February 12, 2009

The Truth About the GIC

Group buying works in alot of situations and can always save money. Let me give you an example. Assume you have three government entities loooking to buy 1000 pens. Instead of each of them buying 1000, they should buy 3000 together and they will save money.

This does not work with insurance!!!! Why? There is a thing called claims experience. Lets take a look at the same case where you have three municipalities where two of them have high claims experience, while the 3rd one has great claims experience. The two bad groups would love the low claims experience group to join with them to buy health insurance, since their overall bad claims, as an average, would drop and they would get better rates. In this case the group with the good claims experience would be crazy to join this buying group, since their rates would go up.

The other night the City Council asked if they were to join the GIC, could the state legislature pass a bill whereby each member of the GIC would get their own claims experience. Yeah right, this will never happen! Lets for arguements sake there were three municipalities in the GIC and their claims experience were as follows:
  • A: Claims were 125% of premiums
  • B: Claims were 110% of premiums
  • C: Claims were 70% of premiums

If you were company C, what would you do? That's right you would leave the group in a second, get better rates on your own and the remaining upside groups will get killed at renewal. Bottom line if a buying group like the GIC were to release claims experience to each member, it would be the end of the GIC.

If we will never be able to get our claims experience from the GIC, how will ever be able to leave the GIC down the road if we are not happy with the plans or rates? It would nearly be very difficult for a group the size of the City of Worcster to get anyone to give us a rate without having any claims experience.

Lastly the GIC definately has a higher percentage of membership in the Eastern part of the Commonwealth, where medical costs are much higher then the rest of the Commonwealth. Moving to the GIC is a big decision and one if made may almost be impossible to change back.

9 comments:

Rich Greenhalgh said...

And that motion came from someone who has an insurance background. Not picking on Germain, but as I've watched the last few meetings it seems like the council has gone from having no leadership or direction to now just throwing crap against the wall and hoping it sticks. O'Brien must just sit there and shake his head. So now I hear on Levy's show Lukes is having a council retreat in Shrewsbury to address this dysfunction. Too little too late I'm afraid.

Anonymous said...

FWIW, Virgin America carried 588 Passengers from ORH to Florida in November. 250 to Punta Gorda and 338 to Sanford.

Punta Gorda loads were 42%, and Sanford loads were 45%. Overall was 44%.

DirectAir may not be required to report the numbers, but Virgin America is.

Bill Randell said...

steve;

great job... man that is alot lower then i feared..


bill

David Z. said...

Even though that load factor is very low; you have to realize that is the month that service began from ORH. I would like to see December/January figures before panicking. Until we have airline service that “sticks”, I think the public may be skeptical to make reservations.

Unfortunately, ORH doesn’t have that luxury anymore of which comes first “the airlines or profitable load factors”.

Bill Randell said...

Dave:

I agree. You make a good point on it being the first month. In fact I think this month we have great loads.

All that said the numbers in the mid 40's are lower then I would have guessed and Direct Air lost money, good deal of it, in November at ORH

Bill

Anonymous said...

Get GIC-y with it!!!

Harry T
Worcester,MA

Anonymous said...

Worcester Area Pilot's Association website www.worecesterapa.org has an online survey for questions to the new airport director Andy Davis. Click on the link and the hit continue to website to bypass security wall.

Also meeting at the terminal at the airport to discuss those questions with Mr. Davis for those who are interested.

Jon

Anonymous said...

Harry T quoted on NECN:

http://www.necn.com/Boston/Health/2009/02/12/Court-finds-no-link-between/1234492858.html

Harry T
Worcester,MA

Anonymous said...

Who give's a crap Harry!