Government / Health and Fitness / Health Care

The role of the health insurance industry


We have a misconception of what the insurance companies job is.  There are two reasons for insurance companies to exist in the current scheme of things.  The first reason is to aggregate risk. That is to share risk amongst a large number of people. This is similar to car insurance or fire insurance.  The second reason is to negotiate with providers for reduced rate that means to represent their members.   It is reasonable that a company doing this should be able to charge a mark up to cover reasonable costs and profit.  The problem is that do to lack of proper regulation the exemption from the anti monopoly laws, insurance companies have decided that their  real service is to provide profits to their owners.

I should say that the idea that everyone pay the same amount does not make sense just as charging driver the same for car insurance without taking into consideration their driving record does not make sense.  That means that the insurance companies are have to decide what is fair to the other members.  But they have distored this role to help them obtain better profits.  They also have to decide what is reasonable medical care under the insurance otherwise some members might abuse the insurance and spend much more than needed.  But frankly, I hate to see a profit based business making these decisions.

To make matter’s even more complicated, we all of an interest in each other’s well fair.  People who are ill cost all of us money in reduced productivity, use of other services etc.

It appears that our government thinks they can improve things by adding some additional regulations.  I doubt that will work.   I believe the concept of medical insurance is a bad idea in these times.

I believe that we need a single payer system even with all the problems that will bring that is not tied to profit making.   We need to do the following:

  • Establish a single payer system  (by slowly increasing those that can be on Medicare)
  • Abolish the employer based medical insurance structure which will improve the competativness of our industries
  • Provide a tax credit to every family to cover the amount presently needed to provide reasonable health insurance.  This money will not have to be used for health insurance.  The government will pay for all costs above this for on a reasonable basis (difficult topic which needs more work).
  • The government must invest substantially more in medical research (take the money from defense  since we have the larges force in the world by a factor of twenty and one of the worse health outcomes of any developed country).
  • The government must invest in education and other actions that can effect life style

3 thoughts on “The role of the health insurance industry

  1. Avram
    I believe the end game in health care must look something like you propose however we need to first recognize the issues that are impeding any form of significant change and a clear picture of the current situation, beyond the politics and rhetoric. The current system has so much momentum that stopping it is virtually impossible. First we must get the system to change direction, then harness it and then it will be possible to morph it into a health system that will be beneficial to all stake holders.
    Whether we acknowledge it or not we are paying directly or indirectly for the health care of all U.S. citizens or other residents whether insured underinsured or uninsured. There are not “thousands of dead people lying in the streets”. Those without coverage whose health deteriorate are forced to make emergency room visits while some who are chronically sick with life threatening illnesses and insufficient health coverage get forced in to bankruptcy. These solutions directly impact the economy of the majority because the costs have to be passed onto to those that can afford to pay in one form or other. Additionally losses of productivity, debt forgiveness also add significantly to the costs burdened by all of society.
    If Health Corporations greed did not come into play, and health insurance became mandatory; like automobile insurance it would allow sick people to obtain early treatment rather than late emergency treatment total existing health costs and subsequently premiums should fall. Unfortunately the potential cost improvements would not be passed on as reduced premiums only as profits to the insurer.
    We pay a high price for what health care we do receive in America due to excessive and often unnecessary testing. Doctors fear litigation and to protect themselves pay absurd insurance premiums for malpractice insurance. These fears result in the need to have unnecessary tests to be performed and to over subscribe drugs and antibiotics (“better safe than sorry” mindset). Some GPs can pay as much as $100,000 per year with specialist paying $250,000 per year. If like in other countries doctors managed their own standards, practices, ethics and behavior through peer bodies, that have the ability to stop a doctor temporarily, or permanently practicing their profession, we would see lower insurance costs, fewer tests and medical cost more in line with other healthier nations.
    While the bills in both congress and the senate are far from ideal a change in direction will make it easier later to vector health care in a direction it must inevitably take to achieve cost effective health care.
    With compulsory insurance, and a significant reduction in frivolous and expensive law suites the ground work would be set to transition into some form of single payer system geared to both preventative medicine and better health care for all residents of the USA.
    As a Brit who has lived under both single payer system and struggled through the inane US health care system I can recommend that people stop listening to anecdotal health stories from single payer systems and look at the overall facts they have “Better Health” and a “Lower Cost” per person.
    “You really don’t need an MRI, expensive antibiotics or pain killers for a fractured finger”…… a wooden splint and an aspirin will work fine.

    Stephen Maine, Paradise Valley Arizona
    January 2010

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  2. I normally bounce all over the internet because I have the tendancy to read a lot (which isn’t always a good thing because the majority of sites just copy from each other) but I have to say that yours contains some great substance! Thanks for stopping the trend of just being another copycat site! 😉

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    • No. The premiums will not go up for that. Usually helath insurance is up for renewal once a year and the cost increases at that time, but not just because you use your policy. The cost of group helath insurance where I work has had double digit increases in the premiums every year for 10 years now. The helath insurance companies are out of control. If you have insurance and need helath care go get the care you need.

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