad my employer never merged with GE. IIRC it was blocked. Of course they still implemented much of the management BS, such as stack ranking (firing 15% of your workforce every year).
I have no respect for a company that moves from manufacturing to the worst kind of finance; high interest credit cards.
Old news. GE has been in free fall for a year now (down almost 50% over the last year and worst djia performer).
Last week a warning came out and it fell then. It was pretty well anticipated that news relating to the insurance business was coming out this week. I guess the news is about inline with what was expected.
Generally, by the time news like this hits the papers, everybody already knows about it, unless it is some secretive expose. This wasnt a secret.
Confounding news. Earnings were good; this news is negative.
> The shares rose less than 1 percent to $16.97 ahead of regular trading in New York, erasing a gain of as much as 5.8 percent that followed the announcement of the company’s fourth-quarter earnings.
The company's estimates and outside analyst's estimates are two different things. When they agree then I think the price gets reflected quickly, when they disagree it opens it up for more volatility.
Maybe the news was already baked in? Seems like a common underfunded long term liability issue that could be forseen in their financial statements. (Any company with long dated fixed liabilities and unrealistic investment return assumptions can fall into this)
40% of the time, options prices move in the opposite direction of the earnings surprise.
For those who are skeptical, this is not magic. The reasons for it are all the reasons you might expect: the biggest investors may not agree with the market consensus, the analyst consensus doesn't weight analysts by credibility so the "credible" analysts may not match consensus and so on.
Workday beated estimates by over 50%, yet shares fell.
I can give a lot more examples...
Lots of investors also sell when earnings beat estimates because they think they'll be selling high, etc. Point is there are tons of factors and it is way too simplistic to say beating earnings = price increase on that day.
There are two estimates you need to consider. The official estimate and the 'secret' estimate that investors really think you should beat. Although most people focus on the first one, it's only the second one that really counts.
Point is there are tons of factors and it is way too simplistic to say beating earnings = price increase on that day.
This really depends on how accurate analyst estimates have been in the recent past. Consistently beating estimates will produce less gains over time. Similarly, consistently missing earnings will eventually cause less price damage over the mid run (of course it will probably produce bankruptcy in the long run). Confounding this picture in this case is that the market is trying to price a bunch of spinoffs which have been announced or rumored.
Have you seen the new crop of LED bulbs? The clear ones with the filaments visible are almost as brilliant as "traditional" clear bulbs, and the light is indistinguishable for me–all at 10% of the power usage of traditional lighting.
I had avoided CFL bulbs for aesthetic reasons, but the advances of the last year have convinced me.
Do you mean the 'filament' LED bulbs. It's a nice thing the manufacturers seem to have pulled off there, especially because it seems to have eliminated a whole set of power electronics at the same time.
The narrow wavelength range of LEDs makes them look cheap and piercingly glaring, especially compared to the warm aesthetic illuminating quality of incandescents.
No, we have these at work and the LEDs are definitely controlled with a square wave. If you wave your hand back and forth you can see the strobe effect. Nice light bulbs but they'll still give you a headache.
I want the spectrum to be relatively flat, i.e. lacking the spikes that we see with most fluorescing materials. The flatter it is, the more well behaved it'll be compared to what our biology is designed for: black body radiators.
Also, the aging profile is important. Just because the thing won't stop working for 10 years is not what's important. If it starts color shifting in a year, which to date they do, that's pretty much shit. Try mixing and matching bulbs, it's horrendous.
"Aging profile" is a really good point. Especially since LEDs generally don't burn out, but just get dimmer and dimmer. You might need to remind yourself to replace them someday even if you don't notice a problem.
I had one of the early LED PAR-38 (?) lamps that Costco recalled after they discovered that their lifespan was much shorter than they promised. I didn't return mine and generally forgot about it. When I finally replaced it, I was stunned at how bright the replacement was in comparison! Like the boiling-frog parable, I just didn't notice how dark the room had become because it got dim so slowly.
Let's not forget the time GE sold its Swiss subsidiary to Hungary for 40k and back an hour later for 6,7 Billion to avoid paying taxes in Switzerland. [1]
When I hear of accounting like that, my immediate desire is to see GE Switzerland nationalized, and its shareholders get paid $40K for it. That's what it's worth, right?
