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This is regulation everybody should be able to get behind. How are these markets supposed to function efficiently with healthy competition if critical informati
by daenz 4y ago
This is regulation everybody should be able to get behind. How are these markets supposed to function efficiently with healthy competition if critical information like this is hidden away?
- AdmiralAsshat 4y agoThat would get in the way of unadulterated profit, you see.
- ch4s3 4y agoHealth insurers in the US have a cap on how much of premiums can go to profits.
- wccrawford 4y agoDoesn't that just mean that they have an interest in keeping these costs high? The higher the costs, the larger that % is for the in absolute dollars. If all the costs come down, they are allowed to make less money.
- nimish 4y agoBingo. This is why they loved the ACA. Only allowed one scoop of ice cream? Great I'll use an enormous scoop.
- lotsofpulp 4y agoThat enormous scoop results in 5% or less profit margins. Compare to tech companies’ profit margins.
- CogitoCogito 4y agoSo? They're insurance companies. Why should they have high profit margins?
- lotsofpulp 4y agoI never wrote they should. I am disputing the notion that they earn huge profits (“enormous scoop”). Which is trivially disproven by looking at their financials.
- CogitoCogito 4y agoHow is it disproven exactly? Are you saying 5% is not a lot because it's the number 5 or something?
- lotsofpulp 4y agoFrom experience operating businesses and reading financials of various companies, 5% profit margin is on the low end. Walmart and other retail play in the 2% to 5% range.
- CogitoCogito 4y agoWhy would you compare such different businesses profit margins? Anyway I just think saying a 5% profit margin is small because other businesses have larger profit margins is kind of naive. I mean if through competition insurance companies' profit margins dropped to 2%, then the current status quo of 5% would seem crazy. It's all just a matter of perspective. Saying 5% is low because other businesses have higher profit margins doesn't make much sense since the businesses are totally incomparable.
- lotsofpulp 4y agoThe reason to compare it to other businesses is to see what kind of moat/regulatory capture/monopoly/monopsony power they have. For those purposes, a 5% profit margin indicates that health insurance companies do not have the pricing power that many other industries have. They actually have some of the lowest, which is fine, but then the claims of them being in control go out the window. Whether or not 5% itself is too high can be determined by looking at the competition. There are at least 7 other major publicly traded health insurers competing against each other, all with nearly the same profit margin. So either they are colluding with each other and there is corruption on a massive scale, or, the current parameters of the health insurance business simply result in a ~5% profit margin. If you think you can do better, then you are betting that you can do the job better than all the employees at these 7 companies, which is a lofty claim.
- magila 4y agoYes, this is one of the more unfortunate unintended consequences of the ACA.
- tryptophan 4y ago"unintended" Insurance companies wrote the bill.
- ch4s3 4y agoParts of it, but it’s not clear that MLR was one of those parts or even a net positive for insurers.
- heavyset_go 4y agoInsurance costs were increasing at a higher rate each year before the ACA was passed or went into effect.
- ch4s3 4y agoThe rate of growth didn’t go negative or to 0, it just slowed down.
- heavyset_go 4y agoCorrect
- mypalmike 4y agoAre you implying that before ACA, insurers had an incentive to keep costs low?
- vanattab 4y agoIt may have been unintended but it was defiantly not unknown, I remember people pointing out this exact problem during the debate around ACA.
- Spooky23 4y agoYes. Although painted by reactionaries as a communist plot, ACA was modeled after Massachusetts’ “Romneycare”. It’s typical old school GOP policy of leveraging private sector actors with public sector dollars. It’s not awful policy, but did create bad cost incentives and encourages cartel like health networks.
- coredog64 4y agoIt’s called Romneycare because he got it implemented as a lightweight alternative to a pending proposal for more universal coverage. It’s also similar in nature to the Swiss system. Not a lot of GOP voters in Swiss cantons.
- ch4s3 4y agoYou don’t need to be a reactionary to see that it was very poorly written and that the implementation was even worse.
- jjeaff 4y agoIn a vacuum, that would make sense, but most of these insurers still have to compete with at least one or two other big players. So while you could increase your costs so that you can increase your premiums thus getting 5% of a larger pie, that assumes that you can increase your premiums without losing customers to competitors. For the most part, on the ACA marketplace, all the plans are pretty similar, so price is really your main differentiator. Perhaps the obstacles of switching providers makes this competition less of an issue.
- ch4s3 4y agoYes, I agree that price controls set by the state are a bad idea.
- daenz 4y agoIt seems like the cap should be unnecessary in the near future if we have full price transparency.
