The word “Meritocracy” is more of a weapon than an honest description of how our businesses, government, or even personal lives operate. The word also directly contradicts a common phrase, “It is not what you know, but who you know”. What we know, really know, is that the numbers are the numbers, and that in the real world, in this case, insurance, we are sometimes judged as part of a group and sometimes as individuals. Our merit is not always rewarded.
One of the provisions of the Patient Protection and Affordable Care Act is Community Rating. Community Rated premiums are calculated based on everyone’s medical claims within a community (or risk pool), as opposed to Experience Rated premiums which are calculated based on each person’s claims history. Our unhealthy clients are ecstatic. Our healthy clients complain vociferously about community rating until they endure a serious accident or illness. We used to experience rate. We used to underwrite each case. Lots, really LOTS, of people were declined. Others were charged extra or had their existing conditions excluded from coverage. Did people prefer that system? Yes, right up and until the moment they were told “NO”. Some agents would like to return to that system. I am not one of them. I remember what it was like in 2013 and before to tell a family that we could not insure their child because of a diagnosis of asthma. I recall underwriters saying, “Their doctor prescribe a breathing machine? This must be serious.”
Meritocracy is fine if you are part of the favored group.
My start in this business was in Life Insurance. As a rule, it is clean and neat. If you die while insured, we write a check. The process of acquiring life insurance isn’t that simple. Most of our policies involve significant underwriting. The issue is mortality. Do you have a medical condition, dangerous hobby or occupation, bad driving record, risky travel plans? Have you exhibited a behavior that violates community standards or morality (moral turpitude)? Do you have a need for the coverage? These factors determine whether or not you qualify to purchase a life insurance policy and at what price.
I have always been fascinated by life expectancy tables. This blog has posted information from these tables. Is it only a coincidence that states with mediocre health care have the lowest life expectancy? Texas has the highest rate of uninsured adults. As big and as rich as Texas is, the state normally ranks about 30th in life expectancy. Here are two National Vital Statistics Reports. Each shows the life expectance at birth, rank, and standard error, by sex. This is for each state, the District of Columbia, and the United States:
- 2020 – Published August 23, 2022
- 2021 – Published August 21, 2024
By the way, the Centers for Disease Control and Prevention (CDC) now has a new heading – CDC’s website is being modified to comply with President Trump’s Executive Orders.
Is there a meritocracy in life insurance? Yes and No. Women, as a rule, pay less than men because they have a longer life expectancy. Accountants tend to pay less than roofers. Your height and weight will be evaluated. What isn’t considered is your state of residence. If this was a real meritocracy, residents of Mississippi would pay a lot more for life insurance than a resident of Hawaii. Review the tables and see where your state falls. Ohio was 38th in 2020 and 40th in 2021. Certain states are always near the top. Others like Alabama, Louisiana, West Virginia, and Mississippi are always at the bottom. There is no benefit to residents of Massachusetts to have their life insurance risk pool polluted with insurance sales to residents of Kentucky or Alabama.
I am not campaigning to have my clients, most of whom live in Ohio, to pay more for their life insurance. This is just a reminder that our systems, business and government, are always looking to bring in a little fairness.
What is the definition of “fairness”? In truth, it means to give ME a benefit, price, job, or opportunity I might not have been able to access on my own. The news has a lot of talk about fairness right now. It might be important to remember that we are all a part of a lot of different groups. In some of those groups we look like Hawaii. In some we look like Mississippi. Let’s all try to be more consistent in our applications of fairness.
May we all be meritorious in all of our endeavors.
Dave
Picture – Read Between The Lines – David L Cunix