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The Simple Health Insurance Solution

08/30/2009 05:12 am ET | Updated May 25, 2011

"Ninety-nine and forty-four one hundreds percent pure love"
-- Ronnie Millsap

Former CIGNA executive Wendell Potter was on Bill Moyers Journal a few weeks ago and cited a stunning statistic. When the Clinton's were debating health care in the early 1990's, 95 cents on every insurance premium dollar went to pay claims. Now it is slightly above 80%.

The technical term for what Potter cited is the medical loss ratio. When it is at 80%, it means one out of every five dollars that you are paying for insurance premiums is going towards health care. The rest is going to insurance company profits.

I don't have a dog in the health insurance fight. I voted for President Obama and want to see Americans have coverage. I've been around the insurance business all my adult life but I stopped selling health insurance 20 years ago. I buy my own from another agent.

I don't really follow the nuances of how health care is priced and I don't claim to understand it. This puts me in the same boat as most other Americans.

I don't think President Obama is connecting with the American people on the issue. It is complicated and complex. People who have health insurance are afraid of paying more for it. People without health insurance don't have money for high powered lobbyists and non-stop television commercials. People who are intellectually for the idea of universal coverage don't want to pay higher taxes.

It's a complicated problem but I am offering a simple solution.

1. Cap the medical loss ratio at 95%.
2. Make insurance companies cover everyone, no matter what the pre existing condition.
3. Help poor and middle income people buy coverage with a subsidy or tax credit.

My simple solution achieves several goals. It gives everyone an opportunity to be covered. Poor people have Medicaid. By subsidizing the middle class and working class, we will come close to getting everyone insured.

If health insurance carriers are forced to pay out 95% of what they take in, it seems that they are going to compete with each other by offering more treatments and better service.

The idea of a public option is for the government to compete with the big health insurance carriers and drive down costs.

I am seeing a campaign by Obama and Speaker Pelosi to denounce the health insurance company but I am not sure it is going to work. I'm not sure that people like insurance companies but getting them to march against them is an entirely different matter.

Right now, people are worried about losing their homes and their jobs. It's hard to get people focused in a time of economic chaos and high unemployment.

I've had my own angry, screaming battles with my health insurance carrier. It seems like everyone I've talked to has had a similar experience. I just don't see them marching on Washington about it.

My plan (you can call it the McNay plan if it happens to catch on) is a compromise that everyone will like and everyone will hate.

The health insurance carriers will scream that they can't make a profit on a 95% medical loss ratio. However, property and casualty insurance carriers (the people who insure your car, home etc.) have a loss ratio close to 100%. They make their profits investing the premium. Health insurance carriers operate the same way. Under my plan, they won't have a profit incentive to deny claims.

Insurance companies will scream about covering everyone with no pre existing conditions but since they have an extra 15% to 20% in claims money to work with, they ought to be able to make it happen.

The government subsidies will make sure everyone can afford coverage and the health insurance companies can't complain because ultimately the government subsidies are going to go back to them.

Insurance companies are only going to get 5% of the medical loss ratio but if we insure 41 million uninsured Americans, the insurance companies are going to get 5% more of much, much larger pie. That ought to make their stockholders happy. It also will inspire other insurance companies to get into the health insurance business and capture premium for themselves. That is the kind of competition they were looking for.

Implementing my idea makes it harder for President Obama's critics to attack it politically. Opponents can't argue that "government bureaucrats will be making your medical decisions" because it won't be government bureaucrats calling the shots.

It will be the same, private, health insurance, company bureaucrats who are making the decisions now. I don't think that is better but it sure knocks a hole in the opposition's argument.

I want to see President Obama get some kind of health insurance program passed. I suspect the Republican senator who thinks its defeat could cost Obama's re election has a valid point.

Obama is spending a lot of political capital on this. I'm not sure it is catching on and seems to be getting away from him. The president keeps wanting to lecture us but we would rather talk about the Harvard professor and the policeman having a beer.

My idea is so simple that I am sure there are many holes in it. I'm not an expert, just a guy with a lot of insurance industry designations behind his name. None of those designations make me a specialist in the health care debate but it's a different idea. I'm open to hearing from those who don't agree and finding out why.

My idea works and is politically viable. It gets uninsured people covered and it will get better coverage for the rest of us. It will take away the incentive for insurance companies to gouge us on claims, in order to make the stockholders happy. Its not a perfect solution but it's a ninety nine, forty-four one hundreds percent pure idea that we can talk about.

Don McNay is one of the world's leading authorities in helping injured people and lottery winners deal with complex financial issues. You can write to Don at don@donmcnay.com or read his column at www.donmcnay.com. You can reach him on Facebook at www.facebook.com/donmcnay.