Redesign the Paradigm

In the previous blog, A Call For The Transition To Renewable Energy  it was discussed that industrialized nations of the world will soon have to address that a world energy crisis driven by demand from developing countries is looming within the next 25 years. Fossil fuels alone will not be able to meet demand. The easier to extract surface sources are rapidly becoming exhausted requiring more difficult and environmentally damaging drilling and mining procedures that are both more time intensive and expensive. The increased costs of energy and potential shortages can create more geopolitical stresses between countries as they scramble to meet their energy demands. It is beyond time to ramp up existing renewable energy sources (biofuels, solar thermal, photovoltaics, wind, geothermal, tidal, and biomass) to supplement fossil fuels over the next 25 years while actively searching for long term, highly efficient energy systems to transition into beyond 2035.

The liquid fuel transportation sector is dominated by petroleum which is refined into gasoline, diesel, and jet fuel. The transition process in this sector would involve escalating biofuels production in order to supplement future petroleum demand. Cellulosic ethanol can be economically derived from gasification processes and will represent the most cost effective and efficient production means of ethanol production. It also doesn’t compete against food crops, requires much less water, and can be attained from a multitude of carbon based sources including the unusable residue from crops, natural fast growing grasses and plants, disposable wood from logging, and even human waste. Increasing the additive rates of ethanol in gasoline up to E30 (30% ethanol / 70% gasoline) and providing government subsidies for fuel line conversions will contribute significantly to mitigating demand and reduce the chance of rampant  price increases due to regional gas shortages.

Diesel fuel necessary for commercial transportation (large trucks and ships) can also be supplemented by biofuels, in this case utilizing bio-algae, jatropha, and halophytes to create bio-diesel.  Microbial organisms can be used during the processing to increase yield and refinement efficiencies and reduce costs. Diesel blends up to B30 (30% biodiesel / 70% petroldiesel) can be attained without major modification in fuel lines. World governments can then provide similar subsides for fuel line conversions to trucking and shipping fleets. Jet fuel blends can be supplemented with bio-algae; the U.S. military and some commercial airlines have already taken keen interest and developed prototypes for this application.  The goal is to supplement petroleum based diesel and jet fuels with biodiesel which will mitigate demand and reduce the chance of price increases in commercial transportation which adversely affects consumer goods pricing and airline ticket prices.

In addition, supplementing petroleum based fuels should be done in unison with the generation of new hybrid (gasoline/battery) or completely battery based automobiles and light truck production over the next 25 years. Battery technology and high capacitance systems need to be elevated in importance and additional government funding for research and development put in place to provide economically viable batteries and ultra capacitors with greater yields and longer life capabilities. If necessary the patents held by the fossil fuel and aerospace defense industries need to be made available for public use instead of being put on ice as a potential threat of substitution to petroleum, or classified for military uses. Suitable battery technology may very well already exist but the public sector does not have access to it. Utilization of hybrid, battery, or high capacitance system will further reduce future demand for liquid petroleum fuels but will require increased demand in electricity production. Heavy trucks, trains, and ships used for commercial transportation require considerable power to move heavy loads. Battery and high capacitor systems are not currently able to provide adequate power to solely meet commercial transportation needs. They will be more reliant on hybrid systems and will require more energy from the biodiesel / petroldiesel blends than are required for cars and light trucks.

The unspoken and long term strategic goal of many developed countries appears to be to use up the petroleum resources of other countries while saving their own reserves for emergency or to sustain their countries liquid fuel needs decades from now.  This strategy needs to be scrapped and replaced with a new 25 year goal that includes drilling and refining the readily available global petroleum resources in combination with increases in cellulosic ethanol and biodiesel production, government subsidization for replacing fuel lines on existing personal and commercial vehicles,  and creating high efficiency hybrid, battery and high capacitance electric cars and light trucks for personal transportation, and hybrid biodiesel large trucks, trains and boats for commercial uses. Then by 2035, begin the process of transitioning into hydrogen fuel based transportation models for developed countries, while allowing undeveloped countries additional time to become petroleum independent. This means limiting expensive and risky deep water drilling rigs, shale extraction, and production of more oil refineries limited only to petroleum. All government subsidization for the petroleum sector should cease and be transferred to companies generating second (cellulosic ethanol), third (bioalgae), and fourth (high yield genetically modified plants combined with microbial catalysts) generation biofuels, and for the development of biofuel infrastructure. This would include refineries that can be utilized for both petroleum and biofuels.

