This post closes my series of posts on the matter of productivity! It has been an interesting experience, in part because it clearly affirms for me the benefits of blogging! In a way, blogging is akin to journaling – the difference being that journaling is done without concern for an audience (there is no audience) whereas with blogging it behooves the blogger to move away from self-indulgence and consider what might interest the audience! This series has prompted more responses (mostly from my friends!) than any other posts on this blog, which affirms that there was at least a modicum of audience interest in what I had to say!
But here is where this blogging experience and journaling come together – I have also benefited from this reflective excursion into my own approaches to getting things done! Here are a couple of the “lessons” I have learned in this process:
- Even though I speak a firm line about what I do, or more accurately what I intend to do, the reality is not quite so clear-cut! My to-do list has lagged about a day-and-a-half “behind” for most of the duration of this series of posts! Part of this has to do with the kinds of things that happen to everyone .. fighting a bad cold, unexpected family events, fascination with the current political events and drawn to paying attention to what is happening, way too much email that I need to tend to – you get the picture! So the ideal and the real are a bit out of sync! And for some reason, my dedication to this series has persisted despite the to-do list lagging – it has been a compelling project that has drawn me away from the scheduled to-dos!
- Writing about the ideal has in fact influenced my “real” behaviors! Every time I have posted a new blog about one of the tools I am using, and my commitments related to that tool, my daily engagement with those tools has definitely been more focused! For example, my use of Evernote has evolved over time, and once I focused on it in the process of writing the blog, I moved into a “space” of better clarity about how Evernote fits into my overall productivity strategy.
Most important …a bottom line emerged that ironically led me to a stronger sense that what I do has little or nothing to do with being productive! If I am totally honest, my own approach to this all boils down to my age 10 fascination with “Cheaper by the Dozen!” I just love being efficient! It is kind of like the habits that we all take for granted – like the sleeping positions we prefer, or the morning routine that gets us up and out the door, or the little habits of affection that we establish with those we care about. For me, that very early fascination with efficiency ingrained in me something that is more than a habit .. it is a way of being! Like all of these little “things” that constitute who I am, or who you are, there is no reason to expect that we can, or should, aspire to copying anyone else’s ways of being. I have no idea why reading of a book grabbed my attention in such a powerful way at the age of 10!
So here’s to each of us finding the ways that work for getting things done … each of us, in our own ways!
Peggy L Chinn 
Good morning Peggy. Please see my interview with Dr. Donna Clemmens for your review. Thanks again for your flexibility with my days off from class. Lisa
On Wed, Feb 17, 2016 at 12:45 AM, Peggy L Chinn, RN, PhD, FAAN wrote:
> peggychinn posted: “This post closes my series of posts on the matter of > productivity! It has been an interesting experience, in part because it > clearly affirms for me the benefits of blogging! In a way, blogging is > akin to journaling – the difference being that journaling” >
…. and so we come full circle on the theme that first attracted my attention… efficiency. I was tempted to write these thoughts on the first post, but I figured it would be better to let that run its course…
and when combined with your mention of this political season I could no longer resist, one of my favorite topics: The efficiency of risk management, or “… all you wanted to know about insurance but were afraid to ask.”
Recent issues in the Democratic Party primaries have brought one of my favorite efficiency topics into view. What makes for an efficient insurer? Ask most lay people and they are likely to give a knee-jerk response: An insurer with a low loss ratio. But no, that is not the hallmark of an efficient insurer. That is the hallmark of an insurer that isn’t paying its policyholders’ claims.
Perhaps an insurer with a low, non-claims, expense ratio. That is certainly an important component of an efficient insurer, but not the most important component.
The hallmark of a perfectly efficient insurer is an insurer whose loss ratio (Total Claims Costs/Total Earned Premiums) is exactly equal to the loss ratio for the population from which it randomly selects its policyholders. No insurer is ever this efficient. The best any real world insurer can ever do is come close to having the loss ratio for the population insured.
Still, thinking about insurer efficiency can reveal a lot about one of the most important issues in the 2016 election: What is the best way to provide health insurance for the entire population of the USA? Is an incremental improvement in the proportion of Americans covered through the PPACA, as suggested by candidate Clinton, the most efficient approach, or is a single payer, Medicare for All, as suggested by candidate Sanders, the most efficient approach?