- throwaway12245 4y agoIt this a windfall profits tax?
- NaturalPhallacy 4y agoIIRC, it's 15%, meaning that they can only have $675,000,000,000.00 in profits. That is $675,000,000,000.00 they can take from us and instead of using for healthcare or even healthcare administration, it's just additional money that they took.
- lotsofpulp 4y ago> it's just additional money that they took. When did they take it? All the 10-Ks are showing me 5% or less profit margins.
- nicoburns 4y agoThey have low profit margins, but they massively overpay for the care, meaning that it's still incredibly inefficient.
- lotsofpulp 4y agoHow are you determining they massively overpay for the care?
- nicoburns 4y agoBy comparing to the prices paid for comparable care in other countries. And also by comparing what US hospitals charge insurers vs what US hospitals charge cash payers.
- lotsofpulp 4y agoOverpay means getting being able to get a better deal than you did. If it is 1 hospital in a 100 mile radius telling an insurance company to take it or leave it, how is it overpaying? Prices paid in other countries are irrelevant due to numerous factors, such as cost of living, purchasing power of local currency, legal liabilities, and most important, whether or not it is taxpayer funded healthcare which means all sellers are dealing with 1 buyer, which is the nearly the exact opposite of the US, where it is all buyers dealing with 1 seller (hospital or drug manufacturer who owns the patent).
- jjav 4y agoThat's a meaningless cap because you can decrease profits at will by increasing inefficiency and unnecessary costs inside the company.
- coredog64 4y agoIt’s called medical loss ratio (MLR), and insurers are required by law to spend 80-90% of premiums on medical care. They can get there by overpaying for care or by refunding money/charging less. But they can’t get there with increased internal administration spending.
- heavyset_go 4y agoPremiums are not the only source of revenue insurers have.
- uoaei 4y agoWould you like to provide a positive statement that coincides with this negative one?
- heavyset_go 4y agoCopays, deductibles, revenue from providers, etc.
- coredog64 4y agoThe copay goes to the healthcare provider, not the insurance company. That’s why it’s called copay: You are jointly paying the provider alongside the insurance company. A deductible is an amount of care that you’re solely responsible for. None of that money goes to an insurance company.
- foobiekr 4y agoThe problem with this approach, even before the ACA was passed, is that if you have a maximum profit fraction, the way to maximize profit in absolute terms is to just charge more and spend more - it encourages absolutely the wrong behavior in terms of costs management.
- lotsofpulp 4y agoAlso why wages and other transaction data (like it is for real estate in most states) should be public.
- ledauphin 4y agoi don't follow this argument. thr salient point for me is that people should be able to see prices before they commit to contracting to pay them (e.g. by receiving healthcare). With wages, employees (and employers) get to see their price before committing. So the need for transparency seems like it would need a different justification.
- lotsofpulp 4y agoPrice transparency is necessary for market participants to observe the movements of the supply and demand curves. For example, declining prices of labor indicate to suppliers of labor to reallocate labor supply to other fields. Increasing prices of labor indicate to suppliers of labor to reallocate labor supply to that field.
- ledauphin 4y agothanks for this explanation. it's something I've not thought about before and it's enlightening.
- throw123123123 4y agoBecause the obscurity of the prices is a result of regulation as well. We need less layers of control with "unintended" consequences.
- daenz 4y agoCan you elaborate on the regulations that you are referring to?
- arwhatever 4y agoCan’t point to the source, but I think we all know that there is some sort of regulation requiring us to pay providers for services when those providers refuse to provide pricing information at before or during the time of service.
- IfOnlyYouKnew 4y agoThat sounds, among other things, like something entirely unrelated to the issue.
- arwhatever 4y agoI would argue that it is the thing most related to the issue.
- IfOnlyYouKnew 4y agoAnd you'd be wrong: that may be an issue, but it just doesn't relate to OP's idea of some regulation prohibiting health care providers or insurers from publishing prices.
- DangitBobby 4y agoI think you just have you sign documents saying you're responsible for paying whatever the cost turns out to be. Why would a regulation be required to enforce that?
- heavyset_go 4y agoIt's because information asymmetry allows for maximum profits.
- tomrod 4y agoI view healthcare as a service, like utilities. There is a reason the PUC exists in so many (all?) US states.