Resistance from the very profitable petroleum sector will be considerable and OPEC nations will put up a strong fight even going so far as to temporarily drop oil prices in order to draw attention away from the need to transition to renewables and to save the petroleum industry’s future profitability. Excuses for why renewables are a panacea will flourish and will need to be set aside. Our next generation of automobiles may not run as fast, or have the same mileage capability, but they will be clean and reduce our reliance on a polluting fuel source that has created enough geo-political instabilities and wars already. This 100 year old technology is past its prime and the world is certainly capable of doing better. The reason fossil fuels have been held in place this long as our dominate source of energy is because of the massive profitability and wealth generation it provides for a small percentage of the world’s population and not for its current benefit to humanity.

The other half of the fossil fuel equation is electricity production which is provided by coal and natural gas. Electricity production actually requires more fossil fuels than the transportation sector and demand is projected to outpace petroleum and will be further increased by the need for hybrids, electric, and high capacitance vehicles all of which will draw additional power from the grid. The transition of this sector, over the next 25 years, should be a move towards the existing renewable energy sources of solar thermal, photovoltaic, wind, tidal, geothermal, and biomass facilities. Biomass which uses carbon based refuse (forestry, crop, animal, and industrial) and wastes (sewage and municipal solid) will be the only source that requires commodity based replenishment that could be subject to price fluctuations, but this resource will be derived from throw away material.  The transition process itself can begin with the removal of coal and natural gas subsidies and strict limitations on future coal or natural gas power plant production. One such limitation could require no more coal fired plants built without adjacent bio-algae photo bioreactors for algae based biodiesel production and CO2 sequestration. Instead, funds could be allocated to infrastructure development of large solar thermal, geothermal, tidal and wind generation systems. Subsidies should also be provided to business and homeowners to put photovoltaic arrays on their premises.  If regional electricity service providers heavily vested in coal and natural gas production want to continue as public electricity providers they will need to be required to build an increasing number of energy facilities that are completely renewable in nature. Some renewable energy plants are more expensive to construct than traditional coal and natural gas facilities, certainly the case for large solar thermal operations. However, over the 25 year life span of the facility the infrastructure costs become offset within a few years since there are no ongoing requirements for expensive and environmentally damaging drilling, mining, refining, and distribution expenses associated with acquiring oil, coal, and natural gas.  Renewable energy power plants will be cheaper for developed and developing countries in the long run, providing clean energy, and not require purchasing or extracting fossil fuel commodities from potential hostile countries.

Synergies exist between complimentary renewable energy sources and with existing fossil fuel sources. Large megawatt solar thermal facilities can be designed to provide power for cities, or smaller solar thermal power plants can be utilized for neighborhood or suburb electricity generation.  Residential and commercial photovoltaic arrays with government subsidies to assist business and resident affordability can be utilized in conjunction with solar thermal (or other renewable energy sources) to help reduce the regions demand. Solar thermal, geothermal, and wind farms can share space with bio-algae photo bioreactors (PBR’s) to reduce land costs and reduce space requirements.  Biofuels can be generated from sewage, waste material, food crop residue, and wood residues creating fuel sources from material that would otherwise be burned or sent to landfills. Fast growing and drought resistant plants requiring little irrigation can be grown and harvested on lands unsuitable for crops and utilize husks, stovers, and other discardable material from traditional crop harvesting.  All existing coal fire and natural gas plants could have bio-algae PBR’s in place to absorb the CO2 that would otherwise be released into the atmosphere. In developed countries all new power plants should be renewable where possible and only natural gas if not. Coal plants should only be considered for poorer developing countries with large coal reserves.  

A new paradigm for worldwide renewable energy production can be implemented where profitability expectations are removed from future State owned and privately held renewable energy companies.  In countries with a private sector, existing renewable energy companies could be incentivized by their governments to switch to a strictly non-profit model. Another option is the creation of new private non-profit renewable energy companies with infrastructure development and scaling subsidies provided by their governments that would allow them to provide energy at lower costs to consumers and compete directly against for-profit renewable energy (and fossil fuel).  If full government subsidization is not possible then 0% infrastructure and scaling loans could be made available with repayment plans established that assure competitive energy pricing remains available to the public.  State owned energy companies with little incentive to eliminate their profit structure will still be able to provide energy indigenously and to the developing nations but in time will be hard press to remain competitive outside their own borders.

The goal of the non-profit renewable energy provider is to be able to produce and distribute electricity in the most efficient and low cost manner possible and to pass those savings onto their customers. It is also to provide energy sector jobs to replace those jobs lost from the fossil fuel industries.  Favorable government legislation and subsidization for private sector non-profits will be essential to ensure political barriers to entry are removed and to meet infrastructure costs and to develop economies of scale.  Subsidization can come from removing subsidies provided to very profitable oil, coal and natural gas companies and from tax revenues associated with providing clean energy. A non-profit model focused on efficiency and removing unnecessary expenses associated with pay for performance executive compensations, investor ROI expectations, profits for mining and drilling operations, costs related to exporting of fossil fuels, and short sighted profit maximizing decision making will be removed from the future energy equation.  I am not advocating government takeover of the western energy industry, but the establishment of true non-profit private companies in the free market economies. For already established state owned companies heavily vested in fossil fuels my hope is they will eventually operate under the same non-profit guidelines as they to transition towards renewable.  This should also decrease geo-political instability in certain regions of the world that use energy profits to sponsor terrorism or as funds to support military buildup and wars.

