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Originally Posted by The_Jazz
Sure about that? Because they actually do agree with me.
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That IBNR is a guess?
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Actuaries are the first in line to point out under-reserving as well objecting to the early release of IBNR reserves.
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In many cases executives don't always follow the recommendations of their actuaries.
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It's an industry-wide practice that has directly led to the downfall of at least a dozen carriers during my career. Larger than expected actual losses from IBNR reserves in - specifically - California residential construction and Workers Compensation nationally forced the Loews to inject an additional $1.1B in their own personal capital into CNA in 2005 (I think that was the year). CNA, at the time, had been in business roughly 110 years.
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I worked for a WC carrier in California during the "crisis", the under reserving issue was more a problem with cash flow underwriting that lead to reserving issues. In addition their were some major regulatory changes that caught many off guard. Most of the problems were with actual reported losses where costs got out of control as opposed to unreported losses that were later reported.
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Kemper was specifically taken down by unexpectedly large IBNR claims in 2002, mainly because of the IBNR from the mid-90's. Reliance was around for 175 years but got taken down by - dundunDUN - under-reserved IBNR claims for Workers Compensation.
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Like I said there is a science to it. If a company gets it wrong there are consequences. and, like I wrote there are different motivators that in the end balance each other out, if a company takes a short-term view and under reports IBNR or reserves to show profits, their financial strength suffers and they will run into regulatory and pricing issues.
Ace, let me know if you need me to find you this documenation. It's all readily available.
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You don't know what more to say because you've obviously reached the depths of your knowledge.
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That is not it at all.
---------- Post added at 10:41 PM ---------- Previous post was at 10:30 PM ----------
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Originally Posted by dippin
Gee, I re-read what you wrote, and it contains no comparison to other systems that actually have lower overhead costs.
And even then your argument is circular. "If they could operate at a lower cost they would" isn't really a valid argument.
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Just as a simplistic illustration, Cigna has about 300,000 employees, and they have other operating expense (overhead) of about $3.9 billion - that means their overhead expense is about $130,466 per employee. So that includes salary, benefits, supplies, space, etc. everything needed to serve their customers per employee. Let's assume government can do it for half of that or $65,233 per employee. How does the government do that trick????
Do they use low wage employees, reducing professionalism and hurting service?
Do they rent cheap office space?
Do they buy pens at volume discounts?
Or, is the thought that government can pull that trick off bullshit?
Assume the government can do it. How is Cigna going to compete. Are they going to fire highly paid employees? Are they going to be able to match the fact that the government pays no income tax? Are they going to go from being profitable to losing money? How long will that last? Will they cut services? will they go out of business?
What??? Think it through for me, and give me your conclusion of what happens with the public option.