The Truth About Those "Evil Health Insurance Companies"

>> Wednesday, March 10, 2010

Insurer's Profits Aren't the Problem
by Jeffrey H. Anderson, National Review Online
February 24, 2010

[Posted in full...]

For an administration that says it’s committed to using empirical evidence to determine “what works,” and a president who says he’s “not an ideologue,” Obamacare’s marketing sure does rely on a healthy dose of fiction. The central inference behind the supposed need to pass Obamacare is that insurance companies are shamelessly gouging us and disproportionately driving up the costs of our entire health-care system. This is demonstrably false. But the Obama administration’s failure to recognize — or to admit — this inconvenient truth, largely explains why its proposed remedies would not only fail to drive health costs down, but would instead raise them up even further.

According to the most recent Fortune 500 rankings, health insurers are not even among the top-30 United States industries in profit-margin. Health insurers rank 35th, with a profit-margin of just 2.2 percent — less than one-fifth the profit-margin of railroads. None of the ten largest American health insurers made profits of more than 4.5 percent, and two of them lost money. Health insurers’ collective profit-margin is less than one-eighth that of drug companies and less than one-seventh that of companies that sell medical products or equipment. It’s also less than that of medical facilities. Yet when was the last time you heard President Obama rail against greedy hospitals?

The combined profits of America’s ten largest health insurers are $8.3 billion. That’s less than two-thirds of the profits of Wal-Mart alone, less than half of the profits of General Electric alone, and less than one-seventh of what Medicare loses each year to fraud. Health insurers collectively have one-eighth the profit-margin of McDonald’s or Coke, one-ninth that of eBay, and one-fifteenth that of Merck.

Why don’t these much more profitable companies or industries need to be taken over by the federal government? Why don’t they need to be subjected to something like President Obama’s proposed Health Insurance Rate Authority, which would be run by the same U.S. Department of Health and Human Services that already loses $60 billion of taxpayer money to Medicare fraud each year? (Not that I want to give the Obama administration any ideas.)

In all, the combined profits of the 14 largest American health insurers (the ones who crack the Fortune 1000) are $8.7 billion. That’s less than 0.4 percent, or 1/250th, of overall U.S. health-care costs, which are $2.5 trillion.

Anyone but an ideologue could plainly see that insurance profits aren’t the problem. The problem is having a health-care system with too many middlemen (government or otherwise); too little competition and choice; and too little opportunity for Americans to control their own health-care dollars, shop for value, or even see prices.

If you can’t identify the problem, you aren’t likely to stumble upon the solution. Maybe that’s why the Congressional Budget Office says that, under Obamacare, which would cost $2.5 trillion in its real first decade (2014 to 2023), the average family’s insurance premiums in the individual market would increase by $2,100 in relation to current law — while under the House Republican health bill, which would cost $61 billion (just 2 percent as much as Obamacare), the average premiums would be reduced by 5 to 8 percent.

President Obama likes to say that the Republicans don’t have any ideas, but the House GOP bill would clearly make the American health-care system better. The small bill would make it better still. Obamacare would raise nationwide health costs, siphon billions out of barely solvent Medicare and spend them elsewhere, cut Medicare Advantage benefits by an average of $21,000 per beneficiary in its real first decade, politicize medicine, reduce liberty, raise taxes, cost jobs, and inevitably lead to rationed care. In an Olympic competition between the GOP plan, the small bill, and Obamacare, the status quo would clearly merit the bronze.

In truth, the judges — the American people — disqualified Obamacare some time ago. But here comes President Obama, skating back onto the ice to the cheers of the far Left and the amazement of everyone else, seemingly as oblivious to the judges’ verdict as he is to the true causes of American health-care inflation and thus to the solutions that would constitute real reform.


BenT - the unbeliever,  March 10, 2010 at 10:21 AM  

"The problem is having a health-care system with too many middlemen"

The question we have to ask ourselves about any industry is does it add to the well being of the nation?

Do insurance companies increase access to healthcare?

Do insurance companies lower the cost of healthcare?

If you can't access yes to either one of these questions then as an industry insurance companies don't need to exist. These are the same sorts of questions the country had to answer about cigarette companies. Perhaps insurance agencies could be converted into a different business model to make them beneficial to the country, but as they now exist I don't see much point to them.

Medicare on the other hand does provide healthcare benefits to the elderly. Both access and cost containment. Not as much cost reduction as anyone would like, but that can be modified.

Why is medicare and the VA good for seniors but not everyone else?

ELAshley March 10, 2010 at 11:58 AM  

So... are you saying insurance companies need to go the way of the dinosaur? Run them over a cliff? Drop an asteroid on them?

You actually approve of this president bending over backward to crush the private insurance industry? In favor of what? The government run plan? Like the one they run now? Medicare? Which refuses far more treatment to people under its care than private insurance?

ELAshley March 10, 2010 at 12:00 PM  

"Medicare on the other hand does provide healthcare benefits to the elderly. Both access and cost containment. Not as much cost reduction as anyone would like, but that can be modified."

Really!? And how will this fiction continue after Obamacare strips Medicare of 500 billion annually?

BenT - the Unbeliever,  March 10, 2010 at 1:10 PM  

You can't have it both ways.

EITHER medicare denies too many and should approve more claims and spend more money.

OR the program is riddled with fraud and cutting funding will encourage administrators to vigorously weed out cheats.

When you look at customer satisfaction surveys and medical outcome surveys and studies on patient care access Medicare and Veteran's Administration come in tops.

Marshall Art March 15, 2010 at 11:57 PM  

"Do insurance companies increase access to healthcare?"

Was that ever their purpose?

"Do insurance companies lower the cost of healthcare?"

Was even this ever their purpose? They do, however, mitigate the cost through upfront premium payments to cover whatever the plan spells out.

The high cost of health care has much less to do with insurance companies than it does with government influences. The cost of premiums people pay is more a consequence of rising costs, not a cause.

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