It is time for world governments especially those in developed countries with free market to start acting responsibly and considering its citizens. Energy is a basic requirement for all societies and the world has been limited to technology and policies that are outdated and no longer in its best interests. The question of how to pay for the transition to renewable energy is legitimate. Whether governments should increase taxes or use existing tax dollars to subsidize renewable energy infrastructure and provide assistance for companies to scale up production will be debate and heavily resisted from many channels. Interestingly enough, funding didn’t appear to difficult to acquire when it was necessary for bailing out irresponsible financial companies or providing massive subsidies to the ridiculously profitable fossil fuel industry. Fossil fuel based companies know they will eventually have to venture into the renewable market as oil, coal, and natural gas become to scarce or expensive. Why should the world wait until governments are near financial collapse due to high energy costs affecting nearly every sector of their economies, or countries are on the brink of war due to scarcity and conflicts over meeting demand?

Prior to 2035, world governments, academia, and even private sector labs should have been be utilized to search out the most promising energy sources with the greatest efficiencies that will meet the world’s long term energy needs. The push should be to develop free or extremely low cost energy systems such as fusion or kinetic systems for electricity production, and a hydrogen based fuel source for vehicles. We must begin this researching process and planning for this process now.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

How is it that our scientists and technologies have created exponential growth in computing, super colliders, nano-technology, particle weaponry, world-wide satellite coverage, etc. and yet for energy production we are limiting ourselves to a polluting, 100+ year old technology that creates geo-political instability around the world and has most recently become subject to the whims of commodities traders?

Industrialized nations of the world will soon have to address that a world energy crisis driven by demand from developing countries is looming within the next 25 years. The bulk of the energy industry’s production motives which are dominated by fossil fuels and its obsession with profitability are not going to provide the solution for our upcoming energy problems. World energy producers have become very efficient at extracting, processing, refining, and distributing petroleum for transportation liquid fuels, and coal / natural gas for electricity production. However, production will not be able to keep pace with the growing world wide demand expected to rise almost 50% by 2035, much of that coming from the developing countries of China, India and in Southeast Asia. This is not a matter of peak oil or how much fossil fuel remains in the ground, but an issue of simple supply versus demand.

Fossil fuels have served our world’s growing energy needs extremely well, despite the fact that oil and coal use has been around since the turn of the 20^th century, but we are fast approaching the limits in improvements that can be expected from production capabilities. In addition, the easier to extract surface fossil fuel sources are rapidly becoming exhausted requiring more difficult and environmentally damaging drilling and mining procedures that are both more time intensive and expensive. The increased costs will be passed on to end users and when combined with potential shortages will create stresses between countries scrambling to meet their own energy demands,  this may even include going to war to guarantee energy  stability. This scenario can be further complicated by fossil fuel commodities traders who take advantage of regional problems to run up prices. This is an excellent formula for State owned or privately held oil companies interested in ensuring ongoing profits for decades, but not for the rest of the world.

There is also the matter that the regions containing fossil fuels are not only proving to be environmentally difficult to work in but geo-politically hostile as well. Many countries rich in fossil fuels (ie. Middle East and African countries) also divert funds to groups and organizations that sponsor regional unrest and acts of terrorism or can use earnings to build up military capacity and develop weapons of mass destruction.

We are fast running out of time to seriously implement existing renewable energy sources (biofuels, solar thermal, photovoltaics, wind, geothermal, tidal, and biomass) as a supplement to fossil fuels over the next 25 years while actively searching for long term, highly efficient energy systems to transition into beyond 2035. The industrialized countries of the world and their private or state owned energy companies are going to have to set aside their fossil fuel based profitability expectations for energy production and begin thinking in terms of transitioning. This will not be done willingly, these companies and their holdings represent significant infrastructure investments and they are cash cows, in many cases representing the only significant source of income for the region. In countries with capitalism based economies the lobbying stranglehold the fossil fuel industry holds over energy legislation will need to be removed, and campaign contributions that help elect sympathetic representatives curtailed if there is to be any significant infrastructure support from those governments.

This process will have to be driven from the free market economies since State owned companies with large oil reserves will have little incentive to transition on their own since they can meet their domestic demand, and fossil fuels represents a substantial income source for the country and they will profit off of the projected 84% expected increase in demand from developing countries over the next 25 years. This sharp increase in demand will be buffered by developing countries themselves as S. America, China and India are currently taking their own measures to implement renewable energy sources realizing their own vulnerabilities. Even if these developing countries begin the transition process to renewable energy sources, State owned companies will be needed to fill the remaining projected demand. Privately held companies in the U.S., Canada and Europe can then be utilized to meet remaining 16% growth expectation from the developed countries with fossil fuels and renewables.

