Post Office Zip Code Change Prompts Insurance Industry Attempt to Jack Up Rates

by: David Sirota

Thu Sep 24, 2009 at 20:20


I'm really glad Republicans and Democrats in Washington are so intent on protecting the insurance industry when I read stories like this from the Longmont Times-Call newspaper:
David Sirota :: Post Office Zip Code Change Prompts Insurance Industry Attempt to Jack Up Rates
Nancy Clinton got a surprise when she called her health insurance company recently. She was calling to ask about a benefit issue, and she said that as long as she was on the line, the company might as well note her new ZIP code: 80504.

"So, she went in and came back and said, 'Oh, this is going to significantly increase your premium,'" Clinton said Friday...

Clinton's was one of 8,610 northeast Longmont addresses that had their ZIP codes changed to 80504 from 80501 on July 1.

"Our health insurance would go up about $60 a month," Clinton said. "I didn't move, and the hospital didn't move."..

Al DeSarro, a spokesman for the U.S. Postal Service's Western Region, said he's sympathetic to the residents' plight but there's nothing he can do. "This comes up every now and then," he said, noting that the post office makes 20 to 30 ZIP code changes around the country each year.

Yes, you read that right - the Post Office in Longmont, Colorado made a routine change to zip codes, the kind of change that happens all the time. And yes, the result was that insurance companies are trying to use that change - and that change alone - as a justification for jacking up their policyholders' insurance premiums.

This is the same insurance industry that Washington politicians are going out of their way to tell us "provide a legitimate service," are run by "not bad people" and are therefore worthy of legislative protection and taxpayer handouts.

I love the smell of "democracy" in the morning...it smells like...money.


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wait (4.00 / 1)
Are they "jacking up rates", or are they adjusting customers to the rates already established for the new zip code?  You make it sound like they're using this as an excuse to arbitrarily increase the rates of some customers, when I suspect it's just a matter of having different rates for different zip codes which have difference in their health insurance claims -- the same thing happens for stuff like auto insurance too, where some parts of town are more expensive to insure.

It's a nice illustration as to why basic health care shouldn't be provided with insurance, because insurance is based on exactly this kind of thing -- amortizing risk across the population and determining rates based on their projected chance and size of claims.  It's not evil, it's just what insurance is.  It's more expensive to insure an expensive car, or a car in a bad part of town, or if your teenager drives your car.

Fundamentally, we shouldn't be providing health care with "insurance".  But it's hard for me to get too worked up over basic and commonplace statistical analysis like this, that insurance companies of all stripes do every day.


Bullshit (4.00 / 2)
Health insurance can work, but it can't be amortized over finely chopped up population regions. If it is, then you start ending up with exactly what you say: people at higher risk paying higher rates.

What does that mean? I'm sure one of the biggest factors in medical risk is wealth. The more money you have, the better you take care of yourself, the lower risk you run of major medical problems. So, insurance companies want to charge more to those least able to pay - that's the fundamental reason the US healthcare system is such a failure.

Insurance can be - and should be - regulated so they can't do that. They should have to amortize risk across a large and diverse population - something like at the state level.

But you can't use the dire need for regulation of the insurance industry as an excuse to say "single payer or nothing". And you can't use the fact that single payer would be best to excuse the lack of regulation of the insurance industry. A well regulated insurance industry can supply universal healthcare at affordable rates - there are countries where that system is working.

Even if a single payer system were in the cards, that wouldn't rid us of the private insurance industry - they would still sell supplemental insurance, and they would still need regulation to keep them from unfairly penalizing people for where they happen to live.

Discrimination against the poor isn't an unfortunate necessity for a free market system - not caring about the poor is a choice made by those in control of the US system. They could choose instead to protect the poor against discrimination, but they don't. When you look at it that way, it really is hard not to think of them as bad people providing an illegitimate service.


[ Parent ]
but (0.00 / 0)
Every insurance industry on the planet adjusts rates based on risk, and no one calls them evil, or begrudges their profits.

It's only because it's health insurance that's often (though not always) out of people's control, and the the downsides are so huge that this is such a problem.  No one is marching against car or life insurance companies.


[ Parent ]
You've got to be joking (4.00 / 2)
Every insurance industry on the planet adjusts rates based on risk, and no one calls them evil, or begrudges their profits.

Have you been closing your eyes, covering your ears and singing "La la la la - I can't hear you!" regarding insurance industry malfeasance?


