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Saturday, March 30, 2013

Where will this administrative cost be counted?

One of the selling points for Medicare is its reportedly low administrative costs, although the costs per beneficiary may not be so different from private insurance. (

The next foray of the state into the health insurance realm is about to roll out, that being the state insurance exchanges which only some of the states are taking on. One of those states is California and the federal government is providing generous grants to the state to help set up the exchanges. These grants are amazingly generous as highlighted in a piece in Health care policy and marketplace review  last week. (

As noted in this blog:

Privately funded Esurance began its multi-product national web business in 1998 with an initial $5.5 million round of venture fund investment in 1999 and a second round of $34 million a few months later.
The start-up experience of other major web companies is also instructive. Facebook received $13.7 million to launch in 2005. eBay was founded in 1995 and received its first venture money in 1997––$6.7 million.
Even doubling these investments for inflation still leaves quite a gap.
The California Exchange officials also say they need 20,000 part time enrollers to get everybody signed up––paying them $58 for each application. Having that many people out in the market creates quality control issues particularly when these people will be handling personal information like address, birth date, and social security number. California Blue Shield, by comparison has 5,000 employees serving 3.5 million members.

OMG..... This looks like walkin' around money. It will likely buy a lot of favors and loyalty but I am not sure that it will bring much value to those who need to purchase insurance.

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