Existing renewable energy processes need to become more efficient and costs brought down through economies of scale. The purpose for expansion of these renewable sources is to increasingly supplement fossil fuels over the next 25 years.  This must become mandated. In addition, new technologies and system improvements investigated and existing patents that have been shelved to protect fossil fuels from competition should be re-evaluated. Their feasibility and economic viability analyzed, and those with satisfactory efficiencies implemented. World governments cannot immediately dump existing fossil fuel systems since renewable capacity falls far short of meeting demand. In addition, current levels of debt among industrialized countries are already to burdensome due to the irresponsible behaviors of governments and their financial leaders to sufficiently generate new infrastructure in a timely enough manner. We can however begin to aggressively supplement fossil fuels consumption with renewable energy sources in the industrialized worlds. This will allow the poorer developing countries to continue to use predominately fossil fuel sources while they implement renewable energy infrastructure themselves. This may require years of transitioning so it must begin now.

World energy demand can become as significant an issue as the 2008 world wide collapse of the financial markets and generate long term recessions. I would like to emphasize this point once again; regardless of how world fossil fuel producers try to ramp up production they cannot meet global demand. For the transition period over the next 25 years we must utilize all sources of energy and start the process of relinquishing the political stranglehold that the fossil fuel industry holds in the political arenas.

By 2035 renewable energy sources should play significant role supplementing fossil fuels and contributing towards global demand. During this transition period research and development initiatives from world government’s, academia’s, and even government funded and private sector laboratories’ should be utilized to search for new energy sources and refine existing systems for still greater efficiencies. Possibilities for new energy systems include hydrogen, advance fuel cells, new battery or high efficiency capacitors for transportation requirements, and fusion reactors and kinetic energy systems combined with advancements in solar, geothermal, wind and tidal power for electricity generation. 

The goal after 2035 is not to supplement fossil fuels but replace them. The motivation to look for energy systems that provide ongoing streams of company profits and investor return will have to be put aside and a new generation of non-profit energy providers created. Profit maximization will then be replaced with production efficiency and providing free or extremely low cost energy to end users. Research for these next generations of renewable energy systems must begin now with long term plans designed for the transition.

My next blog will discuss procedures necessary to implement the transition process to renewable energy sources in both the transportation and electricity production sectors.

http://www.eia.doe.gov/oiaf/ieo/highlights.html

Profit maximization and increasing individual or shareholder wealth should no longer be the driving goals to meet our civilizations basic needs (i.e. food production, energy for electricity and transportation, and attainable health care). Our current system for meeting these needs is driven by quarterly profits, analyst expectations, executive pay plans, stockholder value, and subsidies to politically connected and very profitable companies. There is considerably less emphasis and focus on the end user – the U.S. consumer and taxpayer.

Removing corporations and investors motivated solely by profitability from these vital sectors of our economy and replacing them with regulated private non-profit companies will do away with the politically connected oligarchies that primarily benefit the wealthy elite at the expense of the population as a whole. Maintaining the status quo only guarantees a constant stream of profits for executive compensation bonuses and increased stockholder wealth while locking out both competition and new innovation through massive economies of scale and lobbyist guided legislation. The purpose of these non-profits will be to provide products and services at the lowest possible end user price and in the most efficient methods possible.

Taxpayer subsidies to the extremely profitable fossil fuel, food production, and healthcare industries should be eliminated. The funds transferred to establish start up true non-profit companies, assist existing companies willing to switch to a non-profit system, and to create necessary infrastructure.

Consider the following situations:

Food production: Our Farm Bill subsidizes four basic crops, corn, soy, wheat and rice, from which the majority of our food and ingredients are derived. These crops are sold to food manufacturing companies for less than the costs to produce them.

Problem: The bulk of westernized food is processed and prepackaged, heavily laden in addictive salts, sugars, fats, and simple carbohydrates. In addition, these processed foods contain a host of additive combinations many of which are untested, including nano-particles which are being used in food production without satisfactory tests to determine the affects of long term ingestion. The drive to increase profits in an industry with traditionally low margins seems to have resulted in an attitude of increasing consumption habits in order to increase market share.  The result has been foods that cause obesity and related illnesses while providing very low nutritional value.