First, the landscape. We hear a lot about some of our biggest insurers/health benefit plans: AETNA, Humana, United Healthcare, Kaiser Permanente, etc. We have also heard about some colossal insurer failures: AIG, Reliance Insurance Company etc.But the real issue of inefficiency has to do with the hundreds of smaller health insurers/health benefit plans we have. Most of these hundreds of insurers are terribly inefficient, often paying only a small portion of their premiums in the form of policyholder benefits, nowhere near the loss ratio appropriate for the population insured.
So, what is the magical ingredient in efficient insurance? Volume, Volume, Volume. The more policies an insurer issues, the closer its loss ratio falls to the expected loss ratio for the population insured. The importance of this proximity to the loss ratio for the population is critical. The more accurate an insurer’s loss ratio the easier it is to convert premiums into health care benefits. If an insurer knows exactly what its claims will be, year after year, it faces little or no risk of adverse operating results. The lower the insurers risk, the less need there is to reward investors with profits and the lower the “risk premium” it should have to charge for its risk management services. As these two items decrease, the insurer can convert more of its premiums to policyholder health benefits.
Now the thing about insurers, as I suggested above, is that the more policyholders, the more efficient the insurer becomes, the higher the benefits it can offer, the lower the premiums it can charge, and the lower the risk of bankruptcy.
For every population there is ever only one maximally efficient, risk managing, insurer. The largest insurer possible, or a national health insurer. Let’s imagine we have an “efficient enough” health insurer, insuring 1,000,000 Americans and converting 75% of its premiums to health benefits, having a profit goal of 5% of its premiums, charging a risk premium of 5% for its service as a risk manager, and having non-loss operating expenses of 15% of premiums. This insurer can reliably convert 75% of its premiums to policyholder benefits.
Year after year, in some years it will have lower losses than expected and it will earn higher profits than expected. In other years it will have higher losses than expected and it will incur operating losses, using up the 75% of its premiums earmarked for policyholder benefits, eating through its 5% risk premium and eliminating its expected profits. In really bad years it may lose all the money it has, it will become insolvent, shut its doors and deprive some policyholders of their benefits. This happens fairly rarely for insurers with 1,000,000 policyholders, but it happens quite often for insurers with 5-10,000 policyholders.Precisely because they are inefficient risk managers, small insurers earn excessive profits, or incur crippling losses, fairly frequently.
But we are interested in efficiency, not inefficiency. So we need to look the other way. While an insurer with 1,000,000 policyholders may be efficient enough, it isn’t going to be efficient enough for people like us who want to see real efficiency. So, lets think about the relative efficiency of an insurer covering all 323,000,000 Americans, the Bernie Sanders solution.
I specified the 5% profit margin and 5% risk premium for a reason. Together with understanding the Central Limit Theorem, these assumptions are based on the notion that the standard error for the loss ratio for our insurer with 1,000,000 policyholders is 5% of its premiums. In about 95 years out of 100, our efficient enough insurer will have a loss ratio between 0.65 and 0.85. That is ok but it should be clear that a 20% spread in how much of the premiums will be left each year will make life difficult for everyone.
How would our insurer covering 323,000,000 policyholders compare? Well, to calculate the risk management efficiency of a national health insurer, we invoke the Central limit theorem and we find that the standard error for the loss ratio for our insurer with 323,000,000 policyholders is not even close to 5%, it is only 0.002782%. Our largest possible insurer will have loss ratios that vary between 0.74722 and 0.75278, about 95 years out of 100. This insurer is so efficient that it will never go bankrupt because its losses never exceed its premiums. On the downside it also has very few years when it makes substantially higher than expected profits.
It is this very efficient insurer that lies at the heart of the current political season. Will America be better served by 323 “efficient enough” insurers that cannot plan to provide benefits of more than 75% of their premiums as benefits, or would America be better served by a maximally efficient insurer that could pay almost 85% of its premiums as benefits? Most would probably pick the insurer that pays the most benefits. Yet, all but one Republican party candidate, and one Democratic party candidate tell us that a national health insurer is the wrong choice for America.
This is, of course, only a teaser. A glimpse at some of the ways in which insurers can be efficient. I have a nice little paper that covers all the turf, covered by my book “Standard Errors: Our Failing Health Care (Finance) Systems And How To Fix Them” that I am distributing gratis as my contribution to rational discourse on the topic of how to achieve universal coverage. For a free copy pick the small paper up from my website: http://standarderrors.org/WorkingPapers/2012/JSM073111PaperFinalWorkingPaper09262012.pdf.
In 2016 everyone should understand how insurance really works or we will blindly face the Woody Allen Dilemma in the balance of the primaries and throughout the election year:
“More than any other time in history, {wo}mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”