Orioles Interested in deGrom

[Aristotelian]

15 minutes ago, Sports Guy said:

Is this really a discussion about whether or not he will opt out? Like seriously?  It’s 100% that he will opt out because he will get a lot more guaranteed money than is on the table.

 

I can see the argument for taking a gamble, i.e. one year contract this year, with the goal of $250M contract in '24 assuming he does well this year. However, you are right, even if that is his strategy he can always opt out, explore the market for a long term deal, and still take a one year "prove it" deal should he not get what he wants. Correa would be a precedent for that strategy, and it seems very likely it will work out for him. 

[Aristotelian]

15 minutes ago, Sports Guy said:

Is this really a discussion about whether or not he will opt out? Like seriously?  It’s 100% that he will opt out because he will get a lot more guaranteed money than is on the table.

 

I can see the argument for taking a gamble, i.e. one year contract this year, with the goal of $250M contract in '24 assuming he does well this year. However, you are right, even if that is his strategy he can always opt out now, explore the market for a long term deal, and still take a one year "prove it" deal should he not get what he wants. Correa would be a precedent for that strategy, and it seems very likely it will work out for him. 

[Sports Guy]

1 hour ago, Aristotelian said:

I can see the argument for taking a gamble, i.e. one year contract this year, with the goal of $250M contract in '24 assuming he does well this year. However, you are right, even if that is his strategy he can always opt out, explore the market for a long term deal, and still take a one year "prove it" deal should he not get what he wants. Correa would be a precedent for that strategy, and it seems very likely it will work out for him. 

He will probably get a 3-4 year deal with an opt out after year 1 or 2.

[Tony-OH]

On 10/30/2022 at 12:00 PM, Ohfan67 said:

Degrom will opt out. He was incredibly vocal about opting out last spring and he looked so good in August and September that he will get a huge deal. But I think he will resign with the Mets. He was very vocal about wanting to remain with the Mets last spring and the Mets ownership is all in. They have a legitimate shot at a World Series in the next few years and have already decided to go for it. The Mets paid Degrom 35.5 million this year. I don't think Degrom will have to take a per year pay cut. I think they will give him 4/160 or similar. I think they would happily sign him to 3/120. I think there's a pretty low probability that Degrom "earns" that contract in terms of WAR per dollar (he's averaged 75 innings over the last three years), but they will take the risk and gladly pay for unproductive/injured years if they get to have a World Series victory parade in 2023 or 2024.  

I see this is as the most likely scenario. I'd love for the Orioles to sig deGrom, but I just don't see it likely that the Mets allow him to leave when they are World Series contenders next year.

[tntoriole]

On 10/31/2022 at 10:55 AM, Aristotelian said:

I can see the argument for taking a gamble, i.e. one year contract this year, with the goal of $250M contract in '24 assuming he does well this year. However, you are right, even if that is his strategy he can always opt out now, explore the market for a long term deal, and still take a one year "prove it" deal should he not get what he wants. Correa would be a precedent for that strategy, and it seems very likely it will work out for him. 

Jake is in the driver’s seat for sure. 

[Roll Tide]

On 10/30/2022 at 5:07 PM, now said:

Sorry, refresher needed here. Insurance covers salary for player injuries, right? Granted, you lose the quantity of production you hoped for, but still end up with quality after the insurance discount, no?

The policy would be expensive. You have to consider that as insurance companies do not issue policies to lose money.

In 2018, they estimated that a policy costs $8000 per million in premiums. It’s probably gone up quite a bit. But, a $40 million contract would something like 3.2 million. Premiums are paid quarterly, semi annually, or annually. So the cost to a team is recurring.

And it has to be a wipeout to collect it. I’d be very surprised if the Orioles recovered anything from the Davis contract. Especially, since his diminished reaction time was most likely a side effect of Adderall. 
 

this article talks about the subject …albeit about football players. But, you get the jest. High premiums and then difficult to actually recover money. And needing legal help to actually get it. Meaning you probably have to give up a hefty chunk for legal services.

 

https://www.cbssports.com/college-football/news/leonard-fournettes-10m-policies-and-the-unregulated-world-of-player-protection/

Edited November 2, 2022 by Roll Tide

[now]

5 hours ago, Roll Tide said:

The policy would be expensive. You have to consider that as insurance companies do issue policies to lose money.

In 2018, they estimated that a policy costs $8000 per million in premiums. It’s probably gone up quite a bit. But, a $40 million contract would something like 3.2 million. Premiums are paid quarterly, semi annually, or annually. So the cost to a team is recurring.

And it has to be a wipeout to collect it. I’d be very surprised if the Orioles recovered anything from the Davis contract. Especially, since his diminished reaction time was most likely a side effect of Adderall. 
 

this article talks about the subject …albeit about football players. But, you get the jest. High premiums and then difficult to actually recover money. And needing legal help to actually get it. Meaning you probably have to give up a hefty chunk for legal services.

 

https://www.cbssports.com/college-football/news/leonard-fournettes-10m-policies-and-the-unregulated-world-of-player-protection/

Thanks, that's informative. It refers to players taking out the policies. Does anyone know how this works in MLB? I remember discussion in years past about the Orioles collecting (or not) on injured players... Belle, Segui? No doubt it's costly and hard to actually collect. I just wonder how widespread it is for big contracts to be insured, and how often insurance actually covers losses. DeGrom would be a classic case where it would make a big difference depending on how that works. 

