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devoish (98.81)

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October 18, 2009 – Comments (11) | RELATED TICKERS: CI

But I'd love my local school district to have this opportunity to be frugal with my tax dollars, because every time my school district asks for a tax increase, its been to pay for health insurance. H Edward Hanway's bonus and salary over at cigna was 22 million, plus 10 mil in options. I am sure in America someone would happily do a better job than him for $400k.

In 2007-2008 the Kingston City School District paid out $65.6 million in wages and
$22.6 million for health benefits, including basic hospital, medical, dental and
vision care and a 1.45% payroll tax for Medicare.

Under HR 676, the school district would have paid only $3.9 million for health
benefits, resulting in a savings of $18.7 million for the 2007-2008 school year.
Under HR 676, the average school district employee with an annual wage of
$44,700 would pay only $123/month in a new 3.3% payroll tax—eliminating
co-pays and deductibles.

11 Comments – Post Your Own

#1) On October 18, 2009 at 11:03 PM, devoish (98.81) wrote:

Everybody knows that teachers get the best healthcare plans since they don't care about costs and keep taxing you for more.

If this teacher has the best insurance, what have you got?

Have I suggested calling your Senators and Representatives recently?

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#2) On October 18, 2009 at 11:52 PM, ChrisGraley (31.54) wrote:

Yes, I've called them and told them that if they pass any health care bill that includes a public option, a death panel, or an outrageous fine for people that don't have insurance when they are already struggeling, that I'll donate $10.000 to the oppostion candidate in the next election.

I suggest that everyone else does the same.

 

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#3) On October 18, 2009 at 11:56 PM, davejh23 (< 20) wrote:

How about taxing all the investment bank's profits 100% to pay for healthcare?  Most industries have larger profit margins than the insurance industry.  I agree that some form of healthcare reform is required, but you could complain about executive compensation in any industry.

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#4) On October 19, 2009 at 7:10 AM, devoish (98.81) wrote:

Chrisgraley,

Intersting that you are negotiating a public option, a death panel, aand a fine as a group.

The public option is fine.

davejh3,

I can complain about minimum wage in any industry too. Executive payroll comes out of revenues, not profits, so your tax misses your mark. Hanways salary and bonus cuts directly into your returns as an investor and your benefits as a customer. His options dilute your shares.

Yours is the first suggestion of a 100% tax on profits I have ever heard.

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#5) On October 19, 2009 at 7:49 AM, rd80 (99.12) wrote:

Who pays the difference between the $22.6 mil the district is paying now and the $3.9 mil they would pay under HR 676?

Insurance company profits and exec bonuses can't possibly take nearly 90% out of the cost of healthcare.

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#6) On October 19, 2009 at 8:15 AM, devoish (98.81) wrote:

rd80,

Yes, they can. Especially in the case of an older district with a high premiums, for either very good healthcare coverage, or having had their premiums raised because of high healthcare expenses.

There are 16,000 school districts in the USA. If every one realised similar savings it is $307 billion dollars. The difference between health insurance premiums and healthcare expenses for the insurers is over $450 billion dollars.

I do not know enough about Kingston to know whether it would benefit more than most, but like you, I expect it does. Even if my district saved only half that amount it would still be good for me.

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#7) On October 19, 2009 at 9:20 AM, rd80 (99.12) wrote:

The difference between health insurance premiums and healthcare expenses for the insurers is over $450 billion dollars.

Using Aetna as a proxy.  Their gross margin for '08 was 26%.  Operating margin was 8%.  Assuming AET is representative of the insurance industry,  this bill would have to give virtually all the assumed savings to school districts leaving very little for anyone else.

The numbers stated show an 83% reduction in health care insurance costs for this school district.  Unless AET is the worst run insurance company by an order of magnitude, the vast majority of that savings needs to come from someplace other than insurance company margins. 

Who's footing the rest of the bill?  Or are all the projected savings going to school district plans?

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#8) On October 19, 2009 at 4:47 PM, devoish (98.81) wrote:

rd,

Aetna collected $31bil in revenue in 2008, $900mil from investments. The spent just a shade under $23bil on healthcare.

Take the 900mil out and you have 23% gross margins. Medicare is at 4% overhead. What did I get for besides the knowledge that Aetna execs are living the good life for 19%?

I agree with you that Kingston is not representative of the savings available to every school district. A brand new district on the outskirts of Austin has only five years of benefits to save. An older New England district might have 1/2 as many retirees as teachers and realize savings as great as Kingston.

 

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#9) On October 19, 2009 at 10:55 PM, rd80 (99.12) wrote:

I still don't get the math.  In comment #6 you state health insurance companies in total take in $450 billion more than they pay out in claims.  You also give an estimate of $300 billion as the cost savings that get spread across 16,000 school districts.

I understand that the district in the linked article may not be representative, either in # of employees or legacy costs, but I don't have a better number than the $300 billion you estimated.

Assuming:

a) Private health insurance is wiped out and
b) a gov't plan provides the same or better coverage and can do it with 4% overhead and G&A.

That leaves $150 billion to cover the uninsured and lower costs for everyone who isn't employed by a school district.  The plan seems to require over half the available cash flow that's freed up to deal with far less than half the population (school district employees). There's either a big piece missing from the plan or missing from my understanding of what you've presented. 

Unless school districts are the only ones getting lower healtcare costs, somebody, somewhere has to pony up the difference between the remaining $150 billion and the cost of providing healthcare for the uninsured and lowering healthcare costs for everyone else.  How do those costs get covered?

One additional point.  Assuming this were to pass, is there any plan to reimburse pension plans, 401K's, and other investment accounts for the losses they'll see when their health insurance company holdings get wiped out or at least severely whacked by the new legislation? 

 

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#10) On October 20, 2009 at 7:06 PM, devoish (98.81) wrote:

rd80,

Yes, there is a plan to reduce the losses. But you should sell if this plan gets anywhere near the cellar door.

If the Baucus plan passes there might be a knee-jerk reaction to sell and lower the price. That would be a buying opportunity.

You are correct, the numbers do not add up unless the total savings are underestimated. It is possible it is a conservative estimate. Also the $450bil number is from 2004 data, the Kingston data is more recent and has seen nearly 10% cost increases since then.

The school district (Kingston) may get a better benefit than most and is the most likely answer.  The size of the savings may have shocked the board member and may be why the board member made the numbers available.

Additional savings come from reducing the number of employees in the Doctors office doing paperwork, estimated at 12%

Additional savings will be realized by eliminating the need for medical payouts for malpractice, not the much smaller amount that "pain and suffering" costs.

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#11) On October 20, 2009 at 7:46 PM, rd80 (99.12) wrote:

Thanks.

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