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Medical insurer's profits are limited to a percentage of their gross income, so, more expensive medications and procedures are preferred to less expensive ones
by freeone3000 4y ago
Medical insurer's profits are limited to a percentage of their gross income, so, more expensive medications and procedures are preferred to less expensive ones in order to preserve overall income.
- danuker 4y agoWell, there's a perverse incentive!
- bambax 4y agoAh... Thanks... Unintended consequences strike again.
- kuu 4y agoNot so sure it is unintended...
- willcipriano 4y agoThis predicable outcome was either on purpose or the nation is ran by a cabal of people with severe cognitive impairment. What's better?
- sokoloff 4y agoPorque no los dos? (Why can’t it be both?)
- gambiting 4y agoI don't understand. If you pay $5000 a year for your medical insurance, but it paid $10k for your medication, how have they made money? If they could purchase the same medication for $2000 instead, surely it would be more profitable for them?
- closewith 4y agoPart of the U.S Affordable Care Act is the so-called 80/20 rule, which limits profit margins to 20%. Therefore, the greater the overall healthcare spend by insurance companies, the greater the allowable profit.
- thaumasiotes 4y ago> If they could purchase the same medication for $2000 instead, surely it would be more profitable for them? If the 60% profit margin is illegally high, then no, it's worse. They'd be better off paying more money for the same thing.
- giantg2 4y agoVerticle Integration. For example, CVS Caremark is my insurance. They force me to get most medication through CVS or their mail order service.
- api 4y agoWow what a perverse incentive.
- formerkrogemp 4y agoNo, they're required to spend at a minimum 85% of the money they receive from premiums on healthcare or healthcare quality improvement. As the price of medical procedures goes up, so does the 15% amount that they're allowed to keep and so too do the premiums rise to increase their income.
- nradov 4y agoWhile the Affordable Care Act (Obamacare) did introduce a minimum medical loss ratio, insurers still have a strong incentive to hold down costs by encouraging use of cheaper generic medication so that they can offer lower prices to plan purchasers. Most medical insurance is purchased by employers and other group buyers, and they look closely at costs. In most cases, physicians have to obtain specific approval in order for more expensive medications to be covered.
- spaetzleesser 4y agoMy impression is that they mainly focus on pushing costs to the patient in the form of higher and higher deductibles.
- nradov 4y agoWho is "they"? Medical insurance companies don't really set deductibles. They offer a menu of options to customers (mainly large employers) and let them pick. Insurers are happy to offer plans with zero deductible, but the premiums will be higher. This is all based on actuarial calculations; insurers generally don't make any more profit on high-deductible plans. If you think your deductible is too high then complain to your employer. There is a tax incentive at work here as well. Individuals enrolled in high-deductible health plans (HDHP) can often receive a federal income tax break, so you have to factor that in when calculating your net cost.
- spaetzleesser 4y agoThe configuration of your health insurance is negotiated between insurance and employer. It seems pretty obvious that they are setting things up in a way that’s good for them.
- nradov 4y agoYou don't seem to understand how that negotiation works. Higher deductibles aren't good for medical insurers. In terms of insurer profit margin, higher deductibles are neutral to slightly negative. It's the employer (customer) who has complete control over deductibles. That is the reality of how the market works. Deductibles are generally going higher because healthcare providers and pharmaceutical companies raise prices every year, and because we have an increasingly unhealthy population that demands more services. Insurers try to hold down those increases but with limited success, so they pass those costs on to their customers (employers), and those customers in turn pass on the higher costs to their employees.