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Policy disaster? On the contrary, insurance companies love this. They have a counterintuitive conflict of interest - that is, they make more money when health

Policy disaster? On the contrary, insurance companies love this. They have a counterintuitive conflict of interest - that is, they make more money when health costs are more expensive, through higher premiums.

smt88 8y ago
> they make more money when health costs are more expensive, through higher premiums Do you have a citation for this? If this were true, why would they aggressively negotiate lower costs and offer discount Rx cards? In the US, higher premiums mean fewer subscribers. I'm a co-founder of an auto-insurance company, and all we ever try to do is lower premiums in order to compete.
- ceejayoz 8y ago
  https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-... > The 80/20 Rule generally requires insurance companies to spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs. Basically, if you want to make more profits, you have to increase the raw size of that 20%. There's really only one way to do that - raise premiums. You can't really lower costs, as you risk having to pay back your subscribers for having shrunk the costs side too much.
  - lotsofpulp 8y ago
    Assuming you have competing insurance companies, then you can’t just raise premiums if your costs are unnecessarily high. Unfortunately, a properly functioning insurance market would require dumping everyone on the market, not just those who aren’t lucky enough to have it from their employer, who tend to be in better health anyway.
    - learc83 8y ago
      >Assuming you have competing insurance companies, then you can’t just raise premiums if your costs are unnecessarily high. That's true if it's just your costs that are unnecessarily high. But you can encourage policies and regulation that raise the total cost of healthcare for everyone.
      - lotsofpulp 8y ago
        The main factors keeping cost high is low supply of doctors, hospitals, and medicines. I’m not aware of any insurance industry effort to keep those supplies down. If anything, seeing a doctor who charges $200 for a 5 minute visit to prescribe antibiotics for a fever or a hospital that charges $7.5k for a no complications birth is what keeps prices high. If people had doctors and hospitals competing to offer standard procedures like births, broken bones, fevers, etc at lower costs, then that’s what will bring prices down.
        learc83 8y ago
        >The main factors keeping cost high is low supply of doctors, hospitals, and medicines. This is an enormous oversimplification unless you are taking such a broad view of "low supply" that it loses usefulness. >I’m not aware of any insurance industry effort to keep those supplies down. I don't know every policy that insurance industry lobbyists push. I do know that they lobby against price transparency--the lack of which almost certainly plays a role in healthcare costs. >If people had doctors and hospitals competing to offer standard procedures like births, broken bones, fevers, etc at lower costs, then that’s what will bring prices down. For elective procedures like plastic surgery and LASIK sure, but overall medical care is full of such extreme examples of market failures that you need more than just free market competition to control costs.
        lotsofpulp 8y ago
        I’m not aware of them lobbying against price transparency. I can easily search procedure codes on my insurance website and get the cost back. What I can’t get are the procedure codes from the doctors or the hospitals, somehow not a single person that works there knows what procedure codes will be billed.

smt88 8y ago

> they make more money when health costs are more expensive, through higher premiums Do you have a citation for this? If this were true, why would they aggressively negotiate lower costs and offer discount Rx cards? In the US, higher premiums mean fewer subscribers. I'm a co-founder of an auto-insurance company, and all we ever try to do is lower premiums in order to compete.

ceejayoz 8y ago
https://www.healthcare.gov/health-care-law-protections/rate-review/ https://www.healthcare.gov/health-care-law-protections/rate-... > The 80/20 Rule generally requires insurance companies to spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs. Basically, if you want to make more profits, you have to increase the raw size of that 20%. There's really only one way to do that - raise premiums. You can't really lower costs, as you risk having to pay back your subscribers for having shrunk the costs side too much.
- lotsofpulp 8y ago
  Assuming you have competing insurance companies, then you can’t just raise premiums if your costs are unnecessarily high. Unfortunately, a properly functioning insurance market would require dumping everyone on the market, not just those who aren’t lucky enough to have it from their employer, who tend to be in better health anyway.
  - learc83 8y ago
    >Assuming you have competing insurance companies, then you can’t just raise premiums if your costs are unnecessarily high. That's true if it's just your costs that are unnecessarily high. But you can encourage policies and regulation that raise the total cost of healthcare for everyone.
    - lotsofpulp 8y ago
      The main factors keeping cost high is low supply of doctors, hospitals, and medicines. I’m not aware of any insurance industry effort to keep those supplies down. If anything, seeing a doctor who charges $200 for a 5 minute visit to prescribe antibiotics for a fever or a hospital that charges $7.5k for a no complications birth is what keeps prices high. If people had doctors and hospitals competing to offer standard procedures like births, broken bones, fevers, etc at lower costs, then that’s what will bring prices down.
      - learc83 8y ago
        >The main factors keeping cost high is low supply of doctors, hospitals, and medicines. This is an enormous oversimplification unless you are taking such a broad view of "low supply" that it loses usefulness. >I’m not aware of any insurance industry effort to keep those supplies down. I don't know every policy that insurance industry lobbyists push. I do know that they lobby against price transparency--the lack of which almost certainly plays a role in healthcare costs. >If people had doctors and hospitals competing to offer standard procedures like births, broken bones, fevers, etc at lower costs, then that’s what will bring prices down. For elective procedures like plastic surgery and LASIK sure, but overall medical care is full of such extreme examples of market failures that you need more than just free market competition to control costs.
        lotsofpulp 8y ago
        I’m not aware of them lobbying against price transparency. I can easily search procedure codes on my insurance website and get the cost back. What I can’t get are the procedure codes from the doctors or the hospitals, somehow not a single person that works there knows what procedure codes will be billed.