The Greatest Marketing Job Ever in the US.

        When we think of great marketing campaigns, we normally think of products like Marlboro, Coca Cola or Budweiser.  They are real amateurs compared to the medical insurance industry. 

I have a Bachelor of Business Administration with a major in marketing.  I have a Masters of Business Administration with a major in marketing.  I have worked in small business and marketing my entire career.  I am in total awe at the marketing job the medical insurance industry did on the people of the United States. 

        I took several insurance courses from Emmett Vaughan at The University of Iowa.  Emmett was the best teacher I ever experienced.  He not only knew his subject, he could teach.  Emmett became one of the most recognized names in insurance.  I talk more about him in my book, How To Find The Right Business For You. 

        Emmett had some very strong opinions about medical insurance.  Remember, this was the 1960s.  Emmett recommended a true major medical policy.  A true major medical as he defined it at that time had a high deductible.   It also was strictly between the insured and the insurance company.  The object of a true major medical policy is to cover the insured in the event of catastrophic medical bills.  The insurance company would have no involvement with any routine, preventative, or elective medical expenses.

The insurance company had no contact with the medical provider or any other third party.  If the insured incurred enough medical expenses to surpass the high deductible, these bills and/or paid receipts would be sent to the insurance company by the insured.  This would be a relatively rare occurrence.

        Emmett warned about the high cost of any “First Dollar Coverage.”  I know most medical insurance policies have some deductible and co-pay so they don’t pay the first dollar, but if the insurance company is sent a bill for the first dollar by a health care provider, it is considered a “First Dollar Coverage” policy.  The insurance company incurred expense to process the claim in spite of the fact they did not pay anything on the claim. 

        Emmett strongly discouraged buying a “First Dollar Coverage” medical insurance policy.  He recommended a true major medical policy.  He then recommended putting the savings from the difference in premiums in a savings account. 

        He went on to say that if you did not like to handle the paperwork of saving your medical receipts and sending them to your medical insurance company yourself, you could hire a Certified Public Attorney to do it for you.  You could pay him or her from the medical savings account and you would still be better off than buying a “First Dollar Coverage” policy.  

        Emmett went on to say that if the medical insurance industry were able to “sell” the public on the idea of “First Dollar Coverage”, our health care costs would increase at an alarming rate.  So what happened in the last 45 years?  The medical insurance industry “sold” the public on the idea of “First Dollar Coverage”, and our health care costs are now almost totally handled through medical insurance.  Our health care costs are out of control. 

        The insurance companies “sold” the public on the convenience of having the health care provider bill the insurance company directly.  The insurance companies sold the health care providers that they needed to handle the insurance calms for their patients.  This added cost for both the health care provider and the insurance company. 

        The insurance companies “sold” unions and employers on the idea of providing benefits including medical insurance.  In many cases these “benefits” were given in lieu of wages.   Have you ever heard someone say their job had “great benefits?”

        If you ask someone about their medical insurance, they will often say, “I have the best coverage.  Everything is covered.”  Translated, this means they have no idea of what they have for coverage. 

        We have dental insurance now.  We even have pet medical insurance. This has gotten to the point of ridiculous.  Wake up.  Insurance companies do this for profit.  They do not have an objective of saving you money.

So how much has this “First Dollar Coverage” and third party involvement raised the total cost of our health care?  Estimates are in the 200% to 500% range.  My opinion is that the real cost is probably closer to the 500%.

 Do you think 500% sounds crazy?  That means you are paying $500 in insurance premiums for a medical service that should cost you $100.  Yes, that could be true. 

I like convenience and service too, but at what cost.  More on how insurance increases healthcare costs and possible solutions later.