Solution: Remove or reduce government subsidies from farms and food manufacturers producing corn, soy, rice, and wheat and their bi-products and redirect subsidies into nonprofit farms and manufactures that are concentrated on producing a variety of nutritional, whole, or organic foods. Eliminate or limit current strains of genetically modified crops (GMO’s) and require new strains of GMOs to concentrate on increasing the nutritional content of the foods instead of generating rapidly growing drought resistant plants that could also be considered a pesticide. Independent GMO testing for long term implications of ingestion should be a requirement as well. Equalize the price between unhealthy processed foods (including junk food) and healthier varieties and farming practices by attaching additional taxes to unhealthy food similar to cigarettes and alcohol and use the revenues for additional subsidies towards producing healthier selections and to help pay for obesity related diseases.

Energy production:  Current energy production remains entrenched in fossil fuels. Petroleum is used for transportation and coal and natural gas for electricity generation. Fossil fuels currently represent 84% of all U.S. energy consumption.

Problem: Fossil fuels are very efficient but pollute, increase atmospheric CO2 levels, and create geopolitical instability around the world. The industry has through lobbying and campaign contributions ensured that the current energy production methods, refinement processes, and distribution systems and their associated massive profits will remain intact. Renewable energy systems (7% of production) like solar thermal, wind, geothermal and tidal are met with resistance through legislative driven regulation and difficulties acquiring necessary government subsidization and funding. New energy technologies are either purchased outright and shelved or are met by such significant barriers to entry that even private financing becomes difficult.

Solution: Remove government subsidies of the fossil fuel and supporting industries and redirect subsidies into nonprofit renewable energy companies.  Cease production of new coal fired and natural gas power plants in favor of solar thermal and geothermal that doesn’t require ongoing mining and drilling operational costs. Require existing plants to have bio-algae producing photobioreactor’s located adjacent to facilities for CO2 absorption. Increase bio-fuel production. Subsidize cellulosic ethanol to supplement gasoline and bioalgae, jatropha, or halophyte plants to supplement petrodiesel for all existing engines. Incentivize the automotive industry to begin wide scale production for electric, fuel cell, and hybrid automobiles and light trucks to replace existing lines until cost and energy efficient hydrogen systems become available to meet transportation needs.

Health care:  The German Chancellor described the escalation of costs in the U.S. healthcare system as the direct result of increasing profitability in every subsector of the healthcare industry. Our current system, even with the new reform, is unsustainable unless additional measures are taken.

Problem: For profit healthcare insurance companies have grown so powerful through lobbying and campaign contributions that they can actually monetarily incentivize medical review boards to decline claims. New reform has limited the ability to deny claims but loopholes still exist. Increasing premiums, reducing benefits, high administrative costs, and confusing billing practices guarantee profits at the expense of the public. Pharmaceutical companies have too much control over the FDA, drug testing is rarely conducted via independent sources, and U.S. drug prices are considerably higher than any other country. Medical equipment prices increase drastically each year in the U.S. as compared to other countries as U.S. hospitals rush to acquire the latest generation of equipment.

Solution: Follow successful practices initiated in Switzerland, Germany, and the Netherlands that required for-profit healthcare insurance companies to compete head to head against non-profit companies with their streamlined billing, lower administrative and operational costs, and the ability to reinvest revenues into the system to reduce costs to customers since money is not paid out to shareholders. Remove the pharmaceutical industries ability to fund and influence the FDA. Establish independent 3^rd party testing and stop relying on trial information derived directly from the drug companies themselves or from laboratories sponsored or owned by them. Stem medical equipment price increases through regulation (like the rest of the industrial world has done) and create non-profit biotech laboratories and production facilities for new generation drugs. Unleash the stranglehold the pharmaceutical industry has on “cures and treatments” for illnesses. Open the door to alternative medicine solutions and then hold both to strict double blind tests. If they cannot beat the placebo effect they should not be considered treatments or cures.

Real non-profit companies motivated by providing quality products and services in the most cost efficient manner, and with a long term strategic perspective, will outperform for-profit companies if provided an equal playing field. It is time to stop giving preference to the status quo and its wealthy beneficiaries and start considering the other 98% of the population. Please provide any constructive comments, correction, or direction regarding this post.

Please provide any constructive comments, correction, or direction regarding this post.

Perhaps a brief description outlining for-profit and non-profit health insurance companies is in order.

For-Profit Health Insurance Companies:

Profit is clearly the goal. These profits are generated to provide financial benefit to the company shareholders or are reinvested into the company or distributed to employees in the form of compensation. Taxes on profitability are incurred through both State and Federal Government. Note: Most corporations utilize tax attorney’s and government tax incentives to pay reduced taxes.

Non-Profit Health Insurance Companies:

The goal is to provide for the greater good of society. Profits are used to support this objective and are used primarily for operational expenses, and not for the benefit of any one group or individuals. There are no State and Federal Government taxes collected for non-profit entities. Note: I am not referring to non-profit companies such as Kaiser Permanente which acts more like a for-profit company.

