Regular readers of this blog (all two of you) know that I tend to take notice when actuaries are in the news, since I was an actuary, myself, before I became a minister.
Well, he actuaries of the insurance company WellPoint Inc. have been in the news today, having published an analysis based on their own company’s experience of what result some current health care reform proposals will have on insurance premiums in private markets across 14 states in which they have relevant experience. One would expect this to be a very helpful and enlightening study to help turn possibilities and conjectures about the future into real numbers.
For those interested, it’s worth reading in today’s WSJ opinion section: “The WellPoint Revelation: Private insurance premiums could triple under ObamaCare.”
As the subtitle says there, the results aren’t pretty. But I must say that, as a former actuary, it was nice to see an article that mentions and quantifies the things that have come to my mind in all of this back-and-forth debate.
For instance, it has been a mystery to me how anyone could expect premiums to could go down when an insurer is forced to do such things as accept applicants with pre-existing conditions and those who apply only when they know they are sick, and equal premiums across the board, regardless of various, natural distinctions that should be considered. The result would be monstrous antiselection (noun, the tendency for insurance to be sought only by those who have greater than average need which thereby raises a plan’s cost and reduces its benefits – Dictionary.com). The only way to combat this would be to force those who don’t need health insurance to purchase insurance as well (say, at legislative “gun point”), though this is, of course, a questionable act on many levels — moral, constitutional, economic — and wouldn’t necessarily fix the problem, at that.
Yet, one certainly has to have sympathy for those with pre-existing conditions, given that we have allowed the medical industry to become such that insurance is virtually a necessity when it really shouldn’t be. Of course, the reason for that is debated: Corporate greed and profit maximizing? Overreaching and incompetent government regulation? A little from Column A and a little from Column B?
Hence, this mess of a “discussion” that we currently see around us.
Anyway, the purpose of this post is not to take a political side (and I hope you see no side taken above, as I have tried to stick to facts) — rather, I simply seem to get a kick out of seeing actuaries mentioned in the news. It’s a great “behind the scenes” career, and many in the public are not even aware of it.
And I must say that — if it is true — it is a shame that the White House and the Senate Finance Committee would attack the character of those who created the study less than two hours after its release, which would not be nearly enough time to review the findings and determine their soundness. Actuaries certainly aren’t immune to the Jeremiah 17:9 quality of human nature (I’ve never given scientists a pass on this, so I can’t give actuaries one, either!) and can’t always control how their findings are used, but the pool of actuaries I have known have been quite a mix when it comes to political opinion and the “liberal vs. conservative” sides of things. In fact, towards the end of the “Clinton years” the CEO of the insurance company I used to work for — a former actuary, himself — once stood in the giant atrium of our building during a company-wide gathering and expressed his frustration that the U.S. did not yet have universal health care. Not the most conservative position, right?
Hopefully the actuaries of WellPoint did their jobs according to the standards of their profession, as it could be one of the most enlightening analyses on the real effects of certain health care reform provisions done to date. And, if this is the case, hopefully those in Congress and in the White House will actually look at the results to inform their decisions.
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OK, just one more thing. This isn’t really “actuaries in the news,” per se, but it certainly a walk for me down actuarial memory lane…
The same WSJ online opinion section had an article titled “Efficient Market Theory and the Crisis” in which University of Pennsylvania professor of finance Jeremy J. Siegel defends the Efficient Market Hypothesis (EMH) against a recent attack that claimed the theory was a key factor causing the global financial crisis. This brought up many memories, as I had spent much time with the EMH many moons ago when I was studying for the last exam I ever took in my pre-ministerial life as an actuary: Course 6 — the final obstacle standing between me and my Associate of the Society of Actuaries designation.
For those not familiar with actuarial exams, they involve a lot of memorization (though they have probably changed since then, since the exam system was — and surely still is — constantly being tinkered with). Of course, there was much more to the exams than memorization, but the the vast lists of information one had to have stored in his or her brain was a key feature. Consequently, one tended to develop his own techniques for remembering the items of those lists, and one of my favorite techniques was using odd mental visuals or imaginary scenes. In particular, to memorize the elements of the assumptions behind the Efficient Market Hypothesis I envisioned a football game in which various individuals (players, fans, etc.) make comments or take actions — including an imaginary President Bill Clinton who flew in to see the game wearing a rocket pack on his back. An odd visual, to be sure, but it helped me remember part of the list!
And I must say that it wasn’t the oddest memory-helping visual in my collection at the time. That honor probably belongs to an imagined scene in which Liberace descends from the ceiling of a grocery store whilst playing a piano — which helped me to remember the LIBOR market as an element of a list related to fixed income security options.
Ahhh, studying for actuarial exams. Good times. And horrific times. It was the best of times, it was the worst of times. (Hmmm… that sounds familiar.)
Anyway, it was nice to see the EMH defended, when clearly there was more human error involved in the crisis than simply trusting the time-honored model. And the walk down memory lane was nice, too — however shudder-inducing it might have been.
For those who could care less about the actuarial profession, my apologies! This entry must have been a total waste of your time, huh? 🙂 But for the small population who want to see past posts of mine concerning actuaries or the actuarial profession, just go to the search box above and type in “actuary” for a start. I’ll warn you: It might be an eclectic mix…