- april_22 4y agoGeorge Akerlof's work on information assymetry, especially his 'Market for Lemons' is super interesting and I can only recommend reading about it. He won the Nobel price 2001 for it. https://you.com/search?q=George+Akerlof+information+asymmetry https://you.com/search?q=George+Akerlof+information+asymmetr... https://www.investopedia.com/terms/g/george-a-akerlof.asp https://www.investopedia.com/terms/g/george-a-akerlof.asp
- uoaei 4y agoLibertarians ret-conned Adam Smith's definition of "free market" to mean "complete absence of regulation". And they use this appeal to authority (as well as the naturalistic inevitabilism that originates in evo-psych) as a cudgel to push for the permission of exploitative practices. We are becoming more and more aware as a society of the effects of this campaign, which is heartening, but reactionaries stand at arms to defend their ideological convictions to the death. For the record, what Adam Smith actually meant by "free" was "everyone is free to participate -- barriers to participation are controlled for and mitigated to the best ability". This requires regulation to discourage and ideally eliminate monopolistic behavior.
- zip1234 4y agoThose libertarians who have famously been in charge of the United States since it's founding and got the US into the current health care cost mess?
- tomrod 4y agoNah, not to be political but the parent commenter probably means the retconning folks in the GOP who claim libertarianism as a political ideology but are often anything but. Left libertarianism is summed up as: live and let live. Very different.
- pastor_bob 4y agoThe free market produces the most efficient outcome
- kibwen 4y agoSadly, no. Or it does, but only if one defines "efficiency" tautologically as "what a free market would do", which is sadly too common. There are many factors that contribute to inefficient markets, one of which is information asymmetry among the participants. Keeping markets efficient takes work, and, indeed, sometimes requires regulation.
- tzs 4y agoIt produces a maximally efficient outcome (by some definitions of efficient) if various requirements hold about the market, the goods in the market, and the market participants. Almost all real markets deviate from those requirements. Sometimes these deviations aren't enough to prevent the market from producing close to maximally efficient outcomes, and sometimes they are enough to make the market produce outcomes nowhere efficient. This is one of the reasons why an economics degree requires coursework beyond Economics 101. :-) Economics 101 is the equivalent of Physics 101 where we mostly ignore things like air resistance and friction or Electronics 101 where we ignore things like parasitic capacitance and parasitic inductance of component leads and keep frequencies low and time scales long enough that we don't have to worry about speed of light delays between different sides of our circuits. It's the courses after the 101 courses were you start to get messiness that is the real world of economics or physics or electronics. Anyway, when a real world free market deviates from the requirements to produce a maximally efficient output one of the ways to make it work better is to use regulation to try to make it behave as if the missing requirement held. A good example is when you have a good that costs the maker a significant amount to make but that anyone can easily copy perfectly at close to zero cost. A free market will tend to not be efficient for that good because makers have trouble making a profit (or even staying in business). Consumers pay near zero for their copies and so can consume as much as they want, which makes them happy, but there will be much less variety available than consumers want. A long time ago the approach to that was to just not have a market for that kind of good. Makers would find some rich patron who was willing to pay to have new goods made. Free copies might still be made for the masses, but the rich patrons gained social status among their peers by being patrons of famous makers so would keep patronizing makers. A regulatory fix is to make it so only the maker is allowed to make copies of their goods. You can then have a decent market in those goods. It's still not ideal because although it solves the problem of the market getting makers to make it does raise the price to consumers above the theoretical free market price which should be near zero. Another approach would be to have the government pay the makers, and then let anyone freely make copies. This is probably the way to get closest to maximal efficiency but it raises the problem of how to have the government decide with makers to support. One approach to that is to try to track which things consumers are actually using, and then pay the makers proportionally to that usage. Another issue with that approach is where should the money for the makers come from? It could come from general government revenues but then you have the problem of deciding how much should be used for this. Also you will have people who don't like these kind of goods and object to their tax dollars going to support them. Another approach is to tax use of these goods to fund the makers, or tax something that correlates well with use of the goods. Let's not overlook that an approach that requires tracking of consumer use might require surveillance that, in the hands of someone who wants to do something less benign than just figure out how to allocate maker pay, could be used for evil purposes. That might be too high a price to pay just to get the most efficient levels of production and consumption of this particular good. Real economics is complicated and messy.
- sytelus 4y agoI don't think this will lhave much impact on health care cost. The cost is high because it is paid through employer and therefore it is hidden from you. If the law was to force employers disclose lost wages for employees due to health car, that would have bigger impact. The real impact will come if employers turn off the medical insurence coverage entirely and everyone has to cut the checks themselves.
- IfOnlyYouKnew 4y agoEmployer-provided healthcare is a solution for the problem that health insurance, unless it is mandatory, will tend to attract a self-selected group of expensive customers and, in turn, make health insurance (even more) unattractive for healthy people.