Differences between for-profit and non-profit healthcare insurers:

 Mission Objective – For Profit Insurers:

• Profitability – return on investment for shareholders
• Provide healthcare insurance (service) for policyholders (customers) in manner that ensures maximum profits

    Mission Objective – Non Profit Insurers:

• Provide healthcare insurance (service) for policyholders (customers) in most cost effective and efficient manner

There exists a significant conflict of interest when a company is pushed to meet Wall Street expectations, while providing profit maximization and shareholder wealth, and having to provide healthcare for their policy holders. The pie isn’t big enough to meet all the needs when there are additional demands for executive compensation, which includes: base salary, bonuses, and pay for performance (i.e. bonuses based on stock price and stock option plans).

Non-profit healthcare insurance companies (modeled loosely after Switzerland, Germany and the Netherlands) are concerned about their policy holders and do not offer pay for performance packages.

    Financial objectives – For-Profit Insurers:

• Meet Wall Street analyst’s profit expectations
• Generate profits for shareholder distribution
• Generate profits for operational expenses
• Generate profits for reinvestment
• Provide compensation suitable to attract top employee and executive talent

    Financial objectives – Non-Profit Insurers:

• Generate profits for operational expenses
• Generate profits for reinvestment
• Provide compensation suitable to attract appropriate employee and executive talent

Management styles also differ. For profit insurance companies are focused on profit maximization and shareholder wealth. Non profits are also concerned with profits to ensure surplus holdings in case of emergency, however, their style is geared to running the leanest, most efficient companies with reduced overhead (administrative and compensation).

    Capital & Revenue Sources – For-Profit Insurers

• Financial markets to raise capital in form of bonds and stock issuance
• Policy premiums from policyholders

    Capital & Revenue Sources – Non-Profit Insurers:

• Financial markets to raise capital in form of bonds and stock issuance
• Government outlays in forms of grants, 0% loans, other initial subsidies
• Policy premiums from policyholders

For-profit insurers are more effective at raising capital by issuing stock and current insurers have cash surpluses already on hand. Their size and cash flows alone make for significant barriers of entry. Non-profits start up capital must rely on issuing tax exempt bonds (similar to municipalities) or government grants, loans, or some other type of subsidy with possible strings attached.

    Expenses – For-Profit Insurers

• Insurance claims
• Operating / administrative
• Stock dividends or private debt repayment (i.e. bonds)
• Taxes

    Expenses – Non-Profit Insurers

• Insurance claims
• Operating / administrative
• Private debt repayment (i.e. bonds) and / or Government debt repayment

    Policyholder selection – For-Profit Insurers

• Qualifying examination to determine pre-existing conditions for exclusion or increased rates
• Credit history

    Policyholder selection – Non-Profit Insurers

• Qualifying examination to determine pre-existing conditions for treatment and preventative care

Policy holder selection among for profit insurance companies is centered towards reducing risk among the overall pool of customers. Measures are utilized to prescreen customers and restrict coverage of pre-existing conditions. This tactic becomes more severe and may include drastic rate increases when the individual is not privy to a group plan and relies on private insurance. Non profits implement prescreening as well but to determine high risk candidates for ongoing monitoring and treatment. Preventative care is also available and in some cases required.

    Policyholder risk – For-Profit Insurers

• Denial of claims
• Denial for non-essential or experimental procedures
• Increased rates and deductibles beyond affordability
• Policy removal

    Policyholder risk – Non-Profit Insurers

• Denial for non-essential or experimental procedures (less likely than for profit insurers)

The risk for policy holder’s, of for profit insurance, is having claims denied requiring large out of pocket expenditures that can result in bankruptcy; denials of expensive claims or expensive proposed procedures. If the policy holder is utilizing a private for-profit plan they risk being dropped or having their rates increased.

For a proposed non profit insurance plan, policy holder’s pay the insurance premium for the basic plan based on a percentage of their personal income. If additional premium is required, the government provides a subsidy to make up the shortfall.  Insurers are required to offer this basic insurance to everyone, regardless of age or medical condition. Premiums are based on an area’s income and only adjusted for sex and age. 

In essence, this topic is not about a for-profit vs. a non-profit company or capitalism vs. socialism model. It is about providing for one of the basic staples of life. It’s about walking away from a profit maximization system that has for to long benefit the few at the expense of the many. It’s about utilizing non-profit insurers to meet the collective needs of American citizens in the most cost effective and efficient manners.

As a society we are not doing what is right for ourselves. We allow ourselves to be divided along emotional and ideological lines all the while its business and profits as usual. We allow negative influences to create belief systems that do not benefit us, and we in turn will defend those beliefs to our utmost. We are not even analyzing what we are being spoon fed. Let’s face it; we are the only industrialized country left with solely for-profit healthcare.

