It’s Time For An Insurancectomy
Kevin at Lean Left asks Does That Make Gordon Gecko[sic] Linux or Windows?
Markets create incentives for insurance companies to behave atrociously. The simplest way for an insurance company to become profitable is to never pay out any claims. Thus, insurance companies go to great lengths to not enroll people who can be expected to have high medical costs down the line and to find reasons to deny people the benefits for which they have paid their premiums.
First of all this attitude applies to all forms of insurance, not simply medical insurance, just ask homeowners affected by recent hurricanes. The insurance companies only want to cover people who will never file a claim, and they will do almost anything to avoid paying out.
The reality is when states started requiring automobile insurance, they had to create an auto insurance company to handle people that insurance companies refused to cover. Florida has had to do the same thing with homeowners’ insurance, create a state insurance company to cover people the insurance companies refuse to cover. The Federal government operates a life insurance company for the military, because the insurance companies don’t want to sell insurance to the military.
There is nothing wrong with making a profit, but the level of profit is logically tied to the level of risk. When risk is reduced to a minimum, like a passbook savings account, the return should also be minimal. What the insurance companies want is passbook risks with slot machine payouts.
Logically, if you insure everyone you can make a reasonable profit, but if you only insure the people who never make a claim, your profits zoom.
The market cannot work unless it is free. When the government or reality make it imperative that you buy something, the market loses its freedom and becomes distorted. The insurance companies are controlling the market and the healthcare industry, they aren’t free. The insurance companies are the problem, not the solution. The cost of healthcare is rising primarily as a result of the cost of insurance, not the salaries of doctors.
OT: Gecko is the spokescritter for GEICO Insurance whose first name could be Gordon, but Gordon Gekko is the “greed is good” creep.
3 comments
[…] It?s Time For An Insurancectomy The reality is when states started requiring automobile insurance, they had to create an auto insurance company to handle people that insurance companies refused to cover. Florida has had to do the same thing with homeowners? insurance, … […]
on paper at least, the insurance comapnies are only making about 5% profit, a reasonable margin, actually.
If you control the market, if you’re guaranteed a 5% profit on almost everything you do, while you’re at it, why not increase revenues by just adding more employees? particularly if you can put them to work denying claims.
They have a 30% overhead cost compare to <5% for Medicare, so a shift to Medicare could be about 30% cheaper, with the profit margin of private vendors covering all of the overhead of Medicare. I would note that at $400K the President is the highest paid Federal employee, making twice as much as the next level below, and that Medicare contracts out its processing, so there are very few actual government employees involved.