March 26: Health and Social Security

The lede:
Gotta start with health care, the biggest policy reform of the past four decades (at least). Here is the most succinct summary of changes I’ve found. Reform should be good news for health actuaries, as all of those reforms affect the price of the policy. I think reinsurers in particular will be writing a lot of excess cover on those no-limit policies. AAA weighs in here.
And since I’m a bud, I’ll link to the national health expenditure statistics.
Long term, though, insureds may drift into the insurance exchanges, which would reduce the number of health insurers – though the reinsurance need may remain. Fewer insurers generally means fewer actuaries. But that’s been my long-term view for 20 years now, and I’ve been wrong all along.
The WellPoint hubbub has some noble lawmakers considering moving New York to prior approval for health insurance. Milliman throws cold water on that.
Also, employer healthcare costs rose 7.3% last year.


  • Negative cash flow begins in Social Security, six years ahead of schedule. I try to stay out of pension issues, but I think we should remember that the current state is the result of a Tip O’Neill-Ronald Reagan two-part deal in the mid-80s.
    Part 1: Social Security taxes would rise to keep the system solvent, with any overflow going to the general fund, offsetting deficits created by Reagan’s income tax cuts.
    Part 2: When cash flow went negative (i.e., when the baby boomers retire, i.e., NOW), income taxes would rise, and funds would flow from general revenues to Social Security.
  • I put on my ERM hat to bring you the latest in the battle of the sexes. In short, New York magazine posits that women are more risk averse than men and that the financial meltdown would not have occurred were there more women on Wall Street.
    I remember in the ’80s, companies were told that ethnic and gender diversity let a company better 360 an idea, which would make said company stronger.
    Is it worth asking again today? Is a lack of diversity a risk factor? How would you quantify it? How would you allocate capital?

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