Tag Archives: Econometrics

Health Insurance: Counting The Under-Insured

Are you concerned that your favorite baseball player isn’t pulling his weight for the home team? Our parents would have been content to track his batting average, but today you would undoubtedly follow his on base percentage as well. It’s an arithmetic enhancement of the original ratio; instead of simply dividing his hits by the number of times at bat, you’d include his walks in the numerator too.

What if it’s too cold to sit outside and watch the game? You’d better check the wind chill temperature before you leave home! Although our parents would have been content to simply note the actual temperature, you’d prefer to subtract a few degrees to account for the impact of air currents.

Economists make the same mathematical adjustments when assessing our economic health. They no longer simply note the inflation rate; they now modify it to calculate the core rate, which excludes highly volatile items such as food and gasoline. Likewise, they modify unemployment rates by counting individuals who are working, but who are nevertheless under-employed.

And what about the health care industry, the economic sector that is threatening to devour our government budgets? Years ago, policy analysts simply tracked (and hoped to minimize) the rate of the uninsured. Today, though, they’re modifying that statistic to include another group.

Counting The Under-Insured

Once upon a time, health insurance was health insurance; citizens either possessed it or lacked it. Generally speaking, if Americans were covered by health insurance policies, they knew that they would be reimbursed for the costs of all medically necessary services.

To be sure, there were (and still are) annual cost caps on coverage levels. But years ago, the costs of care were much lower, and thus the caps were very rarely reached. And even when that occurred, insurers could often be persuaded to waive the caps for charitable purposes, or providers could be persuaded to provide the services without billing the insurers.

Today, though, uninsured Americans are not the only citizens who are concerned about obtaining access to medically necessary services. The medically under-insured must be concerned as well, given that truly comprehensive health insurance policies are becoming much rarer.

Et Tu, Empire Blue?

By the next quarter, for instance, many small business owners in New York State who are insured by Empire Blue Cross Blue Shield will be trading down to much skimpier health insurance policies. They’re not doing so on a voluntary basis; instead, Empire is phasing out many of its traditional full-fledged plans and transitioning firms to a handful of less desirable ones.

Can’t those business owners switch to plans offered by other insurance companies? Well, yes … but only four other insurers are still serving New York’s small business community. And according to Crain’s New York Business, only three (Oxford, Emblem, and Aetna) are maintaining a sizable commitment to the market.

A total of three firms cannot possibly maintain a truly competitive economic market. And considering that Blue Cross Blue Shield traditionally played the role of the nation’s “safety net” insurance provider, its retrenchment from New York’s small business market is undoubtedly complicating health policy.

Aflac, Aflac!

Although the rate of the uninsured is closely tracked — it’s now 16.3% of the American population, or 49.9 million citizens, and climbing — the rate of the “not fully insured” is not as well known. And yet that’s the true number of Americans who are at risk of coverage denials for medically necessary services.

Many of the small businesses that are reluctantly trading down to less desirable Empire policies would probably be included in this statistic. The tens of millions of consumers who are covered by Aflac would likely be included as well. Interestingly, the firm explicitly acknowledges that its product “helps pay (for) what Major Medical Insurance doesn’t.”

How important is the plight of the under-insured? From a health care policy perspective, they might be even more costly to the nation’s health care system than the uninsured. That’s because the uninsured will often “make do” without any care at all, or will learn to utilize charitable programs such as Federally Qualified Health Centers. The under-insured, though, will tend to rely on their limited coverage options until their coverage “caps” are triggered, and then throw themselves into our overburdened system of hospital emergency rooms.

A Quarter Of The Population

Last September, the Commonwealth Fund defined the “under-insured”  as citizens who possess health insurance policies, but who must spend a very large amount of their income on medical expenses. They estimated that 29 million Americans were underinsured in 2010, 80% more than the 16 million who were underinsured in 2003.

With America’s population now standing at 312 million, they represent 9.3% of all Americans; thus, a staggering 25.6% (i.e. 16.3% + 9.3%) of all citizens are not fully insured. With firms like Empire continuing to withdraw from major market segments, this rate will likely continue to increase for the foreseeable future.