We are failing our citizens by not including basic health care as part of the formula for protecting and caring for our citizens. We have substituted one of our greatest qualities, compassion, for net profits and we are now paying the price. It is time we take the profitability out of healthcare and demand that companies be created that operate in a TRUE non-profit model, with patient care and coverage being the first priority. It is time to give the non-profit healthcare insurance a chance and let’s see how the for-profit insurance companies compete against them.

Our tax dollars provide for the military to defend our borders, for law enforcement to protect our streets, for schools to provide basic education, public libraries to enhance learning, streets / roads / highways to provide infrastructure and it is time now for it to provide for the basic health necessities of a society. We, the American people, can require that our government use some of our tax dollars to help create and initially fund the first non-profit healthcare insurance companies.

Many Americans now believe that it is a violation of their rights to use tax dollars to provide basic health care benefits to citizens in any manner. However, all Americans act as if they have the right to healthcare if they become seriously ill and will exercise that right whether they are insured properly or not. Lack of insurance or proper coverage result in delayed visits, escalated problems, and emergency room visits. This in turn, ends up requiring more expensive treatment.  These costs are eventually passed on to the tax payer when the state is forced to pick up additional costs. This has contributed to deficits in the States budget which causes debt. Taxpayers are then straddled with the interest payment as well. It can be deduced that in our current healthcare system essentially everyone has access to healthcare even if they cannot pay for it and the burden is still born by everyone.

To be successful, non-profit insurance companies may have to begin at the State levels. Requiring citizens to vote on pre-drafted proposition or amendment. I feel that having a private law firm to draft the legislation will be a necessity. I am strongly convinced that our current federal or state legislative branches would utterly fail in creating a law free of pork, needless and unrelated amendments, and closing the necessary loop holes that would enable the for-profit insurance companies to sabotage the plan.

Please provide constructive comments, additional sources of information, or any ideas that might be effective in making non-profit healthcare insurance a reality.

Large private health care insurance companies have a few things in common: they remain profitable despite economic conditions, they consistently increase their policy holders co-pays, deductibles and policy rates to keep pace with the rising costs of health care, and if a person experiences serious injury or prolonged illness they will look for any method available to decrease the coverage.  Are we as Americans really adequately covered by our for-profit health care insurance providers? Are these insurers our best option?

Health care insurance is considered a necessity in our society. Growing numbers of people look for employers that specifically offer health care coverage as part of the compensation package. Employer sponsored group plans generally provide better coverage at less cost less than those purchased privately.  There are approximately 160 million Americans who have health care insurance through their employer sponsored group plans and an est. 14 million who have purchased private plans.  The remainder of the insured utilizes Medicare or Medicaid if they qualify.

Among both the group and private plans, co-pays and deductibles continue to increase, rejection of claims for subjective pre-existing conditions are also increasing, and denials of claims for non-medically necessary and experimental procedures are also on the rise.

Most people believe they have great health care until a problem develops. Then those same individuals can be faced with insurmountable debt. The debt overload is usually due to: a prolonged sickness of a family member or an accident resulting in catastrophic injury. Although the person or family is insured, the insurance company has the option to deny claims  or previously approved treatment which will require out of pocket payments for continued care. This is more prevalent in expensive treatments.

There are numerous methods employed by the insurance companies to avoid paying for care: denial of claims for subjective interpretations of pre-existing conditions, policy holder’s failure to disclose a seemingly unrelated issue previously recorded in their medical history but not documented in the insurance application questionnaire, and policy cancellation due to a late monthly payment.

In addition, insurance companies tend to bonus their Medical review Doctors (Doctors with final approval / disapproval of claims) for their denial of claims rate.

As many have discovered, having good health care insurance is not a guarantee that the policy holder will be able to afford their medical expenses once the insurance company begins to decline payments. If denials are met with to much legal resistance the insurers still can increase future policy rates beyond the ability to pay.  Even if neither of these possibilities takes place, most insurance policies today max out at around one million dollars, and in today’s high costs of care , that limit can be quickly exceeded.

Sustained chronic illness or catastrophic accidents generally results in bankruptcy – almost 2/3 of bankruptcies in the U S are the result of medical bills.

It is increasingly difficult for policy holders to fight against claim denials, even with attorneys. The for-profit insurance companies have their own staffed attorney’s dedicated to defending  denials, and are prepared to bury cases in litigation if necessary.

To those of you who do not believe this is a reality I encourage you to do your own research and read about the multitudes of people who have suffered this very scenario. The reality is that the system is set up for those who do not need the coverage and rarely get sick. They are the preferred client. For those of you who actually need the coverage, you are left at the mercy of the insurance companies and the medical reviewers.

