Mandatory Insurance for Gun Owners

The mass murder committed at Umpqua Community College is a terrible reminder of the risk we accept by allowing widespread ownership of the means to easily and speedily commit mass murder.  We need a better way to manage that risk.

A rough toll of costs at UCC includes lost earnings, ongoing medical, disability, loss of companionship, and loss of use.  Those damages likely add up to tens of millions of dollars.  Some of that will be paid by insurance coverages such as workers comp or medical, some of it will be paid by charity, and some of it will be left for victims and their families to eat.  Virtually none of it will be paid by those most responsible, the shooter and those who gave him access to firearms.  Why should that be?  Why should the public bear the cost of private, risky decisions that inflict catastrophe on us?

There is an alternative, one that balances respect for gun rights with a recognition of the costs they impose on society.  Require anyone possessing a gun to also hold high-limit liability insurance.  Require anyone transferring a firearm or ammunition to verify the recipient's insurance coverage, with failure to perform that duty constituting negligence should the recipient use them to harm people.

Such insurance would not be a simple flat tax on gun owners.  Insurers are good at classifying risks and determining what factors are connected with high costs.  An older rural hunter who uses a gun safe probably wouldn't pay much, an unemployed young male who collects pistols when he isn't smoking pot might have to pay a lot.  Why shouldn't he?  Why wouldn’t we want him to?

A benefit of using private insurance to manage gun ownership is that it takes the task away from the government.  Insurers would compete for business using whatever plans and assumptions they wanted.  Neither the state nor any single insurer would decide who could or couldn’t own a gun, instead the market would determine the cost of ownership based on an individual’s risk.  For those who believe that private gun ownership constitutes a check on government, insurance creates a kind of regulatory buffer.  The state’s only role would be to ensure that those who had guns could make good on the damages that result.

Mandatory insurance provides a central means of recovery for victims of gun violence, funded by those most responsible for the violence.  It provides market pricing, recognizing that gun owners are a diverse group posing diverse risks.  It minimizes the role of the state, respecting the intent of the second amendment.  And it sends a much needed message to gun owners every time they buy a gun or a bullet: that their private decisions have public consequences, and they will be made to pay for them.

Gun rights advocates routinely dismiss the risk that widespread ownership of firearms poses to the public.  We should demand they put their money where their mouth is.

Social Insurance

I recently finished reading The Great Risk Shift, by Jacob Hacker.  It's an interesting discussion of our shifting understanding of risk.  It contrasts efforts from the 1930's to the 1960's to spread and mitigate risks such as  sickness, unemployment, and disability through social insurance policies, and efforts since then to dismantle them forcing individuals back into baring their full cost in the name of personal responsibility.

Hacker writes one of the best explanations I've seen of what insurance in general, and social insurance and particular can do (emphasis mine):

The breakthrough of 1935 was momentous all the same, for Social Security embodied a bold new imperative of government action: insurance.  The word rings familiar today, but it once had a radical air.  Insurance was an affirmation of free will over fate.  If not an effort to stay the hand of God, it was an attempt to soften his blow…

The intelligence of insurance became genius when insurance principles were coupled with the power of the state to require participation and ensure adequate and affordable coverage.  "Social Insurance," as it was called, transformed individual misfortunes into common problems.  It made the inevitable dislocations of capitalist society risks that could be managed and redistributed, rather than blows of fate that could only be feared and suffered.  The "insurance" in social insurance came from the power of aggregation:  Risks that could devastate an individual or community could be managed if they were spread across many individuals and many communities.  The "social" in social insurance came from the principles of shared fate, the reassurance that "we're all in this together."  All insurance pools risks.  Only social insurance pools risks on terms that enable the poor as well as the rich, aged as well as the young, the ill as well as the healthy to afford protection.  The crafters of the Economic Security Act believed that insurance had to be available and within the means of those who needed insurance most.

At the heart of this belief was a simple conviction:  broadly distributed threats to economic well-being - sickness, injury, disability, unemployment, penurious old age- were not the responsibility of individuals alone.  They were a widespread and often unavoidable feature of an interdependent industrial society.  And because they were, the cost of these risks should be distributed widely across the citizenry, not concentrated on those unlucky enough to experience them- a goal made possible by the unique power of government to compel participation and require contributions.  Government could pool the risks of millions of citizens.  It could guarantee that even workers of limited means were able to afford basic protection.  And it could require that everyone contributed to this common pool throughout their lives, rather than waiting until they fell on hard times or disaster struck, when- for all but the richest- it would be too late.

I don't like all of the policy prescriptions, but this is a great book for understanding the underlying tensions in battles over programs like Social Security and national healthcare reform, and it offers a powerful argument about where our interests lie.

Senior Tax Deferrals

There is an op-ed in today's O that demonstrates the difference between a government program and private insurance.  The state of Oregon has long had a property tax deferral program to help seniors stay in their homes.  Taxes are deferred until a home is sold, with annual interest charges accruing.  The program is equivalent to a reverse mortgage with the annual payment fixed at the property tax level.  The state acts as the insurer, fronting the deferred taxes to counties and taking risk on the level of repayments.

