Friday, December 05, 2008

Innovation: From Wall Street to Minnetonka

Wonder where those creative financial gurus landed after their precipitous fall from towering Wall Street? Did one migrate west to Minnesota? Minnetonka based UnitedHealth Group's "first of a kind" product has that familiar vaporware ring. The Star-Tribune reported:

For these economically uncertain times, Minnetonka-based UnitedHealth Group has a "first of its kind" product: The right to buy an individual health policy at some point in the future even if you become sick.

Called UnitedHealth Continuity, the product is not actual medical insurance, but is aimed at people who may have insurance now but are worried they may lose it -- and may not be able to get replacement insurance on their own.

People who are already sick will generally not be eligible for the new product. Those who do pass a medical review will pay 20 percent each month of the current premium on an individual policy to reserve the right to be insured under the plan at some point in the future.

"What this product is designed to do, for a very modest premium, is to essentially protect your insurability for the future," said Richard Collins, president of UnitedHealth's individual insurance unit, who says he is the first policyholder.

Funny, administrative expenses and profit roughly comprise 20% of health insurance premiums. UnitedHealth guarantees their goodies without providing any coverage.

Calling it a "very modest premium" is inaccurate, as no insurance is provided. One is only buying the right to pay insurance premiums in the future. I see no lock in pricing guarantees, just the right to buy.

By denying coverage for the most spurious of reasons, UnitedHealth drives in fear. Their "innovative" product mines that very fear. America has a bad aftertaste from other recent innovations.

The Wall Street boys ruined investing for years to come. Tainted Tylenol financial products should be off the shelf, but Goldman Sachs & company can't stop securitizing or selling "non-insurance" credit coverage. Balance sheets remain opaque, while derivatives sit outside financial statements ready to pounce in asset slashing fashion.

Imitation may be a great flattery. However, beware UnitedHealth of what you create. On Wall Street, no one is buying.

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