New Republic reporter Jonathan Cohn on health insurance industry profits:
The issue…isn’t the profits that insurers make. It’s the actions insurers take to maximize those profits….The quickest, surest way for insurers to boost profits is to avoid spending a lot of money on sick people. And, particularly in the individual insurance market, insurers can do that in any number of ways. They can charge sick people higher premiums, deny them coverage altogether, or — failing that — revoke their coverage after they start filing claims….They can make it difficult for the chronically ill to get the care they need, by manipulating benefits and provider networks or making it more difficult to obtain authorization for treatments. And they can always jack up rates on blocks of business that have high expenses.
All of which gets at something I’ve been trying to say for some time. Industry profit margins of 3% to 5% aren’t the problem. Administrative costs of 10% to 15% of premiums– i.e., expenditures aimed largely at maintaining the infrastructure needed to do all the things Cohn outlines to ensure profitability — is a big part of the problem. Cohn continues:
These practices help explain why people with serious medical problems so frequently find insurance inadequate or simply unavailable. But they don’t explain why health care generally is expensive for everybody, even the healthy–and why it’s getting expensive so much more quickly. Those problems are the result of the entire health care sector–doctors, hospitals, device makers, the drug industry–providing too much medical care or charging too high a price for it. The insurance industry likes to point this out and it is right to do so.
Said another way, I can understand when insurers raise premiums — even at double-digit rates — to offset rising costs (sorry Mr. President). But I can’t justify higher rates simply to support an administrative infrastructure aimed at denying coverage and care to the sick. Only a highly regulated public-private insurance market or a single-payer system gets at a solution.