The costs of the current health care system are becoming increasingly clear, and public sentiment for a more systematic approach may be growing. The New York Times has an interesting piece on the dirty words “Rationing Healthcare”

You have advanced kidney cancer. It will kill you, probably in the next year or two. A drug called Sutent slows the spread of the cancer and may give you an extra six months, but at a cost of $54,000. Is a few more months worth that much?

If you can afford it, you probably would pay that much, or more, to live longer, even if your quality of life wasn’t going to be good. But suppose it’s not you with the cancer but a stranger covered by your health-insurance fund. If the insurer provides this man — and everyone else like him — with Sutent, your premiums will increase. Do you still think the drug is a good value? Suppose the treatment cost a million dollars. Would it be worth it then? Ten million? Is there any limit to how much you would want your insurer to pay for a drug that adds six months to someone’s life? If there is any point at which you say, “No, an extra six months isn’t worth that much,” then you think that health care should be rationed.

In the current U.S. debate over health care reform, “rationing” has become a dirty word. Meeting last month with five governors, President Obama urged them to avoid using the term, apparently for fear of evoking the hostile response that sank the Clintons’ attempt to achieve reform. In a Wall Street Journal op-ed published at the end of last year with the headline “Obama Will Ration Your Health Care,” Sally Pipes, C.E.O. of the conservative Pacific Research Institute, described how in Britain the national health service does not pay for drugs that are regarded as not offering good value for money, and added, “Americans will not put up with such limits, nor will our elected representatives.” And the Democratic chair of the Senate Finance Committee, Senator Max Baucus, told CNSNews in April, “There is no rationing of health care at all” in the proposed reform.

Remember the joke about the man who asks a woman if she would have sex with him for a million dollars? She reflects for a few moments and then answers that she would. “So,” he says, “would you have sex with me for $50?” Indignantly, she exclaims, “What kind of a woman do you think I am?” He replies: “We’ve already established that. Now we’re just haggling about the price.” The man’s response implies that if a woman will sell herself at any price, she is a prostitute. The way we regard rationing in health care seems to rest on a similar assumption, that it’s immoral to apply monetary considerations to saving lives — but is that stance tenable?

Health care is a scarce resource, and all scarce resources are rationed in one way or another. In the United States, most health care is privately financed, and so most rationing is by price: you get what you, or your employer, can afford to insure you for. But our current system of employer-financed health insurance exists only because the federal government encouraged it by making the premiums tax deductible. That is, in effect, a more than $200 billion government subsidy for health care. In the public sector, primarily Medicare, Medicaid and hospital emergency rooms, health care is rationed by long waits, high patient copayment requirements, low payments to doctors that discourage some from serving public patients and limits on payments to hospitals. Read more here. . .

I help organize the Summit Director and Officer Training Conference that is held every year in Deer Vally, Utah. While doing a bit of research on topics for this year’s conference I found a well-written paper by Steve Wagner and Maureen Errity on the Risk Intelligent Board: Viewing the World through Risk-Colored Glasses. It’s a topic of keen relevance in today’s business world.

Analyze the demographics of most corporate boards and you’ll find a heterogeneous collection of exceptional talent. The skills members bring to the table reflect a wealth of experience, knowledge and wisdom. Yet despite this extraordinary diversity of viewpoints, it is important that every member of the board don a pair of risk-colored glasses.

These days, you can’t even sit on a public company board without giving at least cursory attention to risk. The New York Stock Exchange requires the audit committee of all listed companies to annually discuss the company’s financial risk exposures and understand how management addresses such risks. Several shareholder ratings services and institutional investors now include risk management in their corporate evaluations. And, of course, the potential for out-of-pocket settlements paid by board members or costly shareholder suits against the company have driven home the point in boardrooms across the land — risk has become personal.

To meet their fiduciary responsibilities, directors must share a common vision of risk and adopt a framework to support their risk oversight activities.

Boards are generally not negligent when it comes to risk. Quite the contrary; most board members make careful deliberations and bring to bear their best judgment. They summon the chief risk, strategy and audit executives, along with the external auditor and others who manage exposures to risk and related policies, to appear before the board. They listen to presentations, ask tough questions, and review reports.

Boards are under pressure — regulatory, legal, fiduciary, stakeholder — to oversee the risk management activities of the company. But many board members are unsure how to approach their risk-related responsibilities. They are uncertain about roles and delineation of responsibility. They wonder where to start and how to bring all the disparate pieces together.

Merely putting risk on the agenda for discussion starts a process that will spur creative thinking and generate illuminating discourse. Whether the initial conversation takes place at a committee level, at the full board level, or both is not as important as getting the discussion started. The topic of risk should be placed on the full board meeting agenda on a regular basis, perhaps several times per year.

By broaching the risk discussion at the board level, one pervasive problem is immediately confronted — the tendency for risk management activities to take place in “silos.” Most companies spread risk management across the organization. Treasury manages credit risk; IT oversees technology and information risk; facilities handles real property risk. This level of specialization is essential to effective risk management. But problems can arise if these risk specialists remain in isolation, never venturing from their bunkers. Among the potential concerns: the “big picture” remains out of focus; disparities arise in the terminology used to talk about risk and the metrics used to measure it; and risks in combination and cascading risk scenarios don’t enter into the discussion.

To combat these problems, the board can act as a catalyst to bridge the silos. By bringing various risk managers into the same room to present their perspectives and strategies on risk, the board is creating an environment that will jump-start a collaborative and synchronized approach to risk management.

All publicly traded companies, regardless of size, are exposed to risks arising out of the company’s securities. Companies are subject to SEC oversight, securities regulations, and reporting requirements, all of which expose organizations to risk. Further, the actions of providing guidance to the street, conducting road shows, and having non-director shareholders create additional risk and potential liability for a firm. Any one of these items can be the impetus for a securities-based lawsuit. Additionally, directors and officers are held personally liable for their actions in running a company. This means that personal assets and wealth are potentially exposed in the event of a lawsuit against the firm that also names the individual director or officer. Directors & Officers (D&O) liability insurance is designed to protect individuals and companies from such exposures.

D&O Insurance Costs

Directors and Officers make decisions daily while wearing their “fiduciary hats.” However, I often advise clients to take off this “hat” and think beyond the direct cost of the D&O insurance premium, looking to the indirect costs of not purchasing the coverage. Such costs include the inability to attract top board talent, exposing personal assets to loss resulting from the error of a colleague, and even the potential demise of the entity. Given these potential scenarios what would you be willing to pay for such protection?

Follow this link to view the graphs and read additional details regarding trends in D&O.

Regan Guth is a Vice President with Diversified Insurance Group in Salt Lake City, UT. Over the past 7 years Regan has advised dozens of public companies in the procurement of D&O insurance coverage. Regan can be reached at rguth@diversifiedinsurance.com, (801) 325-5080.

Techassure has a really cool coverage calculator that can help a technology company evaluate and anticipate risks and appropriate coverage levels for their company.

Follow the link to check it out.