Unsurprisingly, the program has gotten screwed up because of the recession.  Tax repayments are no longer adequate to front the money to counties, and the state has to either find a way to reduce fronted expenses or get into the business of subsidizing senior property taxes.

The legislature opted for the former (emphasis mine),

The Revenue Committee's response to this temporary downturn was to eliminate 5,000 people from program rolls -- by capping enrollment, raising interest rates, changing eligibility rules and excluding anyone with a reverse mortgage. The cruelest response was to apply these changes retroactively to existing program participants.

The result was to disqualify nearly half of the 10,500 families in the program, including many lower-income homeowners -- the very people it was designed to help. Most participants had assumed that once certified for assistance, they could be reasonably secure in their retirement years and safe from the threat of tax defaults.

 I don't fault the legislature for refusing to create a subsidy, that money doesn't come out of the air.  It comes out of budgets for other priorities like education, healthcare, and social services which have already been slashed.  Prioritizing public spending, deciding what should be paid for and what should not is pretty much the legislature's job.

And that shows the difference between public and private insurance:  A public insurance program has no guaranty, it exists at the whim of lawmakers.  As a program it necessarily competes with other public spending for priority and its benefits and costs can be changed unilaterally with the stroke of a pen.  In contrast, private insurance is spelled out by contract and can be changed only with mutual consent.  People who buy private insurance don't have to justify its benefit against money for schools or Medicaid or whatever the public thinks is more important.

As participants in the tax deferral program are discovering, that is no small thing.

Governments, Insurance and Unfunded Liabilities

There are a lot of things one can criticize about the private insurance market, but one thing you can’t say is that they have chronic issues with unfunded liabilities.  In contrast, you can barely find a story about government pensions or retiree benefits that doesn’t involve funding problems. 

Simply put, governments are really bad at managing current commitments to future obligations.  They habitually fail to put enough money aside to fund their promises.  I suspect a deep sociological root to this, that those with immediate needs or experiencing immediate suffering will always take precedence over future needs which can only be understood now in abstract.  Or it could be a cynical political calculation that tomorrow’s voters don’t vote in today’s elections.  Regardless, efforts to write insurance through government agencies warrant skepticism. 

Ask the question of your elected officials: are you willing to ignore current needs and suffering in order to save enough money to meet future obligations?  If not, you shouldn’t be in the insurance business.

Rate Review vs. the Legislature

One thing worth pointing out is the open and democratic nature of the provider pricing regulatory process in MA.  Hospitals will push back and rightly so, whatever doctrine emerges will need their support and consent.  The right way to get at that is through a legislative process.  That may be slow, cumbersome and prone to unwieldy compromises but so is life.

In contrast certain people in Oregon have pushed to twist premium rate reviews into the be-all end-all of healthcare reform.  Rate review is a poor forum for the task, it is dominated by technical calculations that few people understand and has no apparatus or experience with assimilating input from all the interests involved.  With limited input you are more prone to get unintended consequences. 

Case in point, the call to subsidize individual policies at the expense of large group plans.  That would in effect penalize companies who offered health coverage to the benefit of those who did not.  Obviously, it would encourage companies to drop employee coverage which goes against the stated objectives of reform advocates never mind the politics.  It’s an absurd policy on it’s face that would likely not make it out of committee in the legislature.  Rate review on the other hand is basically at the discretion of DCBS.  It merely takes an ambitious Director to put such an ill-conceived policy into practice.

It makes you wonder, why are reformers so reliant on demagoguery?  If it’s good policy bring it through the legislature, make a case for it and make it law.  The back door stuff demeans us all.

Hospital Profits

I noticed the Lund Report was showing rising profit margins for health insurers in 2010.  That’s good news for insureds, as they can expect that to translate into relatively lower rate increases.  It also got me wondering about hospital profits, how do their margins compare to insurance?  Fortunately, Oregon has easily accessible data on the financials.  Here are the 8 largest hospitals and the state wide total:

	Fiscal Year 2009
	Operating Income	Operating Margin	4 Year Avg Operating Margin
Legacy Emanuel Hospital	-2,313,000	-0.4%	0.8%
OHSU Hospital	56,581,768	5.9%	4.7%
Providence Portland Medical Center	13,709,002	2.3%	3.2%
Providence St. Vincent Medical Center	59,341,480	8.4%	8.5%
Rogue Valley Medical Center	26,624,000	7.9%	3.3%
Sacred Heart Medical Center Eugene	-15,026,259	-3.0%	7.0%
Salem Hospital	7,157,704	1.5%	2.9%
St. Charles Medical Center (Bend)	26,762,158	7.1%	5.6%
	172,836,853	3.9%	4.7%
Total Statewide	330,548,996	4.0%	4.2%

Other then Legacy I’m not seeing any angels.  And the 3% insurers made in 2010 seems pretty light given that they have capital at risk.