[ Parent ]
Pretty much, yeah. (0.00 / 0)


Montani semper liberi

[ Parent ]
so (0.00 / 0)
Where's the anger against auto or home or life insurance?  I don't recall seeing any.  Do you?

Obviously there's malfeasance everywhere, in every industry.  But health insurance is pretty uniquely awful in this country.  I'd rather focus on why health insurance is different, rather than complain about the nature of insurance in general.


[ Parent ]
You can't see it (0.00 / 0)
Where's the anger against auto or home or life insurance?  I don't recall seeing any.  Do you?

if you choose not to see it. Consumers have been fighting corrupt practices of home and auto insurers for years, and continue to do so. I'd say that constitutes "anger", wouldn't you? Why don't you do some research before making such flat-out wrong statements about no one being upset or complaining about home and auto insurers. I'll even help you get started:

CA Prop 103

And this from just a few months back:

In recent years Floridians have seen the worst of the insurance industry.  From lousy hurricane claims handling to price gouging, dumping customers and defiance of state orders.  It got so bad with Allstate, that the company was barred from doing business by the state insurance commissioner for a time last year.

http://www.consumerwatchdog.or...


[ Parent ]
fair enough (0.00 / 0)
Though they're not nearly at the magnitude of the issues with heath insurance.  

[ Parent ]
Not "Every insurance industry"! Many are regulated... (4.00 / 1)
...and so they aren't allowed to just act as they like. Don't forget, the rest of the world isn't exactly like the US, many nations have stronger laws in place prohibiting discriminatory practices by the insurers. Imho we, as liberals, shouldn't simply accept if an industry argues with the need to have different rates for different risks, but should look hard if the risk is based on something the customer can affect, for instance the type of car he buys, or something that's out of his control, for instance his gender. So, taking the insurance idustries practices for granted isn't a good idea at all!

[ Parent ]
really? (0.00 / 0)
Are there any insurance industries that don't adjust rates based on individual risk?  Obviously I may be wrong, but I can't think of any.

Car insurance adjust rates based on age and gender, both factors you're unable to control.  And I again, I don't see anyone being up in arms about auto insurance.


[ Parent ]
Please explain how the risk of covering this person was increased (0.00 / 0)
by the post office changing her zip code?


"It sounds wrong...
     ...but its right."


[ Parent ]
well (0.00 / 0)
Obviously the risk to this individual person didn't change, and the the insurance company should really re-evaluate the rates that are applied to each zip code since their borders are changing.

But there are going to be discontinuities whenever you group people into risk categories, and there are somewhat absurd cases everywhere.

Does it make sense that my auto insurance rates dropped the day I turned 21?  Was I better driver that day than I was the previous day? (almost surely the contrary in that specific case, heh)

Would it be any less absurd if she'd moved two doors down and crossed a stationary zip code border?

This just feels like a goofy edge case to a fairly typical behavior that's uncontroversial in all other insurance industries.


[ Parent ]
Pointing out the absurdities in the current for-profit, private insurance (0.00 / 0)
for health care is part of the struggle. Would this change in zip code provoke the same kind of rate increase if a more humane heathcare system were in place?

If changing zip code changes risk assessment, how often are the rates readjusted downward in similar situations? Ever?

I don't buy the analogy to auto insurance because driving a car is not a right, as is access to healthcare.

"It sounds wrong...
     ...but its right."


[ Parent ]
Please do more research (0.00 / 0)
Your conclusions are both flawed and contradictory.  Just because you don't know something or you are not aware of something doesn't mean it isn't happening or hasn't happened.  Do some research on those in the Gulf Region, specifically in New Orleans, after Katrina and find out how citizens were raped by insurance companies all in the name of profit and the unwillingness of insurance companies to pay policyholders.  Allstate basically said 'f' you to hundreds of their customers.  Again, just because you don't know about it or didn't hear about it doesn't mean it didn't happen.  There was plenty of backlash from their policyholders.

[ Parent ]
I agree (0.00 / 0)
I think your point that "insurance" may be a flawed model is spot on. I'd also add that this shows the lack of a competitive marketplace for health insurance.  Rate increases like these should be met with "Thank you. Now go f--- yourself.  I will go with your competitor."  Instead, for a variety of reasons (and we don't know which applies in this case), people do not have a meaningful choice in policies and are subject to either paying any rate increase or going uninsured.

[ Parent ]
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