Consider what might happen if you or a family member has a serious illness or accident?  Not only will you have your illness to deal with but the very real possibility that your insurance company might reduce or drop your coverage because your coverage has become too expensive. What’s more, no one thinks that they will ever reach their $1 million or max coverage limit. But with the continuing rise of health care costs, how long do you think you can stay in the hospital before that limit is surpassed and large out of pocket expenses are incurred? Do you think the insurance company will even allow you to reach the maximum limits before employing the practices mentioned above? In order to protect their financial position, they place you, the individual, in a position to lose everything.

The goal of the for-profit insurance company is to maximize profits and shareholders wealth, their customers are the means to that end. They act in their own financial interest, not necessarily in the interest of their individual policy holders. If greater profits can be gain by denying  expensive claims or procedures or limiting long term care they will follow that course of action unless met by significant legal opposition or negative publicity. These measures have resulted in consistent profitability among the larger insurers and extremely lucrative pay for performance packages for their senior executives.

High profitability has also enabled a very strong health care insurance lobbying arm resulting in nearly 4x the number of lobbyists than congressman. This in turn has lead to quite a number of favorable laws and regulations.

Currently, there is an argument on the airwaves about a potential US public health care insurance program becoming available. Many fear this will result in the government deciding what type of care you will receive. While I do not believe a public insurance policy in the United States will work, due to aggressive lobbying pressures, I also no longer believe that the decision should remain with our current health care insurance providers.

If executive compensation is tied largely to bottom line profits and stock prices, it seems inevitable that in addition to generating revenue through acquiring additional policy holders, insurance executives will attempt to elimate expenses as much as possible.  Here is the crux, the best way to curve expenses is to be selective of who is insured, reducing coverage for individuals that become high risk, and finally to deny claims. These are simply good business practices to ensure continued profitability, raising the stock’s price, and increasing executive compensation via pay for performance packages and stock option plans. Read more…

Why can’t I, as a consumer and a tax payer, have access to quality health care that hasn’t over the past seven years consistently increased in price, required higher co-pays and deductibles, and provided diminishing levels of care? I consider myself fortunate that my family has been under an employer’s group plan during this time and that we have not experienced a serious accident or chronic illness. Otherwise I am fairly confident that my insurance costs would have increased substantially while benefits would have been decreased.

In the past seven years I have noticed:

• My health care costs have increased
• Insurance company profits have increased
• Insurance company Executive Level pay and incentive packages have increased.
• Administrative (billing / payments) inefficiencies have increased.
• Doctors and Hospitals are increasingly capped by the insurance companies as to reimbursement for services but expected to provide the same level of care.

I have no issue with for profit insurance companies. If some segment of the population wants them, they should have that choice. I am also not convinced our US Government could run a public program as efficiently as Germany or Switzerland’s Governments.

I do have concerns about the increased number of mergers resulting in a few, very powerful insurance companies setting industry standards and pricing. Competitive pricing is limited since the smaller insurance company’s appear to be following the lead of the larger companies relying on being more exclusive in their selection of the insured to make a profit.

The national debate on healthcare seems to be largely consumed with whether we are going down the road of socialism. It is my perspective that our current system of health care insurance disproportionately benefits the health care industry, its senior executives and shareholders. All of which, do not represent me or the vast majority of Americans. There seems to be considerable misinformation that from a strategic sense seems to be geared towards maintaining the status quo.

If there are other systems out there such as: privatized non-profit health care insurance options, why can’t we seriously consider these? I’ve read many of the arguments for how it is really a public program in disguise, it requires funding by the government and therefore there are strings attached, how the private, non-profits and /or co-ops could never compete against the top for-profit companies, etc….

There are other countries around the world that have non-profit, private companies. The first thing that happened once the programs were in place was a considerable decrease in administrative costs and executive compensation.  These companies within months ran more efficiently, provided transparency to their insured regarding prices and availability of service and lowered the overall cost paid by the consumer for coverage and services. I think that this is our most viable plan.

As a tax payer I would like to see my dollars pay for something that will benefit the majority of insured American’s by providing funding for the startup of non-profit, private insurers which in turn will generate strong competition within the health care insurance industry. My tax dollars are already subsidizing and financing major industries, such as: banking, oil, and agriculture, perhaps we should pull some of the dollars from these already profitable industries and put it towards something as vitally important as health care.  What I believe is needed at this time is management  focused on providing paying customers with the most efficient, cost effective plans not the most profitable. I would also like to see no strings attached from any federal financing, low interest loans or subsidization.

I am not advocating the removal of for-profit insurance companies. I am looking for the best option that I, as a consumer, can have. I now believe that the priorities of the for-profit insurance companies have shifted so far into profit maximization that they no longer provide myself or our American society the value they once did. Perhaps its time to consider an alternative that is focused more on the care than on generating shareholder wealth and stock option plans for executives.

I have read many of the reasons for why this type of plan or any plan outside of our current system will not work, and they were not convincing. The purpose of this blog is to generate ideas or discuss the viability of options; let’s make that happen by providing your constructive comments.