Environmental Economics, Walmart Style!

Tired about talk of the Producer Price Index? Depressed about the sad state of the Consumer Confidence Index?

Cheer up! We can now look forward to analyzing a brand new index, currently under development by a group of statisticians at …

Walmart!

Huh? Walmart, purveyors of tube socks and toothpaste, issuing socio-econometric statistics? Yep, and more than just sales data. Earlier this week, Walmart’s President and CEO proudly announced the retailer’s development of a worldwide Sustainable Product Index (SPI). Environmental economists, meet the Walmart Smiley Face!

Walmart and the Economy

Walmart shoppers may be surprised to learn that the store produces economic data that can rock the financial markets. Nevertheless, as the world’s largest retailer, it makes sense that business performance at Walmart would greatly influence the world economy. And with most of its operations based in the United States, it is also reasonable to expect that Walmart’s growth or decline would dramatically impact the health of the American business community as well.

More interesting, though, is the manner in which the evolution of the American economy has led to changing perceptions about the economic relevance of Walmart’s performance data. Years ago, when Walmart was pursuing Sears and Kmart for the title of America’s Largest Retailer, growth at Walmart was perceived as a bellwether indicator of the growth of the New Retail Economy. It’s difficult to recall the world of one dollar gasoline in the United States, but at the time that it flourished, economists actually believed that Americans would become more productive by driving their SUVs to stand alone warehouse stores in the suburbs to purchase massive quantities of household items at cut rate prices.

During the temporary affluence of the Great Bubble Economy, Walmart’s growth was perceived as a contrarian economic indicator, as its stores became destinations for shoppers with limited means while wealthier consumers flocked to upscale shopping malls. Chains like Macy’s and Bloomingdale’s boomed; heck, even Target became a more popular destination for the fashion conscious than the stores of the Walmart chain. But then the Great Recession torpedoed the American economy, and frugality once more became en vogue.

Today, any business activity is considered noteworthy, and Walmart revenue has held up far better than the revenue of its rivals. Walmart has also moved successfully into electronics and other higher end product lines; it is once more perceived as a bellwether of the American economy.

The Sustainability Initiative

Considering Walmart’s central role in American society and the U.S. economy, it should thus come as no surprise that the retailer has responded to spreading social concerns about environmental sustainability. A significant portion of its corporate web site is now dedicated to projects concerning climate protection, energy efficiency, waste elimination, and green product development and sales.

Nevertheless, last week’s announcement of Walmart’s socio-economic SPI did raise a few eyebrows. Why would Walmart feel compelled to develop its own socio-economic index? And why didn’t it simply use one of the existing indices that surely must be in place throughout the corporate world?

The answers to these questions are quite simple.  There aren’t any universally agreed upon indices of environmental sustainability in the corporate world. In fact, there aren’t even any commonly accepted or government regulated definitions about what it means to be environmentally friendly. Thus, Walmart simply stepped forward into this vacuum to announce its own index.

Calculating The SPI

In a refreshing burst of honesty, Walmart acknowledged that it doesn’t possess the econometric expertise to create a statistically valid and reliable SPI. And yet, in its press release, it defined fifteen questions across a quartet of categories addressing: (a) energy and climate, (b) material efficiency, (c) natural resources, and (d) people and community. And it promised to obtain answers from its top tier of American suppliers by October 1st, and to request answers from the remainder of it’s 100,000+ global suppliers shortly thereafter.

What happens after that? How does Walmart intend to move from a data base of survey responses to a published socio-economic index? Well, its implementation plan is admittedly a little murky. Walmart proposes to create a “consortium of universities” with the expertise to maintain a data base and define an index; it also promises to translate product information into a “simple ratings for consumers” about the environmental sustainability of specific products. But there are no timelines or deadlines for these activities, and there are no guarantees that other organizations will partner with Walmart for the long term.

Nevertheless, any business economist would agree that one needs a data base in order to create a statistical indicator, and that (in turn) one needs quantitative research questions in order to gather sufficient answers to populate a data base. And thus, although Walmart may not yet be close to achieving the goal of a meaningful SPI, one cannot help but admire their willingness to step forward and lead an initiative to do so.