[Frobby]

3 minutes ago, now said:

Thanks, that's informative. It refers to players taking out the policies. Does anyone know how this works in MLB? I remember discussion in years past about the Orioles collecting (or not) on injured players... Belle, Segui? No doubt it's costly and hard to actually collect. I just wonder how widespread it is for big contracts to be insured, and how often insurance actually covers losses. DeGrom would be a classic case where it would make a big difference depending on how that works. 

I do think the teams can buy it.  The deductibles are stated in terms of games missed.   I think they often don’t begin paying until the player has missed at least half a season, and even then pay only a portion of the salary.   

[DrungoHazewood]

5 hours ago, Roll Tide said:

The policy would be expensive. You have to consider that as insurance companies do issue policies to lose money.

I'm sure you're missing a "not" before issue, but that's a very good point.  The net payout to teams from player insurance is going to be negative. On average a team will pay more in insurance payments than they receive in benefits, otherwise why would anyone run a baseball player insurance company?

If the company's actuarial tables think deGrom has a 1-in-2 chance of being hurt enough to pay out, they'll price the policy such that they make money in most situations, meaning that the insurance would be quite expensive.  Perhaps expensive enough to not be worthwhile, except perhaps in a situation where they're only taking out catastrophic insurance to cover something like a career-ending injury.  Which should be much cheaper than one that covers lesser injuries and missed time.

[Roll Tide]

2 minutes ago, DrungoHazewood said:

I'm sure you're missing a "not" before issue, but that's a very good point.  The net payout to teams from player insurance is going to be negative. On average a team will pay more in insurance payments than they receive in benefits, otherwise why would anyone run a baseball player insurance company?

If the company's actuarial tables think deGrom has a 1-in-2 chance of being hurt enough to pay out, they'll price the policy such that they make money in most situations, meaning that the insurance would be quite expensive.  Perhaps expensive enough to not be worthwhile, except perhaps in a situation where they're only taking out catastrophic insurance to cover something like a career-ending injury.  Which should be much cheaper than one that covers lesser injuries and missed time.

Well you have to consider that many/most aren’t needed or typically don’t meet the requirements to issue payment. Then the insurance company will pay out a portion (50-60 percent) when they finally do.

So….an 8 year $240 million. So ….let’s say the player tears an ACL while playing or TJ surgery in year 4. Causing the player to miss 1 full season. 
 

premiums start are $2 million dollars. Then dwindle some as the contract value decreases with time. 
 

year 1 $2 million

year 2 $ 1.6 million

Year 3 $ 1.45 million

Year 4 $960 Thousand

So over that period the premiums were $8 million. The insurance company will pay 50% of the 30 million or $15 million. The premiums will still be owed in the final 4 years. That’s another 2.4 million, so approximately 12 million dollars versus the 15 million that they’d pay out. I’m guessing that these types of contracts probably pay something out in 1 out of 10 contracts. 
 

 

 

[DrungoHazewood]

7 minutes ago, Roll Tide said:

 I’m guessing that these types of contracts probably pay something out in 1 out of 10 contracts.

Right, so if you paid $8m for each contract like that let's say you're the Yanks and you have 10 large, insured contracts.  You pay $80M in insurance on them.  Is that better or worse than just paying the money owed to injured players?  From the insurance company perspective, I'd say it's not worth it for the team.  The premiums are set up so the insurance company makes money in a large percentage of the cases, which means the teams lose money.

Edited November 2, 2022 by DrungoHazewood

[DrungoHazewood]

I may be missing some nuance here, but insurance is set up to cover expenses that are a) relatively rare, and b) expensive enough that you can't pay out of pocket.  Like health insurance, which helps pay for massive costs by spreading the premiums out among thousands of people, most of whom are healthy.

Baseball injuries are pretty common, and the team has already set up their budgets to afford the contract in question.  I have to think that the number of contracts really worth insuring are pretty small. Which means you have a smaller base to spread the costs out for the company, driving premiums higher. 

Unless I'm missing something. I'm certainly not an insurance guru.

Edited November 2, 2022 by DrungoHazewood

[now]

Given all of the above (and the Orioles' own history with injured players), I would expect that health probability would play a key part in the team's assessment of player evaluation and contract size--even if it means finding ways around paying the going market rate for big-ticket players. 

Which helps explain their strategy to date, of prioritizing position players, supplementing with proven healthy pitchers, and leaning on system depth more than pricey veterans. Of course, all that is easier when rebuilding than going to the next level. Still, I think they'll steer away from the riskier health resumes and choose instead more "high floor" assets from the market. 

[Roll Tide]

3 hours ago, DrungoHazewood said:

I'm sure you're missing a "not" before issue, but that's a very good point.  The net payout to teams from player insurance is going to be negative. On average a team will pay more in insurance payments than they receive in benefits, otherwise why would anyone run a baseball player insurance company?

If the company's actuarial tables think deGrom has a 1-in-2 chance of being hurt enough to pay out, they'll price the policy such that they make money in most situations, meaning that the insurance would be quite expensive.  Perhaps expensive enough to not be worthwhile, except perhaps in a situation where they're only taking out catastrophic insurance to cover something like a career-ending injury.  Which should be much cheaper than one that covers lesser injuries and missed time.

So the Orioles insured the Davis contract …. Probably 

 

Quote

After the restructuring, Davis’ 2022 salary effectively functions as a buyout that honors the original deal over time and provides the O's with roster flexibility. At least some of that money is covered by insurance since Davis did not play this season after undergoing left hip surgery.

 

 

 

https://www.mlb.com/news/orioles-chris-davis-retires

Edited November 2, 